Nevada will reduce COVID-19 restrictions and increase capacity on gaming floors starting Monday, Feb. 15, and even more on March 15 — days ahead of March Madness — in a move Wall Street analysts said will boost tourism and convention business in the coming months.
The plan outlined Thursday by Nevada Gov. Steve Sisolak has already paid dividends.
The Mohegan Sun Casino at Virgin Hotels Las Vegas announced within an hour of Sisolak’s press conference that it was reopening the former Hard Rock Hotel and Casino on March 25. Strip casinos that have shut down some operations for midweek business are preparing to reverse those closures starting in March.
The Hard Rock closed in February 2020 as part of a renovation and rebranding and remained closed even after the Las Vegas gaming industry resumed June 4 after a 2½-month shutdown due to the coronavirus. A planned Jan. 15, 2021, reopening was postponed after Sisolak announced Thanksgiving week that casinos’ gaming floor capacity would be cut from 50% to 25%.
In his announcement Thursday, Sisolak boosted the capacity to 35%, effective Monday, and allowed shows and meetings to increase from 50 people to 100 by March 1. Gaming floor capacity will increase to 50% on March 15 when shows and meetings can increase to 250 people or 50% capacity, whichever is less — the same guidelines in place prior to Thanksgiving when shows had started back up. That enables casino ballrooms to be set up to host March Madness parties, something they couldn’t do on any significant scale for the Super Bowl.
If COVID-19 infection rates and hospitalizations continue their decline, casino capacity and the reopening of nightclubs and day clubs at casinos would fall to the jurisdiction of local counties, effective May 1. The state’s COVID-19 positivity test rate has fallen sharply after peaking Jan. 13, and vaccinations are gradually ramping up after a slow start.
‘A necessary first step’ to recovery
Barry Jonas, a Wall Street analyst with Truist Securities, said the increase in capacity limits combined with increased vaccinations around the country gives hope of a sustainable recovery for Las Vegas.
“It starts with the drive-to customer [from California and neighboring states] and over time with the vaccine increasing [fly-in] destination and business visitation and getting to prior levels over time,” Jonas said. “This is a necessary first step to see that happen.”
The most up-to-date numbers from the Las Vegas Convention and Visitors Authority showed December visitation fell 64% year-over-year and the month’s hotel occupancy came in at 31%. That was the weakest full month in Las Vegas for visitation and hotel occupancy since casinos reopened.
MGM Resorts International closed its casino at The Mirage for midweek business in January. It had previously closed the hotel towers at Mandalay Bay and ParkMGM during the fourth quarter. Company executives said at an earnings conference call last week that they expect to reopen those properties seven days a week in March.
“I know we are all encouraged by states lifting operating mandates in the past couple of weeks, and this will no doubt assure our properties will be able to serve a greater number of guests, and I expect these guests to lead the recovery in our system,” said MGM Resorts International CEO Bill Hornbuckle. “March Madness, spring break, and the pool season are … meaningful and substantive [in Las Vegas], and I think we will see occupancies go back to October levels and beyond.”
Caesars Entertainment said in a statement it’s encouraged by the progress in easing Nevada’s capacity restrictions and will expand capacity where possible.
Virginia Valentine, president and CEO of the Nevada Resort Association, told US Bets that the ease of the restrictions is encouraging news for the resort industry.
“The governor’s action is a positive next step forward for our state’s economic recovery and bringing more Nevadans back to work,” Valentine said. “We look forward to continuing opening up dormant areas of our business and expediting Nevada’s recovery.”
Sisolak announcement encourages some, not all
Jonas said it’s clear that Virgin Las Vegas set the March opening date because of Sisolak’s actions. Las Vegas is still waiting on the $4.3 billion Resorts World to announce its opening date, expected to be this summer or possibly earlier.
The easing of restrictions isn’t expected to have an impact on the one major Las Vegas property that has remained closed since the shutdown of the industry in March 2020. The Palms Las Vegas will remain closed for now, executives of its owner, Red Rock Resorts, said in an earnings call last week. They indicated it would take an increase in destination travelers for it to reopen.
“You need the town to open up for new supply to come on board,” Jonas said. “I don’t believe in coincidences. Clearly, [Virgin Las Vegas] held off on announcing a date and now that the restrictions are eased, we hear what it is. The easing makes it easier, but there are still challenges by opening in this environment until there’s enough comfort for folks to return to Las Vegas. The good news is that Mohegan has a strong database from back East.”
Brent Pirosch, an analyst for commercial real estate services company CBRE, said the easing of the restrictions starting Monday won’t mean a big increase in visitation immediately, but he called it a “step in the right direction.”
“The quicker we can get back to above 50%, the sooner the Strip can recover,” Pirosch said.
Pirosch said increasing the meeting limit to 250 (which would allow a group of 500 divided into two) is significant because 25%-33% of meetings in Las Vegas consist of less than 500 people.
The National Indian Gaming Association just announced that it’s bringing its 2021 convention and trade show and thousands of people to Las Vegas in July.
“There’s been a lot of new convention space construction, and assuming they can market it correctly, there’s a lot of midweek convention business that they can start to court again,” Pirosch said. “Those smaller groups don’t need a long booking window. The larger meeting business, however, will take longer. That will be the fourth quarter or beginning of 2022. But every step forward is better than before.”
How close are we to ‘normal’?
Brian Labus, an epidemiologist with the UNLV School of Public Health and a member of the medical team advising the state, said the easing of casino restrictions is the natural step with decreasing caseload. A careful approach helps maintain safety because infection rates are still elevated, he said.
“The numbers still have to come down quite a bit before we talk about coming back to normal,” Labus said. “Even though things are headed in the right direction, we are not at our destination yet. Adding the vaccine changes the way we are approaching this so we can even think about reopening things. Our numbers aren’t the greatest yet, but we can have a convention where everybody that attends is tested and vaccinated. We have some options we didn’t have previously.”
Wynn Resorts is preparing to open its own testing center where convention attendees and those buying tickets to entertainment venues have a negative test before they can enter facilities.
MGM executives said they expect travel to Las Vegas will be robust by the end of 2021 based on advanced bookings in January being the strongest they have been since the pandemic started.
“We still have significant rooms on the books for the third quarter and more on the fourth quarter than at this time last year,” Hornbuckle said.
People are burned out on Zoom conferences and some big events are scheduled for June, executives said.
“We expect the attendance to be a little less initially, but I think as vaccines roll out and people feel more comfortable traveling, we hope [attendance picks up more] in the beginning of 2022,” said MGM COO Corey Sanders. “We have more than 120,000 rooms under contract for 2021 that I think people are looking for one more sign things are on the clearer side.”
Those bookings also include leisure travel.
MGM said it hasn’t had entertainment for almost a year, but still holds 82% of deposits for tickets for shows such as Lady Gaga and others that haven’t been rebooked.
“What that says is when available, people want to come back,” Hornbuckle said. “Some of the groups may be lighter in participation, but the leisure travel and this massive amount of pent-up demand for people to get out will offset occupancy. I’m excited about the trends. We just had a great Super Bowl weekend in terms of participation.”
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