Why Casino Industry And Las Vegas Economy Are Likely To Collapse From Economic Impact Of Deadly COVID-19 Virus
Casinos have their hands out, alongside the airline industry, asking Congress for emergency financial help as Las Vegas and other tourist destinations take a severe financial beating from the coronavirus outbreak.
It sounds like a stretch for casino companies to argue for bailouts, considering the nature of their business and the fact they have used their resources for massive buybacks — until you realize how many U.S. jobs the industry supports.
In 2018, Nevada casinos hired 409,444 workers, according to Statista. Another 300,000-plus employees worked at other casinos around the U.S. The gambling industry supports 1.8 million jobs, according to the American Gaming Association.
Many of those jobs have disappeared almost overnight amid the coronavirus outbreak.
The $260 billion gaming industry is at a “near standstill,” and additional funds are needed to support casino companies and their employees, the American Gaming Association (AGA) said Monday in a statement to the Washington Post.
Some of the largest Las Vegas casino operators draw most of their revenue from Macau, where the Chinese government suspended all casino operations on Feb. 4 to curb the spread of coronavirus.
Wynn Resorts derived about 75 percent of its total revenue from Macau over the past 12 months, according to FactSet, with some of the highest China exposure among its peers. Las Vegas Sands draws 64 percent of its total revenue from its Macau operations, according to Barrons.
Significant furloughs and layoffs began last week at MGM Resorts International properties in response to declining demand and the accompanying tourism collapse brought on by the coronavirus.
In early March, MGM Resorts International planned a $1.25 billion share buyback after the previous week’s sharp decline in the stock market. The casino operator had originally announced plans to repurchase shares on Feb. 13 but then lowered the price. This creates an opportunity for MGM to buy more stock than expected and could lead to a favorable return for the casino operator, analysts said, according to the Las Vegas Review.
Due to COVID-19 distress, MGM withdrew the $1.25-million share buyback plan, terminating a previously announced modified Dutch auction tender offer, according to Nasdaq.
The COVID-19-driven workforce reduction hit everywhere in Las Vegas, from cocktail servers and bellmen at Bellagio and housekeeping staff at New York-New York to front desk workers at The Mirage, sources told the Review-Journal.
“Nobody has a job, no one can pay bills,” said a man who was laid off after working for 14 years at a Las Vegas strip hotel. “They told us that because the demand at the hotels is so low because of single-digit occupancy, they laid off the whole department,” he said in an 8NewsNow interview.
A growing number of states are demanding that all casinos, bars and restaurants shut down immediately to reduce crowds and minimize person-to-person contact.
Lobbyists are asking for aid for the casino companies. It could come in the form of a comprehensive bailout package, similar to what lawmakers may give airlines, cruise companies and the hospitality industry, Washington Post reported. Or it could include direct cash payments, deferred taxes or special bankruptcy protection.
“As state governments close casinos as a part of the urgent public health response to COVID-19, elected leaders should move just as urgently to support the workers and businesses who will bear the brunt of those effects,” the American Gaming Association said. “Our immediate priorities are actions that provide liquidity to allow us to support employees.”
Bailing out the casinos could see more opposition than efforts to support airlines or other travel industries, “particularly as federal lawmakers face scrutiny over whether they are picking winners and losers in an economy broadly affected by the pandemic,” Washington Post reported.
Casino bailouts could also get added scrutiny due to President Donald Trump’s history as a former casino developer and owner, and his close relationship to casino magnate Steve Wynn. A top GOP donor, Wynn was vice chairman of Trump’s inaugural committee and was named chairman of the Republican National Committee’s finance committee before he stepped down over sexual harassment allegations.
The coronavirus isn’t the first devastating blow for Las Vegas. On Oct. 1, 2017, a shooter opened fire on a crowd of concertgoers on the Las Vegas Strip, killing 58 people and wounding 413.
Nobody knows now when things will return to normal in Las Vegas, columnist Ed Graney wrote for the Las Vegas Review Journal. “Vegas Strong. It will prove so again.”