Two factors produced the biggest smiles for investors in Las Vegas’ publicly traded companies as they pored over their earnings reports this quarter.
Their companies either had a connection to Macau or are delivering — or are on the verge of delivering — real-money online poker.
As the quarterly earnings season winds down, it is clear that the biggest winners this time were the companies that had a presence in Macau, and the bigger the presence, the bigger the score.
Las Vegas Sands, Wynn Resorts and MGM Resorts International had good quarters, and, not surprisingly, all three are in various stages of building resorts in the only place in China where people can legally gamble.
Sands, which operates the Venetian and the Palazzo on the Strip, generated 64 percent of its record $3.24 billion revenue through its Sands China division. The company is building a 3,000-room Parisian Macau-themed resort on the Cotai Strip, the newest section of Macau. Of the three Las Vegas companies with a presence in Macau, Sands has the most properties, rooms, tables and slots.
Wynn also is building on the Cotai Strip, and Chairman Steve Wynn announced the name of the new property — the Wynn Palace — during his earnings call. With Wynn Macau and Encore generating revenue on the city’s main peninsula — a little less than usual because the company was in the midst of room renovations during the quarter — Wynn Palace, a floral-themed resort, will be the company’s first venture at Cotai.
Steve Wynn has an ambitious construction schedule, planning to open the new resort by Chinese New Year 2016.
MGM also is in the Macau market, although not as deeply as its Las Vegas counterparts. It has a 51 percent ownership stake in MGM China, resulting in earnings that weren’t as stellar as Sands’ and Wynn’s. Still, Macau revenue was at record levels for the quarter, and overall, the company’s revenue was up 6.8 percent to $2.48 billion, narrowing quarterly losses by 36.1 percent.
The company announced a $113 million dividend to MGM China investors and made a passing reference that construction was underway for MGM Cotai.
All three Las Vegas companies operating in Macau had similar reports about their Las Vegas operations.
Generally, visitation has shown slight gains and revenue is trickling upward. Wynn was lucky in the casino and had a 44.7 percent revenue increase while MGM was unlucky, particularly at Aria, where the table-game hold percentage fell 3.2 points to 20.8 percent. MGM also noted it is investing in capital improvements at its New York-New York and Monte Carlo properties, where the company is removing corporate buildings west of the properties to make room for a 20,000-seat sports arena and its retail gateway.
Another Las Vegas company has a similar strategy, and its earnings showed it. Revenue fell, but losses narrowed for Caesars Entertainment, which is building Project Linq, a retail center highlighted by a giant observation wheel.
Caesars’ net revenue declined 4.5 percent to $745.9 million, compared with the second quarter of 2012, with weaker gaming volumes and a decline in hold percentage.
Caesars had some Macau news after earnings were announced — it sold its golf course there for $438 million. Company executives had been hoping to gain entry to the Macau casino market and purchased the course as a potential location. But when it became clear Macau’s government wasn’t going to offer new licenses anytime soon, Caesars sold the asset.
But Caesars and several other companies are hoping that their investment in online gaming will translate into additional revenue. Caesars is among the companies in the online poker pipeline, and it's awaiting state regulatory approval for its World Series of Poker-branded Internet site.
Caesars is expected to have the second real-money poker site behind Station Casinos’ Ultimate Poker online product.
Station showed a 1.4 percent increase in revenue and an 11.4 percent increase in earnings, in part due to operating online poker for two months of the quarter. The company didn’t specify how much revenue was generated by Internet poker, but Executive Vice President and Chief Financial Officer Marc Falcone said Ultimate Poker outperformed expectations.
Station also is line to deal poker online to New Jersey residents.
Of the three Las Vegas companies with connections in Macau, only MGM is interested in online poker. The company is still evaluating whether it’s lucrative to operate on a state-by-state basis. The company has license applications in Nevada and New Jersey.
Steve Wynn has said that he has more fulfilling projects to tackle than online poker, and Las Vegas Sands' Sheldon Adelson has lobbied against the national legalization of online poker, which most of his contemporaries support.
Another Las Vegas company anticipating revenue through the Internet is Boyd Gaming, which had a stellar quarter, due primarily to additional revenue generated from its newest acquisition, Peninsula Gaming, which had properties in Iowa, Louisiana and Kansas.
Boyd President and CEO Keith Smith said the company’s part ownership of the Borgata in Atlantic City should benefit its online presence as it works toward acquiring a license in New Jersey. Borgata is considered one of the top properties in that market.
Boyd’s Las Vegas properties showed a slight increase in revenue — more evidence suggesting a slow and steady rebound in Southern Nevada’s economy.
Penn National executives said casino revenue was soft in its East/West division, which includes Henderson’s M Resort. The company doesn’t separate M from its other casino properties, which include several racinos at horse tracks.
Revenue was up less than 1 percent for American Casino & Entertainment Properties, which operates the Stratosphere, the Arizona Charlie's developments and the Aquarius in Laughlin. Company executives said it was the Aquarius that carried the company for the quarter and that gaming revenue and occupancy were down at the Stratosphere.
Affinity Gaming, which has six Nevada casinos, including the Silver Sevens in Las Vegas, had a revenue decline that executives attributed to a construction project at one of its Primm properties.
The city’s gaming equipment manufacturers had good quarters, with Bally Technologies turning in record performances in revenue and earnings thanks to sales of its gaming management systems and the performance of its wide-area progressive slot machines.
International Game Technology’s progressive system, Megabucks, didn’t perform quite as well, but IGT rallied behind its expansion in developing social gaming software. IGT’s DoubleDown, the world’s largest virtual casino, has more than 30 slot machine and table games and is one of the top five Facebook games. It averages 5.4 million visits per month.
IGT also is capitalizing on the replacement cycle of Canadian video lottery terminals.
Many analysts view the performance of airlines as leading indicators for Las Vegas casinos. Las Vegas-based Allegiant Travel, parent company of Allegiant Air, and Spirit Airlines, the fastest-growing domestic air carrier at McCarran International Airport, had double-digit revenue increases for the quarter while market leader Southwest Airlines had a fractional increase.