When a major aspect of your economy depends of tourism and visitors, closing up shop is bad for business. The governor of Nevada decided to shut things down across the state in mid-March. The coronavirus outbreak was forecast to hit Las Vegas harder than most cities.
Not only were the casinos closed for business, but almost every retail entertainment establishment was also part of the order to close. Take away casino gambling and entertainment and you take away the lifeblood of Las Vegas.
How Is Las Vegas Continuing To Weather The Covid-19 Storm?
It appears the current state of affairs in town were discussed. The initial forecast was filled with doom and gloom. Massive layoffs with little gaming revenue coming it, you would think that investors would be betting against this gambling town.
The opposite has taken place with investors hunkered down to ride things out. Taking a very conservative approach, they appear poised to hold their positions. Lessons learned from the Great Recession in 2008 demonstrated the resiliency of Las Vegas in the face of adversity.
The biggest players know exactly what this town has to offer over the long haul. In recent years, firms such as Blackstone have been on multi-billion-dollar buying sprees. Going back to 2018, this city experienced the highest multifamily rent growth in the nation verse the previous year. Just this past year, Las Vegas office vacancy was at its lowest point since 2007.
One of the biggest mergers in the history of the casino gaming industry nears completion. This will join Caesars Entertainment with Eldorado Resorts.
Brian Gordan is the principal at Applied Analysis. He commented: “Lenders in the environment leading up to recent weeks were sitting in a relatively healthy position. Given the trajectory of the economy, the stability of cash flow and the reasonable performances commercial properties were turning out year after year.”
This is not to say that Las Vegas is still not one of the hardest-hit metropolitan areas. Business is at a standstill at the present time. With more than 150,000 hotel rooms and hundreds of casinos closed, this is not a long-term sustainable situation. Add in the numerous cancellations of major conventions and the loss of revenue is staggering.
However, the pockets remain deep for the biggest players. The planned Caesars Entertainment and Eldorado Resorts merger has been pushed backed to June. Each company remains in a position to survive the economic effects.
Caesars reportedly has $3 billion in liquidity on its balance sheet.
Other major casino deals were in the news before the coronavirus took hold. Penn National recently partnered with MGM. This created some real estate investment trusts in sale-leaseback transactions. One Las Vegas Strip property involved was the Tropicana.
Back in February, a similar deal took place between MGM Growth Properties and BREIT. This involved the MGM Grand and Mandalay Bay. At the end of 2019, Blackstone announced a deal to acquire the Bellagio.
Some analysts fear that too many companies may have overextended themselves in light of falling stock values. However, this is still a town controlled by the biggest high rollers in the game.