What We’ve Learned About the Casino Economy During the Pandemic

Las Vegas and Macau With Coronavirus Images

Chips were flying, restaurants were packed to the gills, and Las Vegas was bouncing reopening weekend as Sin City returned after more than two months of shutdown due to public health concerns centered around the Covid-19 pandemic.

The good news: Hotels and casinos were much busier than anticipated, prompting many Las Vegas resort companies to accelerate their plans to open more of their properties.

The bad news: According to field reports from casino floors and the busy sidewalks lining Las Vegas Boulevard, few visitors were wearing face coverings or practicing social distancing. The two primary precautions that local and federal public health officials encouraged in order to slow the spread of Covid-19 through the summer.

Put simply, Vegas is back. In fact, this scenario has been playing out across the globe. While there is certainly much to be excited for going forward, I want to take a look at what we’ve learned.

What did we learn about the casino economy during the pandemic?

Let’s take a look.

Macau’s Gambling Industry

In Macau, known for its luxurious casino resorts, more than 80% of local revenues are earned by the operation of casinos or gambling-related businesses.

However, due to the pandemic, Macau hosted just around 3 million tourists in January and February, down nearly 57% year on year. Gambling revenue plunged by 80% year-on-year in March.

The dramatic decline in gambling-related earnings has been widely attributed to both Macau’s proximity to mainland China, where the outbreak of COVID-19 originated, and the Macau Government’s decision to close the border in phases from mid to late March. Essentially prohibiting non-Chinese nationals as well as those from Greater China from gaining entry.

Casino Tourists in Macau

The Chief Executive of Macau reported that gaming revenues for the first three months of 2020 saw a 60% year-on-year fall to about US$3.81 billion.

Since gaming revenues are expected to remain relatively low for the remainder of the year due to the uncertainty of the public health crisis, the government has cut Macau’s gross gaming forecast for 2020 by half, to US$16 billion.

It is probably worth noting that visitors to Macau from the Greater China region, including mainland China, Hong Kong, and Taiwan, account for over 90% of local tourists.

Therefore, the recovery of Macau’s casino economy and businesses dependent on it will remain limited unless travel bans and restrictions are lifted and potential Chinese visitors are comfortable that COVID-19 is contained in the region.

Even if restrictions on visas and transportation are lifted, business will likely remain slow as Chinese gaming players are probably unwilling to travel at this point.

Yet, if Macau and the Greater China region can continue winning the battle against the COVID-19 outbreak and prevent a catastrophic second wave, then tourism in Macau may show a swiffer recovery than expected.

Las Vegas Casinos

From the Aria to the Mandalay Bay, Las Vegas was a virtual ghost town. With the exception of the security guards who remain posted outside casino entrances and the occasional joggers, the Las Vegas Strip was deserted.

This was the scene in early 2020.

The haunting emptiness is a version of what many Americans have witnessed in the places they call home. Vacant subways, wide open freeways and unoccupied shopping centers became the norm for many.

Tourists Walking the Vegas Strip

But as measures to control the spread of the coronavirus shut down businesses across the country, those who live and work in Vegas worry that they’ll suffer more and longer than most.

Just a few months later after Las Vegas shut down, the casinos began to open back up in limited capacity. Unfortunately, the damage has been done.

There are thousands of unemployed casino workers in the wake of the pandemic. The reality that nobody wants to talk about is this:

Imagine you own your own casino. You are a relatively small operation employing only 50 blackjack dealers. You are relieved to be back open, but you can only operate at 50% capacity. The new restrictions also mean that you’ve gone from 10 tables down to 5. So, you have half the people (best case scenario) playing half the tables. Pretty clear that you don’t need 50 blackjack dealers. Wouldn’t you say?

Now imagine broadening to include all facets of casino operations. Then multiply it into the hundreds if not thousands.

Catastrophic.

Like many other states, Nevada closed all nonessential businesses to stem the spread of the coronavirus. The economic well-being lives and dies by the booming and busting of a single, extremely fragile industry.

This month last year, 3.5 million tourists came to visit Las Vegas. A complete halt to the beating heart of the casino economy is devastating.

Real Money Online Gambling Boom

While most sports leagues were on hiatus and casinos across the country closed because of the pandemic, a lot of people were placing bets online from home, leading to several record numbers with real money online casinos.

Among the states that have seen meteoric rise in online poker numbers are New Jersey and Pennsylvania.

New Jersey took in a record $79.9 million from online poker and casino games in April, a 118% increase from the $36.6 million in revenue the state had in April 2019.

The four most popular online games during the boom were unsurprisingly slots, blackjack, craps and roulette.

Online Casino Game List

Google searches for online poker reached a five-year high during the coronavirus pandemic, with the increase beginning in mid-March, the week when most sports leagues called it.

While the boom in real money online poker has helped the struggling sportsbooks during the pandemic, it has not made up for all the losses. The revenue from a typical month of sports betting when sports were still operating dwarfs any extra revenue casinos have seen from online poker.

There will likely be lasting ramifications from this surge in online gambling interest. A behavioral shift that makes online gambling permanently more popular is likely to continue even after casinos are back at 100%.

However, the reality is that despite the gains made at online casinos, the shutdown of brick and mortar casinos left a revenue hole that can’t be made up.

The People That Work in Casinos

About 206,000 of Nevada’s casino workers have been affected by the mandatory closings.

For Las Vegas, shutting down the hospitality industry means wiping out the economic security of entire families. The coronavirus pandemic awakens memories of the 2008 financial crisis. In fact, many casino centric areas have only recently recovered from that recession.

But casino leaders seem to have learned from past mistakes under immense pressure. Matthew Maddox, the chief executive of Wynn Resorts, cited the lessons of 2008 as the reason his 25,000 employees were still paid during the mandatory closing. Some other casino leaders also kept workers on payrolls.

Las Vegas Showgirls Wearing Masks

But the largest casino employer, MGM Resorts, which employs over 75,000 in Nevada, could only guarantee their furloughed workers two weeks of pay. And for those workers at small businesses or franchises that operate inside casino walls, layoffs became the new norm.

Even with tourists free to return , I am curious if they will. Concerns about their physical health and safety may likely keep them off planes and out of hotel rooms for months. That $1,200 check certainly won’t stretch far enough to cover the cost of a post-pandemic vacation, for those that got them.

Without additional help from the federal government, it will take a stroke of good fortune for the average Joe to survive this crisis.

It’s very likely that casinos will struggle to make money under these conditions, but the big three will certainly move to reopen. The necessary COVID-19 precautions very closely mimic the ones being used in Macau.

Las Vegas hasn’t seen a complete return to normal, but it’s been baby steps toward that. In theory, Caesar’s, Wynn, and MGM will cut their losses and bring back more than a few eager casino gamblers.

It will, however, be a very slow journey. Until there is a vaccine, effective treatment, or herd immunity, normal operations will not return to the casino industry. Having long lasting impacts on the casino economy.

Conclusion

It is far too early to be able to say what the future of casino gaming will look like. I know that there are people hurting because they are not able to work.

Fortunately there are also a large group of people that are in desperate need for a getaway. The distraction of a casino trip would most certainly be beneficial to both groups.

I don’t know when the right time to get back to business as usual is, that’s above my pay grade. However, I do believe that the sooner we are all able to resume our lives, safely, the better.

In these uncertain times, I am completely confident in one thing; the resilience of the human race. Gamble on.