How Long Can Sin City Casino Companies Last in the Face of the Compulsory Shutdown?

After Governor Sisolak’s order turned USA’s gambling mecca into a ghost town, the cash reserves of gambling giants in Las Vegas are about to be spread thin for the next coming months. As surreal as the mandatory casino closures seemed at first, operators in Sin City are now starting to face the harsh reality of the matter.

Closed Vegas Strip casinos continue to suffer under the current situation, and it is difficult to state with precision how long they will be able to stay afloat after the indefinite closures. Their liquidity is being put to the test now that the operators are burning cash with virtually no turnover.

Even though casino operators like Wynn Resorts, MGM Resorts and William Hill are resorting to desperate measures to try and cover their furloughed employees, the broader picture is much grimmer. Right now, such steps are only short-term solutions if we consider the fact that the gambling industry will lose about $40 billion in economic activity during the shutdown over the next eight weeks.

What are Analysts Saying?

In a bid to project how long the Sin City gaming titans could survive the closures, independent financial services and analytics institutions crunched the cash burn data. Bear in mind, however, that the projections vary, and this analysis is a matter of comparing daily expenses of individual companies against how long they could survive with their doors closed. It’s also worth noting that this liquidity is not only based on cash but also cash equivalents and the capacity of revolving credit lines that’s available.

Macquarie’s analysis disclosed that Penn National could last a little over 5 months with their expenditure averaging $6.4 million every day while MGM Resorts International have reserves that can last them 9 months given that they are burning $14.4 million every day. These two burn the most money for every day of closure.

Additionally, Macquarie’s findings indicate that Boyd Gaming is expected to stand tall for about 9 and a half months, given that the company burns $3.2 million every day. In contrast, Red Rock Resorts could push their survival under closed doors to 13.8 months with $1.7 million in daily expenditure.

Ballpark figures from Barron’s however differ, showing that MGM Resorts International may have the financial muscle that will cover the company for about 563 days.  Las Vegas Sands, on the other hand, is forecast to have one of the highest chances of staying afloat at about 760 days, while MLCO (Melco Resort and Entertainment) and Wynn Resorts follow with about 563 and 556 days of survival respectively. Caesar’s Entertainment’s liquidity was also projected by Barron’s to last about 239 days.

How Markets Affect Companies Ability Weather the COVID-19 Storm

From Macquarie’s and Barron’s numbers, casinos whose primary customer base is not from the United States have a higher chance of surviving the global crisis. That’s because companies like Wynn Resorts, Las Vegas Sands and MLCO operate more in Macau than they do in Las Vegas. The implications of this are positive as the virus seems to have been contained in Macau according to the latest reports.

Therefore, casinos with more exposure in Macau have a chance to start generating revenue once the region opens for external business again. Harry Curtis, an analyst at Nomura Instinet, estimates that Macau should be resuming normalcy in four to six weeks.

Moreover, operators who already branched to offering online gambling services may also have a better footing in the COVID-19 crisis, given that virtual gaming is becoming increasingly popular as bettors are confined to their homes for self-quarantine.