Eldorado Resorts’ CEO is convinced the gaming industry’s post-COVID-19 revival will surpass expectations.
“I think you’re going to see margins that are quite impressive early on,” said Tom Reeg, CEO of the Reno-based casino operator. “As places have reopened and social distancing has been eased, there has been enthusiastic recommitment by consumers. I would hope that’s the case in our business.”
Reeg expressed the same optimism for demand at Caesars Entertainment Corp.’s Las Vegas properties. Despite recent financial challenges amid the COVID-19 pandemic, Reeg maintained that the company hopes to close the $17.3 billion deal by the end of June and believes the combined company’s portfolio of properties will be allowed to reopen “in the next several weeks.”
Eldorado Resorts reported a net revenue of $473.1 million in the first quarter, down 17.5 percent from the same period last year on a same-store basis.
A different cost structure
Like other casino operators, Eldorado has taken significant blows during the COVID-19 pandemic.
Reeg said Monday the company lost one staff member to the virus.
It also took a series of cost-saving measures after casinos shutdowns were announced. In early April, Eldorado announced that it would furlough a number of corporate and property employees and that the remaining corporate and property “leadership team” workers — along with the company’s board of directors — would take pay cuts.
Eldorado is now preparing to reopen its 23 properties, spread across 11 states. Louisiana will be among the first markets to see customers return, after Gov. John Bel Edwards announced Monday that casinos would be allowed to open with 25 percent capacity Friday.
Eldorado operates three properties in the state, with plans to sell one to Twin River, along with the MontBleu Resort Casino & Spa in Lake Tahoe.
While the pandemic has been a challenge for operators, Reeg believes it has also offered them a chance to examine and streamline their operating structure.
“We’ve found a lot of additional contingency in our own business and the business we’re going to take over moving forward,” Reeg said. “You’re looking at being thoughtful and analytics and optimizing how much cost you bring back.”
He said a subdued focus on marketing compared with previous financial crises would also save costs, and added that the company would “be careful” when bringing back employees to make sure staffing matched demand.
Reeg does expect additional sanitation and cleaning costs, but said they’ll be “dramatically offset” by operational changes such as ending buffets — a marketing strategy he long has thought was inefficient and costly.
“Your cost structure is going to be very different than it was before we came into this crisis,” Reeg said.
Moving ahead with the merger
While it has yet to be seen how much demand Las Vegas will draw in upon reopening, Reeg believes Caesars is poised to fare better than its Strip competitors by relying less on trade shows and more on its loyal rewards members.
“The group business seems to be clearly laggard in terms of recovery,” Reeg said. “Caesars is the least exposed to the group business of anybody on the Strip.”
The Federal Trade Commission, the Nevada Gaming Commission and other regulators still need to sign off on the $17.3 billion Eldorado-Caesars merger before the deal can close.
Despite the challenging economic environment, the two companies have continued to push toward completing the merger in the first half of the year. The two divested three casinos in April, a move analysts say probably eased antitrust concerns that could have come from the FTC.
“It’s very clear to us the best option is to continue and close the Caesars transaction,” Reeg said on a Monday earnings call. “All of the upsides … (are) still available to us and Caesars.”
A previous version of this story incorrectly reported the number of Eldorado team members lost to the virus. The company lost one staff member.