Las Vegas losing 'house advantage' as coronavirus spike curbs bookings
City hotels have reduced room rates from August through Sept. 18
The recent flare-up in COVID-19 infections around the country will reroute more than $24 billion in leisure spending away from the gaming industry, according to Goldman Sachs Group Inc.
The loss, already showing up in Las Vegas resort bookings, is a harsh blow to industries left reeling by the pandemic that were just beginning to see sales trending in the right direction.
“The deceleration in forward bookings appeared in mid-June just as COVID cases started accelerating, but before more restrictive measures from local governments,” wrote Goldman analyst Stephen Grambling. “As a result, consumers likely need to see a sustained decline in COVID cases in addition to state restrictions being lifted to begin spending in the space again.
LAS VEGAS CASINOS DEALT NEW THREAT AMID CORONAVIRUS RESURGENCE
New COVID-19 infections reached a record high of nearly 76,000 a day on July 17 and while the total has since come down, it remains stubbornly elevated at above 54,000. Deaths are currently above 1,100 a day, about 42 percent of the May peak of 2,701.
As the number of new cases has climbed, air travel has suffered. Transportation Security Administration screenings at U.S. airports were down 16 percent on July 28 compared with the first Tuesday of the month. Grambling thinks airlines could lose $25 billion of revenue as travelers remain cautious.
Las Vegas casinos, which lost $4 billion of revenue in a three-month-long shutdown in the spring, were just beginning to see some pricing power return to room rates.
Advance booking prices had risen 13 percent week-over-week for the remainder of July and 12 percent for August, according to a July 9 note published by SunTrust Robinson Humphrey analyst Barry Jonas.
That trend has already begun to reverse. Las Vegas hotels have reduced room rates from August through Sept. 18 as the resurgence in infections nationwide slowed efforts to restart the economy.
Average weekend rates for the Bellagio have tumbled 9 percent since reopening, while weekday rates at Mandalay Bay and Park MGM are down 15 percent and 25 percent, respectively, according to company data compiled by Goldman’s Grambling.
Additionally, the Consumer Electronics Show announced Tuesday its January event will not be held in Las Vegas in 2021 but take place online. The event brought more than 171,000 visitors to the city last year.
“It's going to be a long time for that destination market to improve, and every uptick in cases around the country is a step backwards,” Jonas told FOX Business earlier in July.
As casinos brace for the potential slowdown, Nevada Gov. Steve Sisolak, a Democrat, announced Monday that the state was ditching its phased reopening plan for a longer-term approach -- still under development -- that will offer both flexibility to adjust health rules as needed and continuity to help struggling business owners plan ahead.
Nevada reported a 15 percent unemployment rate in June, among the highest in the country, as nearly 225,000 workers found themselves out of a job. The rate peaked at 34 percent in April.
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Sisolak warned that any resort caught skirting the new rules could be forced to close.
“Business establishments who serve unmasked patrons may be closed if it’s a pattern of non-compliance," he said, and "non-compliant resorts could have part or all of their property closed for a period of time."