30-Day Las Vegas Closure Will Be Catastrophic For Local Economy
Las Vegas casinos closed their doors on March 18 following instructions from the Nevada state government. The unprecedented closure is in response to the ongoing COVID-19 coronavirus outbreak.
It is the first time in 57 years that the neon lights of Las Vegas aren’t shining bright. Sin City remained open during the September 11, 2001 terrorist attacks. The show went on after the mass shooting at the Route 91 Harvest Festival in October 2017. The famous strip ground to a halt on November 25, 1963 for the funeral of President John. F. Kennedy.
Nevada Governor Steve Sisolak ordered all non-essential business to cease operations for 30-days. Businesses include all bars, gyms, beauty salons, malls and sit-down service restaurants. Casinos also fall under this category, hence the enforced closure.
Las Vegas Casinos to Remain Closed Until At Least April 17
The health order remains in place until April 17, although experts believe an extension is likely. All 440 licensed casinos are now closed, bringing the complete gambling industry to a grinding halt. Governor Sisolak hopes closing the iconic venues will help contain the spread of the deadly COVID-19 virus.
Some Las Vegas casino already implemented preventative measures. A handful of venues announced temporary closures before Governor Sisolak’s announcement. Others restricted the number of players allowed at poker tables and table games. All are now dark for the first time in 57 years. Nobody knows how long they’ll stay shut.
Las Vegas Major Says An Economic Disaster Looms
Carolyn Goodman, the Las Vegas major, claims “economic devastation” looms because of the closures. Goodman said shutting down casino operations for longer than 14 days is too much for the Las Vegas economy to bear.
Several of the state’s casino corporations have already asked for bailout aid from the US federal government. There is widespread opposition for this, however.
CEO of the American Gaming Association, Bill Millar, is one of those asking the government for help.
“Nevada is the epicentre of the resilient American gaming industry. The federal government must act swiftly to bring relief to our friends, neighbours, and colleague in Nevada and across America whose livelihoods have been severely impacted by these hard but necessary actions.”
Leaseback Deals Set To Be Tested
The popularity of sale-leaseback deals for Las Vegas casinos peaked last year. Several major casinos were sold only to be leased back to the previous owners. Casinos under these deals have to pay astronomical rents despite having no means to do so.
These Real Estate Investment Trusts (REIT) are complex, but have never been tested during a major downturn. That fact is about to change.
“There are lots of unanswered questions and lack of precedent as to what will happen,” said John DeCree the Union Gaming analyst.
Bellagio entered an REIT last November. It sold its real estate to Blackstone for $4.2 billion before leasing it back for $245 million annually. Blackstone also acquired MGM Grand and Mandalay Bay for $4.6 billion. It’s leasing back those Las Vegas casinos for a combined $292 million annual rent.
Caesars Entertainment selling the Rio All-Suite Hotel & Casino to Eric Birnbaum is the latest deal. Birnbaum paid $516 million for the Rio and receives at least $45 million a year in leasing costs.
The Las Vegas casinos mentioned are now in a good financial state with plenty of liquid cash. This means they can afford to meet their rent obligations, but an extended closure will hit them hard.
Almost 300,000 people are employed by the gambling sector in Las Vegas. Most, if not all, are now out of work for the foreseeable future. That’s a lot of people to be out of work in one area at any one time.
Could The Same Be Coming to Australia?
These drastic measures may happen closer to home and do so soon. Crown Resorts and The Star have already turned off half their pokies as part of “social distancing” initiatives. Experts say they need to close completely.
Bondi Beach closed only yesterday because revellers didn’t follow social distancing guidelines. Australian casinos are already struggling because of the lack of Chinese VIPs. A total closure like in Las Vegas could be catastrophic for the industry.