Absence of international visitation will prolong the Las Vegas COVID-19 recovery

Las Vegas’ McCarran International Airport, the nation’s ninth-busiest travel hub, recorded just 70 total arriving and departing international passengers during June. All of them were coming from, or going to, Las Vegas and Calgary, Alberta, Canada on Calgary-based WestJet Airlines.

Granted, compared to April and May – when the total combined number of McCarran’s international passengers was zero – 70 Canadians amounted to a boom in foreign visitation to Las Vegas in the wake of the coronavirus pandemic.

With all due respect to Calgary, however, that international passenger figures neatly encapsulates the troubles that the Las Vegas gaming and tourism industry faces during a protracted and painful recovery from the financial impact of COVID-19.
Most analysts believe the nation’s largest casino market could experience 18 months of diminished revenue figures on both the gaming side and non-gaming areas of the resort business.

The past few weeks saw cancellations of the Global Gaming Expo and the Consumer Electronics Show, both of them huge conventions that draw large international contingents.

McCarran’s international airline terminal is currently a ghost town. Foreign travel bans and mandatory quarantines, such as the 14-day isolation imposed by Canada on  passengers deplaning from flights originating in the U.S., have cost the Strip its international customer base.

Last year, Strip casinos accounted for $6.587 billion of the state’s $12 billion in pre-tax gaming revenues. More than $1.05 billion of the Strip’s revenue total came from high-end baccarat play, a game which primarily attracts customers from Asia.

Without international flights – including those foreign customers shepherded to Las Vegas on casino company private jets – the baccarat business is currently as barren as the Mohave Desert along Interstate 15.

During the 27 days casinos were open in June, Las Vegas Strip baccarat tables collected $46.5 million in pre-tax gaming revenues, a decline of 70.3% compared to a year ago.

“Las Vegas is inevitably going to take longer than regional markets to recover due to its relative exposure to international customers, domestic airlift, and group meeting business,” Union Gaming Group analyst John DeCree said in a research note.

International airline passengers accounted for more than 3.8 million of McCarran’s record 51.5 million travelers in 2019. Through June, the airport’s international business is down almost 63%. There is little insight to be had on when that trend might reverse itself.

McCarran saw just more than 1 million total travelers in June, a 76.6% dropoff from the 4.4 million passengers that came through the airport in June 2019.

Strip resorts are also losing out another customer base – domestic visitors attracted by luxury hotel rooms, celebrity entertainment, high-end dining, retail offerings, and large conferences and business meetings. That combined segment contributed more than $12 billion in non-gaming revenues in fiscal year 2019, more than 60% of the overall revenue total.

For now, much of the non-gaming business is limited or non-existent due to state-mandated coronavirus health and safety protocols and social distancing guidelines. Showrooms and theaters are closed, Las Vegas resorts are limited to 50% capacity in hotels and on the gaming floors, and restaurant and retail offerings have been sharply reduced.

MGM Resorts International CEO Bill Hornbuckle was asked on Wednesday’s second-quarter earnings conference call when he believes the showrooms at his company’s 10 Strip resorts and the T-Mobile Arena will be welcoming back headliners and Cirque du Soleil. (The Montreal-based entertainment company is going through a bankruptcy reorganization.)

Smaller lounges could open with a week or so, but large productions, such Cirque du Soleil’s “O” show at Bellagio, could take three or four weeks to re-boot. Hornbuckle said, however, “you can’t necessarily do it on 50%,” referring to the capacity restrictions. “I think you’re going to have to wait to see a full recovery (from COVID-19) for T-Mobile to host 20,000 for – pick your favorite artist,” he said.

Hovering above the Las Vegas Strip have been Southern Nevada’s COVID-19 statistics, which spiked upward in the weeks following the July 4th holiday. Nevada recorded 1,264 new cases of COVID-19 on Friday, well above the daily average of 986 cases over the preceding week.

Hornbuckle said coronavirus headlines have a “meaningful impact on booking trends and cancellations,” but that the bottom line for the Strip’s recovery is “dependent on the return of conventions, entertainment, and significant air travel.”

A somewhat blunter take was that of Stifel Financial gaming analyst Steve Wieczynski, who offered this sobering assessment: “The Strip certainly has the longest of long roads back to normal.”