- Nevada’s gaming industry was shut down for over two months at the height of the COVID-19 pandemic.
- Self service buffets have been eliminated during the reopening phase due to heightened health, safety and social distancing protocols.
- A growing number of gaming companies have no plans to bring back casino buffets.
Precisely one month ago I wrote an article considering the viability of the Las Vegas casino buffet in the post COVID-19 world:
Along with that article I offered some odds on when the self serve, all you can eat buffet would return to Las Vegas casinos and which properties would be the first to bring them back. My assessment wasn’t overly optimistic but in the month since I wrote that article the future of the Las Vegas casino buffet has taken a decided turn for the worst.
The latest poorly boding harbinger for the Las Vegas casino buffet came in the form of Caesars Entertainments Q2 Earnings call held on August 6. The call was interesting not only because it was the company’s first since the merger with Eldorado Resorts was consummated but because of some very candid comments on the casino gaming industry, present and future. There’s a lot to unpack here and already there’s at least three articles worth of material in my notebook.
There wasn’t really a ‘money shot’ quote but the overall tone of the conversation was interesting. These thoughts from CEO Tom Reeg are a bit heavy on the business jargon but I’ll provide a translation:
But I think the fear of return of promotional spending in the regional space is completely off the mark. We for a very long time have looked at or have been talked to you about that these subsidies in the business were unnecessarily. All of us, everybody in the sector has gotten a look now, as to what their business looks like without those subsidies. And it’s impossible to argue with the results that we’re seeing. I just saw a Penn this morning, super strong quarter and just the latest in a line of them. You should not expect people running back to promotions that are dilutive to EBITDA.
So, on the one hand if you believe that you believe the people that run the businesses in this sector are morons, because they can see what the business looks like without them. But two, the actives that you would have been worried about in the past in that area, have largely been absorbed by companies like us and Penn and Boyd and others. And those that are left that could behave in that fashion, don’t have enough scale to where somebody like us would need to react to it. So, I think I read a lot about your fears or here questions on fear of promotional return. I think you guys are way off base.
EBITDA is a commonly used financial acronym standing for ‘earnings before interest, taxes, depreciation, and amortization’. More specifically, it represents how much money they’re making from operating their core businesses without concerns of other adjustments to the bottom line. Promotional spending in the casino industry represents the proverbial ‘loss leader’–as in anything that a company does to attract business where they know they’ll lose money.
What Reeg’s comments mean is that the company isn’t planning a return to promotional spending in hopes to keep their properties full. Earlier in the call transcript, Reeg gives a profile of the Caesars customer and indicates that they’re very gaming motivated. Given their strength in attracting customers of this sort and marketing to them via their databases they have no interest in chasing ‘FTA’–foreign tourist arrivals’ since “you really don’t know what you’re going to get.”
The overall tone of the Caesars’ call–and particularly Reeg’s comments–is that the company sees ‘the writing on the wall‘ while many of their competitors don’t. The reality is that what was considered ‘normal operations’ pre COVID-19 may never return. There’s plenty of companies that look to be operating in something of a ‘holding pattern’ just waiting for the world they knew to return. Reeg suggests that many of the components of the Las Vegas experience pre-COVID-19 may never return.
Another takeaway–the ‘old school’ of thought in the casino industry just doesn’t work anymore. That’s the mentality where you can lose money in an operational area as long as it brings traffic into the gaming area. The gaming industry–particularly in Las Vegas–has been moving away from this for much of the past couple of decades and now the COVID-19 pandemic and resulting slowdown in business has made it imperative. Gaming resorts can’t afford to lose money in any operational area.
So what does this mean for the venerable Las Vegas casino buffet as we once knew it? Nothing good. Caesars makes it clear that they’re not going to operate ‘loss leaders’ and the buffet is a classic example. As we noted in our previous article, the excellent monthly newsletter Las Vegas Advisor reported in their May 2020 issue that buffets aren’t planned for Resorts World, Virgin Hotels Las Vegas or the Circa Resort & Casino. The Golden Nugget and Treasure Island aren’t expected to reopen their buffets. The new watchword among properties that have reengineered their buffets such as Wynn Las Vegas and The Cosmopolitan is ‘assisted serve’ over ‘self serve’. In the Wynn website promotional copy for their buffet they promise to bring “the flavors of the world right to your table.” That sounds a lot like a traditional restaurant even if it operates in the part of building marked ‘buffet’.
One month ago, I was of the opinion that some sort of dramatic positive development in the fight against COVID-19 could portent a return to the traditional self service Las Vegas buffet–something like a highly effective vaccine that rendered it an afterthought. Since then, I’ve recalibrated my view significantly. At this point, the self service buffet is untenable due to health and safety risks. Most gaming companies are going to take this opportunity to eliminate it altogether or at the very least ‘redefine’ the buffet experience into ‘assisted serve’ table side dining. This allows greater cost control and makes it much easier to run profitably. It won’t be long before the expectation of a casino having a buffet is gone entirely. Some tenants of the buffet concept may remain–the variety of food for example. That component of the buffet experience is likely part of the insane popularity of food halls in major markets all over the world.
Under the current set of circumstances–the COVID-19 pandemic and the economic challenges it has created in particular–there might not be a place for the self serve, all you can eat Las Vegas casino buffet. A dramatic change in the scope and severity of the virus could potentially improve the future prospects of the buffet but not by much. The corporations who run the casinos know that they can provide a similar dining experience much more safely–and profitably–and the desire for that won’t disappear even if the COVID-19 pandemic does.