- Boyd Gaming has announced the sale of the Eldorado Casino in Henderson, Nevada to DeSimone Gaming.
- DeSimone Gaming currently owns the Railroad Pass Hotel & Casino just over the Nevada State Line near the Hoover Dam.
- The Eldorado is one of three Boyd Gaming properties that has not reopened since the shutdown of the gaming industry in March.
For the overall well-being of the gaming industry there are few better deals than a win-win transaction like Boyd Gaming’s sale of Henderson’s Eldorado Casino to Railroad Pass owners DeSimone Gaming. The Eldorado was one of three Boyd properties in Southern Nevada to not reopen after the COVID-19 forced shutdown of the state gaming industry ended in early June along with the Eastside Cannery and Main Street Station. You could see Boyd unload the Eastside Cannery as well though my thinking is that they’d like to keep the Main Street Station in their portfolio. According to Las Vegas Review-Journal article by business reporter Bailey Schulz the Eastside Cannery is considered part of Boyd’s ‘locals facing’ business while Main Street Station is not.
This is an important distinction, though admittedly a slippery one within the Las Vegas market. In some circumstances it’s tough to see where the ‘locals market’ ends and the ‘tourist market’ begins. The currently shuttered Palms Hotel & Casino is a good example–for years, the property tried to cover a number of angles in their marketing simultaneously positioning themselves for a ‘hip, rock&roll crowd’ while pitching their slot payouts and sportsbook to locals. For a long time, it sort of worked. Then again, they’re currently one of the few major properties in town that has yet to reopen (and don’t be surprised to see Stations Casinos/Red Rock Resorts unloading the Palms sooner rather than later).
The LVRJ’s Bailey Schulz reported that Boyd’s locals segment is down significantly from a year ago:
During the third quarter, Boyd’s Las Vegas locals segment — which includes the shuttered Eldorado and Eastside Cannery but not Main Street Station — reported $171 million in revenue, down 20 percent from the year prior.
This isn’t quite as easy to write off as a byproduct of COVID-19 as has been the case with broader industry trends. The locals market throughout the gaming industry has been much quicker to bounce back than the tourist market. Here are the most recent revenue figures from the Nevada Gaming Control Board:
One of the first thing that jumps out at me is that Boyd’s 20% decline in the locals market is pretty much in line with macro trends throughout Nevada. The statewide decrease from October 2019 to October 2020 is 19.5% and the fiscal YTD decrease has been 22.54%.
Here’s where things get interesting–the entire loss for Nevada’s gaming industry in October came from Clark County which experienced a -23.57 yearly decline. Drill down a bit and you can make a compelling case that the sub-elements of Clark County’s gaming loss are in inverse order to each area’s exposure to national and international tourism, particularly conventions and business travel. The Las Vegas Strip was down -30.22% but if you drive up I-15 to the border town of Mesquite you’ll see a different picture–their gaming revenues were *up* 6.81% for October.
I’ve spent plenty of time in Mesquite–a quick jaunt from St. George, Utah–and really like the area. That being said, it’s not exactly a magnet for international travelers. It is, however, very attractive to residents of Utah and Arizona looking for a quick getaway by car. This has been the strongest area of the travel and tourism market during the pandemic for obvious reasons–it’s not hard to ‘socially distance’ in sparsely populated Southern Utah/Eastern Nevada.
More interesting numbers–outside of Clark County every reporting area of Nevada experienced an *increase* over October 2019 ranging from a fractional increase in Elko County not including Wendover (0.42%) to a whopping 21.98% increase in North Lake Tahoe. South Lake Tahoe also enjoyed a double digit gain (10.87%) and the inference is that both sides of the lake are a perfect getaway for Northern California residents who are especially likely to need one due to the state’s increasingly draconian lockdown policies.
LOCAL CASINOS BENEFIT FROM A SMALLER–AND LOCAL– CORPORATE STRUCTURE
At least within the state of Nevada, there is probably more demarcation between ‘locals’ and ‘non locals’ properties than ever before. There just aren’t a lot of them that attract a sizable number of fly-in tourists *and* locals. Maybe the Red Rock Resort in Summerlin and possibly places like the South Point or Boyd’s flagship property in Las Vegas, The Orleans still work both sides of the street but my thinking is that the locals market is simply a different type of business than the ‘fly-in’ tourist market. Increasingly, gaming companies will have to decide if they want to be one or the other. This distinction probably doesn’t exist to a significant degree outside of Nevada but within the state is definitely important.
Another thing you’re going to see in the coming decade is that companies will have to decide whether they’re going to focus on Nevada or the rest of the United States. This probably won’t be quite as pronounced as the locals/non locals dichotomy but the demands of running a casino in Henderson or Summerlin are dramatically different than running one in Iowa or Indiana. This dynamic is why you’ll likely see Stations Casinos unload The Palms in the near future–it’s not a good fit in their portfolio of locals facing properties.
If this is true, Boyd Gaming is at something of a ‘crossroads’. Back to the LVRJ article–Las Vegas gaming and hospitality consultant Josh Swissman is quoted about Boyd’s decision to sell the Eldorado:
“It’s not a complete, full-service property like every other property they own. They’re probably realizing that they’re able to retain and maintain a good portion of their database and gaming revenue (without) those shuttered properties from other properties around town that are open.”
Swissman’s observation isn’t completely correct–Boyd still owns the Jokers’ Wild Casino which doesn’t have a hotel and offers limited dining options–but otherwise he’s right that the rest of Boyd’s portfolio now has similar operational scope and scale. Then again, it wouldn’t surprise me to see Boyd unload that property in the near future. In the longer term, Boyd might benefit from limiting their Las Vegas operations to downtown along with The Orleans and Sam’s Town (and maybe the Gold Coast). Boyd’s ability to market to Hawaiian and Polynesian markets is legendary and there’s no reason for them to ‘fix what ain’t broke’ but I’m thinking that having less capacity in Southern Nevada might translate into greater synergy and bigger profits.
THE LOFTY POTENTIAL OF HENDERSON’S WATER STREET DISTRICT
Turning our attention to the Eldorado, Joe DeSimone’s ‘day job’ of real estate sales and development is probably a huge component of this deal. He could have a ‘big picture’ goal of revitalizing Henderson’s Water Street District with a spiffed up Eldorado (I still think they’ll go with a new name) as the centerpiece. I’m not sure what he already owns in the area but I’d be willing to wager that within a few years you’ll see DeSimone’s name on a number of non-gaming related development projects in the Water Street District. In the LVRJ article on the sale, Brendan Bussmann, director of government affairs for Global Market Advisors, cited the potential of the Eldorado and surrounding area:
“There’s an opportunity within that market to further develop that asset and create that niche within that portion of Henderson. It’s good to see somebody who has a local interest (taking over the property).”
If Joe builds some swanky loft condos on Water Street I’ll move down there. Just sayin….
There’s already quite a bit on Water Street but I’ve always had the vibe that the area could be much more. Maybe somewhere between Downtown Las Vegas and what is now known as Downtown Summerlin. I really like the eclectic mix of businesses on Water Street which include a taxidermist and muffler shop in addition to coffee shops, restaurants, pubs and gaming. You don’t want to lose what makes the area unique but at the same time there’s a lot of potential to make it into something that could bring in new residents/shoppers/diners/gamers/taxidermy enthusiasts from all over the Las Vegas Valley.
I’ve always loved the Henderson/Green Valley area and have ended up living there for most of my on and off time in Las Vegas. As Henderson has grown into a viable city in its own right the Water Street area has always intrigued me for the potential it represented to add an ‘urban core’ into one of Southern Nevada’s quintessential suburbs. Hopefully, DeSimone has a similar vision.