Research Brief: Understanding Casino Operations
Given the uncertainties of coronavirus disease (“COVID-19”), investors are looking to understand the general operating parameters of a given casino operation and fixed versus variable expenses. This document provides detail on the intricacies of casino operations from a revenue and expense standpoint, including gaming revenues, operating expenses, and earnings before interest, taxes, depreciation, and amortization (“EBITDA”). The goal of this exercise is to provide an understanding of how these items may fluctuate between operators, as well as between jurisdictions. Additionally, this document will provide readers with an understanding of fixed versus variable expenses (for facilities that are open), allowing investors to more accurately project the performance of target properties under a variety of recovery scenarios.
The following discussion is based on Global Market Advisors’ (“GMA”) experience of reviewing hundreds of income statements from casino properties across the world. For the purposes of this analysis, GMA focused its evaluation on regional gaming operations in the United States, representing casino operations that have generated between $50 and $700 million in annual gaming revenue. Often, the only access that investors may have to operating income statements would be from those published from Nevada and New Jersey. As will be seen within this document, many departmental and overall margins vary greatly from casinos between these and other states. While many operations may have expenses that lie outside of the ranges presented in this report, the overwhelming majority of regional casinos across the United States likely fall within these ranges.View Full Article