Steve Gallaway

Research Brief: U.S. Senate Judiciary Committee – Protecting the Integrity of College Athletics

Today, the United States Senate Judiciary Committee held a hearing titled “Protecting the Integrity of College Athletics.” The full committee, chaired by Senator Lindsey Graham (R-SC), heard testimony on two major topics in college athletics, Name Image Likeness (“NIL”) and sports betting. These are two issues that, while extraordinarily important in college athletics, the NCAA clearly lacks the proper education to understand their true impacts. The hearing was divided into two panels with a total of seven testimonies on these two major topics:

Panel I: Name Image Likeness
• Dan Radakovich, Athletic Director, Clemson University
• Professor Matt Mitten, Executive Director of the National Sports Law Institute, Marquette University School of Law
• George Wrighster III, Former Member of the National Football League Players Association (“NFLPA”) Board of Representatives
• Dr. Mark Emmert, President of the National Collegiate Athletic Association (“NCAA”)
• Ramogi Huma, Executive Director of the National College Players Association (“NCPA”)

Panel II: Sports Betting
• Bill Miller, President and CEO of the American Gaming Association (“AGA”)
• Heather Lyke, Director of Athletics at the University of Pittsburgh

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Strip Reset: COVID-19 is definitely challenging, but does the crisis present opportunities for a Vegas makeover?

Las Vegas soared until recent years, but we’ve reached the tipping point, where it’s necessary for the Strip to redefine itself again. Las Vegas is like no other place in the world. It’s the entertainment and sports capital of the world. It has the most amazing resorts. It just needs to remember our industry’s roots, redeliver on customer service, and provide value.

Covid-19 has devastated the industry and the greater Las Vegas economy. With the resulting industry shutdown, the city must take the opportunity to develop a strategy to reopen, reinvigorate and recapture its guests.

For the first time in well over a decade, both Caesars Entertainment and MGM Resorts, which between them operate 18 Las Vegas Strip resorts, have new leadership teams. These teams are comprised of seasoned casino industry professionals—not outsiders from professions other than hospitality—who have the ability to make these changes.

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Research Brief: PASPA U.S. Sports Betting Two Years Post Repeal

Two years ago, the Supreme Court of the United States made a historic decision in Murphy v. NCAA (National Collegiate Athletic Association), ruling on the constitutionality of the Professional and Amateur Sports Protection Act (“PASPA”). In overturning PASPA, the Supreme Court allowed sports betting to spread across the country with active sports betting now in 18 states. There are eight other jurisdictions that are in the process to go live in the near future, including North Carolina, which is tribal; Tennessee and the District of Columbia, which have regulations completed; Washington, Virginia, and Puerto Rico, which are currently in the regulatory phase; and South Dakota and Maryland, where sports betting will be on the ballot this November.

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Research Brief: Japan’s IR Opportunity

Given these unprecedented and uncertain times, many questions continue to be raised as to how the process of integrated resorts in Japan may be affected by the ever-changing events surrounding the coronavirus (COVID-19) pandemic. As seen by government actions around the globe, this virus has not only affected Japan, but the rest of Asia, the United States, the Americas, and the world. China is experiencing a second wave of the virus not only in Wuhan, which just recently updated its case counts, but throughout the country. This has extended over the past few weeks to other jurisdictions such as Hong Kong, which just extended its lock down by 14 days, and other parts of Asia that were not initially hot spots but have extended as conditions have changed.

Japan’s integrated resort selection process has come into the crosshairs between numerous issues including the virus, the now-2021 Olympics, the upcoming World Expo in 2025, and the microcosm of Japan’s political process. While tourism has been halted across the globe, Japan will once again be on a path to achieve the tourism goals set by Prime Minister Abe; goals which are achievable with the introduction of integrated resorts once the pandemic subsides. The robust opportunity remains available for Japan to reach these goals and bring in tens of billions of dollars in investment between the three licenses, as well as job creation and other economic benefits that go along with them.

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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.

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The China Syndrome: Why the PRC’s impact on gaming throughout Asia is dependent upon many issues

The People’s Republic of China (PRC) continues to emerge as an economic and political superpower in the world, and its actions have a direct influence on the gaming market in Asia. This goes
well beyond the borders of Macau, SAR (Special Administrative Region) that nearly 20 years ago opened up for the first time to foreign casino operators beyond Stanley Ho’s monopoly.

The reach of the PRC permeates both economically and politically into key emerging markets such as the Philippines, Cambodia, Vietnam, South Korea, and other markets throughout the Far East (including Northeast and Southeast Asia).

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The Evolving Casino Marketing Landscape

Twenty years ago, there was much talk in the gaming industry of how to engage GenXers, and the potential value of this segment. As GenX is only now becoming a meaningful contributor to the industry, this conversation has now evolved into the current hype around millennials.

What allowed GenXers to become gamers is simple: they began to acquire the two key items that people need to gamble—time and money. As millennials age, we will see them gravitate toward casinos gaming as well. While the demographics of casino participation have been little changed for a generation, there have been material changes in products, channels and, importantly, methods of engaging with casino patrons.

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Research Brief: Japan IR Timeline Update

Late last month, many stakeholders following the Japan Integrated Resort process believed they were thrown a curve ball, following reports stating that the process would be delayed by a year without the appointment of the Casino Management Commission and other cabinet and ministerial positions. However, the delay will likely not be as long as initially thought but would only be a minor delay in the marathon for integrated resorts in Japan.

First and foremost, this process is still in its infancy. While stalwarts of the process have been trying to get legislation passed for over twenty years, the race continues to move at a moderate pace as the government begins its official process to form the Commission and the 300-plus items that still need to be officially decided. It was thought that the Commission would likely be appointed before the end of the current regular session of the Diet. However, this part of the process has been delayed because of the upcoming elections that have been planned for the Upper House of the Diet. While it has not been confirmed that a double election would occur in July 2019, there is also the potential that a snap election in the Lower House could be held at the same time.

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Macau: The Future Beyond the VIP

Fifteen years ago, on May 18, 2004, Las Vegas Sands Corp. opened Sands Macao and changed the course of casino gaming in the region.

Macau was once considered a secondary gaming market that catered to a small base of customers from Hong Kong and Guangdong, China. However, Sands Macao and subsequent entrants demonstrated that by providing high-quality gaming, dining and lodging environments, markets will respond.

In the case of Macau, markets responded enthusiastically. In 2005, the city’s casinos generated $5.9 billion in gaming revenue, and by 2018, the industry had generated $37.9 billion.

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