As the world begins to recover from the Covid-19 pandemic and economies start to reopen, there may be room for a reshaping of the global casino industry through mergers and acquisitions and reshuffling of shuttered assets.
Throughout the crisis, the gaming, hospitality, and tourism industries have likely been hit the hardest and will have some of the greatest challenges in recovery depending on the region of the world. In the United States, local gaming markets have recovered more quickly than major destinations such as Las Vegas, Macau, and Singapore, which rely heavily on non-local tourism and are not designed for the regional market. While the industry continues to recover, it brings to light the challenges that operators face in both the short and long term. It also brings about innovation through an understanding of how these changes in the market have caused disruption that can provide additional opportunities.
Balance sheets have been hammered because of continued strains on income, and development projects have been shelved to maintain sufficient cash flow since the beginning of the Great Shutdown. Operators have also had to shed expenses, some of which will likely never return even when the industry returns to normal, and even if that is still a few years down the road. However, this brings opportunities for potential shifts in the industry including the opportunity for mergers, acquisitions, and other new market opportunities being put forward as governments look to new sources of revenue for the post-pandemic world.
As casinos around the globe have reopened, not all of their assets have reopened, providing opportunities for acquisitions by other operators that may want to purchase these shuttered assets. This could come from either existing operators that are trying to gain access into markets they previously desired, or create a bigger footprint to support their existing operators. There is also the opportunity to bring in new operators that look to build a veteran team of leaders from around the industry as new companies have been formed.
One of the most recent examples of M&A comes from the transactions as part of the Caesars Entertainment merger in the United States. Because of individual market considerations, Caesars and Eldorado Resorts were forced to jettison some assets to meet regulatory challenges, as well as to raise additional cash. The greatest beneficiary of this has been Bally’s Entertainment, formerly Twin River, that has seen its portfolio grow exponentially.
Recent news of a potential sale by Las Vegas Sands Corp. of its Las Vegas assets – The Venetian, Palazzo, and Sands Expo – has caused quite the stir in the industry at a potential value of $6 billion, per media reports. While any potential sale is still pending, the structure of a potential deal to a REIT or another operator would be a major shift in the company’s current portfolio. While news of the potential sale has raised questions regarding the company’s commitment to the U.S. market and its desire to focus on Asia, this news seems premature as Sands continues to make expansion overtures in potential future markets from New York to Texas.
Prior to the pandemic, other potential overtures were made into Crown Resorts. Some of these initial offers came from major operators in Wynn Resorts and Melco Resorts. This was prior to Crown’s recent regulatory struggles, as the investigation continues into its past compliance issues and potential licensure for its Sydney casino. Analysts at Credit Suisse have suggested a potential merger with Star Entertainment in a “better together” approach.
Other potential new opportunities will abound in Japan as it still works through its process for its first three integrated resorts. Southeast Asia remains a strong potential opportunity for some operators, depending on the existing or potential regulatory structure. Other markets will likely emerge as governments realize that gaming is an economic engine that can serve as a strong resource for additional development through this form of entertainment. Additionally, with expansion areas of online gaming and sports betting in the Americas and Asia, there are further opportunities for M&A activity, as seen most recently between Caesars Entertainment and William Hill.
While the gaming world is beginning to emerge from the throws of the Great Shutdown, this is also likely the beginning of further opportunities for expansion, mergers, and acquisitions. Anytime there is a major disruption in a market, it provides the opportunities to embrace the change, innovate, and push forward a new model. As stronger operators gain an ability to succeed and emerging operators grow in various ways, the only option is to survive and thrive or face extinction.
Brendan D. Bussmann is a Partner and Director of Government Affairs with Global Market Advisors (GMA). GMA is the leading provider of consulting services to the gaming, entertainment, sports, and hospitality industries.