A relatively small brand in the marketplace, Twin River Casino has made its biggest splash to date.
In an attempt to revive the Atlantic City casino market, Twin River has purchased Bally’s Casino and its naming rights in perpetuity. This purchase from Caesars Entertainment does not just signal a new era for Bally’s. It signals a dawning of a new era in gambling’s future as a whole.
Likewise, Caesars moving on from their casino located directly on the Atlantic City Boardwalk is yet another shining example of how gambling companies have new priorities.
In 2017, Caesars Entertainment filed for Chapter 11 Bankruptcy. In its filing, Caesars reported being $18.4 billion in debt with badly struggling Vegas locations. Furthermore, from 2008-2017, Caesars Entertainment invested just $176 million between Bally’s and Caesars Atlantic City. That kind of investment is borderline unacceptable if you are going to own that much real estate in the area.
Once a proud and prosperous gambling hub in New Jersey, Atlantic City has turned sour over several decades. Locations like the Trump Plaza, Revel, and Showboat (owned by Caesars) all failed and shut down. The NJ Division of Gaming even commented on the low level of spending by Caesars Entertainment.
NJDGE said in 2017, “The relatively low level of capital expenditures is, in the division’s view, one reason that the net revenues from Caesars AC and Bally’s remain well below historical”
Twin River will now have the opportunity to rebuild and rebrand itself with heavy marketing, and hopefully, a cash infusion.
Addition By Subtraction: What Other Companies Will Sell-Off Retail Casinos?
This recent sell-off was not unexpected and could even be a trend of things to come. Even when Caesars was at its worst and filing for bankruptcy, they wanted to hold on to all of their casino locations. The idea that Caesars would want to minimize its position in Atlantic City seemed unlikely.
Things have been changing quickly in the gambling industry. Sports betting is rapidly being legalized across the country forcing Caesars to take notice. On Sept. 30, Caesars purchased William Hill for $3.7 billion, acquiring one of the largest sportsbooks in the country. The massive purchase by Caesars shows the direction of online casinos and online sportsbooks being gambling’s future.
Furthermore, MGM Resorts International launched its app (BetMGM) in 2019 and has been extremely aggressive with bonuses and promotions. In addition to MGM, Golden Nugget is another well-known casino brand to launch their app. They IPO’d this past summer after launching their online betting app in February of 2019. These companies are typically known for their luxurious casino locations and being a hub for some of the best entertainment spots in the country.
Bally’s AC was one of Caesar’s least profitable casino locations. While they do have some of the nicest casinos in Las Vegas, Caesars Atlantic City is also hemorrhaging money. Only time will tell when they decide to move away from there too and focus that money on online sports betting.
It is not difficult to envision a world where Golden Nugget, MGM Resorts, or even Las Vegas Sands Corp. begin to trim the fat of retail locations. The COVID-19 pandemic has shown how important it is to have a strong virtual platform. Companies that have struggling retail casino locations could sell their locations and reallocate their assets elsewhere, presumably sports betting.
Virtual Gambling Is Now The Most Important Asset To Gambling Companies
DraftKings (NSDQ: DKNG) has quickly become the industry leader for sports betting without even having a land-based casino. Their presence is strictly online based on their casino and sportsbook. Its user experience is fantastic, they offer some of the top promotions, and fans love to use their product.
Investors have noticed all of these things that consumers enjoy. Their earnings reports show that they do not need physical casinos to compete with the big boys. DraftKings is now over a $20 billion market cap, second only to Las Vegas Sands Corp. (NSDQ: LVS).
The COVID-19 pandemic has had lasting effects on the entire industry. Caesars is just one example of a company that is moving towards a significant online platform. MGM Resorts International has invested a ton of resources into its mobile platform too. They offer the best in industry online sign-on bonus and their user experience is very strong. As states continue to legalize, the resources needed will only increase.
No one can predict what will happen next, especially in this country. The industry’s unpredictability is at an all-time high and gets wackier by the day. Imagine 10 years ago saying that the largest gambling company in the United States would not actually have a casino?
The market and actions of these companies show that this is, gambling’s future. Caesars is preparing for that direction, I’d expect the other major players to do the same.
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