Steve Gallaway: Regional and tribal casinos to lead US industry recovery

Steve Gallaway Global Market Advisers casinos reopening
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As casinos across the US start to resume operations, Steve Gallaway, managing partner at Global Market Advisers, discusses what form recovery may take and looks at some of the challenges facing operators.


Casino Review: As casinos in the US begin reopening, what kind of shape will recovery take?

Steve Gallaway: We expect the recovery to be slow, but ultimately get back to normalised pre-coronavirus levels once a vaccine is found. However, assuming that point is 12-18 months away (perhaps more), we expect the regional and tribal casinos to experience a far quicker ramp-up than the Las Vegas strip and other destination markets. Given the need for social distancing and the likely hesitation on a large part of America to venture outside of their homes except for essential items, I think regional gaming will ramp-up to 70 percent of pre-coronavirus levels before the end of the year. The Strip will likely be much less.

Due to restrictions on large groups, many companies’ moratoriums on travel, and people’s overall hesitation to travel, I believe the group business will be one of the last to recover. I think we will also see a more permanent change of businesses allowing people to spend more time working remotely, and business travel being reduced in the long-term due to strong advances in technology that have allowed net meetings and online collaboration on work products to be far more effective than in past years.

CR: In terms of reopening plans, what are some of the factors US operators will need to take into account?

SG: US gaming operators are very well positioned to enforce and implement policies that respect social distancing and other health related items as they relate to COVID-19. Casinos are already large operations with the country’s best security and surveillance forces, P&Ps in place that will be adjusted for extensive cleaning and sanitation measures, and some of the leading edge HVAC systems that allow fresh air to be introduced into a building multiple times per hour.

CR: Regarding social distancing, what do you think will be the new normal going forward and how will amenities such as buffets be affected?

SG: In the long term, after a vaccine is found, we may likely never see buffets return to being a standard in casinos. These venues generally lose money and can be very difficult to manage. More and more operators have been finding reasons to not include them in their building plans and I suspect many will never come back into operation.

CR: What are some of the strategies operators could use to attract visitors once they resume operations?

SG: For the Las Vegas strip, the key for operators will be to cut parking fees, reduce resort and F&B fees, and make the customer feel welcome again. They must give value for the dollar and leave them enough money in their pocket to go have fun in the casino. The right company policies and well thought out marketing tactics and offers can make this happen. For the regional casinos, it will be important to convey the measures the casino is taking to ensure a clean and sanitary operation that respects their host state’s COVID-19 social distancing requirements. In addition, like the Strip, sending the appropriate offers and messaging will be key as well.

CR: From a manufacturing point of view, how will the crisis affect operators’ investment in new slot machines, particularly given that casino floor space is likely to be reduced for the present? Additionally, how might the leased market be affected?

SG: This will have a similar impact as in past economic downturns. Due to revenues and profits being lower, less money will likely be spent on capital projects, such as new slots. For the leased market, those machines that perform well historically will be left on the floor but for those that have been below the floor average, operators will be more likely to have them removed.

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