Indy Gaming: Are declining Strip room rates during Formula One weekend a yellow flag?
An $800 hotel room during Formula One might seem extravagant. However, a year ago, that room could have cost as much as $1,500. Still, the resort industry expects the Las Vegas Grand Prix to boost revenue.
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Strip hotel room rates for the Nov. 21-23 Formula One Las Vegas Grand Prix are “stuck in neutral,” according to Truist Securities gaming analyst Barry Jonas.
The average room rate for MGM Resorts International Strip properties is $800 on race night (Nov. 23), Jones wrote in a research note to investors that was published Monday. A year ago, those same resorts’ rooms averaged $1,500 on the final night of the Grand Prix. Just two of the company’s Strip properties — Bellagio and Cosmopolitan of Las Vegas, sit along the race course.
“We have been surveying F1 weekend rates for seven weeks now, and rates seem to have stabilized recently with little data to suggest improvements (or deterioration) over that time,” Jonas wrote.
During MGM’s second-quarter earnings conference in July, CEO Bill Hornbuckle raised the yellow caution flag when he mentioned “softness” in early hotel reservations for the race weekend.
Still, the room rate is double of its $400 average for November 2022 when there wasn’t a Grand Prix.
Jonas added that Strip resorts operated by Caesars Entertainment were also experiencing lower hotel room rates than a year ago, down from $600 on race night to $400. In 2022, Caesars was getting an average of $200 on what would have been race night. Caesars has eight properties along the Strip portion of the track, including Caesars Palace, Flamingo, Horseshoe, Paris and Planet Hollywood.
Last year, MGM executives touted the company’s financial success from the F1 event,
which helped the company’s fourth-quarter Strip revenue hit a record $2.4 billion. The race produced “the highest-grossing weekend for hotel revenue” in the company’s history, MGM Chief Financial Officer Jonathan Halkyard said shortly after the checkered flag was waved.
Jonas, in his research note, said MGM expects to see a $30 million loss because of the drop in hotel room rates during race weekend.
“While our survey is just one facet of the market and can change, we note continuing investor concerns around slowing growth amidst tough comparisons,” Jonas wrote.
Hornbuckle has said MGM still expects a strong weekend during F1 despite the declining room rates. He said they expect heavy traffic throughout the weekend at Mandalay Bay and the company’s half-dozen south Strip resorts as the Las Vegas Raiders host the Denver Broncos at Allegiant Stadium that Sunday.
Meanwhile, with work building out the 3.8-mile F1 circuit underway, MGM said it began removing trees in front of the Bellagio fountains Monday to begin construction of the Bellagio Fountain Club, a three-level ultraluxury trackside experience. Unlike a year ago, when MGM cut down the trees in the front of the fountains, the replacement trees are in planters allowing for easy removal.
Two southbound lanes of the Strip in front of the Bellagio will be closed through early December.
Earlier this month, Grand Prix race organizers announced the Ferrari Challenge Trofeo Pirelli, a support race featuring high-performance Ferrari vehicles, would take place in addition to the F1 event and is part of existing ticket packages.
Legislation for a nationwide ban on sports betting called ‘misguided’
Nearly 40 states have legalized sports betting since a May 2018 U.S. Supreme Court ruling set aside a nationwide ban that exempted Nevada.
But two federal lawmakers seeking to change that introduced legislation last week establishing a nationwide ban on sports betting. States where sports wagering is legal would have to apply for a new, three-year limited license with the U.S. Department of Justice.
Based on comments from one Nevada lawmaker and an American Gaming Association (AGA) spokesman, the legislation has less chance of succeeding in Congress than a gambler has in cashing a wager on the Carolina Panthers winning the Super Bowl.
“Pre-empting state gaming regulators by outlawing most forms of advertising and restricting the types and methods by which customers can place bets is a misguided approach,” Rep. Dina Titus (D-NV) said in a statement after the legislation was proposed by Sen. Richard Blumenthal (D-CT) and Rep. Paul Tonko (D-NY).
Titus called the bill "outdated" and "unwarranted."
The legislation would federalize sports betting laws, change regulations covering advertising, end certain types of wagers and frequency of wagers and ban the use of artificial intelligence in sports wagering
According to the AGA, Americans wagered nearly $120 billion legally on sports in 2023, an increase of 28 percent from 2022. Last year, sports betting produced $11 billion in taxable revenue nationally.
AGA Senior Vice President of Government Relations Chris Cylke told ESPN the legislation was “a slap in the face to state legislatures and gaming regulators” who created their regulatory structures.
Blumenthal, the bill sponsor, said efforts to regulate sports betting on the state-by-state level were "faint-hearted and half-baked. That's why we need a national standard.”
Titus disagreed with everything proposed by Blumenthal, saying advertisements by legal sportsbook operators “are essential ways to compete with the illegal market which offers no consumer protection, state tax revenue, or responsible gaming resources.”
Earlier this year, Blumenthal sponsored legislation that suggested using half of a small federal excise tax on sports wagers to fund problem gambling treatment and research. Titus has spent a decade trying to eliminate the so-called “handle tax.”
What I'm reading
🏨 Three Strip casinos operated by Caesars get a new top exec — David Danzis, Las Vegas Review-Journal
Ken Ostempowski, who oversaw The Row in Reno, is the new general manager for Horseshoe Las Vegas, Paris Las Vegas and Planet Hollywood.
🏀 Adam Silver says league, owners 'not quite ready' to discuss expansion — NBC Sports
The commissioner said teams for Seattle and Las Vegas would have an entry-level price tag of $6 billion per team. Note: The expansion Vegas Golden Knights of the NHL had a $500 million entry cost in 2017.
🏇 As race days decline, tracks bet big on casinos — Noah Raess and Joshua Bowling, Searchlight New Mexico
The relationship between slot machines and race tracks has come under increased scrutiny. “Nevada used to have a healthy horse racing industry. It no longer exists thanks to mechanized gambling. Slot machines will not save the horse industry. They will replace it.”
Boyd approved for tribal casino deal in Virginia
Boyd Gaming is on the verge of adding an 11th state to its casino portfolio. Last week, the city council in Norfolk, Virginia, approved a resolution for Las Vegas-based Boyd to partner with the Pamunkey Indian Tribe on a long-stalled casino project along the city’s waterfront.
Boyd plans to build a temporary casino that will open in November 2025 while a permanent casino and resort is planned to open nearly two years later. Financial details were not disclosed. Boyd said the project would include a 200-room hotel, food and beverage options, and a casino with 1,500 slot machines and 50 table games.
The project has been under consideration by the Pamunkey Tribe for almost 10 years. Virginia has three casinos, including a temporary casino in Danville operated by Caesars Entertainment.
This is not Boyd’s first experience working with an Indian tribe. Boyd opened the $500 million Sky River Casino near Sacramento in 2022 with the Wilton Rancheria Tribe and oversees the resort through a management contract. Boyd is advising the tribe on an expansion project.
News, notes and quotes
☀️ Agreement will help move MGM Resorts Strip properties to 100 percent solar
MGM Resorts International signed a power purchase agreement with Escape Solar that will double the company’s access to solar electricity. MGM now uses solar power for 90 percent of the total daytime needs at 11 of its Strip properties and the 25-year agreement will expand the coverage to 100 percent by 2030. The project will be built in Lincoln County and would produce enough renewable electricity to power more than 28,000 U.S. homes. Operations are expected to begin in 2026.
🏆 Annual AGEM awards to honor Sutherland, Nelson-Kraft
Konami Gaming CEO Steve Sutherland and Lori Nelson-Kraft, senior vice president of public affairs for the Formula One Las Vegas Grand Prix, are the recipients of the Association of Gaming Equipment Manufacturers annual awards that will be handed out at the Global Gaming Expo in October. Sutherland has been associated with Konami for 25 years and spent three decades in the gaming supplier sector. Nelson-Kraft has been a spokesperson for the gaming industry through her roles at R&R Partners, Red Rock Resorts and the Las Vegas Convention and Visitors Authority.