The stock market sent that message to the Las Vegas gaming and hospitality industry and to Macau as well on Friday when the World Health Organisation called Omicron “a variant of concern.”
In response, world leaders started implementing travel bans to southern Africa, where the variant was identified, but have since learned that it may have been in Europe earlier.
That dip in the US stock market, especially gaming stocks, continued this week as health experts continue to investigate whether Omicron is more transmissible, invokes more severe illness and evades vaccines.
That will take a few more weeks to know, but it’s already causing jitteriness just when the latest Las Vegas gaming and visitor numbers signal a strong ongoing recovery, and the US permitted overseas visitors starting 8 November, provided they are vaccinated.
The Consumer Electronics Show that had more than 175,000 people from around the world attend in 2019 is slated for early January after a one-year absence.
The timing couldn’t be worse.
The Las Vegas Convention & Visitors Authority on Tuesday announced the city saw 3.39 million visitors pass through in October. This was the most since the pandemic struck the US in March 2020, and led to casino closures for more than two months. While it’s still nearly 8% lower than where it was in October 2019, Las Vegas is nearing a complete recovery just as conventions are returning.
McCarran International Airport saw 4.18 million passengers pass through its terminals in October, the most since prior to the pandemic even though 9% lower than October 2019.
That number was expected to jump since the travel ban was lifted. There were 102,560 foreign visitors counted at the airport, mostly from Canada and Mexico, with the ability to grow since international travel counts were down 70% from October 2019. That’s when British Airways had more than 31,000 passengers, Virgin Atlantic more than 22,000, Korean Air more than 11,000, and KLM nearly 8,000 passengers.
On Tuesday, Emirates Airlines President Tim Clark warned that Omicron could cause “significant traumas” in the global travel industry in December and beyond.
That would erode Las Vegas’ growing gaming revenue and occupancy rates which surpassed 80% for a month for the first time since the pandemic (down from 90% in October 2019). There was 90% occupancy on the weekends and nearly 78% occupancy midweek with the return of conventions, including the Global Gaming Expo.
Nevada set a record in October by making its eighth consecutive month of more than $1bn in gaming revenue. The Las Vegas Strip recorded gaming revenue 30% higher than 2019 at $702m – a figure that is particularly symbolic since it’s the city’s area code. Nevada’s gaming revenue is running 9.2% higher than it was in the first 10 months of 2019.
Corey Padveen, a partner with t2 Marketing International, believes the concerns over this new variant are understandable, because people know how severe the situation can become when “things get out of control,” with the coronavirus.
“Planning for the worst and hoping for the best is probably the unfortunate new normal for an industry that would have previously been looking towards ‘a hoping for the best’ mentality,” Padveen says. While the casinos have positioned themselves to survive better than ever, the root of the business is brick and mortar retail operations, Padveen adds.
“This isn’t 10 years later,” he explains. “It’s all still very fresh. It’s like facing the threat of an attack while you’re still rebuilding the fort.
“The panic is coming from we still haven’t had a full recovery and sense of normalcy despite all trends going up. To see a wall hit so soon after things were starting to look like there was no way but up, that’s where that panic is coming from. You can’t blame people for feeling that way when the alarm bells went off overnight and everybody was hoping December would bring even more success to build off what we’ve seen during the last few months.”
Impact felt further afield
Lawrence Shen, a financial analyst and partner with C3Gaming, said investors aren’t just worried about the impact on gaming and travel in Las Vegas, but the impact on Macau, which is taking far longer to recover.
The CEO of a travel junket company, Suncity Group, was arrested last week and the company has suspended its VIP rooms in Macau. That has hurt Wynn Resorts, MGM Resorts International and Las Vegas Sands, Shen said.
Last week, some analysts said there were indications that Macau would start to open its borders more to visitors to bolster the marketplace.
As for Las Vegas, Shen says investors are most concerned about any border tightening between the US and Canada that will limit travel of high-end baccarat players and wealthier older customers. Those with Asian heritage are culturally more reluctant to take risks with a coronavirus, he adds.
“The Asians in Canada are even richer than in the US and are big gamblers,” Shen explains. “The casinos in Canada have pretty low limits and many casinos in Vegas have benefitted from their high-end play, especially baccarat already, but that might be lost. That’s what the analysts are basing their future evaluations on.”
Many of these Canadians travel to the US during Chinese New Year in February but they might delay their trip now even if borders remain open, Shen points out.
“It’s possible that quarterly earnings from casinos might be lower because of that. That’s why stock market evaluations are going lower.”
“People want their lives back”
Padveen says gaming investors expect travel and gaming to be one of the first spending hits by any new wave of Covid-19. That won’t help Las Vegas if that occurs.
“I don’t necessarily think we’re about a correction but a trigger that’s likely as a result of looking at the worst possible outcome where you’re hoping that is not the case,” Padveen says. “There are governments that are going all in on preventing a spiral and as a result investors think there’s going to be a travel lockdown and hotel shutdown and more.
“I hope some of the news that comes out, as more and more testing and research is done, is more positive because a lot of the reaction is understandably overly cautious.”
Brendan Bussman, a partner with Global Market Advisors, adds that while no one knows much about the variant yet, it’s “probably already” in the US. He calls investors’ views a “cautionary tale of what may come” but time will tell on that.
“The investors see the challenges of when viruses happen,” Bussmann explains. “We’re going to be having these conversations for a couple of weeks since we’re still in the infancy of this.”
While October gaming numbers were strong for Las Vegas, Bussmann believes November will likely be the same when they come out at the end of the month because of concerts, NFL games and Thanksgiving that attracted visitors. Travellers weren’t deterred in coming to Las Vegas over the Thanksgiving weekend despite the emergence of the virus in the media.
“What bodes well for me is seeing on Saturday there was an 18-mile backup on Interstate 15 between Nevada and California,” Bussmann says. “It tells me people want their lives back.”
Buck Wargo is a Las Vegas-based business and gaming journalist. He’s a former reporter for the Los Angeles Times. He has a degree in Middle Eastern Studies from the University of Texas and worked as a foreign correspondent in the Middle East.