Hey guys I've started to be interested in real estate and especially gaming/casino business. I heard people talking about a "probability spread" being a key value driver of the gaming business. I assume its like the expected % of (win-loss)? Hope someone could shed some light on this. Cheers!
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I cover gaming. Never heard the term probability spread. In order of importance, would focus on:
1) capacity (number of slots/tables in a region, also includes competition). Look for new casino license approvals
2) demographics of customers
3) taxes. What cut of GGR does the state take?
4) leverage. If you stack operating leverage on top of financial leverage, you are gonna make a shitton of money when GGR is going up. Careful, this cuts both ways
5) macro. Gaming is cyclical and discretionary. Currently, GGR is dropping across the nation. Bad time to be a regional casino.
--- big step down ---
6) everything else
Thanks a lot cries, very helpful! Just curious is do you guys use metrics like revenue per table/slot or anything like this to do comps?
Im more of a big picture guy. If you have a good location, limited competition in your region, and you spend capex on decent-looking slots then you will have good GGR/position.
For more info on revenue per slot/table, you need to go further down the rabbit hole. Look at companies like Aristocrat, SGMS, IGT, etc (all are public). May wanna go back and look at SHFL as well, which was acquired, but focused more on table products (added value by increasing hands per hour).
Can you explain to me in more detail #4? I don't understand how a casino operator would make more money if they're operating + financial leverage is high and the GGR is going up. Or are you talking about an investor? Either way, can you clarify please.
Can you explain to me in more detail #4? I don't understand how a casino operator would make more money if they're operating + financial leverage is high and the GGR is going up. Or are you talking about an investor? Either way, can you clarify please.
I also never heard of probability spread before. Cries is right with the topics he mentions. The gaming industry has changed as almost every state is hungry for tax revenue and new casinos are being approved everywhere. Bigger pieces to understand is competition, demographics, taxes, etc. Also understanding components such as how the unions work (ie. Icahn and Trump Taj Mahal)
If you are interested in understanding gaming and various economic factors, just take a look at whats happening to Atlantic City. Take a look at Revel. There are plenty of good articles out there.
Thanks! Will go check :)
First, you and @"Cries" are completely correct. And I have no idea what probability spread is (maybe one of the PhD quants sitting in the basement of casinos analyzing the games themselves talk about it?) and I've been involved in gaming pretty in depth, in US and euro casinos both land based and online. They can be ridiculously lucrative but I'm not sure if the time has passed. In the US, too many jurisdictions have allowed gaming. Vegas and AC used to be the monopoly. It's a different world now. When I was involved in gaming in depth 10+ years ago it was a monopoly for land based and a wild west land grab in online.
If you all want a laugh, a few of us put together a group to acquire The Revel last autumn through this past summer. At first glance it seemed like the asset could be acquired and turned around, especially at the near zero $ acquisition cost people were talking about. We spent a decent amount of time and money digging into it and at the end of the day it was all about the macro scene that Cries described. It didn't matter if we paid $1 or $1 trillion to acquire the asset, it was all about the surrounding states that had recently allowed gaming-PA, NY, MD and so on. You could be the greatest casino/hotel operator on the planet and you couldn't make it work. Macau works because you have >1B people wanting to gamble there. AC used to work because there was no competition other than flying 3 hours from the east coast to Vegas.
There are tons of micro KPI's for gaming, but the macro factors trump them everytime.
Would love to be able to look at those kinds of deals. There have been a few lucrative Ch11s in gaming in the past few years, but I was still in school. Centaur & [possibly] Affinity stand out in my mind - should have looked at those instead!
isn't Macau like the only thing that matters for these guys anymore? serious question...
Cries, I'd love to hear you opine on AC, this trend of cities getting casinos, sports betting expanding and the over supply of gambling in general.
Revel is so poorly designed it is shocking. And Philly just awarded another casino license. AC is toast.
That was one of the biggest problems with The Revel-every casino makes you walk through the casino floor to get anywhere for a reason (your room, a restaurant, bar, whatever) and they built it to make it difficult to find the casino floor. It was about $150MM+ to just unfuck the general layout and then they hadn't built another 10 or more floors of rooms, and I forget the exact numbers but a mid 8 figure sum to build out the rooms. Too bad. It could have been great. The original developers just didn't realize that you can't build a $2.3B, 1600 key hotel with a casino on the side in AC. And they flopped the opening and could never recover. It was a pretty good pool party though.
Wow, thats interesting. I have been fairly interested by the Revel story lately. Brookfield bought it at pennies and then backed out. The issue is you got a $2 billion+ casino sitting empty.
Call me an optimist, but I think Revel could be saved at the right price and with improvement of the city. You're def right about the layout, its pretty bad. I hate the escalators, they take forever and its pointless. However, Revel's problems extend way beyond the casino. AC is just terrible. Las Vegas diversified and became an entertainment hub. If AC is able to do the same, maybe Revel has a chance. If this doesn't happen that Revel is doomed.
Macau and Baccarat is all that matters. Gaming in the U.S. has been trending downwards for some time.
I interned in S&T at a boutique that only covered gaming. Learned a ton about the industry. The biggest piece of doo-doo out of everything is Caesars (CZR). I like MGM and WYNN
my mom made a killing off of wynn the last couple years
The stock or at the tables?
WYNN is my favorite Vegas property and they have a great presence in Macau as well. I think Steve Wynn is the best CEO out of all the gaming companies. I like Wynn a lot, by far my favorite place on the strip.
Besides the fact that AC is the worst ghetto imaginable. Beach is shit. You can gamble anywhere. I like the Bogota, but it is nice and off the strip.
Its just that there was no other game in town, so people were forced to gamble there.
Of course everyone will abandon AC when other properties open up in nicer & more convenient locations.
.
I think Wynn has the purest exposure to Macau VIP Bacc. If I was gonna short one equity in the gaming space, it would be Wynn because it actually has concentrated exposure to a catalyst on the downside.
Again, still toying with the idea. Its reasonable to believe that growth in casual gaming may offset the declines in VIP, so its not exactly a no-brainer.
However, I think its safe to say the rapid growth we saw over the past few years is gone. More capacity continues to come online as well, which helps the short thesis.
http://www.wsj.com/articles/police-launch-money-laundering-probe-into-m…
Hadnt put on my WYNN short yet. Missed this headline :(
Oh well
=)
I can offer as one example https://catscasinos.co.uk/ This casino service is relatively young, so there are many features that are paid in other casinos. There is also a blog section. You can find many relevant reviews on other legal casinos as well as monitor top services.
Thoughts on the casino being built at xfinity in philly? Seems like it will be a very lucrative spot
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