When the owners of Encore Boston Harbor and MGM Springfield made plans for their Massachusetts casinos, they anticipated that it would take some time for the new properties to reach their economic potential. What the companies couldn’t have anticipated, however, is that a global public health scare would threaten business in some of their most important markets.
Businesses and investors around the world are trying to reckon with the extent of the economic damage the novel coronavirus outbreak will bring. But Wynn Resorts and MGM Resorts are among the US companies that have already felt it.
Both own properties in the Asian gambling hub of Macau, where visits have slowed following an all-out two-week casino shutdown last month that cost operators millions of dollars daily. And any decline in leisure travel or conference business could hurt the companies’ interests in Las Vegas and other US destinations.
“A significant portion of our US business relies on the willingness and ability of premium international customers to travel to the US, including from mainland China,” Wynn Resorts said in a recent filing with the US Securities and Exchange Commission. “As such, our Las Vegas Operations and operations at Encore Boston Harbor may also be adversely impacted.”
Encore, which opened last year, and MGM Springfield, which opened in 2018, have both been underperforming revenue expectations in the early going. Both had been among the weaker properties in their companies’ portfolios in recent quarters. And both have seen leadership changes as their companies try to improve results.
But industry observers say there’s been little sign at this stage in the coronavirus crisis that the casinos’ parent companies will lose the ability to carry out their plans for the facilities.
Though gambling companies acknowledge that they can’t know the extent of the disruption that coronavirus will cause, they say they are in a strong financial position to weather a storm. Analysts say both companies have a lot of cash that they can use to help them during a downturn.
Problems elsewhere could actually make regional properties like those in Massachusetts more of a priority for the companies, according to New Jersey casino consultant Alan R. Woinski, president of Gaming USA Corp.
“There’s always an impulse: If you’re not making money somewhere else, you do something at one of your other properties to make it back,” he said. Woinski noted that Massachusetts gambling isn’t going to make up for losses elsewhere by itself ― Wynn told investors it was losing about $2.5 million per day during the Macau shutdown ― but it could help to reduce the pain.
MGM and Wynn already spent huge amounts of money just to build the Massachusetts casinos. Encore cost $2.6 billion, and MGM Springfield cost nearly $1 billion. Barry Jonas, a gaming analyst with the financial firm SunTrust Robinson Humphrey, said the cost of supporting the casinos as they find their financial footing will pale in comparison with those outlays.
“The spending is done,” he said. “Maybe there are plans down the road for some select expansions, but for now, I think the ramp [up] likely has more to do with marketing campaigns, advertising approaches."
He said such activities require less capital than other improvements that might be necessary if the properties weren’t “so new, and so fresh.”
A more immediate concern for the casinos would be a viral outbreak here, though there have been no signs of that happening. The casino industry involves large gatherings of people ― mostly touching the same chips, dice, or slot machines ― so the casinos could be a focus of intense public health focus if the virus emerged somewhere in Massachusetts.
Already, the management of Encore says it has moved to increase the availability of hand sanitizer for staff, remind employees of handwashing protocols, increase efforts to sanitize surfaces that many people touch, and encourage workers to stay home if they don’t feel well.
“Safeguarding the health of our guests and employees is of the highest importance,” Encore officials said in a statement.
MGM Springfield said it is “proactively communicating with guests and employees and upholding the highest standards for health and safety.”
"That includes following the CDC’s guidelines involving flu season cleanliness and vigilance and reinforcing proactive cleaning and sanitation procedures,” casino management said in a statement.
Though operators commonly carry insurance to cover business interruptions, a lengthy shutdown could be a financial headache. But Jonas said circumstances that would lead to such an outcome would have much larger implications for the community.
“Right now, you’re starting to see some hesitations for travel to more destination markets like Las Vegas,” he said. But anything that might lead people to stop going to regional casinos, would also affect other activities.
“Whether that’s schools, sporting events ― any sort of meeting places, I think we’d have a lot more to worry about," Jonas said. "For now, we’re not seeing that level of panic. But we need to monitor this closely to see if it gets worse from here.”