Call it the tale of two CEOs.
One, Tom Reeg of Caesars Entertainment, thinks inflation hasn’t impacted gaming spending in the US. The other, Hard Rock International CEO Jim Allen, is warning of inflation’s effects on gaming.
Which casino CEO should we believe?
The money is on Allen. He has much more freedom to talk about the health of his casinos and sports betting because Hard Rock is a private company. It’s simply the corporate umbrella for the Seminole Tribe’s gaming operations.
Caesars, on the other hand, trades publicly on the Nasdaq. As a result, bearish words from Reeg could end with his stock price dipping and lost value for shareholders.
While this may seem like a minor war of words, Allen’s boldness may signal something more significant as Florida contemplates allowing sports betting in the state.
Allen is warning of inflation’s effects on gaming
Allen was questioned after the recent opening of a Hard Rock property in Manhattan, NY. He talked about a “softening” in revenue.
“Being privately held, I think we have the ability to be more candid, you know, in what the industry is really seeing. I think what we’re definitely seeing, across the United States, is a little bit of softening in the April numbers. I don’t think anyone can dispute that, especially when you look at certain segments of the database.”
Allen went on to point out that Florida is doing well amid inflation, but that there are some signs of softening. He did not offer evidence behind his claim.
Reeg plays down impact of inflation on gaming
Reeg said quite the opposite in his recent earnings call.
“I know that, as investors sit here today crouched under their desks waiting for the next shoe to drop in inflation or the economy. We’ve been living with inflation for about a year now, and we’ve seen no real impact on gaming spend.”
While Allen didn’t offer evidence for his caution, Reeg’s statement seemed to ignore future projections. Instead, he implied a rosier future by focusing on the strong results of the last year.
Could inflation alter Seminole Gaming’s stance on sports betting?
When discussing a softening in gambling spend from inflation, Allen points to rising gas prices.
“We look at gasoline anywhere from $5 to $6 a gallon … There’s no doubt that in most regional gaming markets, that customer is a day-tripper, utilizing gasoline to get to the facility. And when that’s up 30% to 40%, that’s going to be problematic.”
Think of it like this. Florida’s drivers are facing gas prices of more than $4.50 a gallon. Seminole Gaming‘s casinos are spread out across the state. Gamblers in its most populous city, Jacksonville, have to drive three hours to get to the closest real money casino. Inflation slowed last month, but there’s no telling how long it will take for gas prices to return to pre-pandemic levels.
If the softening that Allen referred to becomes more severe, it would make a lot of sense for the Seminole Tribe to expedite sports betting, even if it meant allowing commercial operators into the market.
In the 2021 gaming compact that’s still tied up in court, the Seminole Tribe was essentially handed a monopoly on the sports betting market. If Hard Rock was willing to negotiate a new agreement with the state that allowed outside operators to enter the market, it would likely pass without resistance.
The new industry could lessen the blow of any inflation-related problems. Sports fans who have no interest in slots or table games would likely be more than happy to head to a Seminole property sportsbook to place bets and watch games, matches and races. Or place a wager on the company’s mobile app if the agreement led to the reemergence of the Hard Rock Sportsbook.