News - October 30, 2017 - by Ray Hagar
By Ray Hagar
Union Gaming Research of Las Vegas recently upgraded shares of Monarch Casino & Resort, Inc. -- the parent company of Reno's Atlantis Resort & Spa -- from a hold rating to a buy rating. Not only are projections of Monarch stock on the upswing, Union Gaming Analyst John Decree said Monday on Nevada Newsmakers that the entire Reno area is on the economic upswing.
"We've seen housing prices really firm up," Decree said. "That is always a great economic indicator for the casino and entertainment industry."
"There are certainly going to be more construction jobs coming with the need for residential development, which is the kind of economic activity that begets economic activity," Decree said. "It is great for the whole city. As large companies come and create construction jobs, they bring population and migration to the city which then requires housing development, then expansion of schools and other social services.
"So we are kind of in the early stages of what is a very exciting expansionary cycle for Reno," Decree said. "And each step we take, the more economic development there is. And certainly, a casino is an entertainment option, and as the city gets larger, more tourism comes. And as more people live in the city, the airport can then expand and add more direct service.
"It is a one-of-a-kind really exciting growth cycle that we think is still in the early days," Decree said.
Factors in Decree's assessment of Reno's growth potential -- especially for gaming companies -- include:
* Positive inroads made by gaming executives and the Reno-Sparks Convention and Visitor Authority in seeking out more meetings and convention business,
* Home-grown and well-schooled sets of family executives from the Farahi and Carano families, operators of Monarch and the Reno-based Eldorado Resorts, Inc., and;
* The possibility of long-term growth in the Reno market because of the "Tesla effect" and other factors.
"The investment community rarely looks past a year or two these days," Decree said. "But three to five years (if we are) still in a high growth cycle and if things keep going as they are, I think 10 to 20 years is something that could be feasible. Let's hope the global and US economy kind of steer the course and I think Reno will keep leading away."
The Reno gaming community's mid-week tourism slump is being aggressively addressed by the RSCVA's marketing for meetings and conventions, Decree said.
The Atlantis is well-positioned to reap benefits in this area since the resort is connected the the Reno-Sparks Convention Center with a sky bridge. The Eldorado is also strategically based to take advantage of meetings and convention business with the downtown Reno convention center and ballroom.
"It (midweek issues) is something that Reno, overall, is starting to work on," Decree said. "The convention authority is under new leadership, very well directed and we are pretty excited about the opportunities ahead.
"They (RSCVA) have got a higher marketing budget for group and meeting business, they've got dedicated sales teams going out and attracting new groups and meetings," Decree said. "So we think that is a really big opportunity for the city overall. It will certainly benefit the casino-hotels and all of the hotels in the area that will help start to fill that midweek gap we are talking about."
This is where the "Tesla effect" comes into play for gaming properties, Decree said.
"You also have a lot of the job growth that is coming from large companies, Tesla, Switch, Apple and Google and that brings incremental business travelers to the area who also need hotel rooms and also creates a more interesting place, a more recognizable place to have group and corporate meetings," Decree said.
"So I think that is certainly an area of opportunity," Decree said. "We're seeing some more group and meetings come to the market. There is still plenty of runway (room for expansion) and feel very good about the direction of the convention authority and the focus they are putting on attracting new business to the city.
Host Sam Shad noted that Reno's Circus-Circus resort is renting out about 500 of its 1,500 rooms to Panasonic workers.
"We have heard similar, that a couple of hotels have blocks of rooms dedicated to workers and long-term stays, which also helps fill midweek occupancy," Decree said.
"By putting a chunk of those rooms already on the books, it allows those hotels to raise rates and to be a little bit more choosy on how they fill the rest of those rooms," Decree said. "They can fill them with better casino customers and that just helps with the overall profitability."
Decree was also bullish on what he called "Monarch and Eldorado Resorts' moving to the next generation of management."
John Farahi's son, David, has been the chief operating officer for Monarch since 2012.
The founder of Eldorado Resorts Inc., Don Carano, recently passed away at 85. His son, Gary Carano, has been chairman & CEO for years. Gary's brothers, Gene, Glenn and Gregg, also have executive roles with Eldorado.
"The sons of the owners today have grown up in the business," Decree said. "They have certainly put their time in and have worked in various positions across the casinos. And really for a lack of a better word, they are home-grown executives and it is really exciting to see these families that can do that and be very successful.
"They have certainly put in their time from the ground up and have worked various positions across the casino resort that trains them and prepares them very well to kind of step into leadership roles," Decree said. "We are very impressed with both management teams with existing executives and upcoming executives."