the casino resort indusry

Introduction
The casino resort business consists of a number of companies that operate high profile casino resort businesses. At the core, these companies earn their money from casino, hotel, restaurant and related revenues. They operate where gambling is legalized, as the casino element of the business is critical to their business model. The gambling attracts the guests, and then the resort function works to extract as much money as possible from this captive audience. While the firms in this industry are all relatively similar in this respect, they might differ on some of the details about target markets, their financials and how they execute on this business model in general. This paper will outline some of the major companies in this industry, using their most recent 10-K reports. For most firms, that is the 2016 report, the exception being Caesars Acquisition Co, where the latest report was the 2015.
Las Vegas Sands
Las Vegas Sands (LVSC) operates a number of different casino resorts, in the US and in Asia. Their Asian properties include Singapore and Macau. In the latter, the own three resorts including the Venetian. They own several properties in Las Vegas and another one in Pennsylvania. The Sands positions itself as a premium provider of casino resorts, describing their properties as "best-in-class." They often have several properties in the same place so that the properties can complement one another. Their presence in Macau, which is the largest gaming market in the world, is considered to be one of their strong suits. Competition in both Macau and Las Vegas is intense, highlighting the importance of effective positioning.
The company's related businesses include one of the largest convention centers in America, and several mall properties that are attached to its casino resorts. The key for LVSC is that the properties it owns are large enough to attract a broad and varied clientele, and that it provides as many opportunities as possible for those clients to spend their money on the property. Thus, each property has shopping, restaurants, gambling, hotel, spa and other services. As with all operators, LVSC has high fixed costs, so ensuring that its properties are sufficiently attractive to be relatively full is an important element of their business model.
Financially, LVSC has a relatively stable business. Revenues seem to be fairly predictable year-over-year, and as a result profits are as well. In 2015 and 2016, a downturn in gaming, especially in Macau, had a negative impact on the top line that flowed down to the bottom line. Nevertheless, LVSC was easily profitable, and was able to cut expenses in line with the reduction in revenues, to help ensure that it was able to withstand the natural cyclicality of its business. Debt is greater than equity, but is not at a particularly high level and seems to be within the range of its peers.
MGM Resorts International
MGM is also focused on the casino resort business. They operate large properties, where gambling attracts the audience, and then the properties feature a range of hotel, shopping, dining, spa and other amenities designed to increase the average revenue for each customer that comes to the hotel, either for accommodation or for gambling. As with LVSC, MGM also has properties in both Las Vegas and in Macau. MGM now has permission to operate casino in Springfield, MA, echoing the LVSC property in Bethlehem, PA as being in a city facing a downturn, but geographically close to major markets.
MGM has a relatively stable business. Its revenues fluctuate, but not dramatically. They have declined in past two years, and as with LVSC those declines are related primarily to a slowdown in the Macau market. However, MGM has struggled financially. They suffered losses for several years, such that 2016 was the first year without one in the past five. Given that revenues were relatively low, this is a strong achievement for the management team. The company has a decent balance sheet, with debt just over half of the total value of the company. Yet, it remains to be seen if MGM can continue to recover from those years of losses or if the successes of 2016 will be a one-off.
Wynn Resorts
Wynn is another casino resort company. The company operates in the Las Vegas and Macau markets, and is going to enter the Boston market with a casino in Boston suburb in the near future. As with other companies in the class, Wynn's properties offer gambling, accommodations, shopping, dining and other attractions. They describe the properties as "integrated", referring to the fact that they seek to leverage the captive audience by offering them a wide range of services designed to make money off of those customers. This is the same business model as the other companies in the industry.
As with other firms in the industry, Wynn appears to have a strong baseline of business, but some cyclicality in revenues. These were down in 2015 relatively to prior years, in all likelihood relating to the change in the Macau market that reduced all companies' revenue. Wynn is smaller than either LVSC or MGM, but has been able to retain profitability in each year. That said, Wynn joins the other casinos in not making as much money the past couple of years as it had in the prior ones.
Wynn has a slightly different balance sheet, in that the company is highly-leveraged. Debt is 85% of the total value of the company, and it had almost no shareholder equity in 2015. This means that Wynn has a riskier business than the other companies in the industry. It may have borrowed to build properties, or is not seeing the same capacity utilization as other casino resorts, but it looks maybe like the former.
Caesar's Entertainment
Caesar's is another casino resort company, describing its portfolio as the "world's most-diversified." However, it operates only in the US. The company has struggled with its Atlantic City properties in recent years as other cities in the Northeast invest in gambling, and it does not appear that Caesars has any properties in Macau.
One of the big differences with Caesar's is that it filed for bankruptcy, and then moved to merge Caesars Acquisition Company and Caesars Entertainment Company. They own 8 Las Vegas properties and four in other parts of the US. Where other operators often court a broad market, Caesars strategy involves having properties at different price points, aimed as more specific audiences.
The bankruptcy has created issues for Caesar's, and a higher degree of risk. They are now bound t o a number of stipulations, including on things like liquidity, in order to emerge from bankruptcy proceedings. The financials reveal that Caesars is quite a bit smaller than its rivals. It earns about 2/3 of its revenue from its casinos, but has struggled to be consistently profitable in recent years, a situation that doubtless led to the merger and bankruptcy proceedings. At present, liabilities are greater than debts, meaning that Caesars is at the most financial risk of any of the major casino resort companies. Much of these costs have arisen as the result of the recent restructuring, but may prove to be a burden. Caesars Acquisition Group was a company formed to make investments in other Caesars companies, so more of an odd structure entity.

Conclusions
This analysis shows that there are some different approaches to the business, and that these approaches can have different results. First, the most profitable companies in this industry are the biggest ones. Smaller operators with lower revenues seem to struggle more with profitability, suggesting that they might be overly reliant on gambling revenues. This may also be a function of having older properties, which are less attractive to consumers.
It is also worth noting that the companies that are most invested in Macau are the most profitable. This is the world's largest market, and thus for the sake of profitability it is an important market in which to operate. Shifts in that market have hurt the casino resort business overall, but Macau is strong enough that the larger companies that are major players there have been able to continue to be profitable even with lower revenues. Caesars suffers from not having a meaningful presence in Asia.
It is also evident from this analysis that gambling revenues are the biggest draw. This is the reason why gamblers often receive perks such as free room and food, because the gambling is where these companies make their money. So they compete for gamblers. The ancillary revenues are nice – and they can be effective if they help to attract gamblers by giving their families something to do – but at the end of the day this added revenue also happens to serve the casino portion of the business. What differentiates these resorts from other resorts is the casino element, and that continues to be the focus of their business. The biggest risks they face, therefore, lie with threats to gambling revenues and with their ability to outcompete the other firms in the industry.