Which U.S. Regions Can Eldorado-Caesars Focus On To Achieve Meaningful Growth In The Long Run?

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After entering into a definitive merger agreement with Caesars Entertainment, Eldorado’s management indicated that the casino company will realize $500 million in synergies during the first year of the merger besides an improvement in long-term growth prospects. In this article, Trefis discusses the recent trends in the U.S. commercial gaming industry, and how they will impact the merged Eldorado-Caesars entity in the longer term.

Our interactive dashboard, How Are Eldorado’s & Caesars’ Properties Distributed Across The U.S. And What Are The Avenues For Growth? highlights trends in gaming revenues across prominent U.S. gaming regions in 2018. This dashboard is the second one in our series on the Eldorado-Caesar deal, with the previous one focusing on trends in gaming revenues for leading casinos in the U.S.

A closer look at the U.S. Commercial Gaming Industry

The U.S. commercial gaming revenues have grown by a meager $4 billion in the last five years, which amounts to a CAGR of 2%. In 2018, $41.68 billion of gross gaming revenues were reported across the country, with the top-10 states accounting for 80% of this figure. While Nevada was responsible for nearly a third of this number, other leading states include Pennsylvania, New Jersey, New York, and Louisiana. Nevada also leads with a total of 217 casino properties – a figure higher than the subsequent nine states combined. Understandably, the stiff competition among various casino operators in Nevada has affected profit margins over recent years.

Industry growth, however, has primarily come from new casino properties in Maryland, New York, and Massachusetts. The opening of MGM National Harbor in 2016 benefited Maryland’s gaming revenues over the last two years. Notably, MGM National Harbor is now the third largest casino outside Nevada and reported $700 million of GGR in 2018. As evidenced by the newly opened Encore Boston Harbor and MGM Springfield in Massachusetts, we believe the East Coast region has long-term growth potential outside the gaming hub of Nevada.

Also, after the Supreme Court paved the way for states to legalize sports betting, New Jersey benefited the most by observing a 21% growth in online gambling in 2018. With many casino companies warming up to sports betting over recent months, online gambling could be a potentially large growth opportunity for incumbents in the near future.

How are Eldorado’s & Caesars’ properties distributed across the U.S.?

The combined Eldorado-Caesars entity will be the largest gaming operator in the U.S. with a total of 60 properties in its portfolio. Of these, 19 properties would be located in Nevada, followed by 6 each in Louisiana and Mississippi, 5 in Indiana and 3-4 in other leading states. The merger also help the two casinos achieve some geographical diversification. Eldorado is present in 14 U.S. states and Caesars is present in 10 states, which the combined entity will have a footprint in 16 states.

As Eldorado and Caesars have maintained that they will be focusing on their business in the U.S., the ideal areas for expansion (very likely through strategic acquisitions) would be New York (which is the 4th largest state in terms of GGR, and has 13 properties), Maryland (10th largest state in terms of GGR with 6 properties), and Massachusetts – as these states don’t feature in Eldorado-Caesars portfolio and are becoming strongholds for peers, Wynn and MGM.

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