On the marketing side

Morowitz says, “On the marketing side, consolidation certainly helps because they should be spending less on marketing and promotional allowances.

It’s interesting as you look across the landscape: Atlantic City went through a period with less casinos; marketing costs came down significantly.

And now they’re starting to inch their way back up again. We expect with the opening of two new casinos that those marketing costs will continue to go up.

“And we’re seeing everybody improving their properties. So, having a wider distribution obviously helps the consumer.

I think on the positive of this consolidation, with it usually comes some investment.

As these companies invest in these products and make them better, it’s good for the consumer.”

Machines might get tighter, he says. “But there’s so much competition for

that discretionary dollar, casinos will still have to treat their customers well in order to keep them.”

And no matter who buys up who, the 80-20 rule will always be there to assert itself when the dust settles.

“For those small number of customers that generate the lion’s share of revenue, I don’t think it’s an issue,” he says.

“They’ll continue to get treated extremely well, and even fought over.”

Ultimately, there is a ceiling to how much efficiencies can be wrung from a property without damaging the player experience, he says.

“I think that future margin improvements have to come from top-line growth.

That’s part of the consolidation wave.”

He doesn’t see it subsiding either, not with the “financially engineered value” the REITs have brought to the equation.

“As with a lot of other industries, there’s a lot of copycat stuff out there, a lot of operators who are seeing opportunities to cash out and get full value.

So as long as those multiples stay where they are, you’ll continue to see consolidation.”

It’s not as though there’s a lack of targets.

“There is still room for growth for medium- and small-size acquisitions and mergers, and certainly plenty of room to buy casinos that are freestanding,” notes Adams.

“Don’t forget, Caesars Entertainment is a meaningful player in regional markets,” says Jefferies’ David Katz.

“Boyd, Eldorado. Monarch (Casino & Resort) may have a future in additional markets. Churchill Downs has been an acquirer. Golden Entertainment has been an acquirer.

That’s not a bad list. Not as big as it used to be, but it’s not nothing either.”

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