The Vegas Enigma
Caesars CEO Tom Reeg and MGM CEO Bill Hornbuckle discuss Las Vegas numbers during earnings calls. Analysts point to Vegas separating into two different experiences.
The Bulletin Board
THE LEDE: Gaming CEOs start to grasp the value proposition of Las Vegas.
BEYOND the HEADLINE: Caesars and MGM CEOs discuss prediction markets.
ROUNDUP: NCAA is conducting around 30 betting investigations; NCAA sends a letter to Kalshi; Wisconsin mobile betting bills officially introduced.
NEWS: Leagues and regulators are seeking a solution for player props.
AROUND the WATERCOOLER: Sports betting tax increase on the table in PA.
STRAY THOUGHTS: Ben Franklin on low price, low quality.
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The Lede: MGM-Caesars Talk Vegas During Earnings Calls
The value of a Las Vegas getaway has been a topic of discussion throughout the year, and during their companies’ recent earnings calls, the CEOs of MGM and Caesars dove into the topic.
MGM CEO Bill Hornbuckle walked back some of his previous statements about the affordability of Las Vegas.
“Look, we just lost control of the narrative over the summer,” Hornbuckle said during the company’s Q3 earnings call.
Earlier this year, Hornbuckle argued that MGM properties are a good value:
“We’re going back through our pricing on things people touch every day that matter. Tonight, you can check into New York-New York or Excalibur for 85 bucks, including resort fee. You can get a $5 beer and bet on a $5 table. We’ve looked at the marketplace and we’re going to make a difference where it helps.”
But during the Q3 earnings call (The company’s Las Vegas properties once again saw declining revenue), Hornbuckle noted that customers didn’t quite agree:
“This summer, we heard from some of our guests about value in Las Vegas, and we responded by making adjustments to ensure a rationalized premium value experience across all of our properties… While we don’t expect the dynamic to change overnight, we are proactively working to create initiatives to drive incremental visitation.”
Hornbuckle also addressed what he believes the core disconnect to be:
“When we think about pricing and things that got everyone’s attention, whether it’s the infamous bottle of water, or a Starbucks Coffee at Excalibur that costs $12, shame on us. We should have been more sensitive to the overall experience at a place like Excalibur for those customers. You can’t have a $29 room and a $12 coffee. And so we’ve gone through the organization.”
In a note, Citizens pointed out that the Las Vegas market is separating, and the underlying factors are unlikely to change:
“The Las Vegas market is experiencing two separate stories, with higher-end luxury continuing to see overall growth, benefiting the vast majority of MGM’s footprint in the city. The lower end, to which MGM has exposure through Luxor and Excalibur, experienced a nearly $40M EBITDAR decline in the quarter. We do not see the macro or political factors, including airline capacity, Canada visitation, drive-in traffic, etc., changing in the coming months, leading us to believe the softness will bleed into the first half of 2026.”
Caesars CEO Tom Reeg also discussed his company’s struggles at its “value” properties, but didn’t go quite as far as Hornbuckle:
“So it was a difficult summer. There has definitely been softness in leisure demand for Las Vegas in the summer months, particularly in properties that I would view as priced takers, those that, as you go down the customer spectrum, or you move out from the center of the strip, demand for those were soft; Premium has held up better.”
“So on the pricing question, we price hundreds, thousands of items across Vegas every day, from rooms and restaurants to ATM fees to everything that you purchase in Vegas, and we’re constantly adjusting them… I don’t discount that there are areas in our business and in Las Vegas that might have gotten over their skis pricing-wise… But most interestingly, while those stories were out there, most days that you read those stories, you could have gotten a room in Vegas for $29 plus a resort fee on The Strip. So there’s a value trade in.”
Reeg noted the something for everyone strategy it uses:
Sean McBurney, our Regional President out here, does such a fantastic job using the example of: you can come see Paul McCartney and pay $500 plus a ticket at the same weekend that you can see Donny Osmond for $60. So there’s something at every price point.”
But as I said in a previous column, “a Las Vegas getaway can be cheap, the problem is, not many people are looking for a ‘cheap’ Las Vegas adventure, they are looking for value, and Las Vegas no longer offers that experience.” I’m not sure most people view Donny Osmond at $60 per ticket as a “value.”
Analysts also appear to believe that something is amiss, even if they cannot pinpoint precisely what it is.
“A ninth consecutive month in which tourism declined in Las Vegas, combined with a drop in Strip gaming revenue in September, appears to have some investors on edge,” Buck Wargo wrote in CDC Gaming Reports. “And although Wall Street analysts believe the worst may be over for the destination, they lowered stock price estimates anyway.”
However, visitors (and STTP) seem to have the problem pegged:
Beyond the Headline: Casino CEOs on Prediction Markets
Both CEOs also touched on the topic of prediction markets.
Caesars CEO Tom Reeg:
“We will not put any of our licenses at risk. We believe what’s happening in prediction markets is sports gambling. If there’s a path that develops where we can participate in a way that doesn’t put licenses at risk, you should expect we are preparing and would be prepared to go down that path, but we’re watching it the same as you are.
“I wish there were a point of clarity and certainty in the near term around prediction markets. It seems like the path this is going to go on will ultimately be decided at the court level, ultimately, the Supreme Court level. And I’d expect that there’s going to be rulings that go in both directions along the way.”
“If something gets appealed up to the Supreme Court, there is a state rights versus federal rights question here that’s larger than just sports betting that might argue that the court takes it up relatively quickly… There’s a lot of stuff bubbling up to the Supreme Court, and maybe this gets pushed back further than we’d like… I would expect we’re going to be in this cloudy period for quite some time.”
MGM CEO Bill Hornbuckle:
“I also want to follow up on BetMGM’s recent comments about prediction markets. For decades, the gaming industry has been highly regulated at the state level. This intense scrutiny has been essential to ensuring the integrity of the gaming industry and, in the case of sports betting, has helped to identify potentially irregular activity. This is not the time to back away from these high standards. Gaming has historically been, and should continue to be, a highly regulated industry with safeguards in place to protect consumers and promote integrity.”
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Roundup: NCAA Investigating 30 Players + a Letter to Kalshi; Wisconsin Mobile Betting Bills Introduced
NCAA is investigating 30 current and former NCAA players [ESPN]: Per ESPN, “an NCAA gambling investigation with links to the NBA betting scandal is impacting the status of multiple players at several schools, according to sources familiar with the probe.” The NCAA announced it is investigating approximately 30 current or former men’s basketball players. “One player has been dismissed from a team, and at least two are being withheld from competition due to eligibility concerns related to the investigation, according to the sources.”
NCAA sends letter to Kalshi [ESPN]: On October 30, the NCAA sent a letter to Kalshi, “expressing its concern about the company’s ‘commitment to contest integrity and the protection of contest participants,’ according to a copy of the letter obtained by ESPN.” Per ESPN’s reporting, “NCAA chief legal officer Scott Bearby asked Kalshi how it monitors collegiate sports markets for integrity concerns and activity by prohibited customers, who it considers a prohibited customer, whether it will report integrity concerns to the NCAA, and whether the company will cooperate with NCAA investigations… The NCAA also asked Kalshi in the letter to review language on its website that the NCAA says implies a relationship between them.”
Wisconsin sports betting bills introduced in House and Senate [Sports Betting Dime]: Wisconsin lawmakers have officially introduced SB 592 and AB 601, which would legalize mobile sports betting through a Florida-like hub-and-spoke model. The bills are scant on details, but they would allow each tribe to partner with a sports betting platform and offer mobile sports betting statewide, provided the server is housed on tribal lands.
News: Leagues and Regulators Push to Restrict Prop Bets
ESPN is reporting that the NBA is discussing prohibitions or restrictions on easily manipulable sports betting markets: “Before the season, the NBA identified missed free throws, fouls, and turnovers as types of wagers susceptible to manipulation and asked its partner sportsbooks not to offer those bets, according to the sources.”
ESPN is also reporting that there are ongoing discussions about limits on easy-to-manipulate markets: “Prop bets on individual player performance can raise heightened integrity concerns and warrant additional scrutiny,” an NBA spokesperson told ESPN.
And, as STTP reported on Monday, from the sound of it, MLB is also discussing prohibiting or restricting some markets, which has put talks about a legislative or regulatory ban in Ohio on hold: Gov. Mike “DeWine said this week that he is pausing in his efforts to instigate a statewide ban on micro-betting because MLB Commissioner Rob Manfred is leading that effort… Per the Columbus Dispatch, Manfred’s office told DeWine that it believes it has an agreement with most sportsbooks to ban such wagers.”
There is also this bit of news from Michigan, where the Michigan Gaming Control Board issued a press release stating:
“In light of recent federal indictments involving current and former NBA players and coaches, the Michigan Gaming Control Board (MGCB) is reaffirming its commitment to protecting the integrity of sports betting through robust regulatory safeguards and oversight… The MGCB is closely monitoring risks associated with player proposition wagers — bets based on individual player performance rather than game outcomes — which were reportedly exploited in the recent scandal.
“Certain types of prop bets present a higher risk of manipulation, particularly when tied to insider knowledge or player behavior,” MGCB Executive Director Henry Williams said. “As regulators, we must assess whether current safeguards are sufficient or if additional restrictions are necessary.”
And there is also the ongoing effort in New Jersey (New Jersey Assemblyman Dan Hutchison introduced A5971), which now has company.
As reported by SBC Americas, “Sen. Paul Moriarty‘s S4794 has been referred to the Senate Government, Wagering, Tourism & Historic Preservation Committee… [The bill] defines a ‘micro bet’ as a proposition bet wagered live during an athletic event and concerning the outcome of the next play or action occurring in the sport or athletic event… such as whether the next pitch in a baseball game will be a strike or whether the next play in a football game will be a pass or run.”
STTP Thoughts: If sports betting is for entertainment, then it should be a straightforward solution. Severely limit and, in some cases, restrict the bet amount on easy-to-manipulate props, and/or don’t allow bettors to create parlays based on the performance of a single player.
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Around the Watercooler
Social media conversations, rumors, and gossip.
There are new rumblings (the rumor has been around for several months) that the Pennsylvania legislature is considering increasing its already high tax rate on sports betting, from 36% (comprising 34% state and 2% local taxes). What it would be raised to has not been disclosed.
Per Legal Sports Report, operators are already threatening to pass the increase onto customers:
“Sources tell Legal Sports Report that any increase to the 36% Pennsylvania sports betting tax rate, already second-highest rate among multi-operator states, would prompt sportsbooks to pass the fees down to customers or impose minimum bets.
“Whether there will be a bill to raise the Pennsylvania sports betting tax rate in the 2026 session is still up for discussion with legislators, one source said.”
STTP would note that while the state’s 36% sports betting tax rate is one of the highest in the country, it does allow operators to deduct promotional spend, which lowers the effective rate to around 25%.
As I’ve pointed out in the past, Pennsylvania could increase its tax rate without increasing its tax rate:
“If it wanted to get a little creative, Pennsylvania could increase its tax rate without increasing its tax rate. Instead, it could eliminate or cap promotional deductions. The main argument for promotional deductions is to raise awareness in newly legalized markets, which might fall flat in Pennsylvania, a market that has been live since 2019.”
Stray Thoughts
“The bitterness of poor quality remains long after the sweetness of low price is forgotten.” ~ Benjamin Franklin