As properties reopen following a shutdown enforced by novel coronavirus (Covid-19), Twin River Worldwide Holdings president and chief executive George Papanier tells iGB North America why he is confident the business can rebound
Twin River Worldwide Holdings had enjoyed a relatively robust start to 2020 with revenue for the two months to February 28 up 23.4% on the prior year at $90.3m. By the end of the first quarter, however, all its casinos were shuttered by the novel coronavirus (Covid-19) pandemic; for March, revenue plummeted 60.2% to just $18.9m.
Yet the operator’s president and chief executive George Papanier (pictured) remains confident that the business will rebound, having begun to emerge from the shutdown in late May. Its Mississippi-based Hard Rock Biloxi property reopened on May 21, followed by Delaware’s Dover Downs Casino Hotel from June 1.
Its flagship property, the Twin River Casino Hotel in Lincoln, Rhode Island, returned on June 8, alongside its other venue in the Ocean State, the Tiverton Casino Hotel. It has already announced that it aims to have all properties open to customers by the end of the month.
Twin River, with a growing portfolio of properties dotted across the US, is likely to rebound rapidly due to its regional focus. Local properties, rather than those concentrated in “destination locations” such as Las Vegas, are likely see patrons return quickly, Papanier explains.
“[We] are largely not subject to headwinds like travel restrictions and consumer concerns about air travel that will be a factor for destination locations,” he says. “However, eventually there will be a return to normal distribution of discretionary spending patterns.”
This, he says, is based in part on his experience of weathering 2008’s recession, when Papanier was four years into his tenure as chief operating officer of the business, before stepping up to the CEO role in 2011.
“If you look back at what happened in 2008, the regional markets bounced back very quickly,” he says. “There were declines in 2008 and 2009, but by 2010 the regional markets were flat and growing double-digit percentages in 2012.”
This recovery, he suggests, is underpinned by a strong financial position. Many have bemoaned the exceptional nature of the pandemic, which is routinely described as something that no one could have planned for. Papanier, however, takes a different view.
“While I can’t speak for other companies, we have continuously taken proactive steps to ensure that we were well prepared for an event like this, financially speaking,” he explains. “We have always preferred to operate with lower leverage and high levels of liquidity so that we can remain flexible.”
The operator increased its term loan by $275m under its existing credit agreement. It has used the cash to repay $250m owed under a revolving credit facility—“We may be one of the only companies in America that has paid back revolver debt at this point,” Papanier points out—and has no debt maturities before 2024.
“That’s a testament to our liquidity,” he says.
Being such a well-capitalized business, he continues, leaves Twin River positioned to take advantage of expansion opportunities as and when they arise. This is clear from its deal to acquire Eldorado Resorts’ Mont Bleu and Shreveport properties in Louisiana, and Bally’s Atlantic City from Caesars Entertainment.
The operators, which are in the process of merging, were divesting the properties as part of the business’ integration.
The Eldorado properties, which Twin River will acquire for $155m, were originally set to be snapped up by Maverick Gaming, only for the cardroom and casino operator to pull out of the deal. Twin River will pay a further $25m for Bally’s Atlantic City, with all three deals contingent on the Eldorado-Caesars merger being completed.
Papanier says each property “brought something unique” to Twin River’s portfolio, and had been on its radar since 2019. This meant the business had done a lot of due diligence on each venue, and when the opportunity arose after Maverick pulled out, it moved quickly.
As part of its Q1 results presentation, the operator talked about being “opportunistic” in its approach to M&A, something that Papanier notes is aided by a degree of financial flexibility. It aims to pursue deals that are both valued appropriately, and that allow the business to diversify its portfolio, while broadening its customer offering.
This is backed up by recent activity; in 2020 alone, it has agreed deals for six new properties. The trio from Eldorado and Caesars may take time to complete, but it finalized the acquisition of three Affinity Gaming properties in Black Hawk, Colorado, in January. In 2019, it completed the acquisition of Dover Downs and agreed to acquire two more Eldorado properties, Isle of Capri Casino in Missouri and Lady Luck Vicksburg in Mississippi.
“I am extremely excited about our recent M&A successes and what they mean for the company going forward,” he says. “In fact, within the next 12 months, we will be operating five additional properties, which we collectively acquired at an average purchase multiple of approximately five times.
The soon-to-be acquired trio is a good example of its approach to M&A, he continues, as the venues both immediately contribute to earnings, as well as strengthen its position in a number of states. Not only can it cross-market properties in different locations to a broader customer base, but it can also further leverage opportunities in sports betting and igaming.
Its entry to Colorado, of course, presented such an opportunity, with the acquisition completed before the roll-out of regulated sports betting in the state, from May 1. Days after acquisition was finalized, Twin River announced market access deals with DraftKings and FanDuel. The US sports betting market leaders will now launch skins under two of the three master licenses held by Twin River’s three properties in the state.
The fact that it is yet to sign up a partner for the final master license is noteworthy. After all, to date it has served as a licensing partner for online operators in states such as Delaware and Rhode Island as well as Colorado. Just as another high-profile regional operator, Penn National Gaming, is sizing up opportunities to compete as an operator, Twin River appears to have designs on a more meaningful role in the betting market.
“We are very excited about the prospects of mobile gaming and our ability to participate in this segment,” Papanier says. “We have been evaluating different options across the passive to active licensing partner spectrum.”
It’s for this reason, he says, that the operator has kept its third Colorado skin for itself. Twin River is “bullish” on interactive gaming as well, with Papanier describing it as “a strong addition rather than cannibalization to its revenue.”
“In our view, these represent a logical next step to continue diversifying our offerings for our customers,” he continues. “For example, at Bally’s AC we believe that the licenses we are acquiring for sports betting and igaming will provide a nice upside to the existing revenue at the property.”
However, one of the operator’s first forays into gaming expansion, through the launch of sports betting in Rhode Island, has arguably not quite gone as planned. International Game Technology and William Hill US partnered to power sports betting under the venue’s license, and split 32% of revenue. A further 51% of revenue goes to the state, with Twin River retaining the remaining 17%.
While a mobile offering went live in September 2019, the offering has consistently fallen below projections. For the 2019 fiscal year, ended 30 June 2019, revenue amounted to $6.9m, compared to Governor Gina Raimondo’s initial $24m projection, then revised to $11.5m.
For 2020, it was expected to generate an initial $30m, but this has since been revised downwards. For the year to 30 April 2020, with the caveat that Covid-19 has seen the properties closed and major sports suspended, the total stands at $18.4m.
Nevertheless, Papanier maintains that the state has “tremendous potential” for sports betting.
“While the numbers and projections have been lower than initial expectations, we think that player development, newer product innovation, and potentially increased competition will serve the market well,” he says.
Consumer Confidence is Key
But expansion into new verticals and channels can wait—first comes the reopening of its properties. Papanier says planning for the reopening began as soon as the venues were closed, to develop a “detailed and comprehensive reopening plan.” This has been developed through close work with state and local officials, as well as public health experts.
He believes customer confidence is going to be key to a successful resumption of activity, and Twin River is banking on technology to deliver an experience that is both entertaining and safe. This ranges from mobile room keys—with room key systems across a number of properties already able to offer this—with work underway to add mobile keys to in-property apps.
The operator is in the process of evaluating a number of technology-driven solutions to give patrons confidence that the risk of catching Covid-19 will be minimized. Mobile room keys may soon be complemented by automated solutions managing the slot floor, ensuring social distancing between players, as well as contactless ordering and payments for food and beverage systems.
Even entry to properties may soon leverage technology, by allowing guests to take a virtual ‘number’ to be notified when they can gamble or speak to a member of staff.
“We expect our entire portfolio to be open by July 1 and certainly believe there is some pent-up demand,” Papanier says.
“Even as amenities will initially be limited our customer base is excited about getting back to our properties, and with our company having the benefit of positioning as a regional player, relying on a drive-in customer base as opposed to air travel, we are well positioned for a quick recovery.”
That’s not to say things will return as normal, he adds: “I do think traditional brick-and-mortar operators will continue to migrate towards a convergence of platforms which will include adding the technology to support sports betting and potentially igaming as well as other platforms.
“These will give them the ability to not only coexist but thrive.”