During tougher economic times, people spend less money. That's not just true of people impacted by those economic conditions. It can also be people simply worried about potential bad times or economic struggles who preemptively spend money more carefully.
Inflation or other economic woes might cause people to cut the cord with cable, cut back on eating out, and of course, take fewer vacations. That means that the ongoing economic strife, should it continue, should hurt Caesars Entertainment (CZR) and rivals MGM Resorts International (MGM), and Wynn Resorts (WYNN).
Caesars CEO Tom Reeg has a different take and shared his thoughts during his company's first-quarter earnings call.
"There's clearly something about gaming even within travel and entertainment with the social aspect if you want to, you walk the floors here and see groups of people that have not been out with each other in quite some time enjoying them," he said. "So there's, there's a social aspect to this that I don't know how well we appreciated this until it was gone. And that's, I think, a significant driver of what we've got going here."
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Caesars CEO Trolls Investors (Playfully)
Reeg thinks that economic conditions don't always mirror how people act. He made it clear that he has not seen the economy as a drag on his company's business.
"I know that, as investors sit here today crouched under their desks waiting for the next shoe to drop in inflation or the economy. We've been living with inflation for about a year now, and we've seen no real impact on gaming spend," he shared.
Reeg pointed out that it's not just Caesars experiencing strong results despite the economy. He said that it's industry-wide.
"We just reported a quarter where GDP was down what, one and a half points? And this business, not our business, the business of casinos, in particular, held up quite well," he said,
The CEO did admit that his company's current experience may not reflect what happens going forward, but he's clearly optimistic.
So I can't tell you what's going to happen in September or December, or March, but the resilience of this business and casino customers generally, has been extraordinary. And none of us would have imagined that we would shut our doors for months at a time. And nobody knew what would happen when we reopen. But I look at other sectors, travel and entertainment consumer-facing, the level of demand that has come back here has just been great to see. And like I said, as I walk through our properties now, this feels like what we were buying when we announced this deal back in June of 19. So we're super excited to see where it goes from here.
Earlier in the call, the CEO did acknowledge that the biggest factor facing the casino business was Covid.
"I can say unequivocally that the biggest correlation that we see in the business over the last two years is the state of the virus. And then when the virus recedes and case counts are benign, there is a pent-up demand for travel and entertainment activity. And we see a burst of demand in our business that was Omicron was no exception," he said.
