May 12, 2021
The COVID-19 pandemic landed some very heavy blows against the U.S. economy last year – devastating numerous industries. Among the hardest hit were airlines, casinos and movie theater operators. While 2020 resulted in a few surprise winners in telecommunications, telehealth, video games, and grocery delivery, it was nonetheless a very challenging year for most businesses.
However, with vaccinations well underway and consumers ready to return to some sense of normalcy, some of the players in these beleaguered industries may well start to recover as the year progresses. Let’s take a look at some of them.
Last year was the worst on record for the airline industry – and those losses are bleeding into 2021. According to Airlines for America, an industry advocacy organization, the nine largest U.S. passenger airlines incurred $7 billion in pre-tax losses in the first quarter of 2021 on 68% lower passenger revenues. However, with more Americans receiving vaccinations and states slowly returning to normal, the airlines should eventually recover – it’s just a question of when.
For example, the TSA reported that 1,703,267 passengers went through TSA checkpoints on May 7, 2021 (the weekend leading to Mother’s Day). This is a marked improvement from the 215,444 that passed through on the same day in 2020 but still substantially lower than 2019’s 2,602,631 travelers. Whether airlines bounce back this year or further down the road, shares of the major players are faring better than their balance sheets. United Airlines Holdings, Inc. (Tii:UAL) shares are up 31% for the year. Southwest Airlines Co. (Tii:LUV) shares are higher by more than 36%, while American Airlines Group Inc. (Tii:AAL) and Delta Air Lines, Inc. (Tii:DAL) have increased by 45% and 19%, respectively.
The gambling industry was significantly impacted by the COVID-19 pandemic, particularly in the U.S., which is the largest gambling market in the world. Mandatory closings meant to slow the spread of the virus led to substantial financial losses – especially for those operators without a significant online betting platform. The American Gaming Association (AGA), a casino trade association, estimated 2020 casino revenues at $30 billion – the lowest total since 2003. For the major players, it was brutal. MGM Resorts International (Tii:MGM) announced that consolidated net revenues for 2020 decreased 60% compared to the prior year to $5.2 billion. Wynn Resorts, Limited (Tii:WYNN) was similarly impacted, with a 68.3% decline in operating revenues last year. Las Vegas Sands Corp. (Tii:LVS) saw 2020 net revenues plummet 73% to $3.612 billion.
However, things are starting to pick up, albeit slowly, as states continue to reopen. The AGA reported that February gaming revenue outperformed the previous month by nearly 5%, once adjusting for fewer calendar days. Combined revenue from traditional casino gaming, sports betting and iGaming reached $3.23 billion, representing about 85% of February 2020 gaming revenue—the last fully operational pre-pandemic month. The aforementioned gaming companies’ stock prices have perked up this year as well – possibly due to investors looking to acquire the stocks while at depressed levels. Wynn’s shares are up 18% for the year, while MGM’s have risen 34%. Las Vegas Sands’ shares are the outlier, remaining virtually flat.
Similar to casino operators, movie theater chains suffered devastating losses as North American box office sales fell to a near 40-year low. Research firm Comscore reported that the North American box office brought in $2.2 billion in 2020, compared with $11.4 billion for 2019. With the theaters forced to close, movie studios either delayed big-budget films or shifted them to video-on-demand, cutting out the theater chains. However, 2021 could be a bounce-back year with a robust pipeline of theatrical releases in the pipeline. Among them are Fast & Furious 9; three potential blockbusters from Marvel Studios: Black Widow, Shang-Chi and the Legend of the Ten Rings, and Spider-Man: No Way Home; Dune, the highly anticipated space opera; No Time to Die, the 25th movie in the James Bond franchise; and The Matrix 4.
As of March 31, 2021, AMC Entertainment Holdings Inc. (Tii:AMC) was operating at 585 domestic theaters with limited seating capacities of between 15% and 60%, representing approximately 99% of domestic theaters. While first-quarter revenues for the theater operator were down 84.2% from the same time last year, approximately 7 million U.S. and international patrons returned to an AMC theater during that period. Similarly, while Cinemark Holdings Inc. (Tii:CNK) reported total revenues for the three months ended March 31, 2021, were $114.4 million compared to $543.6 million for the three months ended March 31, 2020, the company anticipates a much stronger 2021 as vaccine rollouts and popular film offerings entice consumers back to the theater.
Though beaten down in 2020, pent-up demand in their respective marketplaces and consumers ready to resume their favorite activities bodes well for these leading brands – provided COVID-19 hospitalization rates continue to decline.
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