In the end, all that talk of Caesars Entertainment selling a Las Vegas Strip asset was just a sham. The company probably couldn’t find any takers for the Flamingo at CEO Tom Reeg‘s preposterous asking price (ditto his equally preposterous conditions for vending Planet Hollywood). Reeg’s explanation was “We ran into a market where the cash flow of the asset continued to increase and the ability of buyers to raise financing made it a very easy decision for us to keep.” Never mind that his decision blows a $1 billion-$2.5 billion hole in the strategy to pay down the company’s groaning $13.3 billion debt load. (If there is a recession, God forbid, Caesars will be in a boatload of trouble.) In the end, nobody was going to pay $2.5 billion for the Flamingo and even Planet Ho would be a heavy lift at that price.
Dangling a shiny object for investors, Caesars execs talked up their Times Square casino proposal, even as they remained coy about costs. Said CFO Bret Yuker, “We can tell you that the project starts with an existing building and will be financed with a new joint venture that is not on our balance sheet. Caesars will brand and manage the asset under a long-term management agreement and any equity investment into the joint venture will be very manageable relative to a free cash flow.” Broadway‘s theatre community is blowing the proposed Caesars Palace a raspberry but New York State Gov. Kathy Hochul (D) has proven deaf to local concerns about where a Manhattan casino would go.
Back in Las Vegas, Caesars had its best third quarter to date and hotel occupancy ran at 94%. Showing some ankle, Roman Empire execs said October was just as good. Reeg credited, in part, “improved operating efficiencies” (read: cost cuts). All the other auguries are positive, given improving group business (12% of rooms booked), growing international visitation and the return of Baby Boomer business to pre-Covid elevation. “Las Vegas has further runway for growth with many new existing entertainment and sporting events coming into the market over the next 18 months,” opined COO Anthony Carano. “We remain optimistic about our business as consumer trends remain healthy, especially versus 2019.”
Deutsche Bank analyst Carlo Santarelli wasn’t buying into the CZR narrative, calling the numbers “good enough” but noting a miss in Vegas projections. “More plusses than minuses” he put it. The former were represented by better-than-anticipated digital results, the latter by higher Nevada utility costs. Like his opposite number at J.P. Morgan, Joseph Greff, Santarelli laid emphasis on improved regional performance, specifically at Horseshoe Indiana, as well as in Reno, Lake Tahoe and New Orleans, all enjoying better years. Santarelli expected $96 million in digital losses and Caesars achieved but -$38 million, a noteworthy accomplishment. Management indicated it believed it will break even on i-gaming in 2023, although Santarelli thinks that achievement is still a year off.
By that time, Caesars should benefiting from a variety of regional tailwinds, including opening new markets in Nebraska and Virginia, as well as reentering the Lake Charles market. But should the Houston Astros win the World Series, Caesars takes a $30 million hit. On the Strip front, “Management noted that energy costs (~$10-15 mm), a soft August, and the completion of construction activity in the front entrance of Caesars Palace Las Vegas all combined to pressure the period.” He was nonplussed about the non-sale on the Strip: “our view has always been that the actual leverage reduction was fairly limited and was unlikely to change the perception of the CZR balance sheet.” And unlike you, dear reader, “management noted it would not be a cash tax payer for several years.” Must be nice.
Greff expressed surprised at how Caesars achieved its numbers. In addition to the online beat, regional casinos “sizably beat our/Consensus estimates.” As for online sports betting, “analytics execution is allowing it to better target and reward profitable players, resulting in increased promotional spend efficiency.” He took the strong October report into account but cautioned that November would not be so good. Looking ahead to year’s end, he predicted even smaller losses for OSB, along with flat cash flow in Vegas and seasonally lower ones in the regional properties. Finally, he noted that Caesars Forum has been “a nice positive” for the company. (And to think that Reeg tried to sell it.)
Barry Jonas of Truist Securities called the regional numbers a “triumph” and said they offset a “miss” in Sin City expectations “as an unfavorable marco [economy] showed no sign of slowing momentum.” He said the company “continues to delever” (without explaining how). If the quarter was the strongest in company history, as Jonas says, it was done on the solidity of regional performance “as customer trends remained healthy.” He didn’t drink CZR-branded Kool-Aid about online turning positive next year, forecasting a $75 million loss in 2023.
Remember when virtuecrat William Bennett was exposed as a slot flea, pretty much ending his career? Next up in the parade of disgraced public figures is Navajo Nation Speaker Seth Damon. A photo of an apparently inebriated Damon draped over a Vegas slot machine during National Finals Rodeo made it onto that court of no appeal: social media. The NFR angle at least explains why Damon didn’t tie one on at a Navajo-owned casino back home. Besides, what happens in Vegas … right? (Wrong.) The Navajo find themselves in an ethical bind, since they forbid the sales of alcohol—except at their own casinos. Even so, legislation to suspend Damon without pay has been placed on the docket.
It’s President Joe Biden (D) vs. Big Gaming. He’s taking on resort fees in Las Vegas … or “junk fees” as he calls them. It’s not just the casino industry in his crosshairs but airline surcharges, bank fees, cable TV add-ons, etc. “Each year these junk fees … that companies charge cost Americans tens of billions of dollars, weighing down family budgets and making it harder for people to pay their bills. So, my administration is taking action on to eliminate those fees,” said POTUS. The rhetoric may be a bit overheated and consumers seem to be willing to take it in the shorts where a Las Vegas vacation is concerned these days, but the sentiment is appreciated. We’ve been against resort fees since jump street and any initiative from the White House to scupper this odious practice is appreciated.
As Travelers United President Charlie Leocha put it, “The advertising says the room costs $100 and when you get to the checkout, it is actually $130 because they throw on a $30 resort fee, that is the average resort fee.” He’s being generous when you the ticky-tacky wi-fi fees, ‘free’ newspaper fees, extra charges for seating at swimming pools and now the obnoxious trend to charge for chairs at sports books. It’s not nickel-and-diming but a red-handed cash grab and it’s about time somebody in Washington, D.C., weighed in on the side of the customer. While Biden’s announcement sounds like a last-minute electoral ploy, Leocha says he’s been working with the administration on the it “for several months.” Feeling the heat already, the American Hotel & Lodging Association is promising transparency in fee structures. How about just charging the upfront price and stop trapping us with your ‘enhancements’? Knowing how greedy the casino industry is for resort fees (the new profit center: something for nothing) we wish Biden the best of luck; he’s gonna need it.
The conflation of a winning Philadelphia Eagles team and the World Series is paying dividends for Philadelphia Live, which has been spotted doing turnaway business—at least at its hotel. “Last night [Monday] the game was postponed due to rain, so the non-local fans had to stay over someplace,” explains our East Coast correspondent, who witnessed the event. Cordish Gaming must be praying for more rain-outs and soon.
Jottings: Hard Rock Virginia‘s temporary casino in Bristol has already seen over 109,000 visits from 40,000 customers. Ergo, the company is in no hurry to open its permanent facility. Groundbreaking will happen at some vague point this month, with a 2024 completion goal. Visitation from Tennessee represents 29% of total clientele, numbers sure to rise once a hotel is added … Four residential towers and a boutique hotel have been approved near the site of Bally’s Chicago. The development would deliver at least 2,200 Chicagoans to Bally’s doorstep … Del Lago Casino & Resort is now Churchill Downs‘ baby. The company has been green-lit to own the struggling property—and hopefully reverse its fortunes … Swinomish Casino & Lodge in Washington State has tapped Unibet to operate its sports book, which opens early next year. The deal still requires state approval, prompting casino CEO Brock Hochsprung to predict “I’d say we are 99% there but there are some additional steps to go through, so that’s what we are working on now” … Michigan Gov. Gretchen Whitmer (D) doesn’t want a tribal casino in Muskegon County but may get stuck with one now that the Department of the Interior has urged the Little River Band of Ottawa Indians to resubmit its proposal. The Little River Band is attempting to build in an off-reservation area previously dibbed by Grand River Bands of Ottawa Indians, staying Whitmer’s hand.
Quote of the Day: “Life shrinks or expands in proportion to one’s courage.”—Anais Nin
The main junk fees consumers endure are government taxes! Oh, and Thanks for the great picture of our wonderful president. NOT
Thanks for sharing the information about the new residential towers being built near where Bally’s casino will be located. The Chicago Tribune recently had a newspaper article about the new apartments being built within a couple miles of downtown Chicago. Most are between 15 to 20 floors high.
Meanwhile in the suburbs some of my friends are planning to leave Chicago once there kids start college because of high taxes. So while younger people want to live in downtown Chicago some older people are leaving the suburbs and moving out of state.
Lastly I hope there are not of election problems on Tuesday but I doubt that will happen. Pennsylvania, Georgia, Wisconsin, Arizona and Nevada might all have close elections and there could be some stupid idiots who cause mayhem on Tuesday.
That’s my wife and I voted early.