Station Casinos announced 2Q21 earnings yesterday and “blows through” previous peaks, according to Deutsche Bank analyst Carlo Santarelli. Despite expiration of the management contract at Graton Rancheria, Station recorded record levels of net revenue ($426.5 million) and cash flow ($210 million), leaving Wall Street‘s $159 million consensus in the dust. Management is in no hurry to reopen Texas Station or Fiesta Rancho or Fiesta Henderson and why not? It costs only $2 million per quarter to keep them dark and their business is obviously being soaked up elsewhere. Station execs performed a fan dance regarding Durango Station, withholding the budget but announced their intent to break ground in early (pre-April) 2022, with an 18-24 month construction timeline envisioned. When completed, it will have 2,000 slots, 40 tables and four restaurants, along with the inevitable sports book. Santarelli expects Durango Station to be financed out of (abundant) free cash flow, possibly filled out with the sale of some excess land. The $650 million all-cash Palms sale proceeds have also been earmarked to cover construction costs.
Buffets may be gone with the wind but Station expects to reopen its showrooms in the second half of this year, and for group business to return over the next two years. Truist Securities analyst Barry Jonas noted “incremental hotel business” improvements congruent with the distribution of the Coronavirus vaccine. “Stimulus payments have also played into recent strength, though management noted sizable savings and discretionary income with their core customer base beyond stimulus.” While acknowledging “uncertainty” around the state mask mandate, Station brass said that business didn’t change markedly when masks came off in June. “This suggests there may not be any meaningfully negative impact with reintroducing masks,” reported Jonas, “Management also notes that they expect any potential impact to be short-lived.”
On other fronts, the cost-savings target has been ramped up to $200 million from $150 million, while the company’s North Fork tribal project in California is hanging fire after an adverse ruling in federal court. REIT conversions or sales are off the table. JP Morgan analyst Joseph Greff joined the chorus of praise for Station, hailing an “outstanding quarter” and lauding the company for “meaningfully exceeding” his forecast. “Results speak to a very strong demand-supply dynamic and rational promotional environment in the Las Vegas Locals market controlled by a finite number of operators, each with the same target of converting more revenue into EBITDA and free cash flow.” Regarding Durango Station, he felt that its addition would enable Station to absorb new consumers in the Vegas Valley. “The area is fast growing, with a high-income population base, large gaming demographic, and zero competition for five miles.” Like other analysts, he advised readers to stay tuned another three months for project details.
In a not-unrelated announcement, the Regional Transit Commission revealed the inception of express-bus service to Las Vegas Raiders games from five casino-hotels, four of them owned by Station. The exception was official Silver & Black hotel M Resort. The lucky Station properties are Red Rock Resort, Green Valley Ranch Resort, Santa Fe Station and Boulder Station. Hopefully for M and Station, Raider Nation will be looking to blow off some steam (and money) at the tables and slots. “Based on the success and popularity of our similar service to T-Mobile Arena for Vegas Golden Knights games, many in the community have shared the same strong interest and enthusiasm for express service to Allegiant Stadium,” RTC CEO MJ Maynard said.
The Las Vegas Strip didn’t get the memo that going mask-free in June was supposed to mean boffo business. Revenues were down 1% from June 2019, for a gross of $610.5 million. McCarran International Airport saw 14% less traffic, with 3.8 million arrivals and departures. Domestic travel was only off 8% but international visitation was a void, -90%. Given that last, dreary metric, perhaps we should be impressed that the Strip performed as well as it did. (Southwest Airlines lapped all other carriers several times over, with 1.4 million fliers.) Locals-derived revenue, meanwhile, was through the roof, up 43% (to $270 million).
Strip slot revenue was a bonanza, rising 34.5% on 21% more coin-in (and significantly tighter hold). Baccarat, though, was a black pit of despair, bringing in $40 million (-74.5%) on 18% less wagering, as luck was not with the house. Non-baccarat Strip table revenues compensated somewhat, up 8% on 4.5% more wagering. Locals slot revenue rose 43% and table game win leapt 47% (helped by hold that was 2% tighter). Downtown rocketed 51.5% higher to $79 million and Reno revenue was 26.5% up to $64.5 million. Breakdowns from other jurisdictions aren’t available yet but we’ll report them once they become available.
Jottings: Positive test results for Covid-19 in Clark County are running at an alarming 15%. ‘Nuff said … Hard Rock Atlantic City President Joe Lupo has done it again, luring former Borgata online-gaming director over as vice president of online gambling. Somebody better stem the Borgata brain-drain. Elsewhere on the Boardwalk, Monday was “very busy” at Ocean Casino Resort (two comped bottles of wine obviously didn’t hurt) but Tuesday at the Golden Nugget “was not busy at all.” A cover story in a casino trade magazine shouts, “Atlantic City is Booming!” Color us a wee bit skeptical, given the town’s recent performance.
Quote of the Day: “No government should order the general public to take a vaccine except in cases of the most extreme health danger. The matter is different for private employers, who should be able to set their own workplace rules … It’s an odd libertarian streak that dislikes government orders to individuals but then says private employers shouldn’t be free to choose.”—Wall Street Journal editorial board
“Atlantic City is Booming” is the sound of the audio gunshot detection system that alerts the police when guns are fired (outside). It is said to send the police quicker than people calling 911.
The tides at Ocean are rising fast! Both HR and Ocean seem to be more and more crowded every time I am there. While they are vastly different properties, both have a great vibe and appear to be managed well.
What I hear from former Borgata employees (scattered around HR and Ocean) is that they miss Boyd running the place and that MGM is too “institutional”. Still though; noting come close to bearing the Big B (Borgata) in that market.
Strip casinos slot and VP hold is crazy high. I do not know what the maximum allowable hold is, but it has to be close. I remember when $1 slots was 5% to 8% holds. Now it has to be somewhere around 15%? I used to go 4 -5 times a year to the strip. Even the local places are getting bad. Not even worth the trip to Vegas. Stay in CA, Some of the casino’s near Temecula are pretty competitive with Pachenga and Rincon, which pretty much mirror the LV strip. And they do not report to anyone.