Case Bets: Station, Isle, Cosmo, Loveman & the horsey set

Revenue growth accelerated at Station Casinos in 2Q11, with cash flow up 8.5% (compared to +4% for the year so far). Keeping room rates steady at an average of $71 appears to have boosted occupancy, up from 81% to an impressive 88%. The repurchase of Green Valley Ranch has helped push long-term debt to $3.2 billion but Station’s raking it back in on the casino floor. Slot revenues rose 7% and table winnings were up 18%. So either the hold percentages were hella tight or players are playing very loosely. Liberalized coupon policies and a huge marketing push also worked to the benefit of the F&B department, which raked in 12% more than in 2Q10. Station endured much damage to its image — some of it self-inflicted — but it’s been working hard to reverse perceptions, as last quarter’s results attest.

Speaking of tight slots, I’ll bet you can find some in Kansas City, where riverboat revenues dipped but slightly despite worrisome declines in foot traffic for everyone but Isle of Capri. Isle’s increased attendance (2%) roughly paralleled its rise in casino winnings (3%). Penn National‘s Argosy vessel was -2% in foot traffic but +1% in revenue, while Harrah’s North Kansas City‘s winnings were steady/flat despite 7% fewer patrons. Player defection was even greater from market leader Ameristar Kansas City, which experienced a 5.5% revenue decline even as patronage dropped 8%. Gotta loosen those machines, boys!

Less-sanguine numbers emerged from The Cosmopolitan of Las Vegas. Cash flow implies an 11% ROI but the Cosmo continues to lose money and its casino isn’t pulling its weight: 19% of total revenues vs. a Strip average of 39%. Cosmo’s restaurants and nightclubs are basically subsidizing the casino. Talk about a “paradigm shift”! As for Cosmo’s assertion of a “steady” increase in gambling volume, they’d have had to have begun with a mere trickle of play for that claim to be believable. David G. Schwartz analyzes the Cosmo’s curious quarter so incisively that I’ll let the good doctor take it from here. (Considering how well nightlife is working for the Cosmo, one is tempted to second-guess the decision to punt the showroom into some unspecified future era.)

Ever the optimist, everybody’s favorite CEO, Gary Loveman, insists for the zillionth time that legalization of online poker is just around the corner. (How many corners have we turned since his initial prophecy?) However, the facts on the ground strongly suggest otherwise. But perhaps Dr. Loveman’s Panglossian outlook is fading. He’s now making noises of support toward state-level legalization on Internet gambling, something Caesars Entertainment has previously tried to scupper in New Jersey and points west.

Online poker’s prospects, however, look better than the grim-to-fatal prognosis for horseracing. A new report sponsored by the Jockey Club Round Table is the prelude to “a multi-million-dollar series of initiatives … to move the sport forward.” That’s a 12-word synonym for “racinos.”