Both Penn National Gaming and Pinnacle Entertainment have weighed in at the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum. Penn engaged in a three-bucket division of its casinos. “The first bucket comprises properties in markets where there has been no new competition, which are trending with the general [growth gaming revenue of the market, which is well understood to be soft of late,” wrote analyst Joseph Greff. “At these properties, the focus remains on controlling costs and maintaining margins. The second bucket comprises properties still working through cannibalization (Lawrenceburg, Columbus, and Charles Town), while the third comprises properties for which it expects growth (Toledo, and the recently renovated Hollywood St. Louis).”
Despite its difficulties in Ohio, Penn continues to push forward with two racinos, demonstrating almost masochistic persistence. The company breaks ground tomorrow in Massachusetts on its slot parlor in Plainville. Having sensed no appetite from regulators for a temporary facility, Penn will go straight to building the permanent facility, with a view toward opening a year from now.
Pinnacle is near the $40 million mark that it expected to hit in terms of savings from the Ameristar Casinos takeover. To make further reductions, the company still is looking at reducing labor costs, outsourcing and monetizing the loyalty program with MGM Resorts International that it inherited from Ameristar. (The partnership was formalized today.) Greff writes, “on days without weather issues, it has been encouraged by the level of play of its customers and remains optimistic that this should show up in its results later this year.”
Expansion of L’Auberge Baton Rouge is under consideration and Pinnacle thinks it is “well-positioned” for L’Auberge du Lac to withstand the competitive challenge forthcoming from Golden Nugget Lake Charles. In the Indiana-Ohio marketplace, the company is ramping up for a May 1 opening of its Belterra Park racino. It will try to ameliorate competition with its own, original Belterra by marketing the latter as a resort and Belterra Park as a locals casino.
Once past May 1, Pinnacle’s focus will be to de-leverage using free cash flow that is expecting to accelerate once Belterra Park is open. Beyond that, Pinnacle “remains open to anything that can increase shareholder value.” Could that be code for “REIT”? We’ll see.
