Red Rock Resorts reported Tuesday net revenues fell 27% in the third quarter but adjusted revenue from its Las Vegas operations rose 38.6% or $39.4 million to $141.7 million from the same period in 2019.
The third quarter net revenues for Las Vegas were $320.8 million, down from $440.7 million a year ago. That marked the highest third quarter adjusted earnings in any quarter of the history of its operations.
“It’s important to look at our result, excluding our still-closed properties of Texas Station, Fiesta Rancho, Fiesta Henderson and Palms Casino Resort in the third quarter,” said Executive Vice President and Chief Financial Officer Stephen Cooley. Excluding those properties, net revenue was $316 million, up from $314.9 million in the third quarter of 2019. Adjusted earnings of $146.1 million, up 39.7 percent from $104.6 million a year ago.
The customer trends seen in June continued through the third quarter with visitation from a younger demographic, increased spend per visit, more time spent on devices and increases in return of “core customers.” Those trends were offset by higher COVID-19 costs, costs with closed properties and restrictions placed on the business.
“We expect those cross-currents will continue to exist for a while,” Cooley said.
The company is benefitting from cost cutting by streamlining the business, optimizing marketing, renegotiating vendor and third-party agreements. Annual cost reductions removed from the business are greater than the $150 million annual costs referenced in the second quarter earnings call. That will increase margins, Cooley said.
“We understand this is the new normal,” he said. “A majority of our mix is predominantly from gaming, which is a high-margin business, which helps sustain those margins. We are looking forward to a return of some of the business lost to COVID such as hotel and catering.”
CEO Frank Fertitta III said there’s been a permanent shift in the cost structure because the shutdown allowed them to question everything they were doing and being cautious upon reopening. He said he doesn’t see buffets coming back anytime in the near future.
There’s more of a focus on direct relationship marketing rather than mass-market promotions that reduces costs.
Company officials said there’s no timeline for reopening the closed properties. Fertitta said there is crossover play from the closed casinos.
“You have a growing population and tax refugees moving from neighboring states into Las Vegas,” Fertitta said. “Home sales are unbelievably strong and very little supply with high demand. As population continues to grow, we control almost all of the supply where you can build a new casino.”
Executives said their properties have continued to rely on locals’ traffic and drive-in traffic because people aren’t traveling and staying in the hotels like they have previously. They can still make money in this environment, Fertitta said.
Board Vice Chairman Lorenzo Fertitta said older customers have started coming back since Labor Day.
During the conference call, executives said the state moving the group size limit from 50 to 250 will be a positive for the social catering side with many delayed weddings and other gatherings.
“We would expect that to be a net positive for us moving forward and in 2021,” one unnamed executive said during the phone conference call. “The governor has talked about in early 2021 talking about 50 percent capacity for meetings and convention. We took that as a positive sign looking forward into 2021.”
Station Casinos owns and operates Red Rock Casino Resort Spa, Green Valley Ranch Resort Spa Casino, Palms Casino Resort, Palace Station Hotel & Casino, Boulder Station Hotel & Casino, Sunset Station Hotel & Casino, Santa Fe Station Hotel & Casino, Texas Station Gambling Hall & Hotel, Fiesta Rancho Casino Hotel, Fiesta Henderson Casino Hotel, Wildfire Rancho, Wildfire Boulder, Wild Wild West Gambling Hall & Hotel, Wildfire Sunset, Wildfire Valley View, Wildfire Anthem and Wildfire Lake Mead. Station Casinos also owns a 50% interest in Barley’s Casino & Brewing Company, Wildfire Casino & Lanes and The Greens. In addition, Station Casinos is the manager of Graton Resort & Casino in northern California.