Strong convention and leisure demand in Las Vegas helped drive higher-than- expected second-quarter revenue growth for Caesars Entertainment Corp. as the company awaits its buyout and merger from Reno-based Eldorado Resorts Inc.
Caesars on Monday reported a 4.9 percent increase in revenue, to $2.22 billion, thanks to healthy returns in the hotel and food and beverage sectors. Executives noted the company’s 97.5 percent occupancy rates in Las Vegas and favorable consumer response to Hell’s Kitchen and Vanderpump Cocktail Garden at its signature Caesars Palace property helped drive demand.
“Room renovations across our Las Vegas assets have been a major driver of our strong performance in recent years,” said Caesars CEO Tony Rodio. “These investments are almost complete and by the end of the year, we will have renovated 92 percent of our Las Vegas Strip hotel product since 2014 providing us with a highly attractive portfolio.”
Eldorado, which plans to unveil its second-quarter earnings Tuesday, announced in June that it is acquiring Caesars in a $17.3 billion cash and stock deal expected to close in the first half of 2020.
Rodio said that while the Eldorado buyout is pending, Caesars executives will continue to evaluate operations.
“Until then, I, along with the rest of Caesars’ management team, remain focused on improving the company’s operations and financial performance through both revenue enhancing opportunities as well as operating efficiencies,” he said.
Gaming revenue for the quarter was sluggish in Las Vegas due to low table game hold.
Rodio said he is encouraged by enhancements in group and leisure attractions with the $375 million Caesars Forum Meeting Center due to open near the High Roller next year and a solid entertainment lineup featuring performers Christina Aguilera, Gwen Stefani, Guns N’ Roses, Journey, Madonna and Shania Twain, scheduled at the renovated Colosseum and at the Zappos Theater at Planet Hollywood. Keith Urban will reopen the Colosseum when the renovation is completed in September.
The company reported a net loss for the quarter that ended June 30, attributed primarily to a $323 million year-over-year change in the fair value of a derivative liability.
The change resulted in $315 million loss, 47 cents a share, compared with net income of $29 million, 4 cents a share, in the same quarter a year earlier.
In response to an analyst’s inquiry, Rodio also said the company intends to keep a close watch on the rise in resort fees across the industry. MGM Resorts International last week acknowledged a $6 resort fee increase to $45 a night at three properties, Aria, Vdara and Bellagio.
“I look at that as something we need to be a little bit cautious about because over time, at some point there’s going to be the straw that breaks the camel’s back,” Rodio said. “I don’t think we’re there yet, but I want us to be very judicious and cautious about taking those rates any further. It’s certainly a revenue stream that’s hard to walk away from and it’s been accepted at this point, but we’re getting pretty high.”
Caesars’ shares didn’t get caught up in Monday’s massive stock market retreat. The company’s shares fell 1.3 percent, 15 cents, to $11.59 a share on below-average volume. After hours, shares increased a penny, 0.9 percent, to end at $11.60 a share.
Caesars Entertainment Corp.
Second-quarter revenue and earnings for Las Vegas-based Caesars Entertainment Corp., operators of Caesars Palace, Flamingo, Harrah’s and the Linq Hotel, among other Strip properties. (Nasdaq: CZR)
2Q 2019: $2.222 billion
2Q 2018: $2.119 billion
2Q 2019: ($315 million)
2Q 2018: $29 million
Earnings/(loss) per share
2Q 2019: (47 cents)
2Q 2018: 4 cents