February 21, 2019 - 6:28 pm
Updated February 21, 2019 - 8:49 pm
Caesars Entertainment Corp. said it expects its Las Vegas revenue to grow about 2.5 percent this year but warned it won’t all be profit as labor and security costs rise.
CEO Mark Frissora hinted the company is unlikely to seek revenue growth by hiking parking and resort fees this year. Caesars last raised them in the first quarter of 2018.
“We don’t have any plans on changing the structure we have in place,” Frissora said in response to a question about fees. “We are certainly sensitive to the fact that we can hurt our own profitability and revenue growth if we get exorbitant or do things that have no value to them.”
Frissora barely commented on Carl Icahn during the 40-minute call earnings call Thursday, saying only that the company is in talks with the activist investor.
Icahn said in a Securities and Exchange Commission filing Tuesday that he owns 9.8 percent of the company and wants the company to sell itself. He also said he wants board representation and a say in the choice of a new CEO.
Frissora, who is slated to step down at the end of April, said the company has made progress on the search for his replacement.
“We are far along in the process. We have gotten through interviewing candidates and have a very good list of potential candidates for this position,” he told analysts during the call.
Caesars Chief Financial Officer Eric Hession said the company’s labor costs will increase about $80 million this year as wages and benefits rise. The company will seek to offset some of the cost increases through efficiency improvements, Hession said.
Caesars will invest between $375 million and $450 million this year in existing properties, he said, including room renovations at Harrah’s and Paris Las Vegas. Last year, the company spent $419 million on existing properties, including upgrades at Bally’s, Flamingo and Paris Las Vegas, Hession said.
The company will invest another $475 million to $550 million this year in development projects including its new Strip convention center, a casino in Korea and sportsbooks, he said.
Caesars said fourth-quarter net revenues rose 11 percent to $2.12 billion compared with $1.9 billion during the same period the previous year as the acquisition of Centaur and growth in Las Vegas offset a decline in Atlantic City. Caesars completed the acquisition of Centaur, which consists of two casinos in Indiana, in July.
Las Vegas fourth-quarter net revenue increased 7.8 percent to $949 million compared with $880 million the previous year as hotel occupancy and hold increased. The Strip experienced a sharp drop in visitation in the fourth quarter of 2017 after the Oct. 1 shooting.
Caesars’ fourth-quarter adjusted property cash flow increased 12.1 percent to $567 million driven by Las Vegas, which saw its property cash flow jump 18.2 percent to $351 million.
Las Vegas margins increased for the quarter to 37 percent as the company continued to cut costs.
Caesars posted stronger Las Vegas revenue and cash flow growth during the fourth quarter and full year compared with its Strip competitors. The company also posted higher Las Vegas margins than its peers.
Profit for the period was $198 million compared with $2 billion the previous year. The profit drop was entirely accounted for by a noncash $2 billion tax benefit earned in the fourth quarter last year.
“A very good quarter, against reasonably muted expectations,” Credit Suisse said in a note.
Caesars shares rose 15 cents, or 1.6 percent, to $9.58 after the close of trading Thursday.
Caesars Entertainment Corp.
4Q 2018: $2.12 billion
4Q 2017: $1.90 billion
Change: +7.4 %
4Q 2018: $198 million
4Q 2017: $2 billion