Executives foresee payoff for Palms, Palace Station improvements

The parent company of Station Casinos weathered construction disruptions at its Palms property to post its highest first-quarter net revenue levels in more than a decade.

Executives of Red Rock Resorts Inc., on Tuesday said the company increased revenue 6.2 percent to $447 million, riding the wave of Southern Nevada’s solid economy, for the quarter that ended March 31.

Company officials said a 78.2 percent decline in net income primarily was due to a decrease in the fair value of derivative instruments, an increase in write-downs and other charges, compared with a prior-year tax advantage.

Net revenue for the company’s Las Vegas operations increased 6.9 percent, or $27.2 million, to $422.4 million. Revenue declined on the company’s tribal casino management contracts, mostly as a result of the expiration of its Gun Lake management contract in Michigan, but offset by higher fees managing the Graton Resort and Casino in California.

With millions of dollars in improvements completed at Palace Station and project completions nearing at Palms by the third quarter, company officials are now anticipating a ramp-up in revenue at both properties. Executives said as of March 31, the company has spent about $587 million in costs against the $690 million project.

“As for the overall strength of the Las Vegas locals market, we have now seen gaming revenues in this market grow on a trailing 12-month basis at its fastest rate of any regional market in the United States on a same-store-sales basis with our gaming revenues growing at more than twice the rate of the remainder of the market during that same period,” Executive Vice President and Chief Financial Officer Stephen Cootey said in a Tuesday conference call with investors.

Executives have indicated they expect Palms to function as a hybrid property catering both to locals and tourists seeking something different off the Strip. CEO Frank Fertitta said the markets are markedly different.

“I think they are two totally different markets,” Fertitta said. “The locals market is going to be focused on population growth, how the economy here is doing, wage growth, retirees coming into the market and all the indicators for the Las Vegas economy are positive and that’s where our business primarily comes from. We’re very bullish on the Las Vegas local market.”

Company executives say they have not seen any weakness similar to what has been experienced at the Strip at Palms or any other property.

The company also on Tuesday announced a cash dividend of 10 cents a share, payable June 28 to shareholders of record on June 14.

Red Rock Resorts shares slid 65 cents, 2.3 percent, to $26.98 a share on volume slightly above average on Nasdaq. After hours, the issue inched up 2 cents, less than a percentage point, to end at $27 a share.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.