Red Rock Resorts’ executives are confident renovation projects at Palace Station and the Palms will pay off.
Steve Cootey, executive vice president and chief financial officer for the parent company to Station Casinos, told investors during a call Tuesday afternoon that the two properties have already been seeing “significant revenue growth,” and have been attracting tourists and locals alike. Net revenue rose 16 percent to $482.9 million last quarter.
“Both of these completely transformed properties are still in the process of ramping up, and we continue to expect these investments to generate significant returns for the company over time,” he said. “The property will continue to ramp faster than the market.”
Renovations at the Palms are expected to wrap up mid-September with the opening of dim sum restaurant Tim Ho Wan and the addition of 16 gaming tables.
Total expenses for the Palms’ grand opening in April, as well as its national branding and marketing campaign, were estimated to be around $11.3 million. This set back the company in other areas; adjusted cash flow fell 7.6 percent to $115.2 million.
“Like any new project, expenses open much higher than you would normally expect,” Cootey said. “There are expenses that will be reduced as time moves on.”
When asked if the renovated properties were cannibalizing other casinos in Red Rock’s portfolio, Cootey said the company was seeing the reverse, with only about 40 percent of visitors being local.
“The addition of the Palms is actually increasing organic growth,” he said. “We’re pretty happy from a locals perspective. And (as for) out of town (visitors), we’re taking them from the Strip properties.”
Las Vegas market
Las Vegas’ economic standing was another boon to the company’s net revenue, Cootey said. He pointed to developments like the Allegiant Stadium and Las Vegas Convention Center, as well as the state’s regulatory environment and low taxes.
Net revenues in Las Vegas grew 16.3 percent to $457.8 million.
“We continue to view the Las Vegas locals market as the most attractive gaming market in the United States,” he said. We “remain uniquely positioned to take advantage of the ongoing growth in this extremely vibrant market.”
Shares of Red Rock Resorts closed down 2.58 percent to $18.50 Tuesday.
2Q 2019: $482.9 million
2Q 2018: $416.2 million
Adjusted cash flow
2Q 2019: $115.2 million
2Q 2018: $124.6 million
2Q 2019: ($7.1 million)
2Q 2018: $99.1 million
Earnings per share
2Q 2019: (6 cents)
2Q 2018: 82 cents