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Hard Rock posts $26.5 million loss in first quarter

The Hard Rock Hotel widened its first-quarter loss, largely due to higher operational expenses, poor performance numbers and interest payments on the money used for the large expansion finished in March, a filing with the Securities and Exchange Commission shows.

Independent gaming analyst Frank Martin said Monday that the property needs dramatic improvement in casino revenue or room rates just to eliminate its operational loss, which was $9.1 million in the first quarter ended March 31.

“Many casino properties have a comprehensive loss, after impairment charges and interest payments,” Martin said. “The Hard Rock is still relatively unusual in that it also has an operational loss which has been increasing for the last three years. In upcoming quarters, gaming revenue must match the improvements in revenue from food and beverage.”

The Hard Rock Hotel posted a quarterly loss of $26.5 million, compared with a $24.3 million loss a year earlier.

The property paid $19 million in interest expense in the quarter on its $1.2 billion debt load.

The $770 million expansion, largely completed in December, added 74,000 square feet of meeting space, a larger concert venue, a larger night club and amenities such as new restaurants, a spa and new poker lounge, two hotel towers totally 865 rooms and 30,000 square feet of new casino space. The property now has 1,500 hotel rooms and 60,000 square feet of casino floor.

Expenses to operate the larger property increased 71.1 percent, while revenue jumped 80.6 percent to $54.2 million in the quarter .

Casino revenues increased 54.5 percent, hotel revenues increased 69.3 percent and food-and-beverage revenues increased 78 percent.

Martin said that the property slot machine average per day was much less than half of the Strip casino average. Table revenue, which improved by 9.8 percent per table per day, was also less than half the Strip average.

While hotel revenues increased, management said in its filing increase was due volume from an increase in room inventory. Room occupancy decreased to 82.1 percent from 89.3 percent.

The property, however, was able to increase daily room rates in the quarter from $145 per day from $142 per day.

Fred Kleisner, chief executive officer of co-owner and operator Morgans Hotel Group, told gaming regulators last week that a sharp decline in room rates experienced last year seems to have leveled off as event-driven demand, such as conventions, and leisure travelers have started to return to the Las Vegas market.

“The free fall on rates, especially on weekends, has leveled off,” Kleisner said. “There is still a decline but the rate of decline has dropped off significantly. If we look 12-to-15 months out we should see recovery on a sustained basis in the Las Vegas market.”

Martin said no matter how the market returns to Las Vegas, the Hard Rock Hotel will likely continue to post operational losses this year.

The 41-acre property is owned by Morgans, which controls 14.2 percent, and Credit Suisse affiliate DLJ Merchant Banking Partners, which owns the remainder. The property is on the corner of Harmon Avenue and Paradise Road.

Contact reporter Arnold M. Knightly
at aknightly@reviewjournal.com or 702-477-3893.

 

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