There has long been a rivalry between Boyd Gaming and Red Rock Resorts.
Their founders, the late Sam Boyd and son Bill Boyd, and the late Frank Fertitta, Jr., are considered pioneers in the Las Vegas casino market catering to Southern Nevada residents. Today, the companies are the two dominant operators.
But the competition once got heated.
Boyd Gaming’s Orleans Casino in Las Vegas, when it was closed during the pandemic
In 2009, Boyd made a $950 million offer to acquire a significant portion of Red Rock, then known as Station Casinos, when the latter was on the brink of filing for bankruptcy. After being rejected, Boyd told state gaming regulators it wanted to offer $2.45 billion for all of Station Casinos, which ultimately filed for Chapter 11 reorganization with $6.5 billion in debt.
Station Casinos emerged from bankruptcy in 2011 after losing just one property to its creditors.
Last week, J.P. Morgan gaming analyst Joe Greff praised Boyd and Red Rock, but for different reasons.
Analysts have long said locals properties are akin to regional markets throughout the U.S. Boyd and Red Rock casinos in Southern Nevada draw business from the neighborhoods and drive-in customers. Unlike Strip resorts, locals casinos are not dependent on out-of-state visitors.
Also, older residents are starting to venture back to their favorite properties after staying away for a year due to COVID-19.
“Remarkably, March results, which operators have commented on being quite strong, haven’t benefited from the core 55-year-old-plus customer, a segment that should recover as vaccination rates improve,” Greff said in his remarks concerning Boyd.
Shutterstock/Palace Station in Las Vegas, which is owned by Red Rock Resorts
In a separate report on Red Rock Resorts, he said the company’s properties have “upside potential” from a return of that same core customer, “which should complement/provide a cushion related to its presently favorable growth in new, younger casino patrons.”
That’s where the similarities end for Boyd and Red Rock. Boyd has moved well beyond Las Vegas in the last decade.
In 2019, Boyd’s Midwest and Southern gaming properties produced almost $2.2 billion of the company’s $3.3 billion in total revenues.
With Southern Nevada’s gaming market taking the brunt of COVID-19 pandemic-related business disruptions in 2020, Boyd counted on its regional properties – 17 casinos in nine states – for 68% of its total revenues.
Meanwhile, Red Rock Resorts is now entirely dependent on a resurgence in the Las Vegas locals market for its revenues and cash flow after the company’s sole Native American casino-management contract ended in February.
Boyd has far more markets to draw from as the company focuses its regional business on a “drive-to leisure customer.”
Greff noted that Boyd Gaming has another business factor in its arsenal: the company’s sports betting deal with FanDuel that gives it a national presence. FanDuel operates Boyd’s online and mobile sports wagering in Pennsylvania, Illinois, Indiana, and Iowa.
Boyd CEO Keith Smith said in February that Louisiana, Kansas, Missouri, and Ohio – states where Boyd operates casinos – are considering retail and mobile sports betting legislation.
Last month, Boyd launched an online casino in Pennsylvania with FanDuel, which Smith said could generate $20 million in cash flow in 2021. Boyd owns 5% of the sports betting provider and FanDuel does not operate the company’s Nevada sportsbooks.
Greff said Boyd’s potential sports betting and igaming business was worth $12 per share. He put a price target of $70 per share on Boyd. The company closed at $63.57 on the New York Stock Exchange Tuesday.
Red Rock Resorts is moving to add another California Indian casino to its portfolio. It expects to break ground by the end of June on a long-stalled tribal casino project near Fresno with the North Fork Rancheria of Mono Indians. But it could be two years before that development is open.
Last month, Boyd and the Wilton Rancheria Tribe held a groundbreaking ceremony in Elk Grove, California, 15 miles south of Sacramento, for the Wilton Rancheria Resort and Casino.
In the meantime, Red Rock is sitting on eight vacant land parcels, six in Las Vegas and two in Reno, a combined 477 acres for potential development.
“We are not giving any credit related to Red Rock’s non-(cashflow) producing land bank, which, when the market improves further, could be monetized (or) sold, with the proceeds to be used for further debt reduction,” Greff said in regards to the company’s $2.9 billion it had on the books at the end of December.
Greff told investors Red Rock’s shares were worth $40. The company’s stock price closed at $34.36 on the Nasdaq Tuesday.
Both companies have not reopened several casinos in the Las Vegas Valley that have been silenced since last year’s state-ordered pandemic shutdown. Boyd has not given a time frame for reopening Main Street Station downtown, nor Eastside Cannery.
Red Rock said the off-Strip and much-maligned Palms, a source of concern from the investment community, will return when the tourist market comes back. No hint was given for Texas Station and Fiesta Rancho in North Las Vegas and Fiesta Henderson.
“We see benefits of traffic from closed properties flowing to (Red Rock’s) geographically diverse phase-one opened properties,” Greff said, noting he doesn’t see the dynamic changing any time soon.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
