Boyd Gaming Corp. and Eldorado Resorts each spent the past 18 months creating two regional casino giants. Boyd has 29 properties in 10 states, Eldorado 26 locations in 12 states.
But there’s one place neither Nevada-based company currently operates – the Las Vegas Strip.
That will change, but not quickly. Executives from both casino companies would like to own a Strip address, but only if it makes financial sense.
Boyd Gaming CEO Keith Smith
“We have said (for some years) that we’d like to get back on the Strip for the right asset at the right price,” Boyd Gaming CEO Keith Smith said on his company’s third quarter conference call last week. Boyd owned the Stardust before it was closed and imploded in 2007.
“We’re not laser focused on it. If there was the opportunity we would, but right now there isn’t,” Smith added.
Eldorado CEO Thomas Reeg said in September that his company – even after some $2 billion in recent deals – is still actively seeking a Strip casino resort.
“It comes down to making sure it pencils out,” Reeg said. “Las Vegas is much different than any other market.”
Eldorado CEO Thomas Reeg
As regional casino operators, Boyd and Eldorado are both building large customer bases through casino ownership in key U.S. gaming markets.
For Boyd, the company’s two recent deals gave the Las Vegas-based casino operator access to guests in four of the top 30 metropolitan statistical areas in the U.S. – Philadelphia, Cincinnati, St. Louis, and Kansas City. Reno-based Eldorado has access to potential patrons in Chicago and St. Louis. The East Coast market is open to the company through its operation of Tropicana Atlantic City.
Analysts know that, notwithstanding their local options, a large swath of regional casino customers still want to visit Las Vegas to see the sights and test their luck. That’s why Nomura Instinet gaming analyst Harry Curtis asked Boyd executives on the earnings call if a Strip resort was an option at some point, especially with the company undergoing a multimillion-dollar effort to boost its customer loyalty program.
“We have plenty of assets in the Las Vegas market for our out-of-state customers or regional customers to come and visit,” Smith said. That’s true: Boyd operates three casinos in downtown Las Vegas and another seven Strip-like properties in locals gaming areas in Summerlin, North Las Vegas, Henderson and the Boulder Highway.
“We already accommodate our regional customers,” Smith said in an interview following the earnings call. “We’ll get (to the Strip), but it has to be the right asset for the right price and one that makes strategic sense.”
After imploding the Stardust, Boyd began construction on the $4.8 million Echelon development, but halted work on the 87-acre site a year later when the economy sank. Boyd sold the property for $350 million in 2013 to Malaysia-based Genting Berhad, which just this year began work in earnest on the $4 billion Resorts World Las Vegas.
Boyd walked away from the Strip and, in doing so, saved the company while the recession sent much of its competition into bankruptcy. In the years since, Boyd has built a well-respected regional casino operation while continuing to add to its Las Vegas locals base. But a Strip casino still seems to loom in the background.
With its latest deal, Eldorado added casinos in Lake Tahoe and Laughlin to its market-leading Reno portfolio. But its lack of a Las Vegas Strip location is also apparently in the heads of the investment community.
There could be opportunities on the horizon. Caesars Entertainment Corp. and MGM Resorts International might be enticed to shed a property, and most analysts figure the Cosmopolitan of Las Vegas – purchased by private equity investment firm Blackstone Group in 2014 – is on the market once again.
There is also vacant land ready for development, such as the former Alon/New Frontier site owned by Wynn Resorts.
Penn National Gaming – the regional gaming leader with 41 casinos, resorts and racetrack facilities – already owns the Tropicana Las Vegas and M Resort in Henderson.
Neither Boyd nor Eldorado plans to jump at the first available opportunity.
In answer to a follow-up question from Curtis, Boyd Gaming CFO Josh Hirsberg said any potential Strip property would have to meet certain criteria, such as strategic value and operating cash flow.
“Having the kind of the nationwide footprint and the loyalty programs are important to us today,” Hirsberg said. However, just because Boyd has expanded that platform doesn’t mean “we’ve got to go pay up for an asset on the Strip.”
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
