Red Rock Resorts leadership said business levels at the company’s Las Vegas locals properties are slowly showing improvement despite coronavirus pandemic numbers in Southern Nevada continuing to spike.
Still, the company – which operates its properties under the Station Casinos brand – isn’t ready to reopen its entire Las Vegas Valley portfolio, including the off-Strip Palms Resort.
“It’s too early to assess clarity so we’re currently undecided about when or if we can reopen the Palms,” Red Rock Resorts CEO Frank Fertitta III said on a conference call Tuesday to discuss the company’s second-quarter results.
“We have been able to move some (customer) play from our closed properties to existing properties, so that’s been a good sign,” Fertitta said.
Red Rock Resorts said its revenues declined 77.5% to $108.5 million in the three-month period that ended June 30. The company reopened just a handful of its casino portfolio that was closed for more than two months during the quarter.
Red Rock’s Las Vegas properties – seven of its major resorts and a chain of smaller casinos – collected $101 million in second-quarter revenues, down 77.9%. Management fees from the Graton Resort in Northern California, which partially reopened on June 18, was $5.9 million, a 75% drop.
Fertitta said the customer base has skewed somewhat younger, which he termed “a good sign,” while the company older and retired customer base seemed to stay home.
“It’s a unique opportunity to build a new customer base as we wait for our loyal customers to return,” Fertitta said. He also noted a “subtle change” in customer traffic patterns, from weekend to mid-week or Sunday.
“We seem to be getting back to the basics,” Fertitta said, although he said roughly 650 bar top slot machines were taken out of service to comply with the governor’s directive last month to close stand-alone bars, and bar top areas in restaurants, taverns, and casinos as a step to mitigate the spread of COVID-19
Cash flow during the quarter was a loss of $6.9 million while the company took a net loss of $71.5 million.
The quarterly earnings were the company’s first since the death of the Red Rock Resorts and Station Casinos President Richard Haskins, who died of July 4th in a watercraft accident while vacationing in Michigan. Haskins, 56, had been with the Las Vegas locals casino giant for 25 years, was the No. 2 executive in the corporation behind Chairman and CEO Frank Fertitta III.
A replacement has not been named.
Through Station Casinos, Red Rock Resorts operates some 20 properties in Southern Nevada, including its flagship Palace Station near the Strip, Red Rock Resort in Summerlin and Green Valley Ranch Resort in Henderson.
In addition to the Palms, the company has not reopened its two Fiesta properties in North Las Vegas and Henderson, and the Texas Station in North Las Vegas.
“While margins are not sustainable at these levels, in our view, permanent cost savings, and what could be permanent property closings/sales, will get Red Rock back on track to its near best in the business margins it saw prior to the Palms acquisition,” Macquarie Securities gaming analyst Chad Beynon said Tuesday. “Much has changed since the beginning of 2020 but we believe Red Rock is in a better position than most given its target customer is not dependent on employment and lives within proximity of a casino.”
The Palms, which Red Rock spent $360 million to acquire four years ago and underwent $690 million in improvements, has been a source of questions. Prior to the pandemic, the company closed a high-priced day club and night club area took millions of dollars in losses on the venture.
Fertitta, during Red Rock’s first-quarter conference call, denied the property was for sale.
Red Rock’s cash and cash equivalents at the end of June were $270.1 million and total debt of $3.3 billion.
Shares of Red Rock closed at $12.24 on the Nasdaq Tuesday, up 55 cents or 4.70%.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
