During a call on third-quarter earnings, Red Rock Resorts executives said Tuesday that earnings were strong, despite the mask mandate put in place on July 30 having slowed some convention and group bookings through the end of 2021 and into the first half of 2022.
They also revealed that Red Rock’s Durango Station casino and hotel in southwest Las Vegas will cost $750 million and they looked forward to developing five other locations in the future.
“We’re extremely excited about this project,” said Red Rock CFO Steve Cooley, who added that construction will start in the first quarter of 2022 and take 18 to 24 months.
The resort will sit on a 71-acre site at the 215 Beltway and Durango Drive passed by 166,000 cars daily. Within a five-mile radius of Durango is a population of 350,000 people with no competition in that area. The customers are “a favorable demographic profile” as well, Cooley said. Red Rock expects the financial return at Durango Station to surpass the company’s overall average return, with twice the number of adults per gaming position than Red Rock Station and Green Valley Ranch.
The property will have 533,000 square feet with 73,000 square feet of casino space that will house 2,000 slot machines and 46 table games, Cooley said. It will have more than 200 hotel rooms, 21,000 square feet of convention and meeting space, four full-service restaurants, a sportsbook, and a resort pool.
The $750 million cost includes design, construction, and opening expenses. Cooley said they delayed unveiling the budget until they identified the procurement on the project.
“Construction costs have risen, but we feel like we’ve captured that in the $750 million number,” Cooley said.
Durango Station would be paid for by cash flow and in part by a land sale.
Red Rock plans to sell about 23 acres behind the Durango site for $24 million to developers looking to build apartments, which casino executives said would provide even more customers.
Red Rock Resorts plans to close on its sale of the Palms and Palms Place condominiums to the San Manuel Band of Mission Indians for $650 million by the end of 2021. The Palms has remained closed since the pandemic hit in March 2020.
Three of Red Rock’s other Las Vegas properties are closed, while six are open.
“We are in development mode on six undeveloped pieces of property we think of as very attractive,” said Lorenzo Fertitta, vice chairman of the board of directors. “We like the idea of doubling the size of our current operating platform here in Las Vegas by developing those properties. We always have that option down the road (if it makes sense).”
CEO Frank Fertitta III said the company sits in “the perfect position” by owning its real estate and controlling its growth pipeline. They will take the “heart of each of the properties” and sell off the remainder, he said.
Red Rock reported net revenues from Las Vegas operations of $412.7 million for the third quarter, an increase of 29%, or $91.9 million, from $320.8 million in the same period of 2020. Adjusted earnings from Las Vegas operations were $197.9 million for the third quarter of 2021, an increase of 40% or $56.2 million, from $141.7 million in the same period of 2020.
Non-gaming revenue, food and beverage and hotel, was strong, while convention business is lagging for now, executives said. Movie-theater business also hasn’t returned in volume.
“While the third quarter presented some headwinds, our disciplined approach allowed a record high (adjusted earnings),” said Cooley, who added Red Rock is positioned well in the Las Vegas market for the long term by catering to locals.
Cooley said the state’s indoor mask mandate started to have an impact at the end of the third quarter and he expects that trend will reverse once the state lifts the requirement. There’s been a slowdown in bookings in the later part of 2021 and early 2022 because of the mask mandate, he said.
Executives said they have no clue when the state will drop the mandate, but group bookings are coming back for late 2022 and early 2023.
“We’re headed in the right direction,” Lorenzo Fertitta said. “Hopefully, it will be lifted in the near future. We’re one of six states that still have a mask mandate in place and we think that when the mask mandate ends, it should be positive from a psychological standpoint and overall for our business.”
As for reopening the three closed properties — Texas Station, Fiesta Rancho, and Fiesta Henderson — there is no timetable. The three represented less than 10% of the cash flow, even though they accounted for one-third of the company’s casinos, Frank Fertitta said. They have moved those players to the open casinos, resulting in higher margins.
