Caesars Regional Casinos Shine in Reopening, Las Vegas Properties Not So Much

Posted on: July 15, 2020, 09:56h. 

Last updated on: July 15, 2020, 02:41h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Caesars Entertainment (NASDAQ:CZR) says its regional properties continue performing well following recent reopenings, but its gaming venues in destination markets, such as Las Vegas, are struggling. The same sentiment is being articulated by Eldorado Resorts (NASDAQ:ERI), the company that’s closing in on a $17.3 billion takeover of the Caesars Palace operator.

Caesars Touts Regional Properties
Caesars and Eldorado say regional casinos are performing well. But destination venues, such as Caesars Palace, are scuffling. (Image: Yahoo Sports)

In Form 8-K filings with the Securities and Exchange Commission (SEC) released today, the two gaming companies updated investors on the performances of their venues that were operational in June. For Caesars, that includes 19 venues — nine of which are deemed to be in “destination” markets. Those are defined as the operator’s properties in Nevada and Harrah’s New Orleans.

Revenues for the reopened Regional properties for the period they were operating in May and/or June through June 30, 2020 increased approximately 9% to 11% compared to the prior year period. Change in hold did not have a meaningful effect on this increase,” according to the Caesars 8-K.

Operating income for the properties in Caesars regional portfolio that were operational through June 30 surged 125 percent to 135 percent, said the company. That jibes with a mid-June update provide by Caesars underscoring strength in markets such as Louisiana, Mississippi, and Missouri, and sluggishness in Las Vegas.

Destination Disappointment

Caesars added adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) at regional venues that were open through June 30 jumped 75 percent to 85 percent on a year-over-year basis as margins surged.

As more domestic gaming properties come back online following the coronavirus shutdown, analysts are bullish on operators with regional portfolios, because it’s easier to cut costs and reduce amenities at those venues, thereby driving margin expansion.

Unfortunately, that doesn’t obfuscate weakness in markets like Las Vegas. Caesars said operating income at its destination casinos slid 75 percent to 85 percent, while revenue dipped 48 percent to 50 percent on a hold basis. At Caesars’ reopened Nevada properties and Harrah’s New Orleans, adjusted EBITDA on a hold basis plunged 55 percent to 65 percent last month.

The operator reopened eight Silver State venues, including four in Sin City, and Harrah’s New Orleans at various points throughout June.

Similar Trends for Eldorado

Eldorado — which is beloved by Wall Street due in part to its strong ex-Nevada portfolio — experienced similar destination/regional trends in June. Seventeen of the company’s gaming venues were operational last month with three, Eldorado Reno, Silver Legacy Reno, and Circus Circus Reno, defined as destination properties.

The company said revenue at three Reno casinos slipped approximately 42 percent, triggering a roughly 29 percent EBITDA drop. Conversely, regional numbers were superior. While turnover at those venues declined nine percent, ERI EBITDA margins jumped 920 basis points, driving a 24 percent rise in operating income.

From May 18 through June 19, ERI reopened 14 regional gaming venues across nine states. Five of those venues were operational for half of June or fewer days.