Strong hotel occupancy combined with a run of good luck to help Caesars Entertainment boost net revenue in its core Las Vegas Strip market by 5.8 percent in the first quarter.
Regional revenues also increased as the acquisition of Centaur Gaming offset tougher competition in Atlantic City and the temporary closure of some Midwest casinos due to bad weather.
In all, corporate-wide net revenues compared to Q118 were up 7.3 percent to $2.12 billion, mainly on the strength of a $50 million surge in Las Vegas to $953 million𑁋with higher hold percentages at the games contributing about half of the increase—while Strip hotel occupancy was up 250 basis points to 95 percent and revenue per available room grew 4.9 percent.
Las Vegas cash flow jumped 12 percent to $360 million compared with $321 million in the 2018 quarter, and more good things are expected there, said CFO Hession, because second-quarter non-group bookings are about 150,000 room nights higher than at this time last year.
For the year, he said the company expects revenue growth in Las Vegas to outpace 2018 by 2.5 percent.
The quarter ended with a net loss enterprise-wide of $217 million, but the culprit there was a $322 million one-time charge stemming from a change in in the fair value of a derivative security. The company reported a loss of $34 million in the same period last year. The loss per share was 32 cents, compared with minus-5 cents in Q118.
In any event, the gaming giant plans to shore up the bottom line long-term with a strategy of steep job cuts, joining Strip rival MGM Resorts International, which earlier this year announced plans to boost cash flow by $300 million, mainly through executive-level reductions, although all levels of the employment chain will be affected.
Last year, both companies negotiated new five-year contracts with Las Vegas-based Culinary Local 226, the Nevada resort industry’s largest labor organization, and so both are facing higher labor costs in the midst of gaming revenue growth in their core Strip market that has been tepid at best.
Las Vegas Strip gaming revenue declined 3.8 percent in March and has fallen in each of the first three months of 2019 compared to last year. It is down a combined 3.2 percent, and although local tourism officials are optimistic about visitation trends longer term, the growth has been basically flat through the first quarter.
Baccarat volumes—a trade that almost exclusively impacts the big Strip operators such as MGM and Caesars—have been the biggest disappointment.
Macquarie Securities gaming analyst Chad Beynon said high-end play on the Strip “remains weak beyond the Super Bowl and Chinese New Year.”
Carlo Santarelli, an analyst with Deutsche Bank, said, “We continue to believe the high-end gaming declines will have a greater impact on flow-through than most appreciate in the first quarter.”
Caesars, meanwhile, is also seeing labor cost pressure in its Midwest markets with unemployment nationwide standing at a near 50-year low.
Caesars said it expects to offset $80 million in increased labor costs this year with annual reductions of $40 million, mostly by eliminating corporate-level positions in finance, legal and marketing.
Hession said the company will continue to improve marketing costs, such as comped rooms and food, through better technology.
“We are always trying to improve the way that we can market to customers. We did change fairly dramatically the amount that we were giving back to our customers.”
