Palms Likely to Stay Shut Until Customer Base Returns
By Mike Shoro
It may be awhile before the Palms reopens its doors.
The off-Strip hotel-casino property probably will remain closed until its tourist customer base returns, Frank Fertitta III, CEO of Station Casinos, said Tuesday during an earnings call for Station’s parent company, Red Rock Resorts. The Palms is one of four Station Casinos properties that have yet to reopen since the COVID-19 shutdown last spring. Texas Station, Fiesta Henderson and Fiesta Rancho are the other three, all locals properties.
Fertitta told investors that the company sees a “light at the end of the tunnel” with the vaccine rollout and recent declines in COVID-19 case statistics.
“I don’t want to get over my skis with it, but I think we’re going in the right direction,” Fertitta said.
“The reality is we have more restrictions on our capacity now than when we opened on June 4th,” said Fertitta, referencing the first day casinos could open at 50 percent capacity. Gov. Steve Sisolak further limited casino capacity to 25 percent starting in November to try to slow the spread of COVID-19.
Overall, the COVID-19 pandemic impacted Red Rock Resorts’ bottom line in 2020, the company reported Tuesday. The company generated $1.2 billion in net revenues during 2020, a 36 percent drop from $1.9 billion in 2019. Net loss for 2020 totaled $174.5 million compared with $6.7 million in 2019.
Its Las Vegas operations had $316.2 million in net revenues during the fourth quarter, a decrease of $121.8 million from $437.9 million during the same period in 2019.
The tighter restrictions on capacity hampered the company’s finances in the fourth quarter, Fertitta said, though Red Rock Resorts closed out 2020 with $49.6 million in net income during the fourth quarter, an increase of $42.8 million from $6.8 million during the same time in 2019.
Despite the pandemic’s detrimental impact on Las Vegas’ gaming and tourism-based economy, Red Rock Resorts remains optimistic about the future in Las Vegas, CFO Stephen Cootey told investors. He cited the valley’s population growth, “stable regulatory environment” and an appetite for locals properties.
Like the Palms, Station’s other three properties will reopen when the company is confident the customer base will return, Fertitta said. Texas Station, Fiesta Henderson and Fiesta Rancho rely on a customer base of locals, typically 65 and older, and their timeline for reopening depends on the rollout of COVID-19 vaccinations, Fertitta said.
Fertitta said the company continues to see a younger crowd at its casinos, and may have found a “sweet spot” of mixing the younger and older demographics.
A J.P. Morgan reaction report cited this dynamic among reasons to be optimistic about the company’s supply and demand in Las Vegas.
“We think there is upside potential in our future forecasts related to a return in its older, core customer (65 years and older), which should complement/provide a cushion related to its presently favorable growth in new, younger casino patrons,” the analysis read.
Red Rock Resorts owns and operates 10 major properties and 10 smaller casinos in the Las Vegas Valley, including Green Valley Ranch Resort, Palace Station, Boulder Station and Wildfire-brand casinos. It also manages Graton Resort & Casino in Northern California on behalf of the Federated Indians of Graton Rancheria.
The company expects to break ground on a 213,000-square-foot property near Fresno, California with North Fork Rancheria of Mono Indians in the second quarter.
Shares of Red Rock Resorts, traded on the Nasdaq, closed at $27.81 per share, down a half-percent.
Additionally, Red Rock Resorts sent a memo to employees Tuesday informing them that the company began rolling out this week over $10 million in “pay adjustments and increases to the great benefit of the vast majority of our Team Members,” and that hourly based contributions for employee 401k accounts would begin next week.
Last spring, Red Rock Resorts laid off roughly 39 percent of its workforce. The company was one of the few that kept its full-time employees on payroll during the shutdown. The company recently expanded free medical and dental benefits to employees making under $100,000.