In preparation for CZR's F3Q 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.
3Q CORE EBITDA
- We're working at generating a reasonable sequential growth in the third quarter over the second quarter in our core EBITDA contribution.
- While conditions in the gaming industry remained difficult... during the second quarter with visitation and casino revenues down across much of the network, we're beginning to observe several tangible, positive underlying trends, resulting from the enhancements we've made to our footprint, particularly here in Vegas.
- The implementation of resort fees at the beginning of March is having a positive impact on revenues and has had a minimal impact on occupancy levels at our properties. We anticipate these resort fees will provide incremental boost prospectively.
- We're optimistic that the positive trends related to Vegas F&B and hotel revenue will gain momentum, particularly in next year, as business disruption from our construction projects on East side of Las Vegas ends and new projects come online and gain traction.
- We've also seen some encouraging developments in our Groups business. Based on the forward calendar, we expect Group business to strengthen next year, improving from the relatively soft trends we've experienced thus far this year. We anticipate the business will grow by high-single digits year-on-year in 2014.
- I mentioned the quantity of rooms that we have in Las Vegas is very significant. Recoveries in ADR should drive disproportionate EBITDA impact. We're down approximately $35 from the peak. This is on a per-room-night basis in 2007, so a recovery of half that will be worth anywhere between $80 million and $100 million of incremental EBITDA to the company. So recoveries in Las Vegas are very material to us. We think 2014 is shaping up to be a good year. Time will tell in terms of how much compression there is in room rates, but we're fairly optimistic.
LV CONVENTION UPGRADES AND OUTLOOK
- 2014 is shaping up to be a very strong year for the convention business. These rooms we took down at the beginning of the third quarter, and they're starting to come back on line. We have about six floors left to come on line, but they'll be in about another month and a half. The whole tower will be completely renovated and ready for the 2014 year.
- One, just based on the cycle of certain large conventions, they come every three years or every two years. They seem to have lined up so that they're going to come in 2014. A couple of the very large ones come in the first quarter. So I think what you'll see is the first quarter being exceptionally strong.
- The market has been very challenged. For those of you in New York that visit Atlantic City, the weekends are very crowded and the midweek periods are very sparse in terms of visitation. We feel that there's an opportunity to invest in the convention business, and we're building a $125 million convention space that will have about 100,000 square feet of leasable space. The convention will be ... will be complete in approximately two years. It's under construction right now.
- We believe our state-of-the-art facility will attract new segments of visitation to the market, particularly mid-week, which of course badly needed, and absorb excess hotel room and restaurant capacity.
- We acquired Slotomania a few years ago. It's done tremendously well. We've continued to grow the business. We added to it Bingo Blitz last year, and that's also done very well. We now have roughly 400 employees.
MACAU GOLF COURSE
- We've also completed or entered into a number of asset sales, most importantly, the sale of our Macau golf course. That sale hasn't closed yet but we have a sizeable, non-refundable down payment. The purchaser has 90 days to close that which about 60 have gone through, so we'd anticipate that closing by the end of the month or thereabout.
- So for the next two years, we really only have about $125 million of maturities and then $1 billion to $2 billion in the following three years.
- Baltimore... It will come online, as we mentioned, in the fourth quarter of next year.
- In Nevada, the way it works is you open it up then you market later. So the market – marketing just started this weekend. So it's been relatively modest in terms of usage, but I think it's certainly within expectation.
- New Jersey is much more of a large potential market, given just the increased population and the wealth effect. And then in addition, in New Jersey, we can operate with both slots and tables, as well as poker.
- I would think that we still have the balance of the shelf out there. There's no reason to say that we would or wouldn't issue shares, but I think our overall goal is to create a more equitized company. So at some point, when the price and the ratio of certain debt securities match up, I think it would make sense to issue more, I mean, potentially do additional buybacks.
- At the LINQ site, the Vortex, a visually-dynamic architectural element... has been erected and the facade at the front of the site is nearly complete. We plan to open the retail, dining and entertainment offerings in phases, beginning at the end of this year.
- Our construction teams are progressing well on assembling the rim of the High Roller wheel and assembling the cabins. We plan to open the High Roller in the second quarter of 2014.
LAS VEGAS RENOVATIONS
- At the Gansevoort Las Vegas, formerly Bill's, we've completed most of the internal demolition. We plan to reopen early next year with Drai's night and day club opening in the first half of 2014. At The Quad, we recently reopened about 40% of the casino floor. We expect to reopen the rest of the casino floor in the third quarter and to complete renovations by the end of this year.
- Approximately $300 million is to be financed and approximately $750 million to be spent directly from the balance sheet; approximately $500 million to be allocated to project-related capital expenditures and approximately $550 million to maintenance capital expenditure. Included in the $500 million of project-related capital expenditure is approximately $300 million of project financing associated with The LINQ, Gansevoort, Baltimore, and other development projects that we have previously financed, plus approximately $200 million of our equity. Included in the $550 million of maintenance CapEx is spending on room upgrades and facilities, especially in Vegas.
- We plan to spend approximately $945 million in CEOC and approximately $85 million in CMBS, with the remainder to be spent primarily in CEC due to the Atlantic City Meeting Facility.
- Both [Ohio] markets have been a little softer, almost entirely on the slot side of the mix, and we've been working on measures to build the database and get more people to come and experience the quality of the properties.