Soft top line but very good cost controls. Comments on April softness and apparent low enthusiasm for REIT spin were only conference call negatives vs investor expectations.
CONF CALL
- Belterra Resort: continue to improve facility; very competitive part of country
- Belterra Park: within 60 mins of Belterra Resorts
- F&B offerings received well
- 2 primary goals: Revenue synergies, marketing expense discipline
- New myChoice program: Owner's club positive response 80%, ASCA guests positive response 86%
- 2 St. Louis properties will be connected by loyaty card program by end of June
- Trip frequency continue to decline, while spend per trip increased 6% YoY
- Bad weather impacted 1Q
- Markets with new competition: double digit declines in trips
- Bossier/Southern Indiana - particularly tough environment due to competition
- Marketing reinvestment as a % of GGR: down 380bps YoY
- Rightsized media spend;
- no more launch mode out of Baton Rouge
- Eliminated low margin programming
- ASCA Black Hawk: made adjustments to reinvestment that led to 28% decline in marketing spend and 11% EBITDA improvement YoY; also implemented improved hotel yield system earlier in April
- St. Louis
- River City: all-time high revenues in March
- ASCA St. Charles: had benefit of entire quarter with new hotel yield system; Early results are positive with a 5% increase in RevPAR and healthy increases in hotel cash revenue. Combined both properties increased market share by over 200 points during 1Q
- East Chicago: highest table game share since 2011 due to increased programming; slot share increased as well
- Vicksburg: Heartland Poker Tour contributed to highest table share ever at 65%
- Impact of Winter weather on 1Q EBITDA: $5m (most felt in Midwest)
- South segment demand performed better than Midwest
- Broad softness in visitation in April: Easter holidays usually softer week. Spring Break softness but more encouraged in the past week as business picked up.
- Another record cash flow quarter at Baton Rouge
- myChoice at ASCA integration for 2014 and portion of 2015: upfront aggregate non-recurring charge of $5m
- Synergies: $53m as of Q1 2014 - includes $5m cost related synergies and $11m of cost avoidance (healthcare benefit cost); expect more synergies ahead
- Belterra Park opening this weekend alongside Kentucky Derby
- Revamped New Orleans hotel will open this summer
- Paid down $260m in term loans; completely paid down term loan B1 loan; term loan B2 now under $1bn
- REIT comments:
- Appreciate shareholder feedback
- REIT idea not new idea
- Currently focused on successful ASCA integration
- Will evaluate ways to enhance shareholder value
Q & A
- Corporate expense: $20m per quarter, good run rate
- Softness in beginning of April but encouraged by launch of myChoice on ASCA side (10 days into April)
- Have not seen increased promotional activity in Belterra market
- ASCA legacy properties: promotions steady
- Marketing efforts done extremely well. Not focused on mass market guests (promotional business)
- NY: not focused on specific region. cash-on-cash return: minimum of 15% required; will explain on 2Q CC if they decide to move forward from June 30 deadline
- Delevering a priority
- Level of future reinvestment: early in the program in understanding sweet spot of where marketing reinvestment % should be
- Japan: not interested
