Coming off a record $3.4 billion in revenue in 2021 and adjusted earnings of $1.4 billion, which exceeded the previous record in 2019 by more than 50%, Boyd Gaming executives announced Thursday it has started a $50 million renovation of its Fremont Hotel & Casino in booming downtown Las Vegas and they’re “as confident as ever” about 2022 as they spend another $250 million on capital projects.
The optimism about 2022 and beyond comes despite what executives said was a slowdown in late December and early January due to the omicron variant. Business has started bouncing back from that slowdown, according to Keith Smith, president and CEO of Boyd Gaming, and Josh Hirsberg, executive vice president and chief financial officer.
During its fourth-quarter earnings announcement, Boyd said it’s reinstating its quarterly dividend and increased the payout to 15 cents per share starting in April. That’s more than double the amount that was paid before the pandemic.
Boyd said 24 of its 27 open properties in Las Vegas and elsewhere grew revenue at double-digit rates during the fourth quarter and 26 achieved double-digit adjusted earnings. The only exception was Sam’s Town Hotel & Gambling Hall in Shreveport, Louisiana, where it’s dealing with a new smoking ban.
Among Las Vegas locals’ properties, fourth-quarter revenues rose 46% over 2020, adjusted earnings were up 70%, and margins exceeded 52%; it was the fourth consecutive quarter that margins have exceeded 50% in the Las Vegas locals’ segment.
Downtown Las Vegas posted record adjusted earnings of $20.2 million and margins of 38% for the fourth quarter. In the Midwest and South, revenues grew more than 29%, adjusted earnings exceeded 42%, and margins increased 350 basis points to more than 38%, the company announced.
Some of the consumer trends seen during the fourth quarter were similar to what has happened over the last several quarters, but there were two weeks at the end of the year “where omicron took hold and we saw some softening of the business,” Smith said. Prior to that, those 65 and older had been coming back at stronger rates.
Hirsberg said those customer trends returned and gained traction later in January and they’re encouraged as they move into February.
“While we saw some slowing in late December and early January due to the omicron surge and winter weather, business improved as we moved through the month of January with revenue and (adjusted earnings) exceeding January 2021,” Smith said. “The 2021 results set a high bar for us going forward and we expect our business to continue to perform from a position of strength in 2022, as we have a number of organic growth opportunities available to us.”
Smith said one of those growth opportunities is increased hotel occupancy, along with the gaming revenue associated with those incremental rooms. They’ve had to turn away hotel customers, which he blamed on not having enough staff.
“Today, we’re unable to fully accommodate the demand from our customers due to labor constraints,” Smith said. “As the labor market recovers, we expect we will be able to drive incremental growth from these customers.”
Smith said as meeting and convention business rebounds and midweek travel recovers, that will grow revenue as well for Boyd. Looking beyond 2022, Smith said they will drive additional revenue from development projects underway that include hotel renovations and converting former buffet space.
Boyd has started a $50 million renovation of its Fremont Hotel-Casino. That money will be spent on upgrading food and beverage offerings and expanding and enhancing its casino floor by taking out the former buffet area and renovating existing gaming space. In February 2020 at the earnings call prior to the pandemic, Smith said they were considering a casino expansion.
“Based on the demand we’re already seeing at the Fremont, we expect to see excellent returns from this investment following its completion in early 2023,” Smith said Thursday.
In 2018, there were reports Boyd had considered building a 509-room tower.
The Fremont, which depends on visitation from Hawaii that slowed during the pandemic, has continued to build back, Smith said. The slowdown there started in mid-December, when COVID cases started rising in Hawaii, he said.
“I would say our Hawaiian business is not back to 2019 levels, but it’s on its way back and doing very well pre this omicron wave,” Smith said. “What’s driving this downtown business generally is a couple of things. There’s a new property down there in the form of Circa Las Vegas that’s drawing people. Also, it has always been a value-oriented destination and people continue to go there for the value downtown represents vis-a-vis the Strip. We run a very strong business down there. We’re doing well with all of the increased visitation downtown anyway, because we have three properties down there. They visit one of our three properties when they’re in downtown Las Vegas.”
Average daily room rates in downtown Las Vegas in December were $93 compared to $160 on the Strip.
Boyd is looking to grow revenue beyond Las Vegas.
In Northern California, the Sky River Casino south of Sacramento remains on budget and on schedule to open in the fall. The building is complete, and the focus has now turned to the interior and infrastructure for the operation, Smith said. Boyd has entered a seven-year management agreement with the Wilton Rancheria tribe.
“We believe Sky River will be ideally positioned to be one of the region’s top-performing tribal casinos,” Smith said.
In Louisiana, Boyd will soon start work on its $95 million project to convert Treasure Chest Casino into a land-based facility that’s scheduled to open in late 2023. It will expand the gaming floor and food-and-beverage offerings and add meeting facilities.
Smith also cited potential for its online business, saying its partnership with FanDuel continues to grow. During the last two months, Boyd opened FanDuel sportsbooks in each of its five Louisiana properties and launched mobile sports betting in Louisiana last week. With that addition, Boyd has expanded the FanDuel sports betting partnership to six of its nine regional states. Ohio, which passed sports betting legislation in December, will be next when it goes live at the end of 2022, he said.
Smith said there’s also a “compelling opportunity” in online casino gaming, which is a complement to land-based operations. Six states have legalized igaming so far, with more on the horizon. Boyd’s digital operations generated $24 million in adjusted earnings; that’s expected to exceed $30 million in 2022, he said.
