In its bid to operate a casino in New York City’s Times Square, Caesars Entertainment CEO Tom Reeg said Tuesday he won’t get into an “arms race” to secure a license, and touted how March is shaping up to be one of the best months in history for the operator in Las Vegas.
Caesars, along with SL Green and Roc Nation, wants to bring a casino and entertainment complex to 1515 Broadway by renovating a 54-story office building in a project called Caesars Palace Times Square. It will be designed to retain the Broadway theater that has hosted The Lion King since 2006.
In an earnings call to Wall Street analysts, Reeg called Caesars’ spending on the New York project so far “modest,” and said state documents point to a license being awarded by the end of the year.
“We believe we have the project that will open the quickest and will start paying New York taxes the quickest and an area that doesn’t need zoning approval,” Reeg said. “It’s already tourist focused, but I can assure you we’re not going to be the one who wins because we built the biggest housing development outside of our casino. We’re going to win this on the merits of the property and how quickly we can get open and how well it fits into the local environment. If it becomes an arms race of who’s going to spend the most money, we won’t win.”
Reeg didn’t provide a breakdown of planned spending on the casino project.
Anthony Carano, Caesars’ president and COO, said trends remained strong in the fourth quarter in Las Vegas, which delivered 11% revenue and adjusted earnings growth compared to the last three months of 2021.
Occupancy in Las Vegas came in at 95.5% during the fourth quarter, up to pre-COVID levels for the first time since the pandemic. Strong occupancy and daily room rates led to strong hotel revenue and food-and-beverage results, Carano said.
Group demand increased during the fourth quarter and represented 16% of occupied room nights, Carano said. The group and convention segment in Las Vegas generated new adjusted earnings records during the fourth quarter and 2022.
For all of 2022, Las Vegas generated more than 25% growth in both revenue and adjusted earnings, leading to annual records of $4.3 billion in revenue and $2 billion in adjusted earnings, Carano said.
“While we clearly had a strong year in Las Vegas, we remain optimistic for 2023 and beyond,” Carano said. “Forward occupancy remains strong and rates are trending ahead of 2019.”
Based on current bookings, group business will exceed 2019 for the first time, Reeg said. As for March, which is the start of spring break and the NCAA basketball tournament, Reeg said it could set an all-time record. Las Vegas will host the Western Regional for the first time in the NCAA tourney’s history during its second weekend.
“It’s hard to express how strong Vegas is right now,” Reeg said. “Occupancy in January was up more than 1,700 basis points over the Omicron-impacted 2022. As we look at forward bookings in Vegas, they’re strong and getting stronger. March sets up to be one of the best we’ve ever had in Las Vegas. As I sit here today, the business feels fantastic,” Reeg said.
Reeg said he’s expecting “Super Bowl-level activity if not stronger” when Las Vegas hosts the F1 race in November, which is the softest period of the year.
In regional markets, Caesars reported $443 million in adjusted earnings during the fourth quarter, up 3% over 2021 despite weather issues in December in the Midwest, Carano said.
For the year, the regional segments generated $5.7 billion in revenue and $2 billion in adjusted earnings, delivering a 34.8% margin, Carano said.
As for brick-and-mortar operations, Reeg said consumers continue to spend and the only weakness has been weather-related with $20 million in lost adjusted earnings in the regional properties. Regional business continues to grow in the first quarter of 2023 with the Horseshoe Lake Charles land-based casino in Louisiana opening in December.
Caesars is expecting its digital gaming operation to be a positive contributor to adjusted earnings in 2023, including both sports betting and igaming.
“The switch to getting out of brand building and advertising in terms of big expensive commercials – you didn’t see us at the Super Bowl – and big granular changes in individual marketing has slowed dramatically,” Reeg said. “This is the quarter that we launched New York and Louisiana [sports betting] last year so you’re going to see over a half–billion dollars of trailing [adjusted earnings] losses disappear this quarter.”