Caesars to sell Las Vegas Strip resort in early 2022

Caesars to sell Las Vegas Strip resort in early 2022

  • Buck Wargo, CDC Gaming Reports
November 3, 2021 5:30 PM
  • Buck Wargo, CDC Gaming Reports
  • Other

Citing the $5.6 billion price MGM Resorts is paying for The Cosmopolitan as an enticement, Caesars Entertainment says it will start the process to sell one of its Strip resorts by early 2022.

Caesars’ operating results set an all-time quarterly adjusted-earnings record in Las Vegas, as well as a new third-quarter record for its regional segment. Las Vegas topped its record from the second quarter.

“We think this is an opportune time to execute on our strategy of a Strip-asset sale, so you should expect us to put that in motion in the early part of 2022,” Caesars CEO Tom Reeg said. “The playing field has been cleared with The Cosmo and Aria trades to where we should have a pretty robust demand for a center-Strip asset that frankly may be one of the last ones to trade for quite some time.”

Reeg said that including the sale, Caesars should have in excess of $5 billion in cash to deploy in 2022. Some of that will be spent on digital and capital projects. Most, however, will go to pay down debt.

President and Chief Operating Officer Anthony Carano said room occupancy at its Las Vegas properties was 89% for the third quarter, with weekends running at 97% and weekdays at 86%. He said they remain encouraged by booking trends into 2022 and beyond.

“As we look to 2022, we see several tailwinds in our business,” Carano said. “We remain optimistic about further visitation gains as consumers return to our properties once COVID fears have fully subsided and the eventual return of convention customers to Las Vegas and our destination markets.”

Some 10% of their occupied rooms during the third quarter were from conventions, which Carano called “a dramatic improvement” over the first half of 2021. Group business in 2022 is running ahead of the 2019 pace and he attributes that to the new Caesars Forum convention center that currently has 175 bookings representing 1.8 million room nights and more than $650 million in revenue in the future.

“Seventy-six percent of the business is new to Caesars,” Carano said.

Caesars’ strength came despite imposing occupancy caps midweek in Las Vegas “to calibrate supply with housekeeping services,” Reeg said.

“We’re struggling across the country to hire guestroom attendants and Las Vegas is no exception,” Reeg said. “Even with the operating caps we set, we had a quarterly (adjusted earnings) record. In October, Vegas had the strongest (adjusted earnings) month in the history of Caesars.”

In the digital space, Carano said Caesars generated more than $3 billion in volume, $96 million of net revenue, and an adjusted-earnings loss of $164 million. Sports betting and igamings revenue were split 55% to 45%, respectively, with 90% of the handle from mobile sports betting and icasino.

“We’re laser focused on scaling our digital business through aggressive customer acquisitions during our first fall sports season post launch of our Caesars brand app in nine states,” Carano said. “While customer handle and acquisitions exceeded our internal expectations, net revenues were negatively impacted by directed promotional investment, competitive pricing strategies, and lower than historical holds in certain markets.”

As of Sunday’s retail launch in Louisiana, Caesars is now live in 20 jurisdictions, with 14 of those mobile. Caesars reported more than $1.7 billion in sports betting handle during the third quarter; to start the fourth quarter, October reported more than $1.3 billion.

“We think we’re continuing to generate momentum,” Reeg said.

Caesars’ national market share was 17% for all states with legalized sports betting, with about 12% mobile market share. That excludes newly launched sports betting in Arizona, which is Caesars’ third strongest state behind Nevada and Iowa.

“We’re gaining share at a pace stronger than we expected given the investment we made,” Reeg said. “It’s encouraging results from sports.”

On the development front, Caesars’ land-based facility in Lake Charles, Louisiana, should be completed in the fourth quarter of 2022. In New Orleans, construction has started on a new hotel tower and property upgrades, Carano said.

In Las Vegas, the renovation to the entrance of Caesars Palace should be completed by the first quarter of 2022.

The casino expansion at the Indiana Grand Racing & Casino should be finished by January.

In Atlantic City, the $400 million capital plan is moving forward, with the remodeling of room towers and setting the stage for new food and beverage options, Carano said.

Reeg said Lake Tahoe, which was hit by wildfires over the summer, has quickly recovered to above 2019 levels. It’s not as strong as it was before the fires, but continues to build, he said.

New Orleans continues to be impacted by Hurricane Ida. Caesars was doing $11 million to $12 million a month in adjusted earnings and now it’s $5 million to $6 million a month and building, Reeg said.

Carano said they’re excited to rebrand a handful of their properties in 2022, using flagship brands from the portfolio, “to further elevate the customer experience.”