Durango Casino & Resort is slated to start an expansion by the end of the year, fueled by its successful opening in December that has boosted Red Rock Resorts’s bottom line.
CFO and Executive Vice President Steve Cootey provided the most detailed plans to date during a second-quarter earnings call Tuesday with Wall Street analysts.
He said, “The second quarter represented another strong quarter for the company by any measure. In terms of net revenue and adjusted EBITDA, our Las Vegas operations had its best second quarter in our history and achieved near-record EBITDA margins.”
Cootey said Durango has been driving incremental play from customers and attracting new customers to the brand. For the six months of 2024, Cootey said the property increased visitation and theoretical win by 90% and 88%, respectively. The property signed up more than 55,000 new customers to the database.
“While it’s still early days, Durango continues to ramp and remains on track to become one of our highest-margin properties over the medium and long term, as well as generate returns consistent with or in excess of our prior greenfield developments,” Cootey said.
The current plans for Durango will add more than 25,000 square feet in casino space, including a new high-limit slot and bar area. Of the 230 additional slot machines, 120 are dedicated to the high-limit room. The plans also call for a second covered parking garage with 2,000 parking spaces.
“While we’re still in the budgeting and planning stages of the expansion, we currently expect construction to start later this year,” Cootey said.
That budget will be finalized in the next month and be announced in the third-quarter earnings call in October. Cootey said there will be minimal disruption to the property.
“The additional parking and everything set us up long term at Durango for phase three, and the reason to bring more amenities and more reasons to come to Durango long term,” said CEO Lorenzo Fertitta.
Red Rock Resorts President Scott Kreeger said Durango is the fastest growing in the market and plans for phase three will be focused on entertainment and day trips for the weekend.
“Things like movie theaters and potentially a country and western dance hall tend to drive weekend visitation,” Kreeger said. “The other side of the property is more resort driven and drives midweek visitation. That’s hotel expansion, spa and meeting space. What you end up with after all of these phases is a true integrated resort that has different activities and day parts during the week.”
The property has a 15%-plus return on investment that’s expected to ramp up to 20%.
Cannibalization continues in line with their expectations, primarily at Red Rock Casino, Cootey said. That revenue is expected to backfill given population growth in the west valley.
This is the 16th consecutive quarter that the company’s Las Vegas operations delivered EBITDA margins exceeding 45%, Cootey said.
“In comparing our results to last year, we continue to see upside and strong visitation and carded slot play across the majority of our database, including regional and national segments,” Cootey said. “This strength, along with strong spend-per-visit across the database, allowed us to enjoy record second-quarter profitability across our gaming segments.”
Food and beverage and hotel also delivered record revenue and profitability in the second quarter, Cootey said. Group business, however, faces challenges by comparison, because COVID pushed demand to 2023.
Kreeger said while the second quarter was stable, the trend is continuing into the third quarter. All of the segments during the second quarter had year-over-year growth, with high performance in the VIP section as part of a shift to high-net-worth customers.
“Our core focus is to go after these high-net-worth customers in high-growth areas of the valley, and we’re encouraged that the lower end of our database is showing positive growth,” Kreeger said.
Uncarded handle is up, Cootey added.
As they look ahead to the third quarter, Cootey said they are seeing stability in the locals market and across their target database and remain confident in their business prospects.
“The company continues to have a strong year and Durango continues to validate our long-term growth strategy and demonstrate the power of our development pipeline and real estate bank that consists of more than 445 of developable land positioned in highly favorable areas across the Las Vegas valley,” Cootey said. The plan is to double the operator’s footprint in Las Vegas long term.
Kreeger said they have the options in their portfolio as to when to start the next wave of expansion, with Inspirada in west Henderson at the top of the list.
“When we look at the demographic profile out there, it’s one of the fastest growing areas in one of the highest net-worth areas of the valley,” Kreeger said.
