Although construction costs, Hurricane Ida, and the Caldor wildfires conspired to depress Full House Resorts’ third-quarter profits to $4.6 million (or 13 cents per share), CEO Dan Lee was in an upbeat and expansive mood during the company’s earnings call. He led off by pointing out that revenues were 12.6 percent higher than the same period in 2020.
Interest payments on Full House’s Chamonix casino project in Cripple Creek, Colorado, also compressed profitability. “We’re spending about a million dollars a week” on construction, Lee explained. The foundation for the resort has been laid and Lee expects the first hotel tower to top out in April 2022, the third in August. However, construction is lagging expectations, partly due to complications created by local utilities. As Lee put it, “You don’t want a storm sewer under your building.”
Full House is seeking permission from the Cripple Creek City Council to push back the opening of Chamonix from December 2022 to the following April. “Whether we open in April or December doesn’t matter much,” Lee said. “It’s the slow period of the year in Cripple Creek.” Meanwhile, supply-chain issues are wreaking havoc with steel and lumber prices, causing Chamonix to go over budget. How much? “I don’t want to quantify that,” replied Lee. However, he said, Chamonix would be “the biggest thing that’s happened to this town since the discovery of gold in 1890.
“The recent numbers in Colorado are very encouraging.”
Bronco’s Billy’s was flat year over year, despite having lost all its surface parking to construction. (The overall market was up 16 percent.) The removal of loss limits and the addition of a “Hampton Inn-quality” hotel at a nearby casino were driving additional business to town. The rival Black Hawk market was doing even better than Cripple Creek, which Lee attributed to high-roller business at the Ameristar-branded casino and a new Monarch Casino hotel, which he said showed that “building a quality hotel can drive visitation.”
In northern Nevada during the wildfires, “The smoke was as thick as fog in San Francisco on a June day. Nevertheless, we made some decent money … If you saw the news, you’d think the fires were within sight of the casino, but they weren’t anywhere close.”
Lee was particularly enthusiastic about the recent $345 million purchase by tycoon Larry Ellison of the Hyatt in Incline Village at north Lake Tahoe; Full House leases its Tahoe-area Grand Lodge Casino, from Hyatt.
“Mr. Ellison has quite a history of buying hotels and putting a lot of money into them. There are ways to build more stuff on that site. There’s great lakefront real restate, but a lot of it’s used for surface parking.” Since he doesn’t believe Ellison would pursue a Nevada gaming license, Lee was sanguine about Full House’s prospects for staying put.
Continuing to look ahead, the CEO said Chicago is “probably too big for our company,” but was very optimistic about Full House’s chances in Waukegan, where its American Place is one of two casino proposals before Illinois regulators. (A decision is expected in January.)
“Our proposal is quite a bit bigger in scope and fancier than the other one” and Full House “has far more development experience” than its rival. Lee thinks he could have a temporary sprung-structure casino open in seven months, three or four to build it and the rest to train the staff. Money would be saved by farming out food and beverage to food trucks run by local entrepreneurs. A permanent casino with amenities would take two or three years to build.
Matters are slightly more complicated for Full House’s bid on a casino concession in Terre Haute, Indiana, partly due to four competitors, including Hard Rock International and Churchill Downs. Of Full House’s design, Lee said, “We set out to do something very creative,” including a giant greenhouse encompassing restaurants, inspired by the Amazon Spheres in Seattle, along with a TV documentary Lee saw about a Swedish man who, seeking a Mediterranean climate, built a cabin inside a greenhouse, in effect choosing his own weather.
“Our proposal has the biggest budget, the most jobs, the most tax revenues,” Lee said of the Terre Haute bid, which will be formally presented on Wednesday with a decision scheduled for November 17.
As for building two casinos at once, “We’re capable of doing both. We’d be scrambling a bit,” Lee admitted, adding that he’d done it before at Pinnacle Entertainment and prior to that at Mirage Resorts. “We were pretty darn busy in those days, but we got it done.”
During the question-and-answer session with Wall Street analysts, the controversial and costly issue of sports betting was raised. Lee, who said five of Full House’s six sports books are operational, was unruffled. He likened the current marketing spend to Amazon 20 years ago when it was buying market share. “We’re not in that directly,” he pointed out. Full House farms out its books to WynnBet and Churchill Downs and takes a rake. “We’re allowing people to park on our licenses.”
Besides, Lee pointed out, his company is in too few states for sports betting to feasibly go in-house. It’s quite a different matter with internet gambling, which the CEO expects to be legalized in Colorado and Indiana. “[It] might only be a year away.”
As further motive for optimism, Lee raised the topic of the new infrastructure bill, which he said could put money in the pockets of Full House high rollers who are in the construction business. He likened it to the more localized economic uplift provided by the remediation packages that followed Hurricane Katrina and the Deepwater Horizon disaster.
“It’s not being spent blowing things up in Afghanistan,” Lee concluded. “The economy is likely to go on being robust, because it’s stimulus. So at the end of the day, I’m feeling pretty good.”
