Golden Entertainment upgrading The Strat to capture business from conventions, F1, Super Bowl

March 1, 2023 8:40 PM

Golden Entertainment upgrading The Strat to capture business from conventions, F1, Super Bowl

Photo: Shutterstock
  • Buck Wargo, CDC Gaming Reports
March 1, 2023 8:40 PM

Golden Entertainment said it’s spending $30 million to upgrade rooms and make other improvements at The Strat to bring in customers from conventions, F1 in November, and the Super Bowl next February.

Golden reported a record $1.1 billion in revenue for the second consecutive year, its second-highest fourth-quarter revenue and adjusted earnings in the company’s history, surpassed only by the fourth quarter of 2021.

During a Wednesday conference call, the company reported fourth-quarter revenue of $279.7 million, net income of $11.1 million, and adjusted earnings of $63.7 million. For the full year, Golden reported $1.1 billion in revenue, a 2% increase over 2021, net income of $82.3 million, and adjusted earnings of $267.1 million.

Golden CEO and Chairman Blake Sartini said the fourth quarter demonstrates a financial performance that remains well above 2019 levels, despite higher labor and other costs. Revenue was up 16% and adjusted earnings up 48% compared to the fourth quarter of 2019, the company reported.

“Our business trends to start this year are encouraging and we anticipate capitalizing on the strength of Las Vegas in 2023 and beyond,” Sartini said.

Golden expects the $260 million sale of the Rocky Gap Casino Resort in Maryland to close in the second quarter; that will provide funds to reduce debt and invest in its properties.

Golden Entertainment President and CFO Charles Protell said revenue at The Strat increased 3% for the fourth quarter, while occupancy remained comparable to the fourth quarter of 2021 at 77%.

The Strat is focused on building a more diverse player database and attracting higher spending levels from guests. They’ve seen success with new reward-card signups, which were up 47% in January, Protell said.

“We still see a lot of potential for improvement at The Strat,” Protell said. “For the full year of 2022, we’re still missing 144,000 midweek room nights relative to 2019 when the property maintained occupancy close to 90%. This implies more than $30 million in additional revenue and almost $20 million in (adjusted earnings) based on current midweek room rates, guest spend, and margin flow through.”

Protell expects to return to 2019 occupancy levels by the second half of 2023 with continued recovery of conventions and international travel, as well as benefiting from the F1 race in November.

Golden anticipates spending $90 million to $100 million in capital expenditures in 2023.

Golden spent $30 million in capital expenditures in 2021 and finished 2022 at about $50 million, which included $10 million at The Strat for renovated suites, an Asian restaurant, and some pre-purchases for expenditures in 2023.

The Strat is currently renovating an additional 537 rooms, hallway corridors, and pool areas, which should be completed in the first half of the year at an expected cost of $30 million in 2023.

When completed, roughly half of the 2,400 rooms at The Strat will have been renovated. Most of the rest were updated prior to Golden’s acquisition of the property in 2017.

“We like where we are and where we’re heading, which is why we should be renovating more rooms,” Protell said. “We’re getting a $15 to $20 premium on those renovated rooms. We saw that in the first batch and in order to prepare for F1, Super Bowl, more conventions, and March Madness, we need a competitive product.”

During the fourth quarter of this year, Atomic Golf, a $75 million 100-bay golf entertainment facility will open. The Strat is contributing a land lease in exchange for revenue participation.

Golden’s casinos that serve Las Vegas locals had strong year-over-year performance by increasing revenue and adjusted earnings over last year’s record fourth-quarter numbers. Margins remained at 48% for the quarter, up slightly from 2022.

“Our improved local performance is a testament to the continued resilience of the economy and stable promotional environment in Las Vegas,” Protell said.

For Nevada tavern operations, fourth-quarter revenue and adjusted earnings fell compared to 2022, Protell said. Their top tavern players resumed travel in the fall for the holidays and that hadn’t happened over the last two years.

Golden is planning new tavern opportunities in Las Vegas where there’s residential development.

Golden will spend $20 million in 2023 on already-identified tavern locations and development sites, with $11 allocated to five locations being acquired and built this year.