Bolstered by the December opening of the Durango Casino & Resort in southwest Las Vegas, Red Rock Resorts reported record revenue and adjusted earnings during its first-quarter earnings call. Stephen Cootey, executive vice president and chief financial officer, said the company also recorded near-record adjusted EBITDA margins.
“We continue to be pleased with the customer feedback and financial performance of Durango,” Cootey said. “While we’re still in early days, the team at Durango continues to execute and improve the property’s operational performance, while at the same time driving play from our existing customers and attracting new customers to our brand.”
With one quarter completed, Cootey said Durango is on its way to achieve its margin target and return goal even faster than planned. The one caveat is there’s been cannibalization at its Red Rock Casino & Resort due to Durango, but it’s in line with expectations. “We expect to backfill this revenue, given the strong long-term demographic growth profile in the Las Vegas valley and the proximity of our properties to those high-growth areas.”
There have been disruptions at Palace Station due to roadwork in front of the property and at Sunset Station in Henderson that’s undergoing a renovation. Despite those, this is the 15th consecutive quarter Red Rock’s Las Vegas operations delivered adjusted EBITDA margins in excess of 45%.
Hotels and food and beverage delivered record revenue and profitability in the first quarter. Group business and catering grew in the first quarter, but Cootey said they expect tougher comparisons for the rest of 2024, because sales were postponed by the pandemic and booked in 2023.
“Looking ahead, we’re seeing stability in the locals market and our entire database and remain confident in our business prospects, but we’ll continue to face disruptions in our Palace Station and Sunset Station properties for the majority of the second quarter,” Cootey said. Those disruptions are valued at $4 million.
Red Rock spent $98 million on capital expenditures in the first quarter. For the year, not including the spending to close out the Durango project, Cootey expects to spend $140 million to $180 million to add restaurants at Green Valley Ranch and Palace Station, along with an upgraded race and sportsbook and partial casino remodel at Sunset Station.
Red Rock intends to double its Las Vegas portfolio over time and is already developing plans for the Durango expansion; the company will make a decision on that by the end of the year. Plans are also being developed for its Inspirada site in west Henderson.
“The company is off to a strong start in 2024 and with the opening of Durango will continue to validate our long-term growth strategy and demonstrate the power of own development pipeline and real estate bank that now consists of more than 441 acres of developable land positioned in highly favorable areas across the Las Vegas valley,” Cootey said.
Red Rock President Scott Kreeger said the company’s database grew in the mid-teens during the first quarter and Durango marked 25% of that growth. More than 37,000 people have signed up at Durango, which has brought more people to the Red Rock brand.
Lorenzo Fertitta, vice chairman of the board, said the lower end of the business has been up for the last two quarters.
“I think a lot of it has to do with the location of our properties,” said CEO and board chairman Frank Fertitta. “If you look at where the growth in Las Vegas is occurring in Summerlin and southwest, they’re growing two to three times the rate of the city. We have the wind at our back for new customers coming online every month.”
Kreeger said they see stability across all of their properties, minus the disruptions taking place. He said as for promotions from competitors, the new residents are bolstering performance. “We’re not seeing anything in the market that would change our strategy and that we haven’t seen over the last couple of years.”
