Saying that they’re “misunderstood,” top executives from Station Casinos made the case for their plan to double the company’s physical size in the next seven years.
Their audience was J.P. Morgan analyst Joseph Greff and the setting was a dinner at Red Rock Resort. Station Casinos brass was out in full force: CEO Frank Fertitta III, Vice Chairman Lorenzo Fertitta, President Scott Kreeger, and Chief Financial Officer Stephen Cootey were all in attendance.
“Management highlighted steady demand and an attractive operating landscape in the locals market [and] emphasized that the most misunderstood part of the [Station] story is the supply/demand dynamic in the LV locals market, a market that is seeing population tailwinds and one in which [Station] owns all of the developable gaming capacity,” Greff reported.
Factors influencing Station’s decisions are heavy migration into Las Vegas from other states, principally California, “and at a higher income level than historically.” Having sacked buffets, Station is focusing on more remunerative, high-end, dining amenities, as well as a high-limit table-game room and a VIP slot salon.
“These shifts will also help in retaining the influx of a younger demographic guest that has visited over the past 24 months,” wrote Greff. He pointed to sizable population buildup around Red Rock Resort and in-progress Durango Station, which bodes well for future foot traffic.
Station is also benefiting from Strip spillover from big-ticket events and is looking forward to more from future Formula 1 events and the upcoming Super Bowl.
The company also believes it can choke off new competition due to the size and dispersal of its land bank. The executives clarified that while they’re in the design phase for Station’s Inspirada and Skye Canyon projects, they “emphasized patience and a desire to let Durango open and ramp before determining which project to proceed with.” Decisions on when and where to proceed will be determined by macroeconomics, population movement, and trends in residential development across Las Vegas Valley.
The Station braintrust expressed no regrets for the ongoing demolition of Texas Station, Fiesta Rancho, and Fiesta Henderson. They reiterated that 90 percent of the casinos’ business has been rechanneled to other Station properties, a point they’ve made consistently over the last several quarters.
As for the economy, the locals player is not feeling a pinch, Station maintained. Their customers’ financial situation was characterized as “healthy,” showing no impact from inflation or gas prices. Greff chronicled, “Employment is near full, average weekly earnings strong, and sub-prime delinquencies meaningfully below prior peaks.” Indeed, customers are reported to be spending more in the wake of new cashless technology at Station properties.
Another indicator of economic health is that 99 percent of mortgages in the valley are fixed-rate, removing the adjustable-rate menace that undid the company’s customer base in 2008. Unlike other companies in the area, Station said it had few, if any, challenges filling jobs and keeping workers. Although economic pressure continues to push wages upward, management waxed confident that this would ease in early 2023 and is planning a major hiring push to coincide with the rollout of Durango Station.