Palms GM out as concern over Las Vegas casino’s $690M redevelopment percolates

Palms GM out as concern over Las Vegas casino’s $690M redevelopment percolates

  • Howard Stutz, CDC Gaming Reports
October 2, 2019 9:58 AM
  • Howard Stutz, CDC Gaming Reports
  • Other

Red Rock Resorts’ Palms Casino in Las Vegas, which recently completed the final phase of a $690 million redevelopment effort, confirmed Tuesday that the property’s high-profile general manager had resigned.

In a companywide statement, Station Casinos – Red Rock Resorts’ operating company – said General Manager Jon Gray resigned Tuesday and “has elected to move on to the next chapter of his career.”

The company said Gray “played a key role in our complete transformation of that property.”

Gray joined the Palms in 2016 after Station Casinos acquired the off-Strip property for $312.5 million. He had been working as an executive for Nike in Oregon when he was brought back to Las Vegas.

He previously worked at the Palms for then-owner George Maloof and as the lead executive for the Linq retail, dining, and entertainment complex on the Strip when Caesars Entertainment was developing the project.

Gray has been a favorite of Las Vegas gossip columnists over the years.

“We are extremely grateful for his many valuable contributions to the property over the years and wish him the very best of success as he proceeds to his next challenge,” Station Casinos wrote in the memo.

Gray told columnist John Katsilometes of the Las Vegas Review-Journal he was exploring his options.

“I’m evaluating right now, and there are a few things out there in the world of hospitality and outside of that world,” Gray said. “I love Las Vegas, and there are some cool opportunities out there.”

The casino company spent much of the past 18 months remodeling and renovating the resort, including hotel and suite renovations, several new restaurants featuring celebrity chefs, entertainment lounges, high-priced artwork, new outdoor signage – including a 272-foot tall LED mesh wall that fills the whole Strip-facing side of one of the towers – and a complete redesign of the casino.

However, gaming analysts have questioned the cost of the Palms renovations and the return on investment. During Red Rock’s Aug. 6 second quarter earnings announcement, the company said $11.3 million of start-up costs and higher-than-anticipated operating expenses associated with the Palms renovation drove down quarterly cash flow.

Recently, Las Vegas entertainment media have focused on changes at Kaos Nightclub and Dayclub.

Last week, SunTrust Bank gaming analyst Barry Jonas lowered his Red Rock Resorts cash flow estimates “to account for continued margin pressure at the Palms property” as its business begins to ramp up following the construction disruption.

“While management has highlighted more margin pressure in the near-term with upward inflections expected in the fourth quarter and entering 2020, we are taking a wait and see approach,” Jonas said in a note to investors.

Earlier in September, Jonas stayed at the Palms during investor meetings and was “impressed with the room product.” He said the opening of an outlet for Tim Ho Wan dim sum restaurant “could be a catalyst, but we think it will still take some time for property (cash flow) to ramp.”

Shares of Red Rock Resorts, traded on the Nasdaq, closed at $20.18 on Tuesday, down 12 cents or 0.62%.

In August, entities controlled by Red Rock Chairman and CEO Frank Fertitta III and Vice Chairman Lorenzo Fertitta both upped their ownership stake in the company, spending more than $51 million to show their confidence in the business.

According to Securities and Exchange Commission filings, the Fertitta brothers control 41.2 percent of Red Rock Resorts – almost 47.7 million shares.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at Follow @howardstutz on Twitter.