Red Rock Resorts’ executives told Nevada regulators that it’s had success luring visitors who normally stay on the Las Vegas Strip to their suburban properties. They also said an announcement is coming in the next two quarters on future construction projects in the valley.
Kord Nichols, executive vice president and COO of Red Rock, appeared before the Nevada Gaming Commission for licensing. He talked about Red Rock’s best quarter in its history.
“Some of our strides are coming from people we know used to be primarily Strip customers,” Nichols said. “How Red Rock and Durango are doing it isn’t all from a local customer base.”
Nichols cited bifurcation between the local market and others and between Red Rock and others. “What you see in the deployment of our operations is a lot toward the aspect of value. We need repeat trips. Our average guests come four to six times a month and it’s important for us to provide value, while at the same time providing luxury.”
The company provides different experiences that range in price and that drives repeat visitation. “It’s no coincidence that at the same time we’re releasing cheeseburgers that cost a couple of bucks, we’re infusing a couple hundred million dollars into Green Valley Ranch to make it one of the nicest hotels in this city,” Nichols said. “We’re providing low entry points, while at the same time infusing capital, so people at the locals side can have unbelievable experiences in the hotel and restaurant program.”
Commissioner Brian Krolicki said Red Rock has a compelling story. He called it extraordinary that guests visit four to six times a month and talked about the range of options.
Stephen Cootey, executive vice president and chief financial officer, said the results “speak for themselves.” Red Rock had the strongest quarter in its 49-year history in terms of revenue and adjusted earnings and it was the eighth consecutive record quarter in net revenue. It’s being driven by robust visitation and spending per customer, Cootey said.
“We do get our share of regional and national customers,”
Cootey said.
One advantage they have over Strip and national competitors is that they own their real estate. That provides flexibility during any downturn, so they can be patient investors over the long term.
“We don’t think quarter to quarter,” Cootey said. “We think generationally. I think that’s part of the differentiation between the performance of local and Strip properties. We do make some of the hard choices that affect us quarter to quarter, but over the long term the customers appreciate that.”
The parking garage under construction at Durango has positioned the company for its next phases, which include a new hotel tower, expanded casino, theater, and more food and beverage options, along with a high-limit room opening in December.
Commissioner George Markantonis asked if that was a strategy to open high-limit rooms as a way to compete with the Strip.
“It is definitely a strategic decision,” Cootey said. “We have new high-limit rooms at Santa Fe, Green Valley, and Red Rock with slots and tables. Our efforts are focused on taking some folks from the Strip, but with locals, not only are we growing with population, most of them are coming from the West and bringing more wealth and more disposable income. All of our properties are where those folks moved, so you’re seeing the development of high-limit rooms in Green Valley, Red Rock and Durango.”
Cootey said the company will be making an announcement about the next phase of its growth over the next two quarters. The options on the table include Durango, Inspirada in west Henderson, and on Las Vegas Boulevard South, south of South Point Casino.
Its Durango property added 108,000 people to the operator’s database, surprising Markantonis, who asked how that’s possible.
“We knew we were under-penetrated from our customer base,” Cootey said. “You can track cell phone usages in that area to see where people were going. Before we had Durango, you could see people going west, going east to our competitive properties or going to Red Rock. By putting Durango there, we knew we were going to grow those metrics and take share from our competitors and grow that market. People were moving past that resort into our competitors’ zone.”
