GAMING INDUSTRY: PERFORMANCE REVIEW
Brian R. Gordon, CPA
FINANCE
finished the year down 3.3 percent, at $5.4
billion. Company-wide property adjusted
EBITDA performed slightly better, finishing
the year at $1.8 billion, down just 2.1 percent.
EBITDA for Macau operations dropped
$66.0 million to $1.3 billion, a loss of 5.0
percent. EBITDA for Las Vegas operations
provided some positive growth by finishing at
$515.2 million, a 5.9-percent improvement.
Wynn Resorts continued investing in the
construction of Wynn Palace in Cotai, spending
$428.7 million on the project in the fourth-quarter.
The company in January also bought 33 acres
of land that will be home to its new hotel-casino
operation in Everett, Massachusetts.
Caesars Looks to Restructure
Caesars Entertainment Corporation (CZR)
ended 2014 in a financial situation that culminated
with the January 15, 2015, filing for
Chapter 11 bankruptcy protection by its
largest subsidiary, Caesars Entertainment
Operating Company. The planned bankruptcy
seeks to restructure more than $22 billion in
long-term debt.
Chief Executive Officer Gary Loveman, who
guided Caesars for a dozen years, announced he
will step down later this year. Former Hertz
CEO Mark Frissora will take his place.
The news overshadowed a mixed fourthquarter
performance that saw net revenues rise
but profitability fall. Net revenue climbed
$127 million (+6.3 percent) over a year ago,
rising to $2.1 billion. However, adjusted
EBITDA for the fourth quarter fell 8.4 percent,
from $406 million to $372 million.
Full-year results mirrored the fourth-quarter
returns. Net revenue in 2014 rose 3.6 percent,
from $8.2 billion to $8.5 billion. Meanwhile,
adjusted EBITDA for the year fell $162 million
(-8.7 percent), from $1.9 billion to $1.7 billion.
Nevada Gaming Abstract
The latest edition of Nevada’s Gaming
Abstract showed positive growth signs around
the Silver State, with total revenue for the state’s
casinos growing 3.6 percent to $23.9 billion in
the fiscal year that ended June 30, 2014. Rising
hotel room revenue fueled much of that growth,
climbing $357.5 million statewide, a 7.5-percent
improvement that coincided with an uptick
in occupancy rate. Gaming revenue rose by
$245.5 million, or 2.4 percent, but lost ground
in its share of overall revenue compared to nongaming
revenue, dropping slightly from 45.1
percent to 44.5 percent statewide.
Casinos on the Las Vegas Strip saw even more
growth, with overall revenue rising $769.2 million,
a 5.0-percent increase. Like the rest of the
state, a significant portion of that growth was
driven by rising room revenue, which went up by
$322.4 million (+8.2 percent) as the occupancy
rate inched up to 90.4 percent. Gaming revenue
for Las Vegas Strip casinos was up 4.2 percent but
dipped slightly as the share of overall revenue
(37.0 percent to 36.8 percent). Room revenue
remained the second-largest category at 26.1 percent
of all revenue.
Downtown Las Vegas casinos also saw revenue
climb, though they relied more heavily on gaming
revenue than their counterparts on the Las
Vegas Strip. Gaming revenue downtown
accounted for 52.0 percent of the $977.0 million
in overall revenue. However, the 3.8-percent
growth in revenue was barely helped by gaming,
which went up a modest 0.5 percent. Downtown
Las Vegas’ revenue growth was spurred by a
12.3-percent growth in room revenue and an
11.1-percent bump in beverage revenue.
Together, they enjoyed $27.9 million in additional
revenue, which accounted for the majority
of overall revenue growth.
Downtown casinos enjoyed a significant boost
in occupancy rate, which climbed from 81.4 percent
to 85.0 percent in 2014. That improvement
was four times better than the occupancy rates
statewide and in Clark County.
The year’s shift in gaming revenue as a share of
overall revenue continued a decades-long trend.
Twenty years ago, gaming accounted for well over
half the revenue generated by Las Vegas Strip
resorts. Since then it has gradually eroded year after
year as other revenue categories have grown. This
trend is expected to continue as Las Vegas continues
its evolution from a one-horse town to a fullresort
destination and experience. Investments taking
place in the Las Vegas Strip corridor today are
designed to capture a larger share of non-gaming
dollars by way of an arena, entertainment venues,
retail shopping alternatives and other amenities.
The mix of assets in Las Vegas is changing, along
with the consumer profile.
Brian Gordon is a principal with the Nevadabased
advisory services firm, Applied Analysis.
Gordon has extensive gaming and leisure
experience from an accounting, finance and
operational perspective.
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