Red Rock Resort’s massive expansion plans at its Durango property are being driven by customers demanding amenities like movie theaters and bowling alleys, company executives said Tuesday.
In the company’s third-quarter earnings conference call with investors, Vice President, CFO and Treasurer Stephen Cootey offered new details on an 18-month, $385 million expansion plan that will begin in January shortly after an existing expansion is completed.
“Supported by robust market fundamentals and the rapid development of the surrounding area, this next phase will expand the podium along the north side of the existing facility by more than 275,000 square feet,” Cootey told investors. “The expansion will add nearly 400 additional slot machines and associated games to the casino floor, as well as introduce a range of new amenities designed to enhance the guest experience and deliver on what our customers demand, including a state-of-the-art 36-lane bowling facility, luxury movie theaters, a mix of new restaurant concepts and food courts designed to attract our customers to repeat visits and multiple repeat tenants.”
Guaranteed cost
Cootey said the project is being carried out under a guaranteed best price concept.
“We are excited to begin this next phase of growth in Durango, and upon completion we believe the property will be even better positioned to capture additional market share and drive sustained growth in the local market,” he said.
Cootey said neighborhoods are expanding around Durango with more than 6,000 new households coming within a three-mile radius of the property in the next few years, “complemented by the continued expansion of Downtown Summerlin and Summerlin West, which together are projected to add approximately 34,000 new households.”
The second Durango expansion follows the current project, which is expected to be completed by the end of the year. It will add more than 25,000 square feet of additional casino space, including a new high-limit slot area and bar. The expansion will add 230 new slots, 120 of them in the new high limit area. The $120 million project remains on budget, he said.
“For this phase, we are also building a new covered parking garage with nearly 2,000 spaces, which will improve customer access and provide infrastructure flexibility to support future growth at the company,” Cootey said.
Record quarter
In Red Rock’s third quarter, the company posted its highest net sales and adjusted cash flow in its history with a near-record cash flow margin. It was the ninth consecutive quarter of record net income and the fifth consecutive quarter of record adjusted cash flow, which, Cootey said, “underscores the strength, consistency and long-term profitability of our operating market.”
For the quarter ended Sept. 30, the company reported net income of $76.9 million, 68 cents per share, on revenue of $475.6 million. That compares with net income of $55.4 million, 48 cents per share, on revenue of $468 million for the same quarter a year ago.
Asked by an analyst if Red Rock was experiencing the same softness in the market as Strip properties, president Scott Kreeger said the Strip and local markets are two different business models.
“I think the first thing to do is to really differentiate the business models,” he said. “For the past 50 years, we’ve seen the Las Vegas local market as just a fundamentally different business. Unlike The Strip, it’s not dependent on heavy tourism, not convention-driven or hotel-driven. Our local market is anchored in a gaming-centric business model that offers value propositions to both local and out-of-town guests.”
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