Four Strip-area hotel-casinos post respectable profits

LAS VEGAS SUN

The Stardust continued its decline, but four other Las Vegas Strip-area hotel casinos today reported respectable profits in the second quarter.

Hilton Hotels Corp. led a series of gaming-industry earnings reports, saying results improved dramatically at the Las Vegas Hilton while its Bally's and Flamingo Hilton held their own despite a 1.9 percent decline in year-to-date Las Vegas visitor volume.

Harrah's Entertainment Inc. reported record revenue from its Las Vegas Strip property, while Boyd Gaming Corp. reported declines at its aging Stardust on the Strip.

Subhead: Hilton

A "dramatic" jump in table-game win at the Las Vegas Hilton helped fuel a 15 percent rise in Hilton's second-quarter net income, the Beverly Hills, Calif., company said.

Hilton said second-quarter net rose to $106 million, or 39 cents per diluted share, from $93 million, or 34 cents per diluted share in the 1997 period. Revenue increased to $1.413 billion from $1.360 billion, the company said.

Hilton said EBITDA, or earnings before interest, taxes, depreciation and amortization, rose 17 percent to $324 million from $278 million.

Hilton's lodging business cash flow rose 14 percent, to $184 million, from the 1997 quarter, while the gaming division's EBITDA was up 15 percent, to $157 million.

The overall cash flow increase was attributable to double-digit gains at many of Hilton's owned and partially owned hotels, continued strong results at The Wild Wild West casino in Atlantic City and significantly improved results at the Las Vegas Hilton, the company said.

"What's important is that these are indicators of the future for us," Hilton President Steve Bollenbach said. "There's plenty of room for growth on both hotel side and the gaming side."

Following completion of its acquisition of Grand Casinos Inc. later this year, Hilton will split its gaming and lodging businesses into two separate entities.

"Once the split is completed," Bollenbach said, "we'll have fantastic growth characteristics and market leadership in the three major gaming markets" -- Las Vegas, Atlantic City and Mississippi.

Bollenbach said the increased supply of low- and mid-price hotel rooms in the United States won't affect the growth opportunities for Hilton's lodging business.

"The hotels that are important to us are great big hotels in major cities, and there's no increase in that supply," he said, adding that Hilton will be an active buyer of such properties..

"We believe the environment for acquiring full-service hotels will improve. Finally, we're seeing the Japanese financial institutions bringing their U.S. hotels to market at sensible prices."

In addition, he said, "Real estate investment trusts have sort of run out of investment capacity, which is reducing competition from other buyers."

Bollenbach said Hilton "lost business in Hawaii, primarily from Japan, but the other feeder market for Hawaii is California, where the economy is booming. So we're shifting our marketing emphasis to that market."

"The gaming side had a great quarter," Bollenbach said. "We're very pleased with the operations in Las Vegas. There was a tremendous turnaround in the Las Vegas Hilton."

Arthur Goldberg, who will head Hilton's new gaming spinoff, said the company won't participate in costly Atlantic City marketing wars that include giving cash to slot customers bused in daily.

He said Bellagio, the Mirage Resorts Inc. property that opens in Las Vegas in October, should help Hilton get higher room rates.

Bollenbach hinted that Hilton's gaming spinoff is looking at another acquisition, which could be completed by the time the Grand merger is consummated.

The most likely target is Empress Casinos, a privately held company that operates riverboats in Joliet, Ill., and Hammond, Ind.

The company's two Las Vegas Strip properties reported respectable comparable quarterly results and performed generally in line with the company's expectations despite heightened competition in the Las Vegas market.

The Flamingo Hilton reported EBITDA of $30 million, consistent with the prior year. Occupancy was flat at 93.3 percent, with average daily room rate down 4 percent, to $81.67.

Bally's Las Vegas showed an EBITDA decline of $1 million, to $22 million, due primarily to lower win percentage. Occupancy declined 1.4 points to 91.3 percent, with ADR down 4 percent to $87.96.

Improved results at the Las Vegas Hilton, which reported a 120 percent increase in EBITDA to $22 million, were driven by an increase in baccarat drop along with a significant increase in non-baccarat domestic table game drop, resulting in a dramatic improvement in table game win, Hilton said.

Slot volume at the Las Vegas Hilton also showed a significant improvement. Occupancy rose 7.3 points to 89 percent, while ADR declined 5 percent to $101.80.

In Atlantic City, Bally's Park Place reported EBITDA of $41 million, up 17 percent, while the Atlantic City Hilton saw its EBITDA improve to $8 million from $7 million a year ago.

Many of Hilton's gaming operations in other markets also demonstrated markedly improved results during the quarter, particularly those in Reno, Tunica, New Orleans, Kansas City and Punta del Este, the company said.

Results in Australia, however, declined due to the adverse economic conditions in Asia.

Subhead: Boyd Gaming

Boyd Gaming of Las Vegas reported a profit of $4 million, or 7 cents per share, up from $3.4 million or 6 cents in the year-ago quarter after special items. Operating earnings of 12 cents per share were equal to last year's results.

Boyd this quarter took a charge of $5.9 million or 5 cents per share to close its money-losing Sam's Town hotel-casino in Kansas City.

Revenues of $245 million were up 13.7 percent from the year-ago quarter.

EBITDA in Boyd's Central Region was $31.5 million vs. $27.9 million in last year's quarter. The regional increase came despite stiffer competition for Sam's Town in Tunica, Miss.

Nevada properties produced EBITDA in the June quarter of $24.2 million, down from $27.6 million. Downtown Las Vegas properties held their own but the Stardust hotel-casino on the Strip and Boyd's Boulder Strip properties reported declines.

EBITDA fell 10.8 percent at the Boulder properties, which were hurt by two new competitors in Henderson: Sunset Station and the Reserve.

The downtown properties reported higher hotel occupancy rates (up 2.5 points to 96 percent) and a revenue increase of 12.9 percent.

"While the Stardust reported revenues and EBITDA below prior-year levels in the June quarter, EBITDA exceeded or equaled the prior three quarters," said Boyd, which plans to redevelop the resort. Hotel occupancy at the Stardust for the quarter was 90 percent, down 3.7 points from the prior year, but the average daily room rate was 3.8 percent above prior-year levels.

Boyd's Boulder Strip properties include Sam's Town Las Vegas, the Eldorado Casino and Jokers Wild Casino; its downtown properties include the California Hotel and Casino, the Fremont Hotel and Casino and Main Street Station.

Subhead: Harrah's

Memphis-based Harrah's, which this year acquired Showboat Inc., said that after special items it earned $20.4 million or 20 cents per share in the second quarter, up from last year's $17.2 million or 17 cents per share. Revenue jumped 17.1 percent to a record $478.6 million.

Harrah's said its Las Vegas Strip hotel-casino experienced reductions in walk-in retail business and in visits from "free and independent travelers" -- business that is tough to replace.

"We believe our aggressive marketing in Southern California will help rebuild this business. And we look forward to the opening of several new projects by other respected operators, which will draw more traffic to our end of the Strip during the next year," said Chairman and Chief Executive Phil Satre.

Meantime, Harrah's said the Las Vegas property capitalized on increased cross-market play from Harrah's customers nationwide. Revenue for the newly renovated hotel-casino increased 40.4 percent as occupancy averaged 94 percent.

EBITDA in Southern Nevada of $21.4 million was up from $16.2 million in the year-ago quarter although Harrah's Laughlin results were even with the prior year.

Harrah's said the Las Vegas Showboat hotel-casino, meantime, remains for sale.

Elsewhere, Harrah's said EBITDA fell in Northern Nevada from $17.1 million to $15.7 million; increased in Atlantic City from $25.1 million to $34.5 million; and increased at its riverboats from $42.7 million to $44 million.

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