Caesars Entertainment reports better Las Vegas results

By Steve Green

Published Friday, Feb. 25, 2011 | 5:17 a.m.

Updated Friday, Feb. 25, 2011 | 9:51 a.m.

Caesars Entertainment Corp. today posted improved results for Las Vegas in the fourth quarter as gamblers returned to the Strip in bigger numbers.

While Caesars lost money companywide in the quarter -- in part due to a slump in Atlantic City -- net revenue in Las Vegas increased from 2009's fourth quarter thanks to the acquisition of Planet Hollywood and higher spending by visitors, despite flat or lower hotel room rates.

Net revenue of $727 million in the Las Vegas market was up from $649 million in the year-earlier quarter.

This helped boost Caesars' profit from operations in Las Vegas from $97 million in 2009's fourth quarter to $101 million in the 2010 quarter. Same-store sales in Las Vegas increased 0.9 percent, Caesars said.

While hotel occupancy in Las Vegas remained above 90 percent, average daily room rates fell or were flat because of increases in the city's room count, Caesars said.

Caesars' Las Vegas properties are Bally's Las Vegas, Bill's Gamblin' Hall & Saloon, Caesars Palace, Flamingo Las Vegas, Harrah's Las Vegas, Imperial Palace, Paris Las Vegas, Planet Hollywood and the Rio.

Today's numbers indicate these properties are holding their own against intense competition from the likes of MGM Resorts International, Wynn Resorts, Las Vegas Sands and newly-opened competitor the Cosmopolitan.

Caesars' properties in Laughlin, Reno and Lake Tahoe generated quarterly net revenue of $94 million, down from $102 million as visitation declined and guests spent less.

Caesars' properties in Atlantic City, hurt hard by the recession and new competition from table games in Pennsylvania, saw net quarterly revenue fall from $467 million to $418 million.

Companywide, Caesars said quarterly net revenue increased 1 percent to $2.121 billion.

The company lost $196.7 million in the quarter vs. a profit in the 2009 quarter of $295.6 million. The 2009 quarter included a one-time accounting gain of $686 million for the early extinguishment of debt.

As Caesars worked to cut costs, companywide EBITDA rose from $443.1 million to $457.8 million. EBITDA is a profitability measure meaning earnings before interest, taxes, depreciation and amortization.

"Our overall revenue rose slightly for the second straight quarter and our EBITDA margins improved, thanks largely to our continued focus on rigorous cost discipline," CEO Gary Loveman said in a statement. "We also achieved the highest overall customer-satisfaction scores in our company’s 73-year history.

"During the quarter, we initiated a new program to streamline our operations further, and I’m confident we will end this year with an even leaner, more efficient and responsive organization," Loveman said.

During a conference call with analysts, Loveman said Caesars shouldn't be hurt in Las Vegas by threats of rising gasoline prices as long as they remain below $5 per gallon.

Half of the company's Las Vegas business is from drive-in customers -- most from the big Southern California market.

He said the company has experienced $4 per-gallon gasoline a couple times and found that overall that didn't interrupt visits by Los Angeles-area customers.

Loveman said the company is excited about development of the "Project Linq" entertainment, dining and retail area next to the Flamingo on the Strip.

It will be anchored by a large observation wheel. Caesars is encouraged about its prospects because of visitation and revenue numbers for similar attractions around the world including the Stratosphere's thrill rides in Las Vegas and the London Eye.

While such attractions can cost $150 million to develop, they can generate strong revenue. The London Eye for instance caters to 3 million people per year, each paying about $20, Loveman said.

Caesars intends to market its wheel not only to tourists but to companies and organizations that could book it for events, Loveman said.

"The wheel is going to be a big hit," Loveman said.

The wheel and 190,000 square feet of retail, dining and entertainment planned to open there in 2013 are aimed largely at attracting visitors staying at the properties of competitors such as MGM Resorts, Wynn Resorts and Las Vegas Sands.

While Caesars controls three of the four properties at the "50-yard line" of the Strip at Flamingo Road, "We need a dynamic to bring them (competitors' guests) into our neighborhood," Loveman said.

With analysts pointing out high-end retail has suffered in Las Vegas, the retail at Linq is likely to cater to the mid market, he said.

"The nature of the retail is completely different. We are not offering a larger Prada or a Louis Vuitton," Loveman said.

Asked about controversial resort fees that have spread across Las Vegas, Loveman reiterated they don't make sense for Caesars' Las Vegas portfolio.

"Were against resort fees," he said.