Local Casino Market in Las Vegas Demonstrates Strong Showing According to Red Rock Resorts
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Red Rock Resorts' Solid Performance and Future Expansion, Despite Economic Concerns
Las Vegas casinos, earnings surge, Buck Wargo's take
Red Rock Resorts stood tall amid investor apprehensions about a potential economic slowdown, following Q1 GDP numbers revealing negative growth. The company flaunted its impressive performance in Las Vegas during a conference call with Wall Street analysts.
Stephen Cootey, the executive vice president and chief financial officer, showered accolades on the first quarter of 2025, which not only registered the highest first-quarter net revenues and adjusted earnings in Red Rock Resorts' history, but also maintained near-record adjusted earnings records for Las Vegas.
The debut of Durango Casino & Resort in December 2023 contributes significantly to Red Rock Resorts' financial health. It's growing the locals market in Las Vegas, bringing in new players, and adding 95,000 new customers to the database. Cootey anticipates that Durango will become one of their highest-margin properties, generating returns net of cannibalization of nearly 16%.
The majority of cannibalization has occurred at Red Rock Casino Resort & Spa in Summerlin. However, evidence suggests that the worst of the 10% cannibalization is in the past. Cootey anticipates revenue recovery in the next couple of years, thanks to the growth in Summerlin, where 34,000 households will ultimately be added.
The Durango expansion, slated for completion in late December, will encompass 25,000 square feet of additional casino space, featuring a new high-limit slot area and bar. The project will introduce 230 new slot machines, with 120 heading to the high-limit room. The total cost, including a parking garage for 2,000 spaces, is $120 million.
During the first quarter of 2025, Las Vegas reported $495 million in net revenue, marking a 1.9% increase from the same period in 2024. Adjusted earnings were $235.9 million, surging 2.7% year-over-year. The adjusted margins were 47.7%, reflecting a 34 basis points increase.
Cootey emphasized the surge in carded slotplay across the database. The robust spend per visit drove near-record profitability across gaming segments during the quarter. In the non-gaming sector, both hotel and food and beverage divisions had a fruitful quarter, boasting near-record revenue and profitability. Hotels achieved the second highest first-quarter revenue and profit, thanks to increased occupancy rates.
Despite challenges in group business and catering, Cootey expressed optimism and expects it to strengthen for the remainder of 2025.
Taking a look at the second quarter, the core slot and table business in the locals market, as well as the carded database, remains stable. "We remain confident in our business prospects moving forward," Cootey said.
For those interested, Red Rock Resorts thrives in the resistance of the Las Vegas locals market. The operator flourished during recessions in the 1980s, 1990s, and 2000s, thanks to customers who favor convenience, proximity, and affordability. These traits ensure consistent visitation even in softer economic environments.
While the 2008 Great Recession and the 2020 recession were driven by unique circumstances, Cootey assures that the issues anticipated for 2025 are unrelated to these factors.
Red Rock continues to invest in Sunset Station and Green Valley Ranch in Henderson to take advantage of the growth in the Cadence master plan and Ascaya luxury development. Renovations to rooms and convention areas at Green Valley Ranch will cost $200 million, with work expected to begin in June and services resumed by the end of the year.
Cootey highlighted the company's North Fork tribal-managed casino in northern California, where construction is progressing for a mid-2026 opening for the $750 million project. The casino will span over 100,000 square feet, housing more than 2,400 slot machines, 42 table games, two restaurants, and a food court. Vici Properties has provided construction financing for the project, eradicating Red Rock's need to finance the project off its own balance sheets. With the deal, Red Rock has received $110.5 million in capital and accrued interest invested over the past 20 years, which will appear in the second-quarter earnings report.
Red Rock has never ruled out a sell and leaseback option, but during the last downturn, not having to pay rent allowed them to retain all of their employees. "We prefer owning our properties, but we'll never say never," Cootey declared.
Interestingly, Red Rock President Scott Kreeger reported that the operator performed better in the Super Bowl and March Madness college basketball tournament compared to others. The company is currently working on sourcing goods used in construction imported from China from alternative countries to mitigate the impact of the tariffs enforced by the Trump administration. The impact is projected to be around 4% to 6% of the project costs.
- Stephen Cootey, the executive vice president and chief financial officer of Red Rock Resorts, anticipates that the Durango Casino & Resort, despite contributing to cannibalization at Red Rock Casino Resort & Spa in Summerlin, will become one of their highest-margin properties, generating returns net of cannibalization of nearly 16%.
- Despite concerns about a potential economic slowdown, Las Vegas casinos, including Red Rock Resorts, continue to thrive, as shown by the $495 million in net revenue reported in the first quarter of 2025, marking a 1.9% increase from the same period in 2024.
- Red Rock Resorts, despite historic challenges during recessions in the 1980s, 1990s, and 2000s, has managed to thrive in the resistance of the Las Vegas locals market, catering to customers who favor convenience, proximity, and affordability, ensuring consistent visitation even in softer economic environments.
- The Durango Casino & Resort expansion in Las Vegas, slated for completion in late December, will introduce 230 new slot machines, with 120 heading to the high-limit room, encompassing 25,000 square feet of additional casino space and featuring a new high-limit slot area and bar, at a total cost of $120 million.
