Casino operator Caesars Entertainment lost over three-quarters of a billion dollars in the third quarter due to restructuring costs involving its bankrupt main unit.
On Monday, Caesars Entertainment Corporation (CEC) reported losing $756m in the three months ending Sept. 30, a far cry from the $15m profit CEC reported in Q2. Revenue was up 12.4% to $1.14b and earnings rose 46% to $311m but the company’s ongoing efforts to reinvent itself drowned all that black ink in a sea of red.
CEC stopped reporting contributions from its main unit, Caesars Entertainment Operating Co (CEOC), since the unit filed for bankruptcy in January. But CEC still had to make payments of $966m in Q3 related to CEOC’s restructuring efforts, which is a nice way of saying it’s been throwing cash at CEOC’s first-lien creditors in a bid to keep them happy while continuing to treat second-lien creditors much like countries not named Germany treat Syrian refugees.
This nearly $1b in bribes undid a generally positive quarter, which included a continued strong showing by Caesars interactive Entertainment. Gaming revenue was up $56m to $535m thanks to a higher overall hold percentage and a full quarter’s contribution from Horseshoe Baltimore, which opened in August 2014.
Hotel revenue improved $37m to $220m thanks to the renovation of The LINQ in Las Vegas and the expansion of more of those loathsome ‘resort fees’ across all Caesars properties, which is where the hotel charges you extra for having had the unmitigated gall to book a reservation. Food & beverage rose $11m to $211m while ‘other’ revenue fell $12m to $117m and comps fell $4m to $134m.
Caesars also found marketing efficiencies by curtailing many direct mail programs, relying instead on email and other digital channels. The company says this allows them to implement a more “agile and personalized” approach and probably puts less stress on the company health plan, what with people no longer slicing their tongues to ribbons licking envelopes.
Caesars says it’s conducting a “relentless approach” to improving operations, “particularly around labor productivity,” so if Caesars frontline staff look more uncomfortable than usual on your next trip to Vegas, it may be because they’re no longer allowed to use the washroom outside of their meal breaks.
Caesars is also hoping its efforts to gussy up its rundown hotel rooms – including the $75m renovation at Caesars Palace in Las Vegas – will allow it to boost room rates.
Caesars continues to make a play for the millennial and Gen X markets, including installing TAG lounges – virtual gaming centers featuring skill-based electronic tables – at various locations. Last month, Caesars CEO Mark Frissora said the company was testing a top secret ‘casino within a casino’ zone aimed at maintaining the millennial generation’s notoriously fickle attention span. Caesars’ Q3 presentation noted the introduction of some “millennial-friendly concept environments” but offered no specifics.