Red Rock Resorts used the Covid-19 pandemic shutdown to get lean and mean, reporting impressive Q3 numbers for 2020. The casino operator saw a net income of $72 million, up from a loss in the same time last year.
Overall, net revenues were $353.2 million for Q3, understandably down from the $465.9 million for 2019. But thanks to cutting costs, it made the $72 million improvement in income, improving from a $26.8 million net loss in 2019. As a result, adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) was $160.9 million, an increase of 44.8%, or $49.8 million.
The costs cut to survive the pandemic look to be a strength for the operator going forward. “We believe there’s a permanent reduction in the cost of operating business,” said Frank Fertitta III, chairman and CEO. “The shutdown gave us the ability to question everything we were doing and to be very cautious reopening.”
CFO Stephen Cootey explained that the company cut $150 million in costs, and renegotiated agreements with third parties to save every penny they could. “These initiatives have resulted in a leaner, more efficient company and will enable us to achieve and sustain higher margins,” Cootey said.
A change in marketing strategy was important as well, as Red Rock went after the customers they knew they had a best chance with. “We went back to focusing on direct relationships with the customers,” Fertitta said, “and being more efficient with our promotions and marketing.”
The good news comes with an obvious cost though. Red Rock improved their bottom line by laying off approximately 39% of full-time employees. Perhaps they could return when hotels are allowed to fully reopen, but good times for some are hard times for others.
“While we’re missing profit from hotel and catering, we’re really a gaming company at the end of the day,” Fertitta said. “(Seventy to 80) percent of our revenues and profits come from slots and table games and gaming. So we look forward to the hotel and the catering returning, and they’re profitable for us, but the results show you that we can still make money even in this environment.”
Funnily enough, the reckless youth often blamed for keeping the Covid-19 pandemic alive were the lifeblood of Red Rock casino floors. “We saw strong visitation from a younger demographic, increased spend per visit, more time spent on device, plus increased return of our core customer,” he said Fertitta said.
To keep improving their offering to a younger visitor, Red Rock noted in its look ahead that they hope to introduce a cashless wallet solution, much like the Bitcoin SV offering being developed by Bitboss.
Red Rock is still being careful however, keeping four of it’s Las Vegas properties shuttered: the Palms, Texas Station, Fiesta Henderson and Fiesta Rancho. “We are still taking the time to gain the visibility of the effect this pandemic may have on our company, as well as the Las Vegas economy,” Cootey said.
Expansion plans are still going ahead regardless of the pandemic. A new 213,000 square-foot property near Fresno, California will begin construction in Q2 2021.