By introducing careful cost cuts and optimizing its expenses, Red Rock Resorts revealed impressive results in the third quarter of 2020. The operator used the COVID-19 lockdown period to re-evaluate its operations which made the company leaner and more efficient.
Red Rock Resorts Reveals Q3 2020 Results
Tuesday, October 27, Red Rock Resorts revealed its third-quarter results for the period ending September 30. Regardless of the COVID-19 pandemic, the operator marked a net income of $72.0 million in Q3 2020. This represents an increase of $98.8 million from a $26.8 million loss for the same period in 2019. Focusing on net revenue, Red Rock Resorts reached $353.2 million for Q3 2020. This marked a decrease of 24.2% or $112.7 million from $465.9 million from the same period last year.
According to the operator, the net revenue decrease was mainly because of the ongoing impact of the COVID-19 pandemic. However, focusing on EBITDA (Earnings before interest, taxes, depreciation, and amortization) the operator marked an increase of 44.8% in the third quarter of 2020, reaching $160.9 million. For the same period in 2019, the operator reached $111.1 million which means that in Q3 2020 the increase is $49.8 million.
Red Rock Used the COVID-19 Lockdown Period for Analysis and Cost Cutting
To reach the listed results, the operator used the lockdown period to evaluate its expenses and reduce costs where possible. In an earnings call, Frank Fertitta III, chairman and CEO at Red Rock Resorts said that the company used the shutdown period to “question everything” it was doing and to carefully prepare for reopening.
“We believe there is a permanent reduction in the cost of operating the business.”
Red Rock CEO Frank Fertitta III
Red Rock’s CFO Stephen Cootey outlined that the company managed to reduce its expenses with $150 million. To achieve this, Red Rock had to change and rearrange multiple agreements but the result was a “leaner and more efficient company” which was able to achieve higher margins, said Cootey.
Results for Las Vegas Operations in Q3
Focusing on the results from Las Vegas, the operator’s net revenue reached $320.8 million for Q3 2020. This marked a 27.2% decrease, or down with $119.9 million from $440.7 million for the same period last year. On the other hand, EBITDA from the Las Vegas operations reached $141.7 million for the third quarter of 2020. This marked a 38.6% increase or $39.4 million more from the $102.2 million raised for the same period in 2019.
Although the operator opened Red Rock Resort, Green Santa Fe Station, Boulder Station, Valley Ranch, Palace Station, Sunset Station, and the Wildfire properties, there are four properties that remain closed in Las Vegas and Henderson. With that in mind, Cootey said: “There is no timetable for reopening those properties.“
New Marketing Strategy Pays Off
Besides cutting costs, Red Rock re-evaluated its marketing strategy. “We went back to focusing on direct relationships with the customers,” commented Fertitta. He outlined that the company aimed at being more efficient when it comes to promotions and marketing. This move proved to be beneficial as Fertitta acknowledged that the company observed “strong visitation from a younger demographic“. Furthermore, the operator recorded an increased spend per visit with more time spent per device and an increased return of “core customers“.
Another key topic that Fertitta commented on is the revenue from hotel and catering. He outlined that although the company was missing on profit from hotel and catering, after all, Red Rock is “a gaming company at the end of the day”. Moreover, he stressed that 70-80% of the revenues and profits come from table games and gaming. In conclusion, he said that although the company is looking forward to returning the profitable hotel and catering services, based on the results, Red Rock was still able to make money even in this environment.