Red Rock executives offer new details about second Durango expansion

Red Rock Resorts’ massive expansion plans at its Durango property are being driven by customers asking for amenities like movie theaters and bowling alleys, company executives said Tuesday. In the company’s third-quarter earnings conference call with investors, Executive Vice President, Chief Financial Officer and Treasurer Stephen Cootey offered new details on an 18-month, $385 million expansion plan that will begin in January shortly after an existing expansion is completed.

“Supported by robust market fundamentals and the rapid development of the surrounding area, this next phase will expand the podium along the north side of the existing facility by more than 275,000 square feet,” Cootey told investors. “The expansion will add nearly 400 additional slot machines and ancillary gaming to the casino floor, as well as introduce a range of new amenities designed to enhance the guest experience and deliver on what our customers are asking for, including a state-of-the-art 36-lane bowling facility, luxury movie theaters, a mix of new restaurant concepts and food hall tenants, and multiple entertainment venues designed to drive repeat visitation and broaden our customer appeal.”

Guaranteed cost

Cootey said the project is being executed under a guaranteed maximum price concept.

“We are excited to embark on this next phase of growth at Durango, and upon completion, we believe the property will be even better positioned to capture additional market share and drive sustained growth in the local market,” he said.

Cootey said neighborhoods are expanding around Durango with more than 6,000 new households coming within a three-mile radius of the property over the next few years, “complemented by the continued build-out of Downtown Summerlin and Summerlin West, which together are projected to add approximately 34,000 new households.”

The second Durango expansion comes on the heels of the current project expected to be completed by the end of the year. It will add more than 25,000 square feet of additional casino space, including a new high-limit slot area and bar. The expansion will add 230 new slot machines, 120 of them in the new high-limit area. The $120 million project remains on budget, he said.

“For this phase, we are also building a new covered parking garage with nearly 2,000 spaces, which will enhance customer access and provide infrastructure flexibility to support future growth at the company,” Cootey said.

Record quarter

In Red Rock’s third quarter, the company recorded its highest net revenue and adjusted cash flow in its history with a near-record cash flow margin. It was the ninth straight quarter of record net revenue and fifth straight quarter of record adjusted cash flow, which, Cootey said, “underscores the strength, consistency and long-term earnings power of our operating market.”

For the quarter that ended Sept. 30, the company reported net income of $76.9 million, 68 cents a share, on revenue of $475.6 million. That compares with net income of $55.4 million, 48 cents a share, on revenue of $468 million for the same quarter a year ago.

Asked by an analyst whether Red Rock was experiencing the same market softness as Strip properties, President Scott Kreeger said the Strip and locals markets are two different business models.

“I think the first thing to do is really differentiate the business models,” he said. “The past 50 years, we viewed the Las Vegas locals market as just a fundamentally different business. Unlike the Strip, it doesn’t rely on heavy tourism, doesn’t rely on conventions, nor is it hotel-driven. Our locals market is anchored in a gaming-centric business model that offers value propositions to both local guests as well as out-of-town guests.”