Orleans’ local customers help Boyd offset declining Las Vegas tourist market
The Orleans has successfully bridged the gap between Las Vegas locals and the Vegas tourism crowd, giving the company a much-needed revenue boost in what is quickly becoming a challenging market.
Boyd Gaming’s Orleans Hotel and Casino has become a barometer for the company’s financial performance while it deals with recent declines in Las Vegas tourism volume.
That’s due to its large following from locals, something Boyd Gaming helped solidify two years ago when it used the resort as a backdrop in announcing a sponsorship with the Las Vegas Raiders as its locals gaming partner.
Orleans has helped Boyd weather the current economic slowdown.
Las Vegas visitation has declined in each of the past four months, including a 6.5 percent drop in June. July’s visitation results are expected to be released Wednesday.
Boyd Gaming CEO Keith Smith said last week that the Orleans’ tourism business has been down, but has performed in line or better than the overall Strip market because of its popularity with the locals market. The company’s locals-focused properties — Aliante in North Las Vegas, Sam’s Town on Boulder Highway, Suncoast in Summerlin and the Joker’s Wild in Henderson — saw a nearly 2 percent revenue increase in the quarter.
“It’s not surprising, given the softness on the Strip,” Smith told The Nevada Independent following the company’s second-quarter earnings conference call. “It ebbs and it flows. When the Strip is off, the Orleans tends to feel the impact. When the Strip is strong, the Orleans benefits.”
The nearly 1,900-room resort, one of Boyd’s 10 Las Vegas area resorts, is considered a Strip property by the company even though its Tropicana Avenue location sits 2 miles west of Las Vegas Boulevard.
However, unlike rival Strip operators that are eliminating resort fees and offering other incentives to boost traffic, Smith said nothing like that is planned for the Orleans.
“I can't comment on why properties in Las Vegas change room rates,” Smith said during the conference call. “Summer room rates are always low compared to the other seasons. This year, they're lower than last year— in many cases, by quite a bit. I don't know why people are doing that.”
He said lower Strip room rates hurt the Orleans, but it doesn’t change the company’s strategy.
Companywide, Boyd’s second-quarter revenue topped more than $1 billion, a 7 percent increase from a year ago. The company’s three downtown properties saw a revenue decline of more than 4 percent, which was due to fewer tourists — a trend similar to that on the Strip.
However, revenue from the company’s casinos across 10 states was up 3.5 percent.
“As people are not traveling as much, we're getting the benefit of them staying closer to home and visiting our properties in the Midwest and South,” Smith said.
Boyd is also taking advantage of the Las Vegas market’s slowdown to remodel rooms at the Orleans as part of a $100 million redevelopment that also includes a room remodel at its Pennsylvania resort in Valley Forge.
The company is not planning to reopen the Eastside Cannery on Boulder Highway. The property has remained closed since March 2020. Earlier this year, Boyd paid $45 million to buy out the property’s lease and acquire the land.
“It's always easier to control the land as well as the building, regardless of what you want to do with it in the future,” Smith said, adding the company has not made any decision about the hotel-casino’s future.
Gaming and Leisure considers its investment in Bally’s Strip project
Bally’s Corp. is continuing its design process for a resort adjacent to the Athletics’ future $1.75 billion ballpark on the Strip. Meanwhile, Gaming and Leisure Properties, the real estate investment trust that owns the 35-acre site, is considering additional funding to support its tenant in the construction process.
Bally’s released preliminary designs of a 3,000-room integrated resort surrounding the ballpark last October, but hasn’t provided any updates since then.
Gaming and Leisure provided $175 million toward last year’s demolition of the Tropicana Las Vegas, of which Bally’s only used $48 million. Last week, Gaming and Leisure President Brandon Moore said Bally’s could use the remaining funds for the project, and it might provide additional financing depending on the final plans for the resort complex.
“There are a lot of different opportunities,” Moore said on Gaming and Leisure’s second-quarter earnings conference call last week. “There is an opportunity for us to invest more. Quite frankly, Bally's needs to decide how they want to fund and finance that site.”
Bally’s pays Gaming and Leisure $10.5 million in annual rent. Moore attended the ceremonial groundbreaking event for the stadium last month. The Athletics are using 9 acres for the 33,000-capacity stadium.
Gaming analyst Santarelli moves to the corporate world
Former gaming analyst Carlo Santarelli is joining Gaming and Leisure Properties this month to oversee the real estate investment trust’s investor relations and corporate strategy. It’s expected the company will give him the same freedom he had in evaluating strategies for investors of Deutsche Bank, JP Morgan and other firms during the past 25 years.
Santarelli didn’t shy away from criticizing gaming operators for questionable decisions.
In 2022, he advised a cautious approach even as post-pandemic gaming revenue soared. A few years earlier, he wrote that a regional gaming operator should look twice at acquiring a Strip resort.
It took five years, but his analysis questioning Penn Entertainment’s acquisition of the Barstool Sports platform to be its sports betting partner was proven correct.
Penn spent $550 million in two separate deals before selling Barstool back to its bombastic founder, Dave Portnoy, for $1 after announcing a multibillion-dollar agreement with Disney-owned ESPN to create a new sports betting product.
What I'm reading (and listening to)
💬 An interview with Frank Fahrenkopf, the first CEO of the AGA — Brandt Iden, Brendan Bussmann, Robin Harrison, The World Series of Politics (podcast)
In addition to gaming, Fahrenkopf reflects on presidential politics and his discussions with the late Sheldon Adelson, former President Joe Biden and President Donald Trump.
🌴 Don Soffer, who sketched an idea for Aventura on a napkin, dies at 92 — Howard Cohen, Miami Herald
The real estate mogul developed Florida’s largest mall and Aventura, one of Miami’s poshest neighborhoods. His son, Jeffrey Soffer, owns the Fontainebleau Las Vegas and the Miami Beach Fontainebleau.
News, notes and quotes
🤝Union secures five-year contract at Golden Nugget Las Vegas
Operating Engineers Local 501 finalized a contract with the Golden Nugget Las Vegas a decade after employees first voted in favor of union representation. According to the union, the five-year agreement included a 20 percent wage increase for approximately 40 building engineers, who maintain the Golden Nugget’s heating, cooling and other mechanical systems. The agreement also included benefits, such as a lifetime pension and increased bonus pay. “It is a testament to the engineers’ solidarity and perseverance to see this process all the way through,” Local 501 business agent Rick Lile said in a statement.
🚢 Carnival Cruise Line joins the American Gaming Association
Carnival Corp. became the first cruise operator to join the American Gaming Association (AGA) the Washington, D.C., trade organization that represents the casino industry. A Carnival spokeswoman said the company’s eight cruise ships have casinos that are operated by its gaming team. The AGA’s membership includes commercial and tribal casino operators, sports betting and iGaming companies and gaming suppliers. AGA Senior Vice President of Membership Maureen Beddis said in a statement Carnival brings a unique perspective and deepens the organization’s network.