Red Rock Resorts (NASDAQ:), Inc. RRR is likely to benefit from digital initiatives, development projects and operations in Las Vegas. Additionally, the company’s focus on cost reduction initiatives bodes well. However, an increase in COVID-related mitigation and carry costs is of concern.
Let’s go deeper.
Factors promoting growth
Red Rock Resorts continues to make substantial progress toward cashless gaming. During Q3 2021, the company initiated field trials with IGT (at Red Rock and Green Valley branch properties) to introduce cashless payments to the slot machine floor. RRR intends to offer one-stop mobile digital wallet access for gaming and payment purposes at each of its Las Vegas properties. Apart from this, the company entered into a partnership with GAN Limited (in October 2021) to build and deploy the next-generation infrastructure stations, STN Sports online sports platform, mobile apps and online sports betting. over-the-counter and newsstands nationwide. Nevada. RRR said the product launch is subject to regulatory approvals.
Following a favorable decision by the Supreme Court of California (in August 2020), Red Rock Resorts has focused more on the North Fork development project. The cost to complete this project, excluding financing costs, is expected to be between $350 million and $400 million. The company said the project is currently in the planning and budgeting stage. He focused on the Durango development project. Located off Highway 215 and Durango Drive in the southwest Las Vegas Valley, the project would likely offer 73,000 square feet of casino space, 2,000 slot machines and 40 table games, a state-of-the-art sports betting, 200 hotel rooms and four full gaming halls. serving food and beverage outlets. Currently in the planning and budgeting phase, the company expects to start the project by the first quarter of 2022. It is optimistic about this development pipeline due to the location and lack of unrestricted gaming competitors. (within five miles of the project site).
The company’s Las Vegas operations have been a key growth driver in recent quarters, which is expected to continue in future quarters. The company is bullish on its long-term outlook due to favorable supply-demand dynamics, positive long-term trends in population growth and a stable regulatory environment. Additionally, attributes such as top-notch assets and locations, unparalleled distribution and scale, and a strong organic development pipeline are likely to add to the positives.
Red Rock Resorts continues to focus on initiatives such as streamlining operations, optimizing marketing initiatives and renegotiating agreements with suppliers and third parties to drive growth. The initiatives will not only support efficient production, but will likely increase margins and free cash flow. Supported by these initiatives, the company expects to save more than $200 million in annual costs (compared to its pre-pandemic cost structure) in future periods.
The coronavirus pandemic has affected the gaming industry globally. The relaxation of certain protective measures against COVID-19 by authorities around the world, travel restrictions, quarantine measures, testing requirements and capacity limitations remain in effect in some regions. Besides RRR, other industry players like Las Vegas Sands (NYSE:) Corp. LVS, Wynn Resorts (NASDAQ:), Limited WYNN and Melco Resorts & Entertainment Limited MLCO has also been affected by the aftermath.
Although Red Rock Resorts is seeing an increase in visits from the younger population, it is largely offset by higher COVID-related mitigation costs (nearly $2.4 million) and carry costs associated with its closed properties (approximately $2.6 million) in the third quarter of 2021. The unprecedented nature of the crisis is likely to affect the company’s results going forward.
A brief review of other actions
Las Vegas Sands is quite confident about the growth prospects in Macau and continues to invest there. Despite the pandemic, the company said it would continue its $2.2 billion investment in Macau. Supported by these investments, the company aims to capitalize on Macau’s likely structural growth in the coming years to stay ahead of the game in terms of product and equipment quality and scale. He expects Macau to lead the recovery this year. The company is also planning rapid vaccinations in Asia to drive growth in the coming days. Four Seasons and Londoner will provide the company with growth opportunities.
Wynn Resorts benefits from improved non-gaming revenue and expansion into domestic markets. Also, focusing on WynnBET bodes well. The company anticipates strong revenue generation through new product features and a unique marketing campaign.
Melco Hotels benefited from pent-up demand and cost-cutting initiatives. MLCO worked on Studio City Phase 2 in Macao. Going forward, the company expects activity to reach pre-pandemic levels as soon as travel restrictions are eased. Additionally, continued progress toward higher immunization levels is likely to reopen the border and accelerate recovery.
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