Caesars Entertainment Credits Tax Break in Q4 Earnings Report, Las Vegas Tourism Drop in Shooting Aftermath Hurt Revenue

Posted on: March 9, 2018, 11:30h. 

Last updated on: March 9, 2018, 11:47h.

Caesars Entertainment reported $1.9 billion in fourth quarter net revenue, lower than the $2.01 billion predicted by many financial analysts. Despite the revenue shortfall, Caesars CEO Mark Frissora and company officers presented a rosy outlook for 2018 during Wednesday’s call with shareholders.

Caesars Entertainment Las Vegas shooting
Caesars Entertainment’s fourth quarter earnings for 2017 took a hit. The company blamed tourism reaction to the Oct. 1 shooting at rival MGM Resorts’ Mandalay Bay for lower-than-expected Las Vegas Strip footfall. (Image: Shutterstock)

CFO Eric Hession said the company, which emerged from bankruptcy in October, benefited from US tax reform to the tune of $2.03 billion. Net revenues for the entire year increased to $8.1 billion, but despite that growth, the company still posted a net annual loss of $375 million.

But Hession remains positive, saying the tax cuts should increase consumer confidence, which in turn will help grow revenue in the months ahead.

Caesars shares fell on Thursday from an opening price of $13.20 down to $12.60 at the close of trading, a loss of 4.55 percent.

A City Affected

Caesars Entertainment said the October 1 shooting in Las Vegas hurt final quarter revenue. The company owns nine properties in the city, with eight of those on the Strip.

Las Vegas revenue declined nearly four percent in the final three months of 2017 to $873 million. Earnings before interest, taxes, depreciation, and amortization (EBITDA), plus rent revenue, dropped 10 percent to $294 million.

Frissora said that business lost following the tragedy cost the company $25 million in fourth quarter EBITDA. THe Caesars CEO said an EBITDA increase of around 11 percent would have been likely without that tragic circumstance. And Frissora noted that tourism fallout from the massacre is still hurting business.

“During the first quarter (of 2018), we continue to feel the impact on our leisure business in Las Vegas from the October 1 shootings. We have challenged our management teams to offset these negative impacts with continued focus on cost control,” the CEO explained.

Frissora told reporters that in the weeks after the shooting, there was a sharp decline in arrivals from Asian markets out of respect for the 58 people who lost their lives. “I’ve heard that it’s sometimes a period of three, four months … People in Asia are very respectful of the deaths,” he concluded.

New Players Coming In 

Caesars Entertainment is bullish on the year ahead, and investors apparently are as well.

On Thursday, 28.22 million shares of the company were traded on 55,937 transactions. Such unusually busy activity typically hints that investors are confident about a company’s direction.

But Hession says there are some reasons for concern, specifically in Atlantic City, where the gaming operator owns three out of seven casinos. And before 2018 wraps up, two additional gaming venues are expected to open: the Hard Rock and Ocean Resort.

“We do expect to face some challenges in 2018,” Hession admitted. “We believe the introduction of new competition in some of the regional markets, particularly in Atlantic City, will negatively impact our results in the second half of the year.”

Along with Hard Rock and Ocean Resort, the owner of Showboat, a former Caesars property, is deliberating about reopening the hotel’s casino. Developer Bart Blatstein filed initial licensing paperwork with the New Jersey Division of Gaming Enforcement (NJDGE) last month.