Durango Casino Off to Fast Start, Small Risk of Red Rock Cannibalization, Say Analysts

Red Rock Resorts’ (NASDAQ: RRR) newly minted Durango Casino & Resort in Southwest Las Vegas is off to an impressive start following its December 5 debut, according to analysts that cover the gaming company.

The $750 million venue aims to fill a void in the Southwest corner of the city, which is rapidly growing, though not yet littered with casino hotels. Durango is home to 73,000 square feet of gaming space, a sportsbook, 2,000 gaming machines, and 40 table games as well as a slew of food and beverage (F&B) locations, which are driving traffic among crucial younger demographics.

Management noted, and has been pleasantly surprised by, the younger demographic that has presented itself at Durango, as well as other properties, with the 25-35 year old demographic showing up in a more pronounced fashion, on both the casino floor and in the F&B outlets,” wrote Deutsche Bank analyst Carlo Santarelli in a note to clients on Tuesday.

Santarelli, who was present at Durango’s opening, rates Red Rock a “buy” with a $54 price target, implying slight upside from Tuesday’s close at $53.20.

Durango Cannibalization Risk Seen as Low

Some market observers are concerned that the new Durango could pilfer business from Red Rock’s eponymous casino hotel in Summerlin. Executives from the gaming company acknowledge that might be an issue in Durango’s infancy, but Red Rock devotees will likely eventually return to that venue.

“Despite the overlap and concerns of Durango cannibalizing demand at Red Rock, visitation to both Red Rock and Orleans was actually up year over year in the first week of Durango’s opening, which could be driven by the NBA in-season tournament,” Bank of America analyst Shaun Kelley noted. “While there aren’t signs of cannibalization yet, we will continue to monitor and model Red Rock locals’ revenue down about 4% year over year in 2024 to reflect the new competition. We stay underperform-rated based solely on relative valuation.”

Indicating that Durango is off to an impressive start, Red Rock management noted the venue should be profitable from Day 1, according to Santarelli. When fully ramped, the property could generate close to $160 million in annual earnings before interest, taxes, depreciation, and amortization (EBITDA), added Bank of America’s Kelley.

Durango Getting Las Vegas Locals Boost

As is the case with the bulk of Red Rock’s casinos, Durango aims to cater to the Las Vegas locals demographic. The venue’s impressive slate of dining options appears to be aiding in that quest.

Another surprise, although somewhat related to the demographic element, has been the late-night demand at the property, specifically in the F&B segment, as Strip workers head home from shifts and are looking for a meal closer to home, prior to returning home,” concluded Santarelli.

Using Wynn Resorts’ (NASDAQ: WYNN) Encore Boston Harbor as a template, Bank of America’s Kelley expects Durango visitation to stabilize at 10K per day, which is below the 13K daily average at Red Rock.