Resorts World Las Vegas Won’t Be Profitable for Several Years, Says Nomura
Posted on: March 19, 2021, 10:38h.
Last updated on: March 19, 2021, 02:59h.
The highly anticipated Resorts World Las Vegas will not be profitable on a net basis for several years, according to Nomura analysts.
The $4.3 billion venue is slated to open in the second half of this year. Construction on the west tower is up to the 55th floor, while 52 floors are complete on the east tower. The main gaming area, poker room, and restaurants are also close to completion.
While the 3,500-room integrated resort is moving along even against the backdrop of the coronavirus pandemic, it’s going to take some time for the property to be a moneymaker for operator Genting Berhad.
However, at the net profit level, given the depreciation/interest costs, we expect Resorts World Las Vegas to remain loss-making in initial years,” said Nomura analysts Tushar Mohata and Alpa Aggarwa.
The researchers forecast the venue will generate earnings before interest, taxes, depreciation and amortization (EBITDA) of $82 million on revenue of $350 million in 2022. Those figures will grow to $112 million and $477 million, respectively, in 2023, they claimed.
Important Difference in Metrics
While Resorts World Las Vegas will be positive on an EBITDA basis, the multi-year slog to net profitability highlights important differences between EBITDA and net income.
EBITDA is a widely accepted financial reporting tool in the gaming industry because it accounts for fixed costs and the depreciation companies can take on assets, as just two examples. However, net income, regardless of industry, is the cleanest view of a company’s profitability because it gauges profits or losses after expenses, taxes, depreciation and amortization.
The Nomura analysts don’t say exactly when Resorts World Las Vegas will turn net income-positive. But they do say the process will take a few years. They add the new venue will contribute six percent to Genting’s 2022 EBITDA.
With its $4.3 billion price tag, Resorts World is the priciest integrated resort on the Strip, just ahead of the Cosmopolitan at $4.18 billion.
Not Surprising Forecast for Resorts World Las Vegas
Nomura’s prediction that it will take a few years for Resorts World Las Vegas to become profitable isn’t necessarily a knock on the venue or the operator, nor is it outlandish.
It can take multiple years for high-end integrated resorts, of which Genting’s new venue is one, to be fully ramped-up. That means it’s not uncommon for such venues to spend their infancy as loss leaders for the respective operators. That’s usually the case in any operating environment, coronavirus pandemic or otherwise.
Still, the Nomura analysts project increasing utilization at the new property in the years ahead.
“We assume a utilization of 50 percent, 60 percent, and 70 percent for 2022, 2023, and 2024 for Resorts World Las Vegas, which we believe reflects a slow build-up of tourism and meeting, incentives, convention, and exhibition (MICE) activities in the post-COVID-19 era. We assume depreciation/interest expense for RWLV also starting in FY22,” according to the research firm.
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