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Caesars plans new Las Vegas developments after bankruptcy exit
[LOS ANGELES] Caesars Entertainment Corp Chief Executive Officer Mark Frissora wants to develop more than 90 acres the company owns in Las Vegas, including land right in front of Caesars Palace, after its largest unit emerges from bankruptcy later this year.
"We have a lot of real estate that's underutilized," Mr Frissora said in an interview with Bloomberg TV Thursday. "We have plans to basically develop all of that very valuable center-strip property as soon as we emerge. Those assets will have a very high-return, low-risk profile." Caesars, the largest owner of casinos in the US, has struggled under a mountain of debt since a US$30 billion leveraged buyout in 2008. In January of 2015, the company put its largest division, Caesars Entertainment Operating Co, into bankruptcy. It's expected to exit in the third quarter.
The Las Vegas-based company has enjoyed growth in sales and profit over the past two years, due in part to a strategy of renovating hotel rooms and searching for cost savings in places ranging from parking lots to guest check-in. Caesars hosted a nearly three-hour-long presentation for analysts in Las Vegas Thursday.
As part of the bankruptcy restructuring, Caesars is creating a real estate investment trust that will own many of the company's casinos, including the flagship Caesars Palace in Las Vegas. Debt and other obligations will be reduced to US$14.6 billion from US$23.5 billion in 2014, the company said. Fixed costs, including interest expense and rent, will decline to US$1.28 billion annually from US$2.67 billion three years ago.
Caesars has reduced promotional costs, like the amount of free casino chips it gives customers, while maintaining its market share in key cities, Chief Financial Officer Eric Hession said in the presentation. The company has cut US$800 million in annual expenses over the past two years.
Balance Sheet With its balance sheet repaired, Caesars is looking at new markets for expansion, including Japan, South Korea, Canada and Brazil. The company wants to hire more people in mergers and acquisitions and in casino development, Frissora said during the investor day.
Hotel revenue has been a source of growth. Average room rates in Las Vegas have risen to US$140 a night last year from US$92 in 2012, the company said. About 56 per cent of the company's Las Vegas rooms will be remodeled by the end of the year. All of the company's Las Vegas hotels will be charging for parking by the end of June.
Almost one third of the company's guests in Las Vegas now use self-service kiosks to check-in to the hotels, technology that frees up hotel staff. The land Frissora wants to develop includes 50 acres behind the Bally's resort, almost 40 acres behind the Linq and seven acres in front of Caesars Palace.
Competitors including MGM Resorts International and Wynn Resorts Ltd have also been remodeling their properties and adding pedestrian-friendly features that emphasize shopping, entertainment and dining more than gambling.
"We are excited because we have a lot of growth plans we've not been able to act on because of the complicated structure" of Caesars, Mr Frissora said. "Once we emerge, we will be able to do a lot of development projects around the world as well as M&A activity." BLOOMBERG