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April 16, 2014

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Jeff Simpson on how Red Rock Resort is fulfilling Fertittas’ lofty expectations for profitability

I hope anyone who doubted the Brothers Fertitta when they ponied up almost a billion dollars to build their Red Rock Resort has come to his senses.

Last week, Station Casinos reported Red Rock Resort's first full quarter of results since it opened in April. The luxury locals property has already reported $44 million in cash flow since its opening - more than the supremely successful Green Valley Ranch collected in its first full year of operation. Cash flow - or earnings before interest, taxes, depreciation and amortization - is the number most used to represent casino profitability.

Station President Lorenzo Fertitta told me Thursday that Red Rock is expected to produce $90 million to $95 million in cash flow during its first year.

When you consider the cash-flow trajectory of Station's other locals casinos, Red Rock is on track to be another gold mine.

When Lorenzo and Chief Executive Frank Fertitta III took me on a preopening tour of the Summerlin casino, they emphasized that Station properties get more and more profitable over time.

Citing Green Valley Ranch and other Station casinos, they said that cash flow would increase dramatically from the first to the second year of operation and would stay on that sharply rising trajectory from the second to the third year.

I think Red Rock is an incredible property, one that is clearly one of the best resorts in Las Vegas - and certainly the best locals casino.

And with Red Rock and Green Valley Ranch, Station has extended its straw into the two wealthiest parts of Las Vegas. (It splits ownership of Green Valley Ranch with the family that owns the Las Vegas Sun.)

Lorenzo Fertitta told me that he and his brother are very pleased with Red Rock's first five months.

"It's been a huge success," he said. "We wanted Red Rock to be something for everyone, and it has been."

Sure, there have been a few tweaks needed, he said. Parking has been in short supply when big events combined with strong weekend demand.

They're adding 1,000 spaces to a parking garage, and considering adding more parking.

When the hotel tower's extension opens up 400 new rooms at the start of the year, Fertitta expects the property to really begin to rev up.

"We're attracting people from a wider radius than most locals casinos," Fertitta said. Why? "It's a combination of things. The amenities are great, the restaurants have been really well-received and we're located right on the beltway."

Although the Las Vegas poker business is clearly bigger and stronger than it has ever been, there are signs that capacity may have caught up with demand. The city's small-stakes poker rooms have seen their business spread a little thin, with some of the most popular venues losing as much as half of their action as almost every casino has opened a poker room.

One of the places capturing a lot of the low- and mid-stakes cash action? Red Rock Resort.

The overcapacity at the low end doesn't appear to have spread to the top of the market.

I spoke to Bellagio poker boss Doug Dalton recently, and he says that his poker room is doing better than ever.

With publicity from World Poker Tour events, the world's biggest cash games and the city's most expensive daily tournaments, Dalton's room enjoys an enviable perch.

And the Venetian poker room has begun to hit its stride, with the room's cash games and tournaments doing a lot of business, as are those at Wynn, Caesars Palace and the Mirage.

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