Riviera feels squeeze in third quarter

By Liz Benston

Thursday, Nov. 6, 2008 | 4:45 p.m.

Third quarter earnings fell 58 percent for the owner of the Riviera casinos in Las Vegas and Colorado as the worsening economy squeezed profit margins at the company’s budget-oriented properties.

Following today’s earnings announcement, Riviera Holdings executives said they were well positioned to weather the downturn because they have a “healthy” cushion of cash and a package of loans at a reasonable rate of 7.5 percent. Those loans don’t require the company to generate a certain amount of earnings relative to its debt, like some of its peers on the Strip – only that the company make scheduled payments.

“We’re used to surviving. We’ve been surviving for 53 years,” Chief Executive Bill Westerman said.

Business has gotten tougher as higher-end competitors have increasingly dipped into the company’s market segment of offering low priced rooms, meals and other amenities, executives said. Earnings are expected to decline in a similar manner in the fourth quarter and by a smaller percentage, year over year, in the first half of next year, they said.

The company has cut costs in every department, including laying off employees and halting the planned renovation of the last of five hotel towers.

Revenue fell 23 percent in the third quarter from a year ago and earnings before certain expenses, a key profit measure, fell 58 percent. The company reported a net loss of $3.5 million, an improvement of $14.8 million from the prior year’s quarter, after one-time gains and losses unrelated to company performance.

Revenue fell 20 percent and earnings fell 52 percent at the Riviera casino in Las Vegas. Casino revenue fell 21 percent, primarily because of lower slot revenue. Hotel revenue fell 18 percent. Hotel occupancy fell 7 percentage points to 87 percent and average room rates fell about $4 to $75.17. Excluding unoccupied rooms, revenue per room was $65.44.