Facebook
Fark
Digg
Reddit
Stumblegaming:
Harrah’s earnings fall with Las Vegas woes
Published Friday, July 24, 2009 | 8:35 a.m.
Updated Friday, July 24, 2009 | 11:15 a.m.
Harrah's Entertainment Financial Information
| 2Q 2009 | 2Q 2008 | % Change | 1Q 2009 | |
|---|---|---|---|---|
| Revenue | $2.271 billion | $2.602 billion | -12.7% | $2.254 billion |
| Net income | $2.273 billion* | ($97.6 million) | N/A | ($132.7 million) |
| *Includes one-time gains |
Sun Coverage
Beyond the Sun
They came to Las Vegas, but they didn't spend much.
That's what Harrah's Entertainment Inc. said today in reporting financial results for the second quarter ending June 30.
The big operator of Las Vegas Strip hotel-casinos said it filled a strong percentage of its Las Vegas region hotel rooms in the quarter. Nevertheless, Harrah's Las Vegas revenue fell 19.2 percent in the quarter compared to the second quarter of 2008, from $873.1 million to $705.2 million.
This contributed to an overall 12.7 percent decline in quarterly revenue for the world's largest casino operator, from $2.602 billion in 2008's second quarter to $2.271 billion in the 2009 second quarter.
Hurt by the recession, its operating profit worldwide fell from $469.8 million in the 2008 quarter to $416.7 million in the 2009 quarter.
But because of a one-time gain of $4.279 billion for the early extinguishment of debt, Harrah's reported a quarterly profit of $2.273 billion vs. a loss in the year-ago quarter of $97.6 million.
Conditions were so difficult in Las Vegas that Harrah's took a one-time $297.1 million charge against earnings for impairment of goodwill for certain Las Vegas properties during the quarter. Goodwill is an accounting term reflecting the intangible value of an asset and measures its ability to produce future revenue.
"While hotel occupancy was strong at nearly 95 percent, second-quarter and first-half revenues declined in the Las Vegas region from the year-earlier periods due to lower spend per visitor and weakness in the group-travel business, which led to lower average daily room rates," Harrah's said in a statement.
In a presentation to investors in May, Harrah's indicated its Las Vegas room rates were averaging just over $90 in March.
Including the goodwill charge, the Las Vegas properties turned in a quarterly operating loss of $123.3 million vs. a profit in the 2008 quarter of $199 million. The properties include Harrah's Las Vegas, Rio, Bally's Las Vegas, Paris, Flamingo Las Vegas, Caesars Palace, Imperial Palace and Bill's Gamblin' Hall & Saloon and generate about 23 percent of total revenue on the Las Vegas Strip.
The Las Vegas results are in line with numbers compiled by the Las Vegas Convention and Visitors Authority.
The LVCVA reports that this year through May, visitation to the U.S. gambling capital fell 6.9 percent from the same period of 2008 to 15.2 million people.
This led to a substantial decline in the room occupancy rate of 6.4 percentage points to 82.8 percent; and a troubling 27 percent decline in the average daily room rate citywide to $97.23.
Among Harrah's hotel-casinos around the United States, Harrah's properties in Las Vegas and other parts of Nevada experienced the steepest declines in revenue.
Its properties in Laughlin, Reno and Lake Tahoe generated quarterly revenue of $114.5 million, down 18.7 percent.
Elsewhere around the country for Harrah's:
--Atlantic City revenue of $516.2 million was down 13.9 percent.
--Louisiana and Mississippi revenue of $314.9 million was down 14.5 percent.
--Iowa and Missouri revenue of $190.6 million was down 2.9 percent.
--Illinois and Indiana revenue of $313.1 million was up 6.3 percent.
The privately held Las Vegas-based company reported progress in reducing its debt and associated interest expenses during the quarter.
Subsidiary Harrah's Operating Company Inc. exchanged $3.6 billion of new 10 percent notes due 2018 for approximately $5.4 billion of outstanding debt with maturity dates ranging from 2010 to 2018.
The deal reduced Harrah's Operating Company's overall debt by about $1.8 billion, decreasing its annual interest expense by $73 million.
In other debt-related deals, holders of certain Harrah's notes waived covenants and events of default and Harrah's bought about $1.3 billion of Harrah's Operating Company notes through tender offers or open market purchases, saving another $142 million in annual interest costs.
"The second-quarter financing activities enabled us to extend our average debt maturity and improve our overall liquidity," Gary Loveman, Harrah's chairman, president and chief executive officer, said in a statement.
He said the deals "have strengthened our balance sheet and enhanced our financial flexibility."
"We still face challenges, particularly in Las Vegas and Atlantic City, though our cost-reduction efforts led to improved second-quarter EBITDA margins in other markets we serve," Loveman said. "A bright spot in Las Vegas was the on-schedule opening this month of our new state-of-the-art convention and meeting center at Caesars Palace."
EBITDA is a financial measure meaning earnings before interest, taxes, depreciation and amortization.
Discussion: comments so far…
Comments are moderated by Las Vegas Sun editors. Our goal is not to limit the discussion, but rather to elevate it. Comments should be relevant and contain no abusive language. Comments that are off-topic, vulgar, profane or include personal attacks will be removed. Full comments policy. Additionally, we now display comments from trusted commenters by default. Those wishing to become a trusted commenter need to verify their identity or sign in with Facebook Connect to tie their Facebook account to their Las Vegas Sun account. For more on this change, read our story about how it works and why we did it.
Only trusted comments are displayed on this page. Untrusted comments have expired from this story.
No trusted comments have been posted.
Post a comment
Most Popular
- Viewed
- Discussed
- E-mailed
Everything Under the Sun
Blogs
The Kats Report
Clint Holmes is a big deal at Cabaret Jazz and 'The Carlyle!'; Playboy's furry-ous closing; Elvis is a 'Legend'
Joe Pesci remembers his own honeymoon in Vegas -- meeting the Rat Pack (1 Comment)
Las Vegas Philharmonic says search for new music director to begin 'immediately' (1 Comment)
With Shenandoah project stalled, Wayne Newton hits back legally (7 Comments)
Where does a Playmate play when she turns 21? Vegas! (3 Comments)
Ice Ice Billy
The road to six-toed cats and Mayor Bubba
The Kats Report
David Itkin tells L.V. Philharmonic officials he's on his way out (14 Comments)
- Locally owned and independent since 1950; Winner of the Pulitzer Prize for Public Service, best news website in the nation & DuPont Award for broadcast journalism
Why am I not surprised? It sucks that tourists aren't spending like they used to, but at least it's good that many of them are still coming here. Hopefully we'll see a turnaround soon, and hopefully the casinos will learn how to retool and give tourists good reason to spend more again.
I really can't understand whats so hard for these genius casino execs to figure out why revenues are off. They need to get used to the idea its never gonna be like it was ever again. The credit card is a dinasour, hail the new king, CASH. And this is just a hint, examine the revenues as they correspond to the general publics paydays..duh!
Mexico is a real bargain and they are down 60% in some areas. There is a global casino glut, Native American Casinos, new Asian casinos. If tourism to Cuba begins for US citizens, Vegas will take another hit. Best thing to do is to demolish older properties, but some of them might be doing OK, because lower non-union overhead. The Poker Palace and Silver whatever in NLV come to mind or Jerry's, they seem busy but no one spending much.
As the room tax is a percentage of the declining room rate and the gaming taxes are a percentage of wagering, is the recently passed state budget already out of balance?
Did raising taxes actually work against the total income of the local government entities as well?
How much was the top exec. at harrah's paid in 2008? any guess out there? something in the tune of $96,000,000? well that is quite a high percentage of their earning numbers right there.
HookerCrook, did you just tell foreigners to go home? Because that's pretty offensive if that's what you were saying.
Solar, if it was pretty offensive you would know straight away and not have to ask permision. Also why assume people from California are foreigners. That is just racist. Shame on you.
Harrahs is doing it to themselves. Most of us here could run the company better than the folks running it now. And for a lot less compensation! I had friends visiting from all over the place and I checked out the old crt tv's in the Flamingo, the understaffed bars in Harrahs, the overpriced restaurants at Ceasars and damn if the had cocktail waitresses could keep up. Of course we all laughed at the 6:5 blackjack tables we used to play at for 3:2. I can afford to sit at tables that pay 3:2 but then my friends can't play with me so guess what? I quit playing anything at their properties. We all then went to the non-monopoly properties and had a good time. Where is the Board of Directors???? Are they afraid to make waves???? Is their compensation too good to try to put a stop to the crap going on with the company?? Those properties used to be a lot of fun and different. Now, they all seem the same. And in such a bad way.
I don't see Loveman taking a cut or being fired. Nothing new in the article. Things are only going to get worse.
bad slots, terrible 21 rules, stupid games like let it ride[etc], so so overpriced food, room taxes, high drink prices- ok so whats there to come for. corporate america-china-india-bangladesh-vietnam-mexico have ruined not only vegas but the country we all love.
executives thought the "mc lean" at mcdonald's and "new coke" were good ideas.
most executives are so far removed from the reality of their corporations that they have no idea what's going on.
there simply aren't enough people coming anymore that spend enough money to keep the margins high enough to keep the business model working.
there will be 20% unemployment in vegas.
Corporate greed is a cancer not just in the casino's but in all corporations. Today's CEO's all seem to have been trained that it is better to over price your product and then demand that employee's do more with less. It's like a broken record. Back in the day, VOLUME was king. You could ask a fair price for the product and turn enough volume that everyone was happy making a smaller margin on more turn. Now, we hear the inevitable speech about delivering "value to the share holders" (read CEO, COO, CFO, VP's). All these greedy pigs care about is their stock options. They have so much money that they couldn't possibly spend it all in their life time. It is just a big ego deal that mine is bigger than yours. The company that I work for today demanded that we cut labor BOY because we only made 1.3 million in profit last month but they wanted over 2 million. I am sick and tired of the whole mess.
The real problem is that the CEO's and board members are the same people. They sit on multiple boards and take care of each other. It's BS.
Until Gary Loveman and his cronies are fired, Harrahs will continue the downward spiral into bankruptcy.
1. Shame on you LV Sun. What lazy reporting. To only report Net Income, which has a massive non cash charge for a reduction in goodwill included is slightly misleading and doesn't show the true picture. If you want to actually tell the story of how the business is really running, then report on company EBITDA YOY.
2. You commenters are idiots. You think Harrah's #'s are bad? Wait till MGM and Sands report. I guarantee you that Harrah's YOY decline is signficantly less than those guys. As for Wynn, "the genius," wait for his #'s. His EBITDA may be up slightly from last year, but that is because he DOUBLED the size of his property. To only slightly increase your cash flow with double the properties is pretty weak.
3. You really think $3 3:2 BJ games are profitable? If you have a full table of $3 bettors who play good strategy, in the long run the casino makes a grand total of $5~$10 an hour, not even enough to cover the dealer's salary and benefits, never mind all of the other costs that go into running a property, such as....
Surveillance & Security
Utilities
Taxes (both Property and Gamimg)
Marketing
Accounting
Finance
Purchasing
IT
Casino Reservtions
Direct Markting
Special Events
Cage
House Porters
Beverage
And more....
Remember, it is not "how busy" you are that makes money. It matters only how profitable you are. If that means freeloaders don't come because there aren't any "deals", then all that means is that there is more room for profitable guests.
The best casinos in the valley, by value, that's the South Point and the East Side Cannery. Whether these super star Strip casino CEO's like to hear that....or not. The South Point with immediate link to the Strip (actually, it's located on the Strip), is also catering to tourists, and not only locals. That's how they fill up the rooms and tourists also appreciate getting good value on the vacation dollars. I think it's about time for these arrogant Strip casinos to understand that it's a well-known fact that Strip casinos have very tight slots, terrible rules on the table games, yet, even higher rake at the poker tables. Plus, the pools are so packed that it's not fun going there anymore. It's time to rethink and analize how come more and more tourists prefer locations such as the Orleans, Gold Coast, South Point or a bit more East, on Boulder Highway......
It will take more than a fast motobike to win this race for the customers. Even tourists are value seekers, not only the tough local breed.
From Switzerland
outstanding; the ship is going down and they pay the head honcho millions to keep it afloat. i wonder if obama will give vegas its own TARP program to keep the wonderful world of gaming in existence. its only a diversion, nothing more.once the suckers exit the casino the game is over.
I usually come to Vegas four times a year. This year, I will only visit twice. I usually stay at Harrah's because of the free rooms. I'll be there in August, but the 10 of us will stay at the Monte Carlo. We are all Diamond or 7 Star players at Harrah's. We absolutely will not play at Harrah's anymore. I understand that the economy is bad and even the casinos are suffering. My problem with Harrah's is that not only are the slots tight, but the customer service is bad, the rooms are dumpy. All the customers need is good service for their money. Harrah's does not value my patronage, so I'm taking it elsewhere. I live in St. Louis, and I won't visit the Harrah's here either. It is the worse casino & Hotel in the St. Louis area. I can understand the slots being a little tighter, but I don't understand why the casinos and hotels are so run down and customer service is so bad. You can't just lay off half your staff and continue to profit. There are too many other casino to go to. Pinnacle in St. Louis is still fun and keeps the customers happy. Their machines are tight too, but the comps are good and their marketing is fantastic, so they keep you coming back. My guess is that Pinnacle will run Harrah's out of the area.
We just got back from Vegas. We stayed at Harrah's. NEVER AGAIN, they basically ruined our entire vacation. The room was not what we were told it was going to be. The service was terrible and almost all employees were rude or you could tell they hated their job. Everytime we turned around they charged for every little thing. No ride anywhere, even the employees told us it was better to take a cab. We were suckered into listening to a 2 hr ( which turned out to be 3 hrs) time share. We thought no big deal we would get 100.00 slot play for it. Except they didnt tell us they were vouchers that you could put in 1 machine and not take the money out. The only thing you could do was play the money off and IF you won anything over and above that, you could then collect it. WTF???? Of course they make it so you don't win a freakin cent. WE were able to eat at their Buffet one time due to the lines. Then I wish i didn't. The night before we flew home @ 6:30am we ate the buffet. I woke up @ 4:00am puking my guts out and then had to get on an airplane!! We did win money in Vegas but not at Harrah's. In all actuallity, Vegas was a sad place. I had not been in 15 yrs and I have to say it was MUCH better then. IT is way over the top now. Just to much of everything with no class anymore. I will never go again. Farewell to the Vegas I once loved :(