Robust Occupancy Aids Caesars Entertainment (CZR), Costs Ail
Caesars Entertainment, Inc. CZR is banking on the strong performance of its Regional segment, along with impressive occupancy rates and advancements in digitalization. Strategic emphasis on expanding into sports betting is a positive development. Nonetheless, challenges persist in forms of heightened operating expenses and disruptions related to construction activities.
Shares of the Zacks Rank #3 (Hold) company have gained 3.2% in the past year compared with the industry’s 13.9% growth.
Let’s delve deeper.
Factors Likely to Drive Growth
CZR is likely to benefit from solid performance of the Regional segment on the back of opening of two temporary gaming facilities as well as reopening of Horseshoe Lake Charles.
The company continues to gain from robust occupancy. During third-quarter 2023, occupancy in Las Vegas grew 300 basis points year over year to 96.6%. Attributes such as strong leisure and casino guest demand along with the return of international guests added to the positives. Management is optimistic about booking trends, witnessing increased bookings for group and convention room nights. It expects return of the group and convention business and entertainment offerings to enhance incremental demand in the Las Vegas market.
CZR focuses on certain tech enhancements to boost product offerings and drive better customer engagement. During the third quarter of 2023, it initiated the rollout of a new stand-alone iCasino app, Caesars Palace Online. It also launched several new product features for football, including SGPs for NCAA, a live streaming product for nationally broadcast NFL games, a bet with reward credits feature and improved payment options.
During the third quarter, revenues from Caesars Digital came in at $215 million compared with $212 million in the prior-year quarter. Sports betting and iCasino volume improved 14% and 38% year over year, respectively.
It generated $2 million of adjusted EBITDA in third-quarter 2023. Caesars Entertainment reported a $38 million adjusted EBITDA loss a year ago.
The company stated benefits from increased state or jurisdictional legalization, new product launches and improved customer adoption. As of Sep 30, 2023, it operated sports betting in 30 jurisdictions in North America, out of which 24 offer mobile sports betting. Also, it noted the availability of iGaming offerings in six jurisdictions.
Concerns
An increase in operating expenses is likely to affect the company’s profits. During the third quarter, food and beverage expenses were $266 million compared with $240 million reported in the prior-year quarter. Hotel expenses amounted to $146 million compared with $142 million in the year-earlier quarter.
Total operating expenses during the quarter were $2,270 million, up from $2,228 million in the prior-year period. Management intends to monitor the economic situation to gauge the impacts of inflation and interest rate hikes.
CZR has been witnessing increased competition associated with the opening of new casino resorts in regional markets. Also, construction disruption from renovation projects has impacted visitation. Moving ahead, it anticipates the challenges to persist for some time.
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