Q1 2023 Red Rock Resorts Inc Earnings Call
Good afternoon, and welcome to Red Rock Resorts first quarter 2023 conference call.
All participants will be in a listen only mode.
I would now like to turn the conference over you think Judy <unk> Executive Vice President Chief Financial Officer, and Treasurer of Red Rock resorts.
Thank you operator, and good afternoon, everyone.
For joining us today for Red Rock resorts first quarter 2023 earnings conference call.
Joining me on the call today are Frank and Lorenzo Fertitta, Scott Kreger, and our executive management team.
I'd like to remind everyone that our call. Today will include forward looking statements under the safe Harbor provisions of the United States Federal Securities laws.
<unk> results may differ from those projected.
During this call we will also discuss non-GAAP financial measures.
For definitions and a complete reconciliation of these figures to GAAP. Please refer to the financial tables in our earnings press release form 8-K, and Investor deck, which were filed this afternoon prior to the call.
Also please note that this call is being recorded.
On a consolidated basis, the first quarter net revenue was $433 $9 million up $32 million or 8% from the prior year first quarter. Adjusted EBITDA was $194 2 million up $15 4 million or eight 6% year over year, our adjusted EBITDA margin was 44, 8% for the quarter.
<unk>, an increase of 28 basis points year over year. This represents the best first quarter adjusted EBITDA and adjusted EBITDA margin results in the company's history.
With respect to our Las Vegas operations. The first quarter net revenue was $430 million up $30 3 million or seven 6% from the prior year's first quarter adjusted.
Adjusted EBITDA was $214 1 million up $15 9 million or 8% year over year. Our adjusted EBITDA margin was 49, 8% an increase of 19 basis points year over year. This represents the second best quarter for our Las Vegas operations in the company's history in terms of both adjusted EBITDA and adjusted.
The EBITDA margin and marks the 11th consecutive quarter that the company delivered adjusted EBITDA margins in excess of 45%.
In the quarter. We also we converted 78% of our adjusted EBITDA to operating free cash flow generating $152 million or $1 46 per share.
The significant level of free cash flow continues to be reinvested in our long term growth strategy or returned to our stakeholders via debt paydown dividends or share repurchases.
Throughout the quarter, we remain operationally disciplined and focused on our core local gas as well as continued to grow our regional and national segments.
Comparing our results to last year's first quarter, we continue to see upside from strong visitation in our regional national segments. This strength, coupled with strong pent spend per visit across our entire portfolio allowed us to enjoy record first quarter revenue and adjusted EBITDA results across our entire gaming segment.
Turning to the non gaming segments, both hotel and food and beverage delivered significant year over year and record profitability in the first quarter.
Hotel revenue was $43 9 million up $7 2 million or 19, 5% year over year, driven by higher occupancy and ADR across our hotel portfolio.
Food and beverage revenue was $78 1 million up $12 4 million or 18, 9% year over year, driven by higher average check across our food and beverage outlets and the strength of our catering business.
Our catering revenue has surpassed 2019 levels and continues to grow as this quarter represents the seventh consecutive quarter of double digit year over year growth in this business segment.
With regard to our group sales business, we continue to see positive momentum driven by growth in both room nights and ADR as our pipeline continues to grow into 2023.
And as we begin the second quarter, our business across both our gaming and non gaming segments remained stable.
On the expense side, we remain operationally disciplined and continue to look for ways to become the most efficient while providing best in class wages and benefits to our team members in delivering best in class customer service to our guests.
Despite macroeconomic headwinds which include inflation and increased interest rates are focused on our core operations have enabled us to generate record adjusted EBITDA maintain adjusted EBITDA margins and returned over $1 $2 billion in capital or nearly $12 per share to our shareholders. Since we reopened in June of 2020.
While we remain vigilant to the macroeconomic picture, we are committed to disciplined investments.
And our core strategy, which includes expanding our footprint in Las Vegas.
And offering new amenities to our guests at our existing locations.
Building upon the success successful openings of our high limit table and slot rooms, as well as Lotus I am at our Red Rock resort property last year, we welcomed <unk> police the oyster bar and Rouge room. During the first quarter. These new amount of these complement the existing offerings at Red rock and have been well received by our guests.
In addition, we successfully opened wildfire Fremont located on the Boulder Highway on February 10th a 21000 square foot casino featuring over 200 slot machines, a sports book and two restaurants at a capital investment of $24 million.
Now, let's cover a few balance sheet and capital items, the company's cash and cash equivalents at the end of the first quarter was $107 $7 million and the total principal amount of debt outstanding was $3 8 billion, resulting in a net debt number of $2 98 billion.
As of the end of the first quarter, the company's net debt to EBITDA and interest coverage ratios was three nine times and five six times, respectively. Our leverage is expected to tick upwards as we complete the construction of our Durango brand.
Upon the completion of Durango, we expect to delever toward our long term net leverage target of three times 3.3 0.3 types.
Capital spend in the first quarter was $175 5 million, which includes approximately $159 $2 million of investment capital inclusive of Durango, as well as $16 $3 million in maintenance Capex maintenance capital.
For the full year 2023, we expect to spend between $70 million to $90 million in maintenance capital and a total of $600 million to $650 million in growth capital inclusive of Durango.
Now lets provide an update on our development pipeline.
Starting with our Durango development as we've mentioned before we are extremely excited about this project, which is situated on a 50 acre site ideally located off the $2 15 Expressway in Durango drive in the southwest Las Vegas Valley.
This project is located within the fastest growing area in the Las Vegas Valley with a very favorable demographic profile and no unrestricted gaming competitors within a five mile radius.
This quarter, we've completed the full enclosure the low rise structure and are finishing the closure of the hotel tower.
Our tower service elevators are now fully operational and we expect to have central plant online in the next couple of weeks.
It is on schedule with an anticipated opening in the fourth quarter of 2023.
We now expect to spend approximately $780 million on the project, which includes all design cost construction hard and soft costs preopening expenses and any financing costs associated with the project.
Most of the increase in this investment is attributable to our decision to expand the casino area and add an additional 360 gaming positions to the casino floor, we believe that a larger casino footprint will better align the product offering with the anticipated growth and favorable demographics and the areas surrounding Durango.
Additionally, there have been some smaller increases to our construction labor and procurement costs as we work to ensure the project opens later this year.
Despite the increase in investment the company expects the return profile for Durango to be consistent with our prior greenfield developments.
Now turning to North work as we noted last quarter. After a favorite resolving all its other litigation. The tribe has a single remaining case in the California courts.
We do not believe that this case when fear with the right.
The ability of North Fork to conduct gaming on its federal Trust land and we continue to work with the tribe.
Our efforts was affected this project, including working toward approval of the management agreement continuing our work on the development and design, having preliminary talks with respective lending partners. We will continue to provide updates on our quarterly earnings calls.
On April 20th the Oakland A's announced that they have entered into a purchase and sale agreement to buy $48 six acres of land on our beta site.
In conjunction with the sale of the Oakland A's were granted an option to acquire an additional eight acres of land on the site.
Due to confidentiality of the purchase price of this transaction has not been disclosed but the anticipated closing of the sales to slated to occur in the fourth quarter later this year.
As a reminder, the entire Veeva site consists of 96 acres. So at the Ace transaction closes and they exercise their eight acre option. We still retained 39 three acres for future monetization as we continue to execute on our strategy of repositioning our land portfolio for future growth.
Lastly on May 4th the company's board of directors declared a cash dividend of <unk> 25 per class a common share payable on June 30 to class a shareholders of record as of June <unk>.
With our current best in class assets and locations coupled with our development pipeline of seven owned development sites located in the most desirable locations in the Las Vegas Valley.
We have an unparalleled growth story that will allow us to double the size of our portfolio and capitalize on the very favorable long term demographic trends and high barriers to entry that characterize the Las Vegas locals market.
Despite a challenging macro environment, our disciplined approach to running our business resulted in record high EBITDA and EBITDAR margin for the quarter.
And while we remain vigilant to the overall economic environment. We are confident in the resilience of our business model as well as our management team's ability to execute our long term growth strategy and take a balanced approach to returning capital to our shareholders and improving upon our already strong balance sheet.
We'd also like to recognize and extend our thanks to all of our team members for their hard work our success starts with them and they continue to be primary reasons why our guests return time after time.
We're also proud to announce today that our employees are voted us comp casino employer in the Las Vegas Valley for the third year in a row.
We're also proud to share that Forbes recently selected our Red Rock Casino resort and Spa is a top overall casino resort hotel in Las Vegas, which we consider a tremendous recognition of our efforts and those of our team members and finally, we'd like to thank our guests for their loyal support in each of the last six decades.
Operator. This concludes our prepared remarks for today and we are now ready to take questions.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
Is there any time your question has been addressed and you would like to Australia. Your question. Please press star. Thank you.
This time, we will pause momentarily to assemble our roster.
Yeah.
The first question today comes from Joe Greff with Jpmorgan. Please go ahead.
Good afternoon everybody.
Very strong results here.
As you mentioned Steve.
Particularly in the non gaming side of things.
How broad based was was this non gaming revenue growth and I guess, where I'm going with this is you know.
How even or uneven or concentrated.
Is this non gaming growth.
Maybe some of your higher end properties like Red Rock and Green Valley Ranch.
Versus maybe some of what I would call sort of your core properties.
Okay.
Hi, This is Scott thanks for the question.
Really it's across the board. So when you look at the company is or whether Youre looking at food and beverage revenue.
<unk> revenue.
The dynamics of average check and covers and food and beverage it's across the board. So we saw about a 20% growth in food and beverage.
78% growth in catering revenue.
And we saw our profit and food and beverage go up 44%, so really strong numbers in the food and beverage side.
And then.
All sides equally strong numbers hotel revenue was up about 20% ADR was up about 18%.
Revpar overall was up about 34% so really strong numbers and then if you look at Boeing.
We're up about 25%.
And so on about the same percentage of $24 six so we're really happy with the blend of results. There as you drop into properties you are going to see some upside benefit.
At Red rock because of the capital investment that we've done there so with the new inclusions of restaurants and lounges.
We're seeing upside revenue increases there, but it really is across the board when you look at a property by property basis.
Great.
You very much and then.
For anybody who wants to take this next question.
How are you thinking about the timing of the next development beyond Durango phase one.
<unk> brought in Henderson and how.
How much time or what do you want to see to give durango time to ramp or read before investing elsewhere.
How does the phase two.
At Durango fit in the priority list and then finally.
I guess, what we would consider increased land asset monetization impact the timing of your next development.
Hello, Joe This is Lorenzo.
I'll take that.
I think our while our thought process is similar to what we said in the past I mean, our focus right now is getting Durango open we'll open that in the fourth quarter.
We would want to make sure the Durango is.
As stable and.
Marching toward the.
Thanks, David.
The expected return on investment obviously that we've talked about that we've been able to achieve historically.
With that said we have been working.
Pretty diligently on planned and entitlements for the balance of the land that we own.
In the land bank for future development.
Also we've been working on a potential phase III for Durango, working on what that programming could look like what it would be.
And.
I'm trying to work out all the details on that I will tell you that historically.
Once you have a <unk>.
Property up in open and cash flowing and doing very well.
Spend to go to a phase two or incremental expansion tends to be very high return on investment is very efficient.
So while we haven't committed to anything yet I mean, it's exactly what we had said before I mean, we just wanted to get the Durango open we expect it to be successful.
As we open up and we want to get stable in the well will be in a position because of the work that we've done to be able to have multiple options, whether we pull the trigger on phase two whether we break ground on one of the other properties.
We'll make that decision, but we're in a really good spot for that from that standpoint.
Great. Thanks, guys.
The next question comes from Carlo Santarelli with Deutsche Bank. Please go ahead.
Hey, guys. Thank you.
I guess, Steve maybe you could opine on this one but when you look at kind of the Las.
Las Vegas.
Shifted lapse.
Sure.
Some of your expenses.
You are cutting out a little bit Carlos.
I'm sorry, Steve you hear me better now.
Yes, I do.
I was saying when you look at the Las Vegas segment.
<unk> was kind of in that 50% to 55% range, obviously the growth in <unk>.
And the growth in some of your other revenues in hotel.
Is coming in stronger than the casino revenue growth right now, but as we move forward. How do you guys think about what normalized flu.
Flow through can look like in the local segment.
Okay.
Well I mean, I think this is going back to the days again from a margin perspective, we feel very comfortable will be our margins again, we delivered 11 consecutive quarters of margin over 45%. So when we think of what normalized margins are those that were here and we think we can sustain these margins.
Through good times and bad.
When youre asking about flow through I.
I mean, we think flow through I think we've always historically use a target of 50% to 70% flow through.
There's going to be some quarters, where timing may.
Prevent that from happening.
But we're sticking with that target.
Understood and.
And then if I could just a follow up as you guys kind of talked earlier and I know Franklin Lorenzo you guys have often talked about.
A return in the high teens on investment commensurate with what you've done historically at the Greenfield developments.
Does that estimate encapsulate any.
Any impact on the existing portfolio that could come from.
Are you thinking about that Holistically on what this project will add the aggregate EBITDA relative to the spend.
Yes. This is Lorenzo we do now when we talk about the returns we're talking about stabilized returns, which we expect to take roughly about three years to kind of hit those targets, but that would include even if there was some degradation early on from opening a new property that there would be backfill at existing properties of that.
So when we talk about the returns it is holistic.
With the new supply in the market affecting everything and that's that's what we've seen historically as we've opened and opened new casinos.
The overall market tends to backfill and grow overall as we add add new products, so that would be our expectation.
Great. Thank you guys.
The next question comes from Shaun Kelly with Bank of America. Please go ahead.
Hi, good afternoon, everyone and thank you for taking my questions.
Actually I just wanted to build on that last point I think Lorenzo you mentioned about three years to hit stabilized returns if I caught it correctly can.
Can you just talk a little bit more about the maybe the opening cadence you would anticipate it's been a number of years since I think we've seen a major opening in the locals market and just kind of curious about what programming as needed kind of upfront is there an investment period around marketing that you would expect I mean generally speaking I would think awareness.
Is very high in this market already so you just kind of walk us through a little bit of a playbook and any any sense of maybe how you'd expect debuts and then like like percentages wise, what it might what the debut May look like relative to that to that stabilized time period.
So historically for the locals market here as we've opened properties.
Tend to be profitable out of the box and it really becomes an exercise of expense management at that point I mean, obviously, when we opened durango or any other property, we're going to be.
Probably overstaffed, and we're going to be overrun with business and the number one priority is not going to be margin for the first couple of quarters, it's going to be making sure that we're taking care of every guest we've got great customer service and on the slot floor on the table games as well as in the restaurant and hotel. So I think it's just a matter of kind of shape.
Looking out the service end of it and then figuring out.
How we get the most efficient operation and then really start to drive margin and continuing to build a revenue I mean these are dynamic.
Growing market enterprises in growing markets and you have new people move into town all the time I would I mean based upon our marketing plans. When we open. This thing we're going to have a very high level of recognition and.
Of Durango, and what it is where it is and that it's opening so we're expecting to be busy from the time, we open up but it may it may take us a little bit to kind of shake things out and get the operations as efficient as.
We need them to be whether that takes.
10 months or three years, we don't know obviously were going to shoot for the for the earliest date possible, but I think historically as we've looked at how these properties growing settle in it's usually like a two to three year period.
For these things to kind of stabilize the way we look at it.
Very helpful. And then as my follow up and you kind of alluded to like a little bit of the staffing side of things.
Just kind of wanted to get the thoughts on that.
The upcoming Union renegotiations that are going on I think across Vegas.
What impact if any does that have on red rock and then more importantly, I think kind of when you think about just matching and prevailing wages across the valley how do you see.
Kind of the wage or expense growth trending as you kind of move throughout this year and maybe the next couple of years once that contract is in place.
Yes. This is Scott so certainly that contract gets negotiated that will set a new bar and have some effect in the valleys across the valley.
But how we look at labor today and into the future as we've said a couple of quarters now that one we've been able to be a best in class selection per employees based on our comps and benefits.
We've priced in to our margins very current wage and hour rates.
We're set up well for Durango, we're out in the market now testing those numbers and we think that those numbers are solid.
Really we're 80 basis.
And so we think that that labor pressure is starting to subside a bit but we do want to be cautious that in the last part of the year. There are several major projects opening in Las Vegas that may cause a bit of inflation over say a six month period.
As we open up Durango, so you'll have the MSG sphere opening up in the fountain Bleu opening up so there will be some competition for labor around those openings.
Perfect. Thank you very much.
The next question comes from Jordan Bender with JMP Securities. Please go ahead.
Great. Thanks for taking my question, if I caught it correctly I believe you guys said you will keep some of the acreage tied to the parcel you are selling to the age.
Does it make sense or could you or would you potentially build a casino on that parcel next to the stadium.
I think what we really talked about the last few quarters.
Giving a better way for our future growth pipeline.
And you've seen that we've acquired a few sites out where all the growth is off the beltway.
In the Las Vegas Valley, we think we're well positioned.
We're looking really to monetize the Viva parcel.
We think that the a.
This was a really good thing to actually increase the value of the remaining properties. So we're pretty bullish that we're going to be able to monetize the VEBA sites.
Basically and we wind up with all these new sites are out in the suburbs that we've acquired over the last 12 months.
Great and then just for my follow up.
Corporate expense kind of ticked up in the quarter was there anything kind of onetime in nature or is that kind of the right way to think about that moving forward.
It's within that range is probably going to be a half a million thats more maybe one time. It was basically bonus related to 2022 and the great year, we had so.
Great Thanks nice quarter.
Okay.
Yeah.
The next question comes from Steve <unk> with Stifel. Please go ahead.
Hey, guys good afternoon.
So staying on the going back to the non gaming side of the business and specifically on the hotel side. It seems like you've been able to push rate there pretty aggressively and I think Scott said.
<unk> were up 18% in the first quarter. So can you help us think about how forward room bookings essentially had been trending as you continue to take that price I mean, basically what I'm trying to understand here is if you're starting to see any pushback as you push those rates.
Yes, Steve This is Scott I think I can help you here so let's take a look at forward bookings same time.
Last year compared to none will also kind of look at 2019, because we do get asked frequently are we back to 2019 levels. So when you look at the pace for sales room nights right now.
Same time last year were up 41%, so very encouraging numbers there when you look at total room nights.
And the revenue associated with though were up 53%.
And then correspondingly catering.
On the books same time last year is up almost 70%. So as we look into the future. We're very encouraged about the booking pace you mentioned ADR. When you look at overall ADR in comparison to 2019.
We're about 21% above 2019.
ADR numbers and we have surpassed 2019.
As it relates to catering and group.
Going into the rest of this year.
Just to maybe piggyback of what Scott said I think not only we are seeing a robust pipeline, but the mix is shifting so we're seeing predominantly.
<unk> entered the mix and in our pipeline and that's a great thing because you get multiple revenue streams and streams from them not only not only rooms, but also a food and beverage.
To add one other thing relative to mix, we're actually seeing quite an increase between now and 2019 and our casino mix, we went from 24% to 31% and so really what that says is a lot of the growth. We're seeing is in ADR.
Thanks for that guys and to add onto that as you start to see more on the corporate side I would assume that.
If corporate continues to roll in and there'll be more opportunity to push price, especially especially midweek.
Midweek is that kind of the right way to think about it.
That's right way to think about it that's what we're seeing in the trends.
Okay, great. Thanks, guys appreciate it.
The next question comes from Barry Jonas.
Please go ahead.
Great.
You guys talked about seeing some impact at the low end is about the database I know you also said it's less of a focus but can you maybe just talk about how thats playing out right now.
Yes. This is Scott so I think what we've said in the past as we focus on our core customer.
That being national regional VIP core customers.
When we look at the performance for the quarter, we see strong growth across all of those areas. When we look at overall <unk> when we were up about two 6%.
So we're pretty happy with that.
And so when we talk specifically about the lowest end of our database I think we've mentioned before a lot of our core strategy is focused on the mid to high out of town customer.
And yet we've shifted away from that low profit.
Low contribution customers, so youre not seeing anything more than we've reported in the past in relation to that database performance.
Great. That's helpful. And then just first follow up.
There are limits to what you can say, but is there any notable conditions for the east land sale to close and with that.
Gaming entitlement included with the A's parcel as well as would remain with the second parcel that you want to monetize.
Unfortunately, we are under confidentiality. So we can't really answer any of those questions.
At this time.
Understood. Thanks, so much guys.
Thank you.
The next question comes from Sam Pearlstein with Wells Fargo. Please go ahead.
Hey, good afternoon, everyone I wanted to talk about the food and beverage side of the business just as it relates to more of your kind of high level strategy. There. It seems like you've been moving more towards third party.
Higher end product can you help us maybe better understand the rationale for doing this is mid to high end customer you just kind of reference and more out of town and how should we think about the impact of free cash flow and EBIT margins.
Yes, Scott I think I'll start maybe Lorenzo can add some color.
I think to say that we're solely focused on that might be a misrepresentation of better a misunderstanding I think in <unk>.
Certain properties, we are looking at more third party and more higher end outlets, but we're really look across our food and beverage platform based on the specific demographic of the customer at that property. So while you do see us doing a lot of stuff with notable food and beverage.
Operators at Red Rock.
<unk> talked about our properties like Boulder, and power station and Sunset station, where we're doing equally as dynamic things, but at a different level.
Of average check or food type.
And we've seen so far a very positive effect, particularly at Red rock with the <unk> that we've done there by replacing the buffet with a high limit table game area, a Greek restaurant and Lotus of Siam and you literally almost see a transformation of what that into the building looks like now with the pace of <unk>.
Customers that we have we've seen a positive impact on our table games, we've seen our occupancy at peak periods on our table games.
Go up considerably and obviously it has helped our high end slots as well. So overall that return on investment for US has exceeded what our expectations are and we're in the process now of kind of doing that.
Future new high limit.
Slot area, so that playbook seems to be working really well for us and it definitely has a positive impact on margin for us as well so.
Got it thanks, and then as you think about capital return, Steve I know you mentioned you should return back to that three times leverage.
All in Durango is opening.
Do you think about getting back to returning capital to shareholders.
The repurchases or any change in the dividend policy is this something you need to get to or could we see it kind of along the way as Durango ramps.
I think I think right now we've paused the share repurchases because we are right in the kind of right in.
And the runway of getting Durango up and running and then once Durango gets up and running where youre going to see rapid deleveraging as Lorenzo mentioned, we expect local local casinos typically come out of the box very cash flow positive and so we will start immediately taken going back to well taking be taking a very balanced approach to returning capital to shareholders.
So as our balance sheet can become.
Balancing become stronger as we roll out Durango, you'll start you'll start the board will start evaluating both dividends and share repurchases.
Understood. Thanks for the color.
The next question comes from Chad Beynon with Macquarie. Please go ahead.
Good afternoon. Thanks for taking my question I wanted to ask about your retention levels free play and promos if that has been stable or with the influx of maybe some new people moving into the area.
<unk> had to step up with any of that.
Just trying to figure out kind of where that's headed.
It's been extremely stable.
Ever since we reopened.
Post Covid <unk> of 'twenty.
As Steve said, we've had 11 quarters with margins above 45% I think this quarter was probably the <unk>.
Second or third best margin that we've had in the company's history.
We see absolutely no changes there I mean, we're focused on the fact that we have the best locations, where all the population is growing we're focused on customer service customer recognition and the things that really matter to people, we're not seeing any changes in the promotional environment.
Great.
Thank you and then a follow up.
You talked about stable customer, particularly at the high end are you still seeing nice growth in I guess your neighborhood properties I guess that would probably be more of a tail on that low end or.
Was the growth fairly balanced with the different levels of properties that you offer in the valley.
Yes. This is Scott.
We would characterize it as fairly balanced and stable across the platform.
Okay. Thank you very much nice result.
As a reminder, if you would like to ask a question. Please press Star then one joined into the queue.
The next question comes from David Katz with Jefferies. Please go ahead.
Hi afternoon, everyone. Thanks for taking my question.
I'll date myself, a bit and maybe a few of us when you look at the economic makeup of the valley and how that relates to your portfolio.
<unk>.
If you could talk a bit about what kinds of economic data and other kinds of information you are looking at and how that makeup of the valley today differs from where it was 10 or 12 years ago.
And how you're deferring your strategies in conjunction with that.
Sure I mean, I'll take a shot at that I am sure skirts with the migration of <unk>.
Population from primarily California tracks is the number one market, but are people moving to Las Vegas, I think you'll also see the number one migration coming from California for business relocation as.
As well and it's really I think much different than it was say back in the.
<unk> <unk> and two thousands where most people moving to Las Vegas.
We're looking for a construction job or dealers job or cocktail waitress bartender and now it's not that you still don't have people looking for those kinds of jobs here, but you have a totally different mix of people who are moving here to run their business from here to reach.
Retire here and you have people that are.
Not hourly employees are bringing their wealth with them through Las Vegas.
It's a completely different dynamic than what we've seen in the past.
I think.
What's one thing when you look at the wealth of these customers and where they are moving into the lung. This is part of our core strategy of development and growth that we have locations in all of these.
Net were higher growth areas of the house.
Sure.
And we don't see that slowing down anytime soon.
Can talk to you a little bit about these recent land purchases that we have in the balance of the portfolio.
Are all within the fastest growing communities from Australia, Yes, David if you look past even last quarter.
From a housing perspective, but when you take a look at the fastest growing master planned communities in the Las Vegas Valley, They're all via properties Summerlin cadence Sky El Skye Canyon in Toronto.
Those names should be familiar because we all have land named after most of them.
So we look at so I think that bodes well for Frank and the rental strategy.
Understood and if I can follow that up.
So also the odd circumstance, where it feels as though we've been waiting around for quite some time for a recession to show up.
How do you go about keeping your fingers on the pulse.
Of that.
I know many of the companies we're talking to this earning season arent seeing anything yet.
But are cognizant of its potential.
Hi, This is Scott I.
I think as far as reading the tea leaves us a difficult thing to do but understanding the macroeconomic pressures.
I think our management teams at the properties are the best in the business at keeping a pulse on the daily efficiency of the properties. So whether youre talking about labor control cost of goods sold control any kind of operating expense pressures I think it's.
Seen in our margins that our operating teams know how to control.
These macro pressures and come out with great results. So we have shown consistently that we know how to manage to those things. Steve you may want to talk about some of the energy costs and other things that are less under our control, yes, I mean, I think from a fleet I think the two things that were.
It's tough to match one as this one is out of our control and what defines really who we are.
And you see that in some of the increases in SG&A as Scott mentioned utility cost Europe , they're up almost $1 $5 million almost 30% that's.
That's something we're trying to work through through various energy initiatives, but thats one of those where the team has done an excellent job fading through and then the other really boost to SG&A as repairs and maintenance and this goes back to the core philosophy and how we differentiate ourselves from our competitors not only it's about location location location, but the quality of asset in that.
Helps Keith keeps.
Keeps our guests coming back and so youll see that as Youll see that youll see that consistently throughout our financials and while we can't read the tea leaves on the macro economy.
We can tell you that we really like our position based on what we see happening in the Las Vegas Valley come on over the next one to five years.
We're professional sports teams relocating here with the sphere opening up with Formula one coming here with the Super Bowl coming here Las Vegas has a lot of things that are here that can buffer what else might be little things that happen in the macro economy as well as the <unk>.
Population growth in our limits on supply in our market.
Understood I appreciate the answers and thanks for including me.
The next question comes from John Decree with CBRE. Please go ahead.
Good afternoon, everyone. Thanks for taking my questions.
Covered a lot of ground, but maybe.
Maybe kind of revisit two topics in a different way one is on <unk>.
Wage inflation I think we discussed earlier in the call about.
Cost pressures, but.
Given wage inflation I think a couple of quarters ago or a year ago, we had a conversation about the importance of wage growth for your customers. So when we think about upcoming wage inflation whether it's.
Union contracts or what have you how do you evaluate the puts and takes as it is it a net benefit as the population.
Or does that more than outweigh the cost just curious if you guys have a view.
Hi, John This is Steve I mean I think.
There are always there are more of them than there are of US I think as wages go grow through the valley for a variety of means looks to union contracts for the sphere or Durango launching our fountain bleu launching the more money in the system benefits our properties as they're uniquely located throughout the valley and the strips employees are generally our customers.
<unk>.
Fair enough. Thanks, Thanks, Steven maybe a specific question you've already mentioned teams relocating.
With as potentially coming.
If you look at.
Maybe the night.
Have you seen direct benefit on game nights, I mean, obviously, a charles population and feeds into the broader economic story, but it was there is there a closer more tangible.
Benefit around those sporting events that you would expect.
Or would compare Fda's do Tom.
Yes. This is Scott we see across the valley that people come out for the Knights games and so.
You can see that in our casino as you can see it in the small pubs and taverns.
We also have a strategic relationship with the Golden Knights.
We benefit from within our marketing Division. So we are big fans of organized sports in Las Vegas, We're big fans of the football team.
A hockey team.
Really the bulk of the baseball team as well.
Okay.
Great for tourism, creating demand for hotel rooms.
And the city here.
Perfect. Thanks, so much for all the color guys. Congratulations on another great quarter.
Thanks, John .
This concludes our question and answer session I would like to turn the conference back over just equally for any closing remarks.
Well. Thank you everyone for joining the call and we look forward to talking to you in 90 days take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
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Okay.
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