Riviera Holdings Corp, the company that owns the bankrupt Riviera casino hotel on the Las Vegas Strip, recently released its annual report. The company had a rough year, and a look at the financial reports from the last few years sheds some light on why the casino's in such trouble, and why the Sahara is closing.
(more after the jump)
For the past decade, the Riviera hasn't been a particularly strong performer. Even in the relatively good years, its annual reports stressed development opportunities on its 26 acres rather than the casino's performance itself. Once the bottom dropped out of the Strip market in 2008 and that development became an ever-receding horizon, the emphasis changed to the property's decline. This chart shows a few of the numbers:
As you can see, net revenues have fallen dramatically--by almost 48% since 2007. Partially, that's because the increases in ADR in the middle of the decade were not sustainable with the current amount of supply on the market. The recession's certainly the primary reason for the hotel's decline, as with room rates falling everywhere, it's not realistic to expect anyone to pay more than $80 a night for a room at the Riviera.
The decline in casino revenues (down 41% since 2007, the first year for which data was available) is just as remarkable. There have been some experiments at the Riviera, with the number of slot machines dramatically reduced, that probably haven't helped results, but the bottom line is that gamblers just aren't gambling as much money--particularly the more value-driven customer that the Riviera attracts.
The drop in F&B revenues might be a little deceiving; over the past few years, there's been a shift to lease out more outlets, so the money spent there doesn't end up on the Riviera's balance sheet. The entire food court, for example, is leased, as is the Banana Leaf and Queen Victoria Pub. But there's still no way to positively spin this; a casino that's been around since 1955 is at what may be unprecedented levels of unprofitability. The scary entertainment decline is due to shows being closed and ticket prices being reduced for those that remain.
Looking at the trends in that chart above should give you a good idea why the Sahara's closing; they don't have the Riviera's convention center, which has somewhat helped the Riv to hold onto a base of customers, even though they've had to drop prices across the board to do so. Make no mistake--things are pretty dire on the North Strip right now.
With Barry Sternlicht and other investors buying the bankrupt Riviera, the hotel isn't in danger of closing anytime soon. It will be interesting to see what kind of changes Sternlicht makes. I would guess that if he can restructure the debt obligations and otherwise keep expenses down, he's got a good chance of surviving.
The interesting thing is that, despite the perception of the Riviera as an aging, decrepit wreck of a hotel, most of its rooms were last renovated in 2008; about 300 rooms in the Monte Carlo tower were renovated in 2005, so it's not like a Tropicana or Stratosphere-style room refreshing is in the cards. Sternlicht has says the focus will be on retooling the public areas, and that seems to be the best bet.
In general, though, things don't look good for the North Strip right now. That explains my comments on 8 News Now this morning about the Fontainelbleau being a "beached whale" on the North Strip. The tide certainly has gone out.
If you want to pore through the 2010 10-K, yourself, here is the link.