LAS VEGAS (KLAS) — Six month ago, Caesars Entertainment executives delivered the crushing news that buffets were probably gone forever.
Casino companies have learned to be profitable during the COVID-19 pandemic by eliminating some parts of the business that customers grew to expect. But Caesars Chief Executive Officer Tom Reeg held firm on Thursday as he talked about the death of the buffet.
When asked about the “new gaming experience” in a question-and-answer that followed the year-end earnings call for Caesars Entertainment, Reeg pulled no punches.
A reporter described one view of casinos as, “Margins are great, but there’s nothing to eat.”
Reeg fired back, recalling that Las Vegas and Atlantic City used to be the only places with casinos, and, “People figured out how to eat dinner.”
He added that he isn’t worried about what the competition might do.
“We’re going to be smarter about how we’re in the food and beverage business,” Reeg said, remarking that the company wasn’t going to lose $3 million on every buffet at its properties.
Caesars Entertainment reports a net loss of $1.8 billion for 2020, compared to earnings of $81 million in 2019. The rough year didn’t exactly end with a bang, as the fourth quarter brought a loss of $555 million, compared to a $13 million loss in 2019.
“We are thrilled to close the book on 2020,” Reeg said.
He described the year as the most challenging year to date, as he charted the company’s path forward.
Reeg said figures show that analysts have “wildly underestimated” the opportunities ahead, which rely on the company maintaining its frugal position against spending money on losing ventures.
He anticipates business coming back strong much earlier than others in the gaming industry — possibly as soon as the second half of 2021. Others are saying it could be sometime in 2023.
And when business is back, expect Caesars to pay down its debt rather than reopen the Bacchanal Buffet.
As with other casino companies, Caesars Entertainment is better at turning a profit on less revenue, building on hard lessons of the pandemic, as well as other belt-tightening experiences that come with corporate takeovers and meeting investors’ expectations.
Executives are paying more attention to profit margins these days, expressing their achievements in “EBITDA” — Earnings Before Interest, Taxes, Depreciation, and Amortization. And Caesars has been one of the best with EBITDA, setting records at 10 properties during pandemic-flattened 2020, according to Chief Operating Officer Anthony Carano.
Caesars Entertainment has done it by reducing costs in marketing, and making hard decisions about what parts of the business remain open when demand is low. If it’s not profitable, it’s not open. Reeg said another factor for Caesars was top-heavy management, which was already being dismantled as part of the Eldorado Resorts buyout of Caesars.
Now the company has its sights set on the return of convention business — possibly by mid-year — and booking levels that have risen past levels they were hitting before the pandemic by about 30%.
It all points to pent-up demand for Las Vegas, and Reeg describes the level as a sea change.
“The recovery that’s going to happen … the magnitude is going to be far more dramatic than I’m seeing modeled,” he said. “And the pace is going to be quicker.”
Also, Caesars executives dismissed reports that it was about to sell off Planet Hollywood, responding that any sale of properties wouldn’t happen in 2021.
Company officials say they are waiting for regulatory meetings in March and a court hearing on March 30 before saying much more about their deal with William Hill — a buyout that would put Caesars in prime position to capture sports betting customers.
They were tight-lipped about plans to integrate iGaming products with mobile sports betting, but wheels are clearly turning. When Caesars Rewards, William Hill and iGaming all come together, Caesars Entertainment will be making more headlines.
Carano also revealed that the “arrival experience” at Caesars Palace would be transformed in 2021, after staying the same since the 1960s. New food and beverage projects are also in the works.
Carano said Caesars continues to pay salaries and benefits for workers at closed properties.