The cities of Southern California may have inspired the architecture of the new South Coast Hotel and Casino but it appears that many Las Vegas locals have yet to be inspired to visit. Boyd Gaming Corporation, reporting its second quarter results, declared that its Las Vegas Locals segment was ‘impacted by additional competition, as well as continued softness at South Coast.’ Second quarter profit fell 79% to US$10.2 million and Boyd has announced that it has reached an agreement to sell the property, which only opened last December, to Michael Gaughan and use the proceeds to repay a portion of the outstanding balance on the company’s revolving credit facility. The additional capital will be used to fund ongoing development issues.

Michael Gaughan founded Coast Casinos, now merged with Boyd. Following completion of the transaction to acquire South Coast, he plans to operate the property under a new name. Boyd will retain all South Coast brands and first right of refusal for three years on any future sale, after a 5-year ban on re-sale lapses. Michael Gaughan noted, "Our merger with Boyd Gaming two years ago proved to be a very successful transaction for both companies. Our Las Vegas Locals business experienced unprecedented growth during that time. That said, I now have a desire to return to an entrepreneurial role as a casino operator. I have been friends with Bill Boyd for over 40 years and look forward to continuing our friendship in the future."

In April Station Casinos opened the Red Rock Casino, Resort and Spa in the Summerlin area of Las Vegas. The company yesterday reported lower than expected second quarter profits due to higher costs, but has announced that the Phase III expansion of Red Rock is scheduled for completion by mid-2007. Station Casinos’ net income fell 34% to US$26.8 million from the same period last year. Whilst revenues from the company’s Las Vegas operations did increase by 28%, this was below analysts’ expectations and Station Casinos’ share price fell following the second quarter report.

Increased competition for the local market in Las Vegas is having an effect on company profits. The disappointing results from Boyd Gaming and Station Casinos suggest that demand has yet to catch up with capacity and that the market shows signs of slowing down. Lorenzo Fertitta of Station Casinos and Michael Gaughan remain upbeat. "The revenue growth reflects the very successful opening of Red Rock and the remarkable customer acceptance of the new property," Lorenzo Fertitta commented. Michael Gaughan reportedly said of South Coast, "I'll straighten this place out. I've kind of been too far removed from it. I've gotten lazy. It's time to go back to work." Analysts will be watching for any signs of an upturn in the local market. (E-07.26.06)

© Copyright 2006 CasinoCompendium



>>> return to archives
>>> return to frontpage