Q1 GGR down 3.1% at Caesars as digital fails to offset land-based decline

Revenue was $54m lower than the $2.83bn posted by Caesars in Q1 last year. The group said revenue was lower across each core reporting area: casino, food and beverage, hotel and other.

These figures were adjusted to reflect the subtraction of results of operations for the Rio All-Suite & Casino. Q1 results from 2023 included these figures and, when left unadjusted, the revenue decline was lower at 1.2%.

The largest segment of decline for Caesars in Q1 was in Las Vegas, where revenue was down 9.1% year-on-year on an adjusted basis, mainly due to low table hold. Without adjustment for Rio, Las Vegas revenue was down only 4.5%.

There was also a fall in Regional, with poor weather pushing revenue down 1.7% year-on-year.

On a more positive note for Caesars, it continues to see growth in its Digital segment. Here, revenue increased 18.5%, with strong growth across both online sports betting and casino. Caesars also went live with online sports wagering in North Carolina during Q1, although due to the initial costs associated with the launch, this resulted in a loss for the group.

Caesars CEO laments “kitchen sink” type quarter

Reflecting on the quarter, Caesars CEO Tom Reeg acknowledged the struggles across its land-based operations. He described Q1 as a “kitchen sink” type quarter for Caesars, where everything that could go wrong did.

“The biggest pieces are hold in Las Vegas, weather across the country, then losses around the launch of North Carolina in Digital,” Reeg said. “The three big ones – hold, weather and North Carolina launch – were more than $75m.

“Operating results during Q1 in Las Vegas are a combination of record occupancy, driven by the Super Bowl and international visitation for Chinese New Year, offset by lower-than-expected hold. In our Regional segment, results reflect weather-related weakness in January and early February partially offset by our new property openings. 

“Caesars Digital delivered strong revenue growth despite lower-than-expected hold in online sports due to unfavourable outcomes for the Super Bowl and March Madness.”

However, Reeg said it is not often Caesars reports quarterly results like this. He adds that he is optimistic for the rest of the year,

“Moving past the first quarter headwinds, we remain optimistic toward improved operating results throughout the balance of the year,” Reeg said. “We really feel good about where we’re sitting and what the rest of the year looks like.”

Land-based lows in Q1

Beginning with how revenue was generated, some $1.54bn came from casino, down 3.2% on last year. Food and beverage revenue also slipped by 1.2% to $422m and rooms revenue fell 2.0%. Other revenue was also down 7.3% to $292m.

Going segment-by-segment, Regional remains Caesars’ main source of revenue at $1.37bn. This is despite the 1.7% decline reported in Q1 on the back of poor weather across various areas. Discounting the impact of weather, revenue here would have been higher year-on-year, according to Reeg.

“We are optimistic about the rest of the year, particularly the second half,” Reeg said. “We continue to believe that Regionals will grow on a full-year basis for us.”

As for Las Vegas, revenue dropped 9.1% to $1.03bn. Here, slot volumes were flat compared to last year, while the business was hit by the decision by singer Adele to move her dates at its Colosseum – inside Caesars Palace – to later in the year.

In addition, Caesars faced tough year-on-year comparable, with Q1 of 2023 featuring several major events in Las Vegas, including a Taylor Swift concert at Allegiant Stadium and local NCAA tournament games.

“People are still here; we just didn’t hold,” Reeg said. “And if you think about running these properties at over 97% occupancy, you are fully staffed. There is no opportunity to make up hold. So, it’s particularly negative on the operating leverage side when you don’t hold.”

Digital dreaming for Caesars

As for Digital, the situation is much different for Caesars. Revenue was 18.5% higher in Q1 at $282m, with growth continuing over from 2023. Online sports betting revenue was up 23.0%, while internet casino revenue was also 54.0% higher.

The North Carolina launch, Reeg says, will benefit Caesars in the long-run despite the initial roll-out incurring certain costs. He says that it was a much more successful launch in terms of customer acquisition than anticipated. 

Long-term, Caesars is planning to launch its new icasino brand in the second half of 2024. In addition, shortly after the end of Q1, it rolled out its upgraded Caesars Palace Online Casino featuring “multi-lobby navigation”.

Add in the post-Q1 launch of mobile sports betting at Harrah’s Gulf Coast Hotel & Casino in Mississippi, and there is reason for more optimism over further growth. 

“We feel very, very, very good about what’s going on in Digital,” Reeg said. “It really matches the progress against markers that we laid out when there was no one in the space laying out any similar markers.”

Net loss widens to $158m

Looking to spending in Q1, operating costs were 1.4% higher at $2.26bn. The main outgoing for Caesars remains casino at $852m, up 2.9%, ahead of general and administrative costs at $500m.

Caesars noted an additional $612m in other, finance-related spend, although this was 22.3% less than last year. As such, pre-tax loss for the quarter hit $127m, an improvement on the $185m loss posted in Q1 of 2023.

However, Caesars paid $15m in tax, whereas last year it received $49m in tax benefits. It also included a $16m loss from non-controlling interests. As a result, it ended Q1 with a net loss of $158m, compared to $136m in the previous year.

In addition, same-store adjusted EBITDA for the quarter hit $853m, down 9.9%.