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Gaming Guru

Chris Jones
 

Hard Rock Helped by Nightclub

4 March 2005

LAS VEGAS – Most soon-to-be 10-year-olds are still years away from scoring big in a Las Vegas nightclub.

The Hard Rock Hotel, however, has seldom been known to act its age.

Powered by strong drink sales at its new nightclub, Body English, the off-Strip hotel-casino enjoyed a solid fourth quarter, company leaders said Thursday.

For the three months ended Dec. 31, Hard Rock enjoyed revenue of $35.4 million, a company record and a 9 percent gain from the $32.4 million it reported for the same period of 2003.

Cash flow, which is generally defined as earnings before interest, taxes, depreciation and amortization, was also a company-best $7.6 million, up 5 percent from the $7.2 million reported a year ago. Quarterly losses were $294,000, also an improvement from its previous $395,000 fourth-quarter loss.

When Hard Rock opened March 10, 1995, it quickly became the focal point for Las Vegas' young and hip crowd. Over time, newer competitors such as the Palms, Rio and Green Valley Ranch Station have eroded that dominance. But the original remains stronger than ever as it begins its second decade, Vice President and Chief Financial Officer Jim Bowen said Thursday.

"No matter what seems to have happened in the market, things have continued to improve here year after year," Bowen said.

Hard Rock ended 2004 riding the popularity of its restaurants and night spots. Quarterly food and beverage revenue increased by more than $3.5 million to $13.3 million, including $1.8 million in beverage sales from Body English alone, Bowen said. Food revenue grew by $1.1 million propertywide, including a $700,000 increase from banquet sales.

Quarterly lodging revenue improved by 14 percent to $7.7 million thanks to strengthened occupancy rates, which grew from 84.8 percent to 88.1 percent, and average daily rates, which climbed to $139 per night compared with $127 the prior year.

The news wasn't all positive, however. Casino revenue dipped from $14.3 million to $12.6 million, a result Bowen traced to fewer gaming tables, a reduced hold percentage and reduced table-games drop.

Those factors helped reduce Hard Rock's daily win per table to $1,009 from $1,063 the prior year.

Hard Rock's slot handle, slot winnings and slots in use were also down compared with fourth-quarter 2003. As a result, its daily win per machine fell to $83 from $93. The property attracted more low- and midlevel slot players but suffered dramatically from the absence of one bettor who played heavily in 2003 but was absent last year, Bowen said.

Once a staple for tourists worldwide, the demand for Hard Rock T-shirts has also slipped in recent years. This is particularly true in Las Vegas, where world-class shopping venues abound. As a result, Hard Rock's retail revenue fell by more than 8 percent to $1.8 million.

"As other (Las Vegas) retail options are brought online, we're looking at ways to maintain and gain back some of our revenues," said Bowen. Stores there could shift away from Hard Rock logo merchandise to more brand-name goods, he added.

Quarterly capital expenditures totaled $2.3 million, including $1.3 million to install 42-inch plasma televisions and minibars in Hard Rock's approximately 650 guest rooms. Such improvements, along with a steady stream of big-name concerts, could keep Hard Rock popular with younger patrons as its original clients age, Bowen said.

Upcoming concerts include a (belated) 10th anniversary weekend featuring Coldplay on April 29, followed by Bon Jovi and Nine Inch Nails in separate shows April 30.

Other scheduled events include Billy Joel (March 26), Las Vegas' The Killers (April 15) and Lenny Kravitz (May 21).

Hard Rock Hotel President Kevin Kelley added the company is at work on early plans to expand its Las Vegas campus, including the proposed $1 billion addition of 800 hotel-condominium units; 400 residential condominiums and 50 bungalows; 70,000 square feet of meeting space; stores; four to five restaurants; parking; and an expanded casino and concert venue.

The bulk of that development will open in mid-2007 off Harmon Avenue near Paradise Road.

"It's going to be an absolute windfall," Kelley said, though he declined to offer more-specific revenue projections.

Hard Rock is also focused on planning a $300 million hotel-casino near San Diego in association with the Pauma Band of Mission Indians, Kelley said. That deal was announced in early February.