Could Caesars Entertainment improve property earnings?
Property earnings metric
Property earnings before interest, taxes, depreciation, and amortization (or EBITDA) is an important performance metric used to gauge how casino properties are performing.
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Caesars Entertainment Corporation’s (CZR) property EBITDA declined 12.9% year-over-year to $445 million. Meanwhile, casino companies MGM Resorts International (MGM) and Wynn Resorts, Limited (WYNN) reported respective increases in adjusted property EBITDA of 0.2% and 5.2% year-over-year.
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CZR’s EBITDA was negatively impacted by ~$39 million of unfavorable hold, ~$23 million of bad debt expense, and ~$52 million caused by lower volumes and lower marginal returns on marketing investment.
Lower volumes were mostly attributed to a lower number of VIP players. Also, business disruption at Caesars Palace due to construction as well as show cancellations contributed to lower volumes than what was seen in last year’s quarter. Another reason for lower volumes was fewer room nights available in Las Vegas as a result of The LINQ Hotel renovation. Marketing expenses also increased in 3Q14, which resulted in reduced profitability in CZR’s core markets.
Meanwhile, the addition of casinos and hotels such as The Cromwell, Horseshoe Baltimore, and The LINQ partially offset the decrease in EBITDA in 3Q14. As well, strong growth in Caesars Interactive Entertainment (or CIE), a unit of Caesars Growth Partners (or CGP) in which CZR has a variable economic interest, also provided ~$23 million in incremental EBITDA in 3Q14.