F1 Grand Prix expected to lift Caesars’ earnings
The F1 Grand Prix, which will be held for the first time in Las Vegas, is expected to attract thousands of fans and visitors to the city, generating high demand for hotel rooms, entertainment, and gaming. Caesars Entertainment, which is one of the founding partners of the race, has secured ticket inventory and exclusive branding rights for the event. The company expects the F1 Grand Prix to raise its fourth-quarter EBITDA by 5% or more, according to CEO Tom Reeg.
EBITDA, or earnings before interest, taxes, depreciation, and amortization, is a measure of a company’s profitability and operating efficiency. Caesars Entertainment reported a same-store adjusted EBITDA of $581 million for the fourth quarter of 2021, up from $348 million for the same period in 2020. The company also reported record EBITDA and EBITDA margin for its Las Vegas and regional segments in the fourth quarter of 2021.
Labor costs pose a challenge for Caesars
However, the F1 Grand Prix also comes with significant labor costs and challenges for Caesars Entertainment, which operates several properties in Las Vegas, including Caesars Palace, Flamingo, Harrah’s, and The LINQ. The company has to hire and train additional staff, ensure adequate security and safety measures, and coordinate with other stakeholders and partners for the event.
According to a recent report by CDC Gaming, an analyst from Jefferies, David Katz, warned that Caesars Entertainment could face higher labor costs and lower margins in the near term due to the F1 Grand Prix. Katz said that the event could increase the company’s labor expenses by $50 million to $75 million, or about 10% to 15% of its quarterly EBITDA. He also said that the event could create operational disruptions and inefficiencies, as well as potential customer dissatisfaction.
Katz lowered his price target for Caesars Entertainment from $140 to $130, citing the labor cost pressures and the uncertainty around the COVID-19 pandemic. He maintained his buy rating for the stock, however, saying that the company has a strong long-term growth potential and a leading position in the US gaming market.
Caesars Entertainment optimistic about the future
Despite the labor cost challenges, Caesars Entertainment remains optimistic about the future of its business and the F1 Grand Prix. The company said that it has exceeded its synergy target from its merger with Eldorado Resorts in July 2020, and that it has improved its balance sheet and liquidity position. The company also said that it is investing in its digital and sports betting platforms, as well as its loyalty program and customer experience.
The company said that it is confident that the F1 Grand Prix will be a successful and memorable event for Las Vegas and its guests. The company said that it is working closely with the F1 organizers, the city authorities, and other partners to ensure a smooth and safe execution of the event. The company said that it is looking forward to showcasing its properties and services to a global audience and creating a lasting impression.
