Pinnacle losing money so far on new casino - Tuesday 27th of May 2008
The new Lumière Place casino may be lighting up the downtown skyline, but its not quite lighting up the balance sheet just yet.
The half-billion-dollar complex, which opened Dec. 19, turned a small loss for the first three months of the year, owner Pinnacle Entertainment said Wednesday, thanks largely to marketing expenses and heavy startup staffing levels.
Lumière turned a $760,000 operating loss on $47.2 million in revenue, figures that include the Lumière and President casinos, the Four Seasons Hotel, Hotel Lumière and the complexs shops and restaurants.
It was not unexpected, said Pinnacle President Wade Hundley, in a conference call to discuss first-quarter earnings with analysts.
"Consistent with other new openings of this scale, we incurred very high costs," he said.
Hundley expects those costs to decline as Lumière scales back its marketing and finds the right staffing levels. Chief Executive Dan Lee predicted a small gain in the second quarter.
"It might be enough to buy lunch," he said. "I wouldnt hold my breath for a big number."
But it will improve, Lee said, and by next year Pinnacle expects the complex to generate $235 million to $240 million in revenue, with 20 percent to 25 percent profit margins.
Also in the call, officials said:
•Pinnacle expects to open the tunnel connecting Lumière Place with downtown next week, gaining better access to 100,000 downtown workers. It also keeps adding
parking spaces as construction wraps up.
•Pinnacle has built about one-third of the foundation of its River City Casino in south St. Louis County, and expects to pick a general contractor for the project soon. With five companies interested, it wants a contract with a guaranteed maximum cost.
"Construction cost inflation might be going the other way," Lee said. "These guys are really sharpening their pencils to try and get the work."
The $450 million project, on the Mississippi River in Lemay, is set to open in the middle of next year.
•Pinnacle will spend about $8 million this year on a ballot initiative to overturn Missouris $500 loss limit. Last week, the Yes for Schools First Initiative, largely funded by Pinnacle and Ameristar Casinos, said it had more than enough signatures to put the measure on the November ballot.
•If the measure passes, Pinnacle likely will keep its aging President riverboat open, because casino licenses will be capped at the current 13. It could change boats, though, and move to a different site on the river in the city of St. Louis.
•Occupancy rates have grown steadily at both Hotel Lumière and the Four Seasons since they opened in February. In April, Hotel Lumière was 75 percent full, with an average rate of $85 a night; the Four Seasons was 37 percent full at $211 a night.
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