This week Caesars Entertainment announced the sale of Rio All Suites Hotel & Casino. The deal made news on the day the deal happened but quickly subsided because nothing will change after the sale is completed.
Casino sales are usually big news. However, the sale of Rio isn’t a traditional sale. This was a sale to a real estate investment company. The Rio was sold to a company controlled by a principal of Imperial Companies for $516.3 million. Under the terms of the agreement, Caesars will continue to operate the property with a lease for a minimum of two years. They’ll pay an annualized rent of $45 million if you’re curious.
Rio will continue to operate as a Caesars property for at least the next two years. The World Series of Poker will also remain at the Rio for at least one more year. Probably the most important part of this deal is that Rio will remain part of Caesars Rewards (formerly Total Rewards) for at least two more years.
The new owner of the Rio has the option to pay Caesars $7 million to extend the lease under similar terms for a third year. It’s difficult to tell how long Rio will remain in the Caesars family as the company is in the process of merging with Eldorado Resorts. When the deal is complete, the staff from Eldorado Resorts will be operating the national casino company.
“This deal allows Caesars Entertainment to focus our resources on strengthening our attractive portfolio of recently renovated Strip properties,” said Tony Rodio, CEO of Caesars Entertainment. “The retention of the World Series of Poker and retention of Caesars Rewards customers are all factors that make this a valuable transaction for Caesars.”
Caesars Vegas Strip Casino Sale(s)
While Rio will remain part of Caesars for at least the next two years, not all of Caesars’ Las Vegas properties will. When Eldorado announced the merger of the two companies they noted that this will be the largest US casino company. Caesars will have about 60 properties in 14 states when the deal closes in early to mid-2020.
Caesars and Eldorado will have to shed some properties around the country so they don’t have a monopoly in certain cities. Any casino sales outside of Las Vegas will be for regulatory purposes. A sale of one or more Las Vegas casino would be to streamline the market for two reasons.
Financially, the sale of a property (or properties) in Las Vegas will generate revenue for the company. Procedurally, the sale of a Las Vegas casino will make it easier for the new owners to focus on its new Las Vegas properties.
Tighter Las Vegas Room Comps Likely Coming To Caesars
Caesars Rewards is a massive casino loyalty club with 40,000 members. The merger between Eldorado and Caesars will add another 10 million people to the Caesars Rewards database. This means that there will be 10 million more people looking to access complementary and discounted rooms.
The looming sale of a Las Vegas casino after the deal is completed means that there will be fewer rooms available at Caesars Las Vegas hotels. When the merger is complete and a property or two is shed, here will be more people seeking deals for fewer available rooms.
Even if the new owners don’t change anything with Caesars Rewards (they will likely change at some point in the future) there will more demand for fewer rooms deals. The increased competition could lead to a shortage of Las Vegas room deals for Caesars customers.