Palms Las Vegas has been sold to Station Casinos. This marks the latest move by Las Vegas locals casinos to consolidate their competitive positions. There are fewer unlimited gaming licenses held by independent operators in Las Vegas compared to a few weeks ago since Boyd Gaming purchased the Cannery/Eastside Cannery as well as Aliante. Now that Stations has purchased the Palms, the two local powerhouses are going head to head in all local neighborhoods. There are a couple of locals properties still operating independently such as Rampart which is next door to Suncoast (Boyds), South Point which is out on its own on the south part of Las Vegas Blvd, and the two Arizona Charlie’s properties (one on Decatur & one on Boulder) which are owned by Ichan’s American Casinos.
The Palms purchase is particularly interesting because of its proximity to the strip and strategic location. The Palms has historically marketed to a mix of locals and tourists. Its also right across the street from Gold Coast (Boyds). Stations still owns a large lot that is zoned for a casino resort on Tropicana where a Days Inn now operates and a casino is run by Stations. Investors should wonder if the development of this site is now less likely? With room rates and visitation to Las Vegas at all time highs, the additional rooms at the Palms (over 700) should provide some firepower against in a fight against the Orleans (Boyds) and Gold Coast (Boyds) nearby. The Palms, which sits on Flamingo west of the strip might also be complementary to Palace Station (Stations) which is on Sahara to the north. Boyds doesn’t have a property on Sahara either. Maybe Stations has a competitive advantage from a room availability standpoint (leaving Boyds vulnerable to discounting) and also from a marketing perspective (by consolidating marketing planning between the three properties immediately west of the strip (Wild Wild West, Palms, Palace Station).
The Palms purchase is another example of a bullish bet on Las Vegas room rates and visitation. Las Vegas watchers should also be wondering whether Stations will re-position the Palms down-market by targeting value guests like those that are otherwise staying at the Gold Coast. I think the sale of the Palms is also a missed opportunity by Caesars, which is distracted by bankruptcy negotiations. It certainly would have made sense of the Rio to be sold to an operator who could re-position it towards the locals market.
With a market cap of just over $2 billion, Red Rock Resorts (Stations) is about the same size as Boyd Gaming, but the more than $300 million price tag for the Palms is going to be a large meal for them to swallow. Hopefully rates stay low and valuations stay high for their sake.
http://www.reviewjournal.com/business/casinos-gaming/station-casinos-parent-company-buys-palms-3125-million
http://www.marketwatch.com/story/after-ipo-red-rock-resorts-to-buy-palms-casino-resort-2016-05-10
http://vegasinc.com/business/2016/may/10/station-casinos-to-buy-the-palms-for-3125-million/
