According to Nomura analysts, the anticipated Resorts World Las Vegas would not be profitable on a net basis for many years.
The $4.3 billion projects will open in the second half of this year. The west tower has reached the 55th floor, while the east building has reached the 52nd floor. The main gaming area, poker room, and restaurants are also nearly done.
Although the 3,500-room integrated resort is progressing despite the coronavirus pandemic. It will be some time before the property generates a profit for Genting Berhad.
However, after the depreciation/interest rates, we expect Resorts World Las Vegas to not make a profit in the first few years,” said Nomura analysts Tushar Mohata and Alpa Aggarwa.
According to the researchers, the venue intends to produce $82 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) on $350 million in sales in 2022. They say that by 2023, these estimates will rise to $112 million and $477 million, respectively.
Important Difference in Metrics
Though Resorts World Las Vegas will be profitable in terms of EBITDA, the multi-year journey to net profitability reveals significant gaps between EBITDA and net income.
EBITDA is a commonly recognized financial reporting method in the gaming industry. It is because it accounts for fixed expenses and asset depreciation, to name a few examples. However, regardless of sector, net income gives the most reliable image of a company’s performance since it calculates gains or losses after costs, taxation, depreciation, and amortization.
The Nomura analysts do not know when Resorts World Las Vegas will generate a profit. They do, however, state that the process will take many years. They add that the new venue will contribute 6% to Genting’s EBITDA in 2022.
Resorts World is the most expensive resort on the Strip. It costs $4.3 billion, just ahead of the Cosmopolitan, which costs $4.18 billion.
Not a Surprising Forecast for Resorts World Las Vegas
Nomura estimates that it will take a few years for it to become profitable. But it is neither a criticism of the location nor of the operator.
It can take years for high-end integrated resorts, such as Genting’s new location, to reach total capacity. As a result, it is not unusual for such venues to begin as loss leaders for their respective operators. That is normal in any operating environment, coronavirus pandemic or otherwise.
Nonetheless, Nomura analysts expect improved utilization at the new property in the coming years.
“We expect 50 percent, 60 percent, and 70 percent utilization for Resorts World Las Vegas in 2022, 2023, and 2024, which we believe represents a slow build-up of tourism and conference, incentives, convention, and exhibition (MICE) events in the post-COVID-19 period. According to the research company, “we expect depreciation/interest cost for RWLV beginning in FY22.”