Director and analyst at Deutsche Bank Ag\
Steve Pezzella is a Director and analyst at Deutsche Bank, specializing in equity research within the consumer and retail sectors. He is known for providing in-depth coverage of major publicly traded companies, drawing on a consistent record of actionable investment insights and positive performance for clients. Pezzella began his finance career following his academic training and has developed his expertise through various research roles prior to joining Deutsche Bank, contributing to his analytical rigor and industry recognition. He holds relevant professional credentials, including FINRA securities registrations, underscoring his commitment to regulatory standards and industry best practices.
Steve Pezzella asked about regional performance trends, specifically if Caesars observed a September decline similar to state-level data, and how Q4 comps for regionals are viewed given last year's October acceleration.
CEO Tom Reeg attributed the September trend to the Labor Day calendar shift and noted Atlantic City as the only market with a significant demand shift. He expects flow-through and margin to increase in regionals as marketing is refined.
Steve Pezzella asked about any notable interquarter cadence in the locals' market performance. He also sought clarification on the sports book hold impact for the current quarter, referencing previous discussions about unusual hold percentages.
Stephen Cootey, EVP, CFO, and Treasurer, stated that the quarter's cadence was 'pretty normal' for the locals' market. He clarified that while no specific sports book hold impact was quantified for the current quarter, the hold has returned to normal after an 'unusually poorly' held Q3 last year, which had a $4 million unfavorable impact.
Steve Pezzella inquired about any notable interquarter cadence within the locals' market. He also asked if there was a specific sports book hold impact for the quarter.
Stephen Cootey (EVP, CFO, and Treasurer, Red Rock Resorts Inc) and Scott Kreeger (President, Red Rock Resorts Inc) stated that it was a "pretty normal quarter" for locals' gaming activity. Stephen Cootey clarified that while no specific number was given for the current quarter's sports book hold, it was normal, contrasting with an unusually poor $4 million hold reported in the third quarter of the previous year.
Steve Pezzella asked for elaboration on Hilton's new system-wide fee reductions tied to product and quality scores, its origins, potential impact on franchise/royalty fees, and its role in incentivizing conversions.
Chris Nassetta, President and CEO, explained the fee reductions were initiated to support owners during a challenging period and to incentivize reinvestment in assets, addressing a cycle of underinvestment post-COVID. The program, tied to customer satisfaction scores, aims to accelerate product quality improvements. He confirmed it does not impact royalty or management fees and has no P&L impact for Hilton, but it does make Hilton a more attractive partner, potentially encouraging more conversions.
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