New York (Reuters) – Pinnacle Entertainment Inc. is looking to boost profit by at least 10 percent by 2008 at its slowest-growing casinos, as it sets up a team dedicated to bringing more gamblers in the door, its chief executive said late on Thursday.
Pinnacle, one of the smaller casino operators in a field dominated by companies such as Harrah’s Entertainment Inc., posted flat sales in the second quarter at its older properties in Indiana, Nevada and Bossier City, Louisiana, but said revenue rose at its newer properties.
The company, which is based in Las Vegas but doesn’t have a casino there, is building more casinos in Lake Charles, Louisiana, and St. Louis.
In the meantime, it is investing about USD 30 million to bring together a centralized marketing team, hoping that more targeted promotions will boost earnings, Chief Executive Daniel Lee told Reuters in a phone interview.
„Do the entertainers we bring in, bring in people who gamble?“ Lee said, giving an example of the kind of things the initiative will examine. „If they are bringing in people who don’t gamble, then that’s the wrong entertainer.“
Pinnacle reported adjusted earnings before interest, taxes, depreciation and amortization of USD 54.5 million for the second-quarter, up 80.2 percent from the year-ago quarter. Wall Street is expecting USD 54.6 million for the third quarter, according to Reuters Estimates.
Marketing costs make up the second-largest expense after gambling taxes for the company, Lee said.
Pinnacle, which also owns casinos such as the L’Auberge du Lac and Boomtown New Orleans in Louisiana, is faced with rising energy, construction and insurance costs.
It has seen insurance premiums triple from those before last year’s hurricane season that devastated the U.S. Gulf Coast and destroyed several casinos, including a Pinnacle property in Biloxi, Mississippi.
„We are paying three times as much for less insurance than we had before the storm,“ Lee said. „We are probably at the worst possible moment.“
But Lee said those costs did not have a significant impact on the company’s bottom line, and spending marketing dollars more efficiently would bring higher returns on investment.
Pinnacle is also trying to expand its reach by looking at properties in Las Vegas as well as other large markets such as Atlantic City and Mississippi, Lee said.
Earlier this year, the company bowed out of a bidding war over casino operator Aztar Corp., which owns casinos in Las Vegas and Atlantic City.
Pinnacle walked away with a USD 44.8 million gain from break-up fees, but is now actively looking at alternatives to enter those markets, Lee said.
„If you a have a customer in St. Louis who likes to come to Las Vegas once in a while — they care if you have a hotel in Las Vegas,“ Lee said. „The geographic diversity is what matters from a customer’s perspective.“