Caesars Experiences $25M Increase in F1 Revenues, May Cancel Two Gambling Agreements

Caesars Entertainment (NASDAQ: CZR) is projected to observe a $25 million cash flow increase from the Las Vegas Grand Prix in November and the operator may choose to disinvest in two of its three prominent sports wagering sponsorship arrangements in an effort to cut costs.

Deutsche Bank analyst Carlo Santarelli, following meetings with Caesars executives, including CEO Tom Reeg and Senior Vice President of Corporate Finance Brian Agnew, noted this among other developments in a recent statement to clients.

The November F1 race, for which Caesars is offering a $5 million “sovereign package” for affluent customers, could bring a $25 million cash surge for the operator and this does not include potential advantages to casino operations during race weekend. Reeg and Agnew told Santarelli they anticipate the race will be of more considerable economic benefit to Caesars than the 2024 Super Bowl, which Las Vegas is hosting.

The Las Vegas Grand Prix, planned for November 18, is estimated to generate 7,700 jobs and add $1.2 billion over a year to the local, gaming-heavy economy while the Super Bowl is anticipated to generate $600 million in economic impact. Notably, the Grand Prix will be a yearly event for Sin City while the Super Bowl is a one-time occasion, changing between multiple cities annually.

Caesars Digital Aspirations

Caesars is also aiming for profitability for its digital division, which includes the Caesars Sportsbook and online casinos. One way of achieving this is by ending unprofitable sponsorships with leagues, networks, and teams.

“Rolling off [of] economically unsustainable partnerships … From an industry perspective, while campaigns have decreased, management believes the promotional behavior remains largely equivalent, if not more competitive, for new state launches,” wrote Santarelli.

It is possible that the operator abandons two of its three major sports betting accords. These three are with the NFL, CBS Sports, and ESPN. There have been rumors that Caesars would like to get out of the ESPN agreement and that DraftKings (NASDAQ: DKNG) could be a willing buyer as it targets exclusivity with the sports network.

Caesars Digital is already doing an admirable job of reigning in promotional expenses as it outperforms one competitor in that area. This is essential at a time when rivals are forecasting profitability, or getting close to being there. Caesars Sportsbook was one of the first operators in the space to reduce marketing spending, and that move seems to be paying off.

Other Caesars Details

Particularly with the company’s extensive land-based casino operations, Reeg and Agnew informed Santarelli that Caesars is unlikely to participate in a 2023 round of Las Vegas Strip consolidation as either a buyer or a seller. Likewise, the operator is unlikely to spend heavily to upgrade its venues there.

Expenditures are likely to be directed to Caesars regional casinos, including those in the South. Looking further ahead, a successful beginning for the revamped Horseshoe in Lake Charles, La. might motivate Caesars to build a new hotel tower there since room supply at that venue is limited compared to rival venues in the city.