Red Rock Resorts Inc

NASDAQ:RRR

Earnings Call Analysis

Red Rock Resorts reports strong performance and future growth plans.

In Q3 2024, Red Rock Resorts achieved record net revenues of $464.7 million, up 13.9%, and adjusted EBITDA of $202.6 million with a margin of 43.6%. The Durango Casino Resort showed a 91% increase in visitation, signaling robust local market growth. The company plans a $116 million expansion for Durango, adding 230 slot machines and a new parking structure. While facing some cannibalization from Durango impacting Red Rock's revenue, long-term demographic growth in Las Vegas promises recovery. The company remains confident in its core business and announced a dividend of $0.25 per Class A share, part of a $194.8 million return to shareholders in 2024.

Strong Q3 Performance Fuels Optimism

In the third quarter of 2024, Red Rock Resorts reported remarkable growth, achieving net revenues of $468 million, which reflects a 13.7% increase year-over-year. This period marks their best third quarter performance in history, bolstered by exceptional results from their Las Vegas operations, where net revenues reached $464.7 million, up 13.9% compared to the same quarter last year. Adjusted EBITDA also saw a solid rise, reaching $182.7 million, corresponding to a 4.3% increase from last year. However, adjusted EBITDA margins experienced a minor decline, settling at 39% for the quarter, indicating a 353 basis point drop compared to the prior year's third quarter.

Durango Casino's Impact and Future

A significant highlight of the call was the ongoing success of the Durango Casino Resort, which has seen unprecedented gains with a 91% increase in visitation and a 92% rise in net theoretical win in its surrounding area. This property is projected to be a key player for Red Rock, anticipated to generate a return of about 15% in its first year, surpassing the initial promise of 10%. To enhance its offerings, Red Rock plans to invest approximately $116 million in an expansion throughout the rest of the year, which will add over 25,000 square feet of casino space and 230 new slot machines, including a high-limit area.

Maintenance of Financial Discipline Amidst Expansion

Despite the robust financial performance, Red Rock is keenly aware of the competition and potential cannibalization effects on existing properties, particularly at Red Rock itself due to new activity at Durango. While accepting that revenue within some of their core segments may exhibit low single-digit declines due to these dynamics, management expressed confidence in their long-term growth strategies. The company continues to maintain a healthy balance sheet, ending the third quarter with $117.5 million in cash and net debt of $3.35 billion, providing flexibility for growth and expansion.

Investment and Renovation Plans Ahead

In alignment with their growth strategy, Red Rock will invest between $185 million and $195 million in capital expenditures for the entirety of 2024, covering both maintenance and expansion expenses. They are also gearing up for more substantial renovations in 2025, with planned costs of approximately $150 million designated for the Green Valley Ranch property. This will include significant upgrades to the hotel and gaming aspects, expected to start in mid-2025.

Navigating a Competitive Landscape

Looking forward to the fourth quarter, Red Rock anticipates a tough comp against last year's Super Bowl-related influx but expects to sustain a strong performance in core gaming and other segments, despite a noted softness in group sales and catering. Management has mentioned that while the promotional environment remains largely stable, the company is actively monitoring developments and is prepared to pivot should market conditions change. The focus will remain on driving visitation through enhanced guest experiences and successful marketing initiatives.

Shareholder Returns and Future Outlook

In recognition of its strong financial position, Red Rock Resorts declared a cash dividend of $0.25 per Class A share, payable on December 31, marking a proactive return of capital to shareholders amid a busy year. The management team emphasized confidence in the growth trajectory enabled by their strategic focus on the Las Vegas locals market and the effective utilization of their growing real estate bank of over 450 acres suited for development. This positioning aims to capitalize on favorable demographic trends, ultimately facilitating the doubling of their assets in the coming years.

Earnings Call Transcript 2024-Q3

[Operator]

Good afternoon, and welcome to Red Rock Resorts Third Quarter 2024 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to Stephen Cootey, Executive Vice President, Chief Financial Officer and Treasurer of Red Rock Resorts. Please go ahead.

[Stephen Cootey, executive]

Thank you, operator, and good afternoon, everyone. Thank you for joining us today on Red Rock Resorts Third Quarter 2024 Earnings Conference Call. Joining me on the call today are Frank and Lorenzo Fertitta, Scott Kreeger and our executive management team.

I would like to remind everyone that our call today will include forward-looking statements under the safe harbor provisions of the United States federal securities laws. Developments and results may differ from those projected. During this call, we will also discuss non-GAAP financial measures. For definitions and complete reconciliation of these figures to GAAP, please refer to the financial tables in our earnings press release, Form 8-K and investor deck, which were filed this afternoon prior to the call. Also, please note that this call is being recorded.

Let us start off by stating that the third quarter represented another strong quarter for the company by any measure. In terms of net revenue and adjusted EBITDA, our Las Vegas operations had their best third quarter in the history -- in our history while operating at near-record adjusted EBITDA margin in the quarter.

In addition to showing strong financial results in the quarter, we continue to be pleased with the financial performance of our Durango Casino Resort. Durango continues to grow the Las Vegas locals market as the team continues to execute and improve the property's operational performance while, at the same time, driving incremental play from our existing customers and attracting new customers to our brand.

With the 3 full quarters under our belt, the property increased visitation and net theoretical win in the surrounding Durango area by approximately 91% and 92%, respectively, while signing up over 70,000 new customers to our database. Durango continues to ramp up and remains on track to become one of our highest margin properties as well as generate a return of approximately 15% net of cannibalization through its first year of operation.

Cannibalization remains in line with our expectations and its impact is primarily felt at our Red Rock property. Consistent with our past performance history, we expect to backfill this revenue over the next couple of years given the strong long-term demographic growth profile of Las Vegas Valley and, in particular, within the Summerlin area, which, between Downtown Summerlin and the Summerlin West communities, we expect to have approximately 34,000 new households upon final build-out.

As stated on our last earnings call, we are planning to move forward with the expansion of our Durango property later this year. Our current plans for the next phase of Durango will add over 25,000 square feet of additional casino space, including a new high-limit slot and bar area. In total, the expansion will add 230 slot machines to the Durango casino floor, including 120 slot machines dedicated to our new high-limit room.

In addition to the expanded casino space, we will be adding an additional covered parking garage with almost 2,000 convenient parking spots, significantly improving customer access to the property while providing us flexibility for future expansions at Durango. The current budget for the project is approximately $116 million, and the expansion is expected to take around 12 months to complete. We are expecting some disruption to the south side of the property during the construction period.

Regarding the rest of the portfolio, we remain operationally disciplined within the quarter, and we continue to execute on our core strategy of reinvesting in our existing properties to deliver fresh and relevant amenities to our guests, all while remaining focused on best-in-class customer service. As we return to a more traditional seasonal pattern, the company continues to manage our expenses, generate record financial performance, maintain near-record margins, reinvest in our properties and return capital to our shareholders within the quarter.

Now let us take a closer look at our third quarter. With respect to our Las Vegas operations, our third quarter net revenues was $464.7 million, up 13.9% from the prior year's third quarter. Our adjusted EBITDA was $202.6 million, up 5.8% from the prior year's third quarter. Our adjusted EBITDA margin was 43.6%, a decrease of 333 basis points from the prior year's third quarter.

On a consolidated basis, our third quarter net revenue was $468 million, up 13.7% from the prior year's third quarter. Our adjusted EBITDA was $182.7 million, up 4.3% from the prior year's third quarter. Our adjusted EBITDA margin was 39% for the quarter, a decrease of 353 basis points in the prior year's third quarter.

In the quarter, we generated operating free cash flow of $46.4 million or $0.44 per share. This brings our year-to-date cumulative free cash flow to $292.6 million or $2.70 per share. The significant level of year-to-date free cash flow was either reinvested in our long-term growth strategy, reinvested into our existing properties or return to our stakeholders via debt paydown, share repurchases and dividends.

As we finish the third quarter, we remain focused on our core local guests as we continue to grow our regional and national segments across our portfolio. When comparing our results to last year's third quarter, we continue to see strong visitation in card and slot play across the majority of our database, including our regional and national segments. This strength, coupled with the strong spend per visit across the majority of our database, allowed us to enjoy near-record revenue and profitability across our gaming segments in the quarter.

Turning to nongaming segments, both our hotel and food and beverage continue to grow year-over-year and delivered record revenue and profitability in the third quarter. Our Hotel division experienced its highest third quarter revenue and profit in our history, driven by the team's success, and continue to drive higher ADR while maintaining occupancy across our hotel portfolio.

Not to be outdone, our Food and Beverage division also experienced its highest-ever third quarter revenue and near record profit, driven by higher average check and cover counts across our food and beverage outlets. With regard to our group sales and catering business, as mentioned on our last earnings call, we faced a tough third quarter comparable and expect to face tough comparables for the remainder of the year.

As we look forward to the fourth quarter, other than playing unlucky in sports in October and the previously discussed softness in our group sales and catering business lines, we are seeing strength and stability in our core slot and tables business in the locals market and across our carded database as we remain confident in our business prospects moving forward.

Now let's cover a few balance sheet and capital items. The company's cash and cash equivalents at the end of the third quarter was $117.5 million, and the total principal amount outstanding was $3.48 billion, resulting in net debt of $3.35 billion. As of the end of the third quarter, the company's net debt-to-EBITDA ratio remained flat at 4.2x.

Also, during the third quarter, we made distributions of approximately $72.8 million to the LLC unitholders of Station Holdco, which included a distribution of approximately $42.4 million to Red Rock Resorts. The company used the distribution to make its required tax payment and pay its previously declared dividend of $0.25 per Class A common share.

Capital spend in the third quarter was $80.4 million, which includes approximately $47.4 million in investment capital, inclusive of Durango project retainage, as well as $32.9 million in maintenance capital. For the full year 2024, not including the spend to close out our Durango project, we now expect capital spend to be between $185 million and $195 million, spread between maintenance and investment capital.

We also remain committed to strategically investing and offering new amenities to our guests in order to drive incremental visitation and spend to our properties. Last month, we successfully opened a Yard House restaurant at Sunset Station. But we are in early days. We are pleased with the guest response and the early results from this new amenity. We expect to continue to invest in our existing properties throughout 2024, including adding local favorite China Mama at our Palace Station property later this year.

In addition to these amenities, we expect to make investments in both our Sunset Station and Green Valley Ranch properties in 2025. At our Sunset Station property, we are building off the success we are seeing with our recently renovated race and sportsbook and partial casino remodel by continuing to refresh the podium in order to better position the property to capture the continued growth in Henderson, including the master planned communities of the Skye and Cadence, which are expected to add over 12,500 new households upon final completion of both communities.

As part of this project, we'll be adding in an all-new country western bar, a new Mexican restaurant, an all-new center bar, along with completely renovated casino space. Workers already commenced on this project, and the total cost of the renovation is expected to be approximately $53 million.

At our Green Valley Ranch property, we're expecting to start a complete refresh of our Room product, aligning the hotel with our most recent renovations made to our well-received high-limit table and slot rooms at the property. Work is expected to start in June of 2025 and will continue through November of 2025. The cost of the room renovation is expected to be approximately $150 million. Like our other recently introduced amenities, we expect these to be solid investments and are looking forward to moving beyond the disruption challenges of these properties as we introduce these new amenities to our customers next year.

Turning now to North Fork. We are extremely excited about this project, which is situated on a 305-acre site located in north of Fresno. California, with great ingress-egress off the heavily traveled Highway 99, the project is one of the most convenient and accessible locations in Central California, with over 5.8 million people located within 2 hours of the development site.

When complete, this best-in-class resort will include approximately 100,000 square feet of casino space, with over 2,400 slot machines, including 2,000 Class II games, 42 table games and 2 food and beverage outlets and a food court with many exciting options. We have started site work and construction as we continue to finalize design. The total construction time for the project is currently anticipated to between 18 and 20 months, putting the opening of the resort into 2026.

The current cost of the project is expected to be approximately $785 million, which includes all design costs, construction, hard and soft costs, preopening expenses and any financing and development fees associated with the project. We are excited to be making progress, and we'll continue to provide further updates on our quarterly earnings calls.

Lastly, the company's Board of Directors have declared a cash dividend of $0.25 per Class A common share, payable on December 31 to Class A shareholders of record as of December 16. When we combine our share repurchases with our special and regular dividends, as we have returned approximately $194.8 million to our shareholders in 2024.

The company continues to have a strong year, and Durango continues to validate our long-term growth strategy and demonstrate the power of our own development pipeline and real estate bank, which consists of over 450 acres of developable land positioned in highly favorable areas across the Las Vegas Valley.

This pipeline, coupled with our current best-in-class assets and locations, gives us an unparalleled growth story that will allow us to double the size of our portfolio and capitalize on the very favorable long-term demographic trends and the high barriers to entry that characterize the Las Vegas locals market.

We'd like to recognize and extend our thanks to our team members for their hard work. Our success starts with them, and they continue to be the primary reason why our guests return time after time. We thank them again for voting us Top Casino Employer in the Las Vegas Valley for the fourth consecutive year, as well as being certified by Great Place to Work for a third year in a row. Finally, we thank our guests for their loyal support in each of the last 6 decades.

Operator, this concludes our prepared remarks, and we are now ready to take questions.

[Operator]

[Operator Instructions] Today's first question comes from Joe Greff at JPMorgan.

[Joseph Greff, analyst]

Looking back at the performance in the 3Q, is there anything that you would call out as sort of onetime or kind of a unique trend change outside normal seasonality, whether that's extreme heat or renovation disruption? And maybe a sort of directional or mathematical way of answering it is, if you look at the performance of Durango less Red Rock cannibalization, how did the rest of the portfolio perform?

I know in the 2Q, you basically mentioned that the $30 million year-over-year EBITDA delta was basically Durango net of Red Rock cannibalization, with the balance of the portfolio flat. Maybe if you can answer it in that way? And then I have a quick follow-up.

[Stephen Cootey, executive]

Hopefully, just quick, Joe. Let me start with the first piece of question. There's no real unusual items throughout the quarter, other than just that return of that typical third quarter seasonality. For example, if you look at past years in 2019, Q2 to Q3 was down almost 19%. So when you kind of look at Durango, what we talked about here is we expect to deliver about net 15% of -- net 15% return on our investment in the first year of investment.

So it's actually higher than we promised. We actually promised 10%. So when you do the quick math, if you have an $800 million cost, it's implying a $120 million net of cannibalization. When you apply some impact to cannibalization, what you end up getting is that the core portfolio was down low single digits in terms of revenue.

[Joseph Greff, analyst]

Great. And then margins 43.3% or 43%, what sort of expenses sort of drove that increase? And then how do you think about flow-through or margins going forward, particularly as we think about 2025 as maybe being more of a reinvestment in existing assets kind of year? And maybe you can talk about 25% in terms of renovation impact disruption that you might anticipate?

[Stephen Cootey, executive]

So in terms of just the margin, I'll just kind of frame it very simply. I think about 150 basis points of that margin is contributed to cannibalization, so revenue moving to our existing properties over to Durango. And then you couple that with lower revenues as part of the Q3 seasonality. And then we did -- we are bearing the brunt of minimum wage, which cost us about $1.2 million for the quarter.

[Joseph Greff, analyst]

And then maybe you can touch on 2025 in terms of anticipated renovation impacts.

[Stephen Cootey, executive]

Yes. Sorry about that. Sorry. So in terms of the renovation impact, if I run it down by property, so our initial estimates on GVR, roughly about $11.5 million from an EBITDA impact; Sunset Station, approximately $5.4 million; and then Durango, about $5.9 million.

[Operator]

And our next question comes from Carlo Santarelli with Deutsche Bank.

[Carlo Santarelli, analyst]

Steve, obviously, in the third quarter seasonality, as you said, kind of returned to normal. And when you go back and look at your model, in particular, the local segment, a lot of noise with Palms and that stretch. How do you generally think about 4Q seasonality relative to 3Q? And obviously acknowledging the moving parts of the stub period of Durango last year makes that a little bit harder for comparability. But just thinking about 3Q relative to 4Q seasonality.

[Stephen Cootey, executive]

You got a couple of factors in here, Carlo. But in general, if you took a pre-COVID year taking out the noise of the Palms, EBITDA is up usually around 12%, but you have to factor in that we did play a little bit unfriendly in terms of sports to this tune about $7.6 million. .

[Carlo Santarelli, analyst]

In October?

[Stephen Cootey, executive]

In October, sorry.

[Carlo Santarelli, analyst]

Okay. So think about it as kind of up $12 million, less almost $8 million from the sports, assuming that doesn't reconcile in November and December?

[Stephen Cootey, executive]

Correct.

[Carlo Santarelli, analyst]

Okay. And then just -- this is just an item of -- just to clarify something. CapEx for the year, you said $185 million to $195 million. Am I correct? And that excludes Durango closeout. Durango closeout for the year was about $95 million. Is that accurate?

[Stephen Cootey, executive]

Yes. Durango closeout for the year is about -- almost $97 million. We still have about $1 million left to close that out. .

[Operator]

And our next question today comes from Steve Wieczynski with Stifel.

[Steven Wieczynski, analyst]

Steve, you mentioned that group sales have been a little bit softer than I think you guys have been expecting. And just wondering if you could give some more color on potentially what you guys think are driving that softness. And if we look at the margin on that Food and Beverage line, it's been a little bit lower than what we've been expecting over the last couple of quarters. I'm just wondering if that's somewhat due to that lower group business.

[Scott Kreeger, executive]

Yes. Steve, this is Scott. Let me take that one. We'll take it into 2 pieces: one, group sales, Hotel; and then we'll correspond in catering. When you look at the quarter, probably the most notable piece of the quarter is, we still are digesting a tough comp year-over-year as it relates to COVID rebooks. So there's about $1 million of good news in last year's number relative to COVID rebookings. If you were to add that in and adjust, we're basically flat when it comes to Hotel sales, room nights.

We expect that we're going to have tough comps into the fourth quarter and somewhat into the first quarter because of Super Bowl as well in hotel. But if you look a little further out to '25 and '26, we're very encouraged with our on-the-books pace as we go into those future years. And then catering really kind of mirrors the same effect as group room night sales does as well, where we're going to have a tough comp in the next 2 quarters and then better outcomes into '25 and '26.

[Stephen Cootey, executive]

And Steven, to answer that last follow-up, in terms of the softness you're seeing in F&B, it's exactly what Scott said, it's pretty predominantly all catering, as F&B experienced a record revenue quarter.

[Steven Wieczynski, analyst]

Okay. And then Steve, I understand you guys don't give formal guidance. But as we start to think about next year in 2025, is there anything you would call out in terms of whether it's headwinds, whether it's tailwinds or anything that would disrupt the normal cadence as we start to think about 2025?

[Stephen Cootey, executive]

Yes, I think what you're -- I mean, from a group perspective or an entire -- or the entire company?

[Steven Wieczynski, analyst]

The entire company, sorry.

[Stephen Cootey, executive]

Okay. I think the one we just talked about with Greff is probably one of the bigger onetime issues. If you kind of add all that together, you're going to experience about $23 million worth of disruption as we start the room remodel at Green Valley, continue the podium remodel at Sunset, and then we attach the garage to -- in the high-limit room at Durango. That's really -- those are really the big onetime items. .

[Scott Kreeger, executive]

And you're going to go up against Super Bowl in Q1.

[Stephen Cootey, executive]

Correct.

[Scott Kreeger, executive]

So royalty as well as...

[Stephen Cootey, executive]

As well as ConAg and a couple of others look at that.

[Lorenzo Fertitta, executive]

I think, generally -- it's Lorenzo. It's important to note that I think most all the operators have said that Q3, that seasonality seems to have come back. It's a bit of a challenge. But October has bounced back and is very stable, both on slots, table games, sports handle rate. Obviously, the whole percentage due to the NFL hasn't been great. But our core business feels good going into Q4.

[Operator]

And our next question comes from David Katz with Jefferies.

[David Katz, analyst]

Can we just dive into the Super Bowl comps a little bit? It came up a couple of times. Was -- it was -- the Super Bowl volume levels in terms of hospitality is strong and perhaps the sports betting was not. What's the hard part and what's the easy part within the Super Bowl piece?

[Lorenzo Fertitta, executive]

Well, this is Lorenzo. I think if you look at, obviously, Hotel and Food and Beverage, things like that, not having the Super Bowl is going to be a tough comp versus last year. I would say, of all the events that the city has had, citywide events, whether it be F1, you name it, I think Super Bowl was just a huge benefit to the overall city. And obviously, we benefited from that as well. Actually, I think we were -- we lost money on the game last year.

[Stephen Cootey, executive]

We did. Just saying that, yes, we did.

[Lorenzo Fertitta, executive]

So that, hopefully, will not be a headwind or repeat it but -- from a comp perspective.

[David Katz, analyst]

I see. I see. So overall volume levels were very strong, but there was some sports got an impact?

[Lorenzo Fertitta, executive]

That came out of the negative last year. .

[Stephen Cootey, executive]

Negative.

[Lorenzo Fertitta, executive]

Historically, over time, we typically would win money to the Super Bowl. It's just that last [indiscernible].

[David Katz, analyst]

Yes. Perfect. And just as my follow-up. The last time we walked through Durango, we talked about sort of longer term with expansions, et cetera. Anything today that would characterize how soon or what those expansions could or would look like and when you'd get to them?

[Scott Kreeger, executive]

Yes, David, this is Scott. First, just want to reiterate that the garage and casino and high-limit expansion is really kind of a preliminary phase for Durango. We need to do that in order to set ourselves up for the optionality in the other 2 phases. And as we look at those phases, we also compare our greenfield opportunities as well. I know we've spoken about Inspirada and Cactus as potential opportunities.

I think what we want to do is, we've got a lot of irons in the fire into the first and second quarter with the existing property remodels and the garage, probably are going to want to see how the market is going into the first half of the year before we make a decision.

[Operator]

And our next question comes from Stephen Grambling of Morgan Stanley.

[Stephen Grambling, analyst]

Well, I guess when we think about the election and some of the policies that's been put out there, aside from perhaps corporate taxes, what is on your radar that could impact your business?

[Lorenzo Fertitta, executive]

I think -- go ahead.

[Frank Fertitta, executive]

No tax on chips, I think, would be a positive for our business.

[Lorenzo Fertitta, executive]

Yes. We've looked at some economic analysis. Not -- I don't know if anything has really been published on it. But we think it could add somewhere in the neighborhood of about $200 million a year to the local economy here, which, obviously, we would benefit from.

[Stephen Cootey, executive]

Yes. And I think it would save the company about $2 million to $3 million in payroll tax as well.

[Stephen Grambling, analyst]

That's helpful. And is there anything that's on the radar in terms of -- accelerate depreciation or other tax incentives for investment?

[Stephen Cootey, executive]

I mean I think we've accomplished that with Durango. That's -- our effective tax rate is below 13%, and that's due to, I think, some good work on the tax side for Durango. But -- so my sense is that we'll look to do that on our Sunset asset as well as in GVR and the Durango garage once they're put in service later in '25.

[Operator]

And our next question comes from Barry Jonas with Truist Securities.

[Barry Jonas, analyst]

You added a new slide in the deck on Cactus at the front of the new development pipeline section. Just curious where this stands in terms of what you'll be focused on next.

[Scott Kreeger, executive]

I think that as we look at all of our greenfield projects, the good thing about a lot of them is the population growth is getting to a maturity point where they're up for consideration. So when we look at Cactus, it has different positive attributes than, say, Inspirada or Kyle Canyon site.

The specifics around Cactus are that it is a hybrid location. It sits on the Las Vegas Strip as well as it is surrounded by a very lucrative local market as well. So it makes it a unique development opportunity because you can take advantage of the hybrid aspect of the property or the location. It would probably be something of larger scale than, say, an Inspirada. So we weigh the pros and cons of that capital contribution as well.

[Barry Jonas, analyst]

Got it. Got it. And then just are there any other tribal or non-Vegas deals you're looking at, at the moment? Or is really the focus just your Las Vegas development pipeline?

[Stephen Cootey, executive]

Well, no. As I think we mentioned during the prepared remarks, we are incredibly excited about North Fork. So after working on this project over 20 years, we're in the ground and looking forward -- and we're in the throes of an 18- to 20-month construction period.

[Frank Fertitta, executive]

Yes. And 5.8 million people in a 2-hour drive, and we think we're going to have the dominant property in the market. By far, the best designed and built product to the market.

[Stephen Cootey, executive]

Yes. And just to clarify, outside of North Fork.

[Lorenzo Fertitta, executive]

Yes. I mean, our core focus, obviously, is Las Vegas, Las Vegas locals market. However, we do have a core competency of developing and managing tribal casinos. So in addition to North Fork, which Steve and Frank mentioned we're in the ground with, it's a great location.

We are active on the development side, looking for new opportunities, as we have been for the last 25 years on the tribal side. But it's just got to be the right opportunity, the right timing, and it all has to kind of line up. But I mean, we've actively looked probably at 5 or 6 just over the last year. Just -- we haven't found one that works for us yet, but we'll continue to look from a development standpoint.

[Operator]

And our next question today comes from Brandt Montour with Barclays.

[Brandt Montour, analyst]

I'm curious, we went through a lot of the headwinds next year, potential headwinds. Maybe we could talk a little bit about the tailwinds, specifically what you would typically see getting added back to Red Rock, mitigating that cannibalization you've seen so far in sort of year 2, as well as Durango or a new greenfield year 2 growth before the construction disruption there?

[Scott Kreeger, executive]

Yes, this is Scott. Great question. if you take Red Rock first, we spoke in the past about Summerlin West, which is the final phase of the Howard Hughes Summerlin project. In its completion over the next few years, it will add an incremental 34,000 households, just up behind the Red Rock location. So not only do we have a great story as it relates to household growth, but the average income in the area is one of the highest in the Valley, and we continue to see growth in average income in that area. So we're optimistic about the Red Rock backfill in the near term.

When you look at Durango, Durango sits in what's called the enterprise district of the city. It is, by far, the fastest-growing area of the city and probably has the largest amount of remaining buildable acreage in the surrounding area. So we're excited about Durango continuing to have its own growth story into the next year as well.

If you switch gears a little bit and you look at Sunset, it's one of the key reasons we're refreshing Sunset is the Henderson area around Cadence has got quite dynamic growth, and we think we're going to see upside from that continued growth in that area of the Valley as well.

[Brandt Montour, analyst]

That's helpful. A second question, the election just now behind us, I can't remember it well. I'm sure you guys can remember elections that had distractions to your database and your players before. But have you gone back and looked at sort of how in your state, in the State of Nevada, swing state, is that the activity pickup that you've traditionally seen post election? And if you think you'll see a similar sort of pick up post this election?

[Scott Kreeger, executive]

Well, when we looked at previous elections, there is definitely an impact, if you will, during an election year, and quite honestly, during an Olympics year as well. In previous years, it did drag on into December. But right now, as Lorenzo said, we're pretty encouraged with Q4 opportunities at this point.

[Lorenzo Fertitta, executive]

Yes.

[Operator]

And our next question today comes from John DeCree with CBRE.

[John DeCree, analyst]

You've covered a lot of ground. Maybe one on the promotional environment, largely speaking, across locals market. I guess a couple of your peers have talked about it maybe stabilizing or abating and, I guess, some of the single-asset operators in the neighborhood have maybe been a little bit more aggressive. So curious what you're seeing if you think it's died down at all and -- or stabilized and if it's had any impact one way or another on your business?

[Lorenzo Fertitta, executive]

Yes. It remains unchanged in our view. And what we think is a stable, rational environment that is very manageable.

[John DeCree, analyst]

Got it. And maybe one for Steve, just maybe a clarification, if I missed it, on the CapEx for next year. I think I heard $150 million for GVR. And was it $160 million for Durango? And then a quick follow-up, Steve, would be the disruption. Would we -- I'm sorry, Steve?

[Stephen Cootey, executive]

Yes. Sorry, it was $116 million for Durango, $150 million for Green Valley and $53 million for Sunset.

[John DeCree, analyst]

And $53 million for Sunset. Okay. And the disruption that you've outlined, I appreciate that. That's really helpful. The timing of those projects, should we expect that to kind of be kind of straight line throughout the year? Is there going to be a 1H or 2H where maybe some of the heavier disruption occurs?

[Stephen Cootey, executive]

Well, Green Valley is really going to be focused in that June and November period. So that's -- that one is really -- you can really pinpoint. Sunset is not likely going to bleed throughout the year as the last construction project is expected to come online before holiday at the end of the year. And Durango, I would say, similarly, it's probably in the middle part of the year is where the yeoman's portion of the construction is being done.

[Operator]

[Operator Instructions] Our next question comes from Dan Politzer with Wells Fargo.

[Daniel Politzer, analyst]

First, you've talked a bit about taverns in the past. I mean can you just give us an update on how you're thinking about that element of your strategy in terms of CapEx or units that you expect to open over the next few years?

[Scott Kreeger, executive]

Dan, it's Scott. Happy to say that a few weeks back, we opened our first tavern in the north part of town. So early performance is outpacing our expectations. So we're happy about that. We have 2 more coming online in the general area in North Las Vegas, which happens to be a very underpenetrated area for us. .

We have a product coming online in January and then the third tavern coming online in June. And then we have a total of 7 opportunities, and the remaining 3 will be scattered over the next year, 1.5 years. I think, in large part, we're attributing the early successes of the first tavern because of the interlinkage of the Boarding Pass program and the fact that we're relatively underpenetrated out in that market.

[Daniel Politzer, analyst]

Got it. And then just on the North Fork, the 4% development fee on presumably the $750 million. Is it -- do you get do you receive that upon the property opening? Or is it, along the way, do you get kind of pieces of that?

[Stephen Cootey, executive]

Yes. It's on the construction financing, and it's not going to be on the full $750 million. There's some puts and takes there.

[Operator]

And this concludes our question-and-answer session. I'd like to turn the conference back over to the management team for any closing remarks.

[Stephen Cootey, executive]

Thank you, everyone, for joining the call, and we look forward to talking to you again in about 3 months. Take care.

[Operator]

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful evening.