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Pinnacle Entertainment (NYSE:PNK)

Q3 2012 Earnings Call

October 24, 2012 10:00 am ET

Executives

Vincent J. Zahn - Vice President of Finance & Investor Relations

Anthony M. Sanfilippo - Chief Executive Officer, President, Director, Chairman of Executive Committee and Member of Advisory Committee

Virginia E. Shanks - Chief Marketing Officer and Executive Vice President

Carlos A. Ruisanchez - Chief Financial Officer and Executive Vice President

Analysts

Felicia R. Hendrix - Barclays Capital, Research Division

Joseph Greff - JP Morgan Chase & Co, Research Division

Jon T. Oh - Credit Agricole Securities (NYSE:USA) Inc., Research Division

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Cameron Philip Sean McKnight - Wells Fargo Securities, LLC, Research Division

Kevin Coyne - Goldman Sachs Group Inc., Research Division

Carlo Santarelli - Deutsche Bank AG, Research Division

Operator

Good morning. My name is Tashana, and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2012 Earnings Conference Call. [Operator Instructions] Mr. Vincent Zahn, you may begin your presentation.

Vincent J. Zahn

Thank you, Tashana. Good morning, everyone. My name is Vincent Zahn, Vice President of Finance and Investor Relations for Pinnacle Entertainment. Thank you for joining our 2012 Third Quarter Earnings Conference Call, and thank you for your interest in Pinnacle Entertainment.

Earlier this morning, we released our third quarter 2012 financial results. If you don't have a copy of the announcement and would like one sent to you, please contact us by e-mailing investors@pnkmail.com.

On the call with us today is Pinnacle Entertainment's President and Chief Executive Officer, Anthony Sanfilippo; our Chief Marketing Officer, Ginny Shanks; and our Chief Financial Officer, Carlos Ruisanchez. We'll begin the call with prepared remarks from Anthony, Ginny and Carlos, and then we'll open up the call for your questions and answers.

Before we get to that, we'd like to remind you that during the course of this conference call, management may state beliefs and make projections or other forward-looking statements regarding future events and future financial performance of the company. We wish to caution you that such statements are just projections and expectations, and that actual events or results may differ materially. We refer you to the Safe Harbor statement that's included in the press release and to our annual report on Form 10-K, quarterly reports on Form 10-Q, and to our press releases and documents filed with the SEC.

It's my pleasure to turn the call over to Pinnacle's President and CEO, Anthony Sanfilippo.

Anthony M. Sanfilippo

Thank you, Vincent, and good morning, and welcome to Pinnacle Entertainment's 2012 Third Quarter Earnings Call. You'll hear this morning from Ginny Shanks, our Chief Marketing Officer, Carlos Ruisanchez, our Chief Financial Officer following my comments. We're going to also take questions from those who would like to ask questions who are on the call.

Well, we have a number of highlights in our third quarter, we're especially pleased to have opened L'Auberge Baton Rouge on September 1. We have received terrific feedback from the guests on the quality of the property and more importantly, the level of service that our team members are providing to our guests. We will be diligent as we've done in other locations, methodically build a profitable revenue base. Our goal when we designed at L'Auberge Baton Rouge was to build a destination property that would compete with other like properties within a 90-mile radius within the region. The guests who have visited the property are telling us we have achieved that goal.

Our L'Auberge Lake Charles and our St. Louis property has seen an outstanding quarter. We continue to improve the financial performance of our properties, breaking financial records quarter after quarter. Let me be clear on the reason that this is occurring, and that is because we have a very talented and most importantly, aligned team members and how we operate our company. And while we continue to achieve improved financial results for our company, we're also providing memorable experiences for our guests. We are focused on providing value to our guests, team members and shareholders each and every day.

Ginny, we've had a number of positive events occur this year as we continue to build a stronger Pinnacle Entertainment. Please share additional information on the quarter.

Virginia E. Shanks

Thank you, Anthony, and good morning. I'm going to spend the next few minutes talking about the opening of our newest property, L'Auberge Baton Rouge, guest behavior trends seen in the quarter and notable property performance metrics.

Starting first with L'Auberge Baton Rouge opening, we have seen strong visitation as evidenced by over 48,000 new mychoice sign-ups during the first months of operation. VIP business has opened up ahead of pace and we're optimistic about our ability to drive continued play from this segment given the high quality amenities at this property.

Showing our ability to expand the Baton Rouge market with the growth rate of nearly 70% in September, we are attracting guests from both local and regional markets. Our universal card program is in place at Boomtown, New Orleans and Boomtown, Bossier, and we saw strong visitation to Baton Rouge from Pinnacle guests during the first month leading to incremental revenue for the company as these trips did not replace those made to the home properties. L'Auberge Lake Charles will be added to the universal card system by mid-December, linking all of our Louisiana properties by year-end.

Turning now to guest behavior trends seen in the quarter. July was soft with business progressively stronger in August and September. On average across the company, but excluding Baton Rouge for comparative purposes, trips were down modestly from prior year. Part of this was driven -- or excuse me, part of this is by design as we continue to focus on driving profitable revenue and part of this is driven by Hurricane Isaac. Spend per trip was up slightly with the greatest increases seen at Belterra, Lumiere and River City properties.

Our revamped mychoice program continues to drive increased play consolidation as current projections show we are on pace to grow our top 3 tiers by double-digits again this year. These results are being delivered with more efficient and effective marketing spend. For the quarter, marketing expense as a percent of gaining revenue was down 60 basis points. This marks the third consecutive quarter where marketing reinvestment has been reduced versus prior year.

Now, let me turn to notable property performance metrics starting first with L'Auberge Lake Charles. This property had a stellar quarter with records set in gaming revenue, net revenue, non-gaming revenue and EBITDA. High-profile events continue to drive strong VIP visitations and more effective marketing reinvestment yielded improved financial results. In St. Louis, we achieved an all-time quarterly record for market share at 33.6%. During the quarter, we saw solid increases in our VIP segments at both properties. Table game growth continues to be a great story at Lumiere, up 21% year-over-year and [indiscernible] for the quarter.

River City's growth was driven by increased play on day-of-trip and overall increased frequency of visitation. Our continued focus on driving profitable revenue is again evident in the results coming out of St. Louis with marketing expense at the percentage of gaming revenue down 180 basis points versus prior year. With these strong results, it's important to note that the River City team has done a terrific job at managing construction disruption since early this year, and we're all looking forward to the opening of the new parking garage in late November.

At our Belterra property, we achieved our highest market share in the last 8 quarters. We continue to grow admissions in a declining market and we remain focused on leveraging our unique assets while maintaining our marketing spend discipline. The Boomtown Bossier team continue to execute against the focused strategy in a tough market. In the third quarter, we outperformed the market again and grew share by 40 basis points.

In New Orleans, the property and the market are clearly struggling, but underlying trends at Boomtown got progressively better throughout the quarter, notwithstanding the impact of Hurricane Isaac. To improve results, we're focused on removing nonvalue-added expenses from the business, increasing both the effectiveness and efficiency of our marketing programs and leveraging the unique amenities at L'Auberge Baton Rouge to incent play at Boomtown, New Orleans.

Wrapping up, the Heartland Poker Tour continues to be a terrific addition to the Pinnacle family. We're looking forward to concluding the eighth season with the Championship Open Event at our Belterra property in November.

All in all, a very solid quarter with the successful opening of L'Auberge Baton Rouge, continued focus on driving profitable revenue and record-setting results at L'Auberge Lake Charles and in St. Louis. I'll turn the call over to Carlos.

Carlos A. Ruisanchez

Thank you, Ginny, and good morning to all on the call. We've made a lot of progress throughout our business in the third quarter.

We continue to make operational enhancements across our business, which is reflected by a growing cash flow and expanding margins. In this quarter, our same-store EBITDA margins improved 174 basis points year-on-year. We welcomed our newest member of our portfolio in Baton Rouge to glowing reviews on September 1, and we hosted our first investor day there in mid-September. Early indications point to confirmation of our thesis in making this investment as L'Auberge Baton Rouge grew the reported gaming revenue -- the overall Baton Rouge market by nearly 70% during the property's first month of operations.

L'Auberge Baton Rouge supported EBITDA of $1.5 million in this month and we look forward for the ramp up of this property in a meaningful return of investments to our shareholders.

We have made significant progress in our share repurchase program. As of yesterday, we repurchased about 5.5% of our shares outstanding since announcing the program in July. We have tremendous conviction in the value of our company and are very pleased to be purchasing shares in what we view as very compelling levels.

Turning to our development pipeline. On River Downs, as we noted on the release, we have started the process of redeveloping River Downs in Cincinnati. We have master-planned a facility that will provide a wider range of entertainment options and capitalizes on the property's location and demographics of Cincinnati.

Rather than open in multiple phases as we had originally planned, we have combined the development to a single phase in an effort to better accommodate the 2013 horseracing season. The project is expected to cost $209 million excluding license fees, land and capitalized interest. We expect to begin construction this year with the entire facility scheduled to open in the first half of 2014.

We have master-planned this facility for future expansion should demand conditions warrant the additional investment. We are very excited about the prospects of this facility and look forward to its addition to our portfolio of market-leading properties.

At River City in St. Louis, the $82 million expansion is progressing rapidly with the parking garage expected to open in about a month. The multipurpose event center is expected to come online before the end of next summer, and the hotel will open in the second half of 2013.

On Asian Coast Development, ACDL has received about $54 million of the $60 million capital raise that was previously announced in August. As a reminder, Pinnacle committed to investing $15.6 million for its 26% pro rata share of that capital raise. To date, we have contributed about $14 million of the $15.6 million, and we expect the remaining funds to close in the fourth quarter. ACDL continues to make meaningful progress on the development, and while there is work to do on the regulatory front, the project remains on track to open in the first quarter of next year. On Retama, we continue to make progress on the acquisition of Retama Park in San Antonio Texas. We expect the transaction to close in the first quarter of 2013.

On our balance sheet, we are in great shape with our net leverage remaining at around 4.5x in the third quarter despite significant expenditures on our development projects during the quarter. With Baton Rouge now open, cash flow from this property will help facilitate the buildout of our remaining development pipeline and we expect River Downs and the expansion of River City to contribute meaningful cash flow and value to shareholders without compromising our liquidity profile.

In summary, we're excited about our prospects, our portfolio and our development pipeline. We believe we have a strong financial profile, room for further operational improvements, and a team in place to execute our strategic objectives. Over the next year, we hope to continue to deliver value for all our constituencies and stakeholders at our company.

And with that, I'll turn the call back over to Anthony.

Anthony M. Sanfilippo

Great. Thank you, Carlos. And we are going to open up the line to anyone that may have a question.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Felicia Hendrix.

Felicia R. Hendrix - Barclays Capital, Research Division

I'd like to start on -- just a question on St. Louis. Margin expansion was obviously impressive and, Anthony, I know you don't like to identify targets, but is there a reason why you can't expand margins at that property close to where some of your competitors are? For example, Ameristar. I know there's some structural differences but barring that.

Anthony M. Sanfilippo

The simple answer is no, there's not any reason why we can't expand margins there. We daily focus on taking things that are not of value out of the business and growing profitable revenue. We also continue to work -- one of our largest expenses is our marketing expenses, we continue to work to refine our marketing strategy and reinvestment to our guests.

We think we've got a great opportunity with a material change happening in St. Louis with the Caesars property, Harrah's, leading the market. They've had a large presence there, they've been there a long time. We believe part of their strength has been their loyalty program. We believe we've got the strongest loyalty program in the industry and we think that that's going to help us with this transition to improve upon our loyalty program and really build upon our guest base at the higher level. So I think you've seen results of -- we continue to improve our margins, not only in this property but all of our properties. And we're doing it in a way, Felicia, that we think leads to a very sustainable long-term viable company, as opposed to coming in and just making some dramatic cuts that may benefit in the short term but won't help the business in the long term.

Felicia R. Hendrix - Barclays Capital, Research Division

Anthony, just to a play devil's advocate for a moment. One could argue that Caesars has just hasn't really been paying attention to that property and when Penn comes in there'll be an invigorated energy level there. Obviously, you thought that through, but do you expect this, given your answer, I obviously understand that. But just wondering if you have any thoughts on Penn running that property versus Caesars?

Anthony M. Sanfilippo

Yes, I absolutely do. Penn is a very good operator and they do a nice job in all the markets that they're in. Penn though is not known in St. Louis. So Penn is going to have to build their presence with the Hollywood brand in Saint Louis. I do believe we have seen that it's difficult for people to make a change. And so we think that there's still a number of customers who have been very loyal at the Harrah's property, really, due to that total rewards that will now cause them to look up and start to decide if they would like to have a different experience that is going to help create by the improvements we're making at River City. As you know, we're adding a hotel that will be in place by the end of '13 and a parking garage will open up by Thanksgiving. So we like the position that we're in and what's happening with competitors today in St. Louis.

Felicia R. Hendrix - Barclays Capital, Research Division

Okay. That's really helpful. Ginny, on Baton Rouge, you'd mentioned that the property benefited from local and destination guests. Just wondering if you could talk about the mix of the definition guests, where are they mainly coming from? I know you targeted the Gulf Coast in New Orleans and we've seen reports recently about New Orleans being impacted. So just hoping you can give us more color there.

Virginia E. Shanks

Sure, Felicia. The bulk of our visitation, in the first month did come from the local market, although we've seen some nice gains out of New Orleans and the Gulf Coast. We expect those outer markets to ramp up over the next couple of months. We just launched our new advertising campaign a few weeks ago in those markets. We saw, also as I mentioned, nice play from Boomtown New Orleans guests who came to L'Auberge Baton Rouge and then when we looked at their play back at their home property, in this case, Boomtown Orleans, we saw that their play in Baton Rouge was incremental to the company. So just to simply answer your question, mostly local in the first month as you would expect, but seeing some nice gains coming out of the Gulf Coast in New Orleans as the month progressed.

Felicia R. Hendrix - Barclays Capital, Research Division

And then a quickie, for Carlos. On Vietnam, I'm just wondering if you could just address the remaining regulatory hurdles there.

Carlos A. Ruisanchez

Sure, Felicia. Certainly, the company continues to work through the regulatory framework. The gaming decree is now going through a review process within different ministries in Vietnam. The particulars surrounding that are probably not appropriate in this forum until there is finality through that process. We can tell you the company continues to make great progress to this end and we expect the property to be functioning by the end of the first quarter of this coming year.

Operator

Your next question comes from the line of Joseph Greff.

Joseph Greff - JP Morgan Chase & Co, Research Division

A few questions for you. Number one, I was hoping you can help us understand at Baton Rouge mix between slot gaming revenues and table gaming revenues?

Anthony M. Sanfilippo

Joe, we don't discuss that level of detailed information on any of our properties, that's not something that we specifically talk about. I will tell you that we believe we have opportunity on the higher-end table play to build that business, that is a business that builds over time, and we think that there is great opportunity to build credit play, to build the table game business. But we feel the same on the slot side. We're pleased with September and initial results. October has a bit different calendar and, but we're pleased with what we see in October, and most important, we really feel like we nailed this facility. It's a terrific facility with a wonderful management team that we're very optimistic over time we're going to build profitable revenues and have really good financial outcomes here.

Joseph Greff - JP Morgan Chase & Co, Research Division

Okay. And then you mentioned in New Orleans about taking out nonvalue-added expenses. I'll ask if you want to help us quantify that, and/or give us a sense of what those expenses entail and how big opportunity that could be?

Virginia E. Shanks

Sure. We have looked at marketing spend, as Anthony mentioned, that's, as with most casinos, a significant portion of our expense structure. And we have evaluated programs that we implemented earlier in the year, those that have not worked, we've either refined or we've eliminated and put back in core programs that we had seen in the past be successful. So we're looking to, again, take out programs that we haven't seen move the needle in New Orleans. And not just redeploy all those marketing dollars, but look to put back in core programs that have worked. And then take some of those dollars, if needed, to the bottom line if it's not accretive to the business. So it's really a hard look at the marketing and effectiveness of our program.

Joseph Greff - JP Morgan Chase & Co, Research Division

What was the diluted share count at quarter end, Carlos or Vincent?

Anthony M. Sanfilippo

We were approximately about -- just over 59 million.

Operator

You're next question comes from the line of Jon Oh.

Jon T. Oh - Credit Agricole Securities (USA) Inc., Research Division

Just a quick sense on Baton Rouge. Maybe you could give me some color as to the foot traffic coming in. Would you know how many percent of that, foot traffic is coming in from existing members or cardholders of your program versus brand-new people that are coming into the property?

Anthony M. Sanfilippo

We -- John, we're building our database there. We obviously didn't have a presence in Baton Rouge, and so we talked about that we've had close to 50,000 mychoice sign-ups. So we're -- that is all-new guests that we have into Baton Rouge. We also have been implementing this universal card system and we'll have all of Louisiana complete on 1 universal card system, reward program card system, by the end of this year. Really, the majority of the business that we've seen in Baton Rouge to date has been much closer in around Baton Rouge. We think that people are making decisions who live in the general Baton Rouge area to come see us as opposed to going to other properties out of the market. And we know our opportunity is to continue to expand our reach to about a 90-mile radius.

Jon T. Oh - Credit Agricole Securities (USA) Inc., Research Division

And I may have missed this in the opening remarks earlier, but could you maybe just give me some -- on L'Auberge, what opportunities are there remaining for you to keep growing revenues? And from a margin perspective, we've seen pretty steady margin improvement in that property. Going forward, is that going to come from more from a cost side are it's going to come from incremental dollars that are still left on the table?

Anthony M. Sanfilippo

In our Baton Rouge property, it's income from both. I mean, we were very focused on opening the property and opening it well, which we did. And we will more rationalize our cost base there over time as we settle into that property. And we're just beginning to really go through and develop our database and our customer base for the Baton Rouge property.

Jon T. Oh - Credit Agricole Securities (USA) Inc., Research Division

But I meant L'Auberge du Lac, not the Baton Rouge.

Anthony M. Sanfilippo

Oh, I'm sorry.

Carlos A. Ruisanchez

Sure. Jon, in Lake Charles, we continue to feel the same way that we've talked all along. Houston is a very under-penetrated market where we think that there is a lot of unmet demands, and we've been able to yield that facility meaningfully better over the last couple of years mostly by having more profitable guests that come through our place, given the depth of that market. And so we think that there is certainly room to go there, and we've made enhancements through our facilities to make sure that we can take advantage of that demand.

Jon T. Oh - Credit Agricole Securities (USA) Inc., Research Division

And on the non-gaming revenue side, we've continued to make enhancements that drive non-gaming cash revenue, which is part of the story, too.

Operator

And your next question comes from the line of Shaun Kelley.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Just wanted to talk real quickly one more on Baton Rouge, I guess, while it's been the hot topic this morning. Just wanted to ask about the cadence of the expense ramp up. You guys have addressed the top line some but just -- in the past, I think when you opened in St. Louis, which at the time is a new market to you, it took 3 or 4 quarters before you could kind of ramp down some of the promotional spend and you got the database to the size you wanted it to be to get -- to really start to get operating leverage at the property. So kind of wondering what's your sense of how long it's going to take on the expense side before we start to see margins really ramping at that property?

Anthony M. Sanfilippo

As you know, we've had our River City property open 2.5 years now. And you're continuing to see improvements in our expense structure there and a build on profitable revenue. I don't think that that's unreasonable from the Baton Rouge standpoint that we are very methodical as we operate properties. We really don't react to try to make a quarter look good. The team that we have there, the general manager is Mickey Parenton, he has a terrific team in place. He'll work closely with Ginny and Matt Ryan and others to really have a long-term strategy to build a very solid revenue base that will be profitable revenue, and then at the same time, daily looking to rationalize expenses. But it's -- we are very methodical about it because I've seen many other companies who really try to manage to a quarter and they screw their business up. And that's the reason I think you continue to see very solid quarters from Pinnacle Entertainment is because we have been methodically building the base of the business at each one of our properties to make our company as strong as you see it.

Carlos A. Ruisanchez

Shaun, I was just going to add, obviously, when you first open a property, you load up on expenses throughout and those naturally fall off as the property goes into its own. So there will be improvements that you should continue to see quarter-after-quarter, but it will take somewhere in the neighborhood of, call it, 2 to 3 years to get us to what you may perceive as more of a steady state business growth.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Great, that's perfect. And second I just wanted to ask about Belterra that actually -- I know it's smaller, but it did beat our expectations by quite a bit. We've seen top line softness elsewhere in the Southern Indiana market even in Central Indiana. And so, I was just wondering if you could talk about that market specifically and what you guys are doing differently to looks like production pretty meaningful share in EBITDA gains?

Anthony M. Sanfilippo

Yes, we're very proud of Belterra. We continue to say it is by far the best property in a multistate area. It is a full integrated resort. It just takes a little bit to get there, that's the difference. So it doesn't have the local convenience that other properties has, but we think both from a product standpoint and a service standpoint, it's far outdistanced the competition. Just like we've talked about with other properties, we have been yielding the quality of the guests that will come into our 600-plus-room hotel. And while we are very aware of increased competition coming to Cincinnati, we believe we've got a unique asset there that we're going to continue to be able to yield through better experiences for higher-end guest and the property continues, as we've talked about, more rationalized expenses. So I think people lose sight of -- that is a full resort with a spa, with the golf course, with a 600-room base of hotel rooms and it's a quality facility.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

So, maybe just to be clear, do you think the margins that you guys did this quarter are sustainable going forward?

Anthony M. Sanfilippo

I do. We don't think -- and I know you all look to talk with us about margin expansion, we are very much focused on continuing to expand our margins but do it in a way that it's sustainable over time and that it's not short term. And I believe that's what you see that what we're doing quarter-after-quarter.

Operator

Your next question comes from the line of Cameron McKnight of Wells Fargo.

Cameron Philip Sean McKnight - Wells Fargo Securities, LLC, Research Division

A slightly bigger picture question first. When you're speaking to customers, what do you sense is more important, equity markets or gas prices? And do you think the election is having some sort of impact on sentiment at the moment?

Anthony M. Sanfilippo

Having a great time in the facility seems to be most important to them. So I know what you're looking for from an opinion on the economy. But when mostly speaking with our guests who come in to our facilities, they're focused on the ability to spend some of their disposable income and free time in a way that leads to an enjoyable experience. Now, I do think because of the regional markets, that gas prices, our guests are very well aware of, but I don't think it's a major issue. I think it is just a -- it's more of a bit of lagniappe, a little something extra, when they see a meaningful price drop, but don't think it's a big issue. And I really think that what's happening in equity markets are, for most of our customers, except for some of the very high end, it's not a big issue.

Cameron Philip Sean McKnight - Wells Fargo Securities, LLC, Research Division

And just moving on, when you're talking about more efficient marketing spend, is it about tweaking your existing programs? Or is it about reducing overall levels of promotional allowance? And then to follow up, how much of the margin improvement do you think is -- has been driven by the continued rollout of mychoice?

Virginia E. Shanks

Yes, when we look at marketing reinvestments, we isolate every marketing program that we execute at every property, and we look at the revenue that it drives and the expense that it took to drive that revenue, and whether or not it incented an incremental trip or not. And so we're able to really drill down to determine what programs are the most effective. And those that are, obviously, we continue to do. Those that are not, we don't just eliminate them, we often look to see what we can do to revise them. So we're very methodical about how we test and we learn and we understand before we make changes. It's important to us that our customers have a consistent experience with us that they don't see wide fluctuations in the offers in which we provide to them on an ongoing basis. So we're lucky that we had information that helps us make smarter marketing decisions. I will tell you the mychoice program continues to be really the nucleus of our marketing program. It is the continuity program that people enjoy with us. It is the reward structure that we put in place 2 years ago -- or a 1.5 years ago, that continues to see switching behavior in customers who have all come to us by way of mychoice. And we're on pace this year to again see double-digit growth in our top 3 tiers, which again speaks of the power of mychoice. And if you have a strong loyalty program, you don't have to spend as much money on separate programs in which you incent visitation, because people, if they value your loyalty program, that will be their first course of decision when they visit a property. So we stay very focused on mychoice.

Anthony M. Sanfilippo

Yes, and they value the experiences they receive at the property. I think that -- I can't emphasize that enough that how our team members are treating guests at properties, the quality of the food, the quality of the gaming experience, the cleanliness of our properties. That, coupled with the loyalty program we have, is what makes the experience at our properties.

Cameron Philip Sean McKnight - Wells Fargo Securities, LLC, Research Division

Great. And a final question, perhaps, for Carlos. In Vietnam, there's been a fair amount of negative commentary that's been floating around recently. As ACDL and MGM gear up to open the property, could you perhaps walk us through what you see as some of the different buckets of demand and where you see players coming from?

Carlos A. Ruisanchez

Sure. We certainly feel like there is great potential in this investment and think that ACDL has a bright future in the context of the Asian gaming market. That property certainly will draw from all areas of Asia, Southeast Asia. In particular -- clearly China is a big feeder of the tourists into Vietnam. Currently, we expect that to continue and grow from there. But more importantly, Vietnam is part of Asian set of countries that allow with a passport, as opposed to a visa, to fully enter in and out. And among those countries, Bangkok, Malaysia, Singapore, the Philippines, all will have that advantage over some of the Asian play that clearly would be restricted by visa constraints in and out of the country. So there is a broad array of markets. I know Korea is surprisingly a big feeder in tourists into the country. And we think the golf resort aspect of it will drive some of that visitation. So we don't think that there's going to be any shortage of demand out there at that facility.

Operator

Your next question comes from the line of Kevin Coyne of Goldman Sachs.

Kevin Coyne - Goldman Sachs Group Inc., Research Division

Just a follow-up for Ginny on the strength of the top-tier growth in mychoice. It would seem that perhaps a lot of that growth could be coming from St. Louis, as some of the Harrah's members kind of switch properties. I was just curious, is that mostly where you're seeing the growth or is it broad-based?

Virginia E. Shanks

It is broad-based. We're seeing growth at all of our properties with the greatest gross coming in our St. Louis markets and with L'Auberge Lake Charles.

Kevin Coyne - Goldman Sachs Group Inc., Research Division

Great. And a question for Anthony. Just with Baton Rouge, I was just curious if you're seeing enough demand where you're going out and buying more hotel rooms beyond the capacity in the tower, and if you could give any color on that. And perhaps, if you've started any airlift programs with the local airport.

Carlos A. Ruisanchez

Sure. The demand we've -- see today it's Friday, Saturday, so we have 205 guestrooms there and we're full on the weekends. We're still building occupancy during the mid-week. We do have relationships with a couple of really nice hotels that are very close to the property. A couple of terrific hotels, actually. And we do have room blocks with those hotels, but we more utilize them today on the weekends. There is a lot of commercial air, believe it or not, that comes into Baton Rouge from Dallas, Fort Worth, as well as from Houston. We haven't started any specific charter programs, although depending on the value of the guest, we do charter planes for high-worth guests at our properties. It -- again, it'll be a methodical build in how we build this property, and we're going to be very, very careful that we're building it in a way that we believe will create long-term loyalty. Now, the other issue that we're very, very surprised with is parking. And on the weekends, we are finding because we might have had entertainment or our food outlets, which have been very well-received, that we were running out of parking. So we're moving forward with adding additional parking and we're fortunate enough that we have 500 plus acres around us that we can continue to better serve the property with not being landlocked. But we are adding additional parking because of the peak periods. The one last comment, and this has to do with non-gaming entertainment and non-gaming revenue, is that we put in a festival ground where we can do concerts, and we've had a couple of events and it's adjacent to our property. And they've been just greatly received by our guests. And the property is doing what we thought it would do. The Baton Rouge area has really lacked a high-quality casino entertainment facility. And that, we believe, when we went to design this and build it, that we would benefit over time by putting a really high-quality regional destination, and early results are very positive for us.

Kevin Coyne - Goldman Sachs Group Inc., Research Division

Great. Just, I know it's early days, but I know there -- sometimes there's big events at the campus there, obviously, with football games and whatnot. Any sense as to whether those have been positives or negatives in terms of creating too much of a crowd or distraction?

Anthony M. Sanfilippo

Yes, we've got a good feeling for it. When the games happen at 7:00 at night at LSU Stadium -- we have a terrific sports bar and grill called Stadium. People are in it an hour before to get a seat and it stays packed. And then once the game lets out, we see a lot of people who were at the game come over to our facility. We have found the games -- there's been 1 game that started 11:00 in the morning, that probably is a little bit better for us if the game is an earlier day game, which gives people time to go to the game and then come over to our place for the evening. So you got to keep in mind that a season is pretty short, there's 5 or 6 home games. So we're just really talking about 5 or 6 days during the year. But we believe about 200,000 people travel to Baton Rouge for the games. So there's a lot of people that are in town. In fact, the South Carolina game that was just there over half of our hotel was filled with people from South Carolina. And give -- we're brand-new people everyday are saying, guys, I didn't know you're here. So just because we all know that the property is there, our focus is on building awareness over time and those who have come to the property are very pleased with it. And that's when we talk about it'll take some time to build awareness. It just takes some time. But those -- what was most critical is that we got the facility right and we got the service right from the word go, and we feel like that's what happened. And so now, we're focused on building a guest base that we'll service well over time.

Operator

And your last question comes from Carlo Santarelli of Deutsche Bank.

Carlo Santarelli - Deutsche Bank AG, Research Division

Ginny, you commented earlier about July trends being somewhat soft and getting stronger in August and September. Obviously, we've seen some of the October is about 3 weeks old right now. Would you be able to kind of provide some color on what you're seeing in October and then you also mentioned spend being slightly up. Is that more of a mix driven where you're getting a little bit more maybe from the higher end of your customer tiers? Or are you seeing that pretty broad-based across the customer segmentation?

Virginia E. Shanks

Sure, let me talk about the October calendar and what we've seen thus far. It is an unfavorable calendar this year where we're swapping a Saturday for a Monday, but we would expect that to normalize obviously as the quarter goes on. But there's a calendar deficit in October similar to what we saw in July. And in terms of the spend per visit increase, it is coming largely from our top 3 tiers, the quality of the guests that are visiting, our properties and the incentives that we are providing to them are yielding higher spend per visit.

Anthony M. Sanfilippo

Operator, that is going to conclude our earnings call. I want to thank everyone who has joined us on this call. I also want to thank those Pinnacle team members that have also dialed in. We very much appreciate the great work that you're doing, and we look forward to continuing to have discussions like this with you that talks about the progression of our company. Thank you all very much for being a part of the call.

Operator

This concludes today's call. You may now disconnect.

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