RCI Hospitality May Cancel Plans for Colorado Casinos Amid Dispute Over Costs

RCI Hospitality Holdings, Inc. (RCI), renowned for its adult entertainment venues, including Rick’s Cabaret, has been navigating a significant strategic juncture concerning its venture into the gaming sector, particularly in Colorado.

In December 2022, RCI made a decisive move by acquiring a property in Central City, Colorado, with the intent to establish Rick’s Cabaret Steakhouse & Casino, signaling a bold expansion into the gaming industry. This acquisition, totaling $2.4 million in cash, marked a strategic shift for the company.

The planned venture involved seeking a gaming license for the Central City location, with proposed offerings including slot machines and various table games, demonstrating RCI's serious commitment to diversification.

However, recent indications suggest a potential reevaluation of these plans. During the first-quarter earnings conference call, RCI's President and CEO, Eric Langan, hinted at the possibility of shelving the Colorado casino project due to regulatory uncertainties and financial concerns.

Langan highlighted the significant costs involved in regulatory processes and expressed reservations about extended approval timelines, casting doubt on the feasibility of proceeding with the Central City venture.

Key challenges faced by RCI:

• High regulatory and licensing costs in Colorado

• Prolonged approval processes delaying project viability

• Concerns over resource allocation and return on investment

This uncertainty has prompted RCI to explore alternative avenues for capital deployment, indicating a shift in strategic direction. Despite being primarily associated with adult entertainment, RCI operates a diverse portfolio of gaming venues and sports bars across the country, reflecting its adaptive approach to business opportunities.

The $2.4 million investment in the Central City property represents a substantial allocation of resources for RCI, especially given its market capitalization. If gaming operations cannot proceed, the project's viability will be questioned.

Possible directions under consideration:

• Reallocating capital toward share buybacks to enhance shareholder value

• Strengthening focus on existing business operations

• Exploring non-gaming opportunities at the Central City site

With the Colorado casino plans in a state of limbo, RCI is actively reassessing its options, including the potential reallocation of resources and a renewed focus on core business operations.

Despite uncertainties surrounding the casino venture, RCI remains committed to Central City as a strategic location for expansion.

Plans for Rick’s Cabaret Steakhouse and a new Bombshells restaurant are underway, emphasizing continued investment in the region.

Future outlook for RCI in Central City:

• Continued development of dining and entertainment venues

• Leveraging existing gaming market activity in Colorado

• Maintaining brand presence through diversification

Even without gaming operations, RCI believes its adult entertainment and dining offerings can capitalize on growth opportunities in Central City, leveraging Colorado's thriving gaming market and existing gaming establishments in the area.