Tilman Fertitta on the Restaurant Alternate, Gaming and NBA Income

Tillman, let's start off here.I do want to start off in the restaurant space here, and that's what a lot ofpeople know you for here. That empire has been expanding, butthere's been a lot of questions, a lot of concerns here about how much isexpansion is left in that tank. Well, from a restaurant standpoint, youknow, our population continues to grow when restaurants close and newrestaurants open up. And and as you watched it for the last30 years, the people that change, change, change and change with what theconsumer wants, you're going to be successful.And the people that don't change, you're.

Going to close and you always haveenough people that don't change. So you don't ever have to worry aboutbeing overpopulated with restaurants, certainly not when it comes to demand.There's the demand side of it, but there's also sort of your own inputshere labor costs and food costs and things like that, things that gotdisrupted during the pandemic. Are they back to normal?TILGHMAN Well, they're back to normal, but youryour cost is so much more today. And people try to understand why does itcost so much to eat out today? What they don't understand is that ourfood cost is 20% more than it was five.

Years ago, and our labor cost is 20 to25% more than it was. And that's why you pay that.You paid $30 for something, you paid $40 for it today is to make up for that.And that's the way the supply chain is from a people standpoint and a coststandpoint. It's electricity, it's it's labor, it'soccupancy, it's all the above. And that's just the new costs inAmerica. But at the same time, everybody makes alot more money today than they did five years ago.Well, what does this mean for how consumers are spending?When you look at kind of the luxury high.

End, we're hearing a lot of anecdotalevidence about the sticky spending you're seeing, particularly onrestaurants and travel. But do you see a bifurcation onAmericans who may feel a lot more stung by the weight of inflation today?100%. Okay.Like, let me give you an example. 21 and 22 for the greatest years thateverybody had in high end retail, high end restaurants, casinos, okay.And 23 without all that government, trillions of dollars out there with thatsame consumer, you've gone back to a normality to your high end restaurants.Now, your your your lower casual in.

Dining, you know, say my rainforestbubble gum, salt, grass steakhouse, even your charred houses and those type ofconcepts but your catch your mashed rows, your morton's your Del Frisco's,your high end steakhouses are not doing the business that they were doing in 21and 22. We're more back to the 19 levels and theearly, early 20 levels. When we think about how people arechanging the way they spend. Let's move from restaurants to gamingfor a second here. You have Caesars coming out, reallydisappointing investors here on the the Vegas numbers that they're putting outthere, but really highlighting digital.

A lot of talk about online gamingDraftKings after the Super Bowl of which of course you have a large stake afterthat Golden Nugget deal. How do you think about how consumers aregoing to be spending on gaming and betting moving forward after thispandemic era? Well, I think they're going to continueenjoying it. And everybody loves the entertainment ofgaming. The national gaming numbers were like 62billion for gaming companies last year, which is huge.But but you've got to remember, okay, we all in 21 and 22 big because our marginswere so high because we couldn't get.

Employees.And also there was so much extra money out there.We all had monstrous numbers and it started to come down a little bit in 23.And it's all this regional gaming is is it's not going to be what it was in 21and 22. And that's why it's starting to slowlycome down toward normality. But at the same time, we're all doing alot more than we did in 19 and of course, 20.Let's not even talk about 20. It's a year that didn't exist.Yeah, but you're not going to do 21 and 22 numbers anymore.You're just it's not going to happen.

And so when people say, Oh my gosh,Caesar's, you know, isn't doing that, those numbers in their regional casinoscompare them to 19, do not compare them to 21 and 22.Don't compare any company when it comes to the consumer of what they're 21 And22 numbers were, oh, you're making a mistake and you're going to bedisappointed. I think a lot of investors have alreadypicked up on that. Tilmon I do want to pivot to sports, andI once again want offer our apologies to you, obviously.The Houston Rockets. Yeah.Yeah.

And we can laugh, too.I mean, I was just watching the all star game, and there's been a lot of talkabout the new NBA contract. There's been a lot of talk about thedecline of regional sports networks. And I'm just wondering where you see therevenue streams for sports coming from longer term here.What do those contracts start to look like?Well, you know, the players and the owners are in the same boat.Okay, We're partners.They get X amount of our our basketball revenue and our revenue related to to tobasketball and anything to do with it.

And so we're all in this together.And and if we do want to continue to grow the value of these teams, we've gotto figure out television and streaming. But at the same time, all thesecompanies that televise this have a right to make money also.Yeah. And so I understand what what Fox andESPN and Discovery are doing, but in trying to shut everybody else out andand trying to make it work for all of us and themselves.And so I'm very sympathetic, but I don't I don't think I know where it's going.I don't think anybody knows where it's going.But when the NFL contracts are up and in.

30 with the networks, things are goingto definitely change. Right.Because well, I can tell you this, people want to watch games ontelevision. They do not want to watch them on theirphone. Okay.Well, I don't know. I'll I'll push back on that.Tell me. I mean, we've seen a lot of folks,particularly younger generations, that are much more comfortable watching iton, you know, their mobile devices rather than on the couch in front of theactual TV that maybe some of us are used.

To here.I mean, how do you adapt for a world where you are going to have just a muchlarger percentage of the population that, let's just say, wants analternative? Well, let's say this.You could still stream it to your TV. But.But I know when I have to watch a game on my phoneand when my kids who are very into the Rockets are watching it, we want towatch it on a big screen TV. Now,I can't tell you, but I know our group of friends, they're young friends.But I guess we're going to do what we.

Have to do.But I still don't ever see those big televisions in all of our homes andbusinesses going empty. That's why bars, restaurants, everybodyhave big TVs in their establishments today, because sports is religion.And the one thing that we all have in common is watching our sports teams.Do you think, though, that the cable networks and the big networks will atleast give a little on that when you guys go into negotiations?Because it's going to be a topic that comes up, whether whether people reallywant it or not. There has to be some component wherethere's a balance between those two.

And I'm wondering how much give do youthink you're going to see there? I think there's going to definitely begive. But I also think you're going to alwayshave the ability to stream it on your TV.And it's amazing, you know, that when you had Netflix and everybody and thenall of a sudden now the TVs come out and you can get it right off of your TV thatyou don't even need the box. Okay.So new technology is going to keep up with whatever the companies need to doto be successful, and it's going to become part of our everyday life.But when you start talking about what's.

Happening now with the streaming, wewill adjust to it and we will adapt to it.But let's all be honest, it was much more difficult to watch an NFL game thisyear when you were used to on Direct TV when you had the the the NFL's ticketjust to go on to another channel instead of having to go to a whole nother systemand YouTube this year. So we all had to learn a lesson thisyear that it wasn't quite as easy.

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