David Mckee's Stiffs & Georges - Station Casinos

Adieu F-bleau, hello Hollywood?

Mon, 26 Oct 2009 13:37:00 -0700

Look what just fell into the S&G mailbag:

Beginning January 1, 2010 Penn National Gaming will partner with RPM Advertising to develop and execute a brand identity for Hollywood Casinos. The full service assignment will incorporate research, brand development, media planning/buying, creative execution, production services and direct marketing. Penn National, one of the top five gaming companies in the world, owns and operates seven Hollywood Casinos across the country including facilities in Aurora, IL; Bangor, ME; Baton Rouge, LA; Grantville, PA; Lawrenceburg, IN; Bay St. Louis MS; and Tunica, MS.

Forgive me if I have a coughing spasm after reading Penn National describe itself as "one of the top five gaming companies in the world." I suppose it would depend on your definition of "top" (number of facilities and/or employees, market cap, etc.) but in an industry that contains MGM Mirage, Harrah's Entertainment, Wynn Resorts, Las Vegas Sands, Boyd Gaming, Station Casinos and even woebegone Trump Entertainment Resorts, the best Penn could hope for in terms of name recognition would be eighth place. (Enter RPM, stage right.)

As for the marketing alliance, given the timing of the belated decision to try and unify the brand, it looks like Penn is going to attempt a Harrah's in reverse: acquire a Strip property (Fontainebleau) and then create a company-wide brand-loyalty program to incentivize customers to visit its shiny new megaresort.

Sounds a bit cart-before-horse to me but, after today's bulletin, it's no stretch of the imagination to suggest that F-bleau could soon become Hollywood Las Vegas or some close variant thereof. At least in terms of brand equity, it would represent a step or two up from F'bleau, whose name recognition factor is now entirely negative.

Green shoot? Weekday room rates for early December at Vdara have nudged upward to $145/night (from $129) according to J.P. Morgan analysts.

What's wrong with this picture? The media night for Wayne Newton's new Tropicana show, Once Before I Go (could we have that in writing?) looks more like a Dancing with the Stars tour stop. In addition to former contestants Sabrina Bryan and Jennie Garth, four DWTS regulars -- including Cheryl Burke and Kym "Tina Sparkle" Johnson -- will be on hand.

Except for Ms. Johnson, who's presumably in town to rehearse current partner Donny Osmond, the quartet is available because they've all been eliminated. (For instance, Alec Mazo helped Olympic swimmer Natalie Coughlin dance her way to a premature exit.)

Trouble is, they'll be in the audience and the Wayner will be onstage. Wouldn't you prefer the reverse proposition? And since Newton is strictly a short-term proposition for the Trop (six months and out), would it be too much to hope for a Vegas offshoot of DWTS as his successor?

Aria drives prices ... down

Fri, 16 Oct 2009 16:23:00 -0700

Contrary to repeated assertions by J.P. Morgan, it would appear that MGM Mirage is putting out promotional specials for Bellagio ... and very aggressively so. Note however, that Steve Wynn's masterpiece is maintaining its price point and Aria is the one having to come down to meet it.

Also, an unscientific survey of mid-week rates parallel to Aria's opening shows that what the CityCenter flagship is doing is sucking the air out of the rest of the Strip, especially other MGM properties. Even Wynn Las Vegas is down to $159/night that week (quotes were predicated on a three-night stay).

The absolute bargain was Downtown's Golden Gate ($12.71) and unless you count Hooters and fellow bottom-feeder Wild Wild West, the lowest on-Strip price was $21.21 at MGM's Circus Circus. The Sahara ($22.40) and Imperial Palace ($25) were close behind. They were ever-so-slightly outpriced by the Riviera ($27) and Tropicana ($29.33).

As for other properties in the lion's den: Excalibur ($31), Luxor ($48.37), New York-New York ($50), Monte Carlo ($58.62), the Green Monster (aka MGM Grand, $70), Mandalay Bay ($72.55), The Mirage ($76.50), THEhotel ($93.29), Vdara ($109) ... with only the Green Monster's Sky Lofts ($600) outpricing Aria.

So, MGM, are you sure this oligopoly business model is the way you want to go? I'm just askin'.

<crickets>

What's a Trump casino worth?

Thu, 08 Oct 2009 15:07:00 -0700

Only $14 million in cash (plus a $100 million equity infusion), according to The Donald. Bondholders say, we'll see your $115 million and raise you $100 million. The latter would recoup at least some -- but not very much -- of their $1.25 billion debt under their plan, while Das Trump would send them away virtually empty-handed. (Moral: When Donald Trump asks you for a loan, take a page from Nancy Reagan and Just Say No.)

The bondholders' assignment of a $75 million valuation to Trump Marina seems awfully optimistic for what is, in essence, a corpse that can't be sold. In essence, the real value proposition is resurgent Trump Taj Mahal, with the other two casinos scarcely better than throw-ins. The Marina is, if anything, an albatross around the company's neck. Still, given that CEO Mark Juliano is going to exceptional lengths to champion the Trumpster's bid, which is a big "screw you" to the debtholders, here's hoping Judge Judith H. Wizmur holds firm for a more responsible solution.

Ho: No! "I don't see major resorts opening for the next couple of years now," says Lawrence Ho. thereby raining pessimism on the expansion plans of Las Vegas Sands, Wynn Resorts and Galaxy Entertainment. The younger Ho also speculates upon the Chinese government's motivation for throttling, then somewhat relenting upon travel to Macao. Interesting tidbit: Marketwatch.com reports that "Venetian Sands" [sic] has cut its number of table games by 25%.

Nevada revenues in. And yeah, they suck. They're much less sucky than usual (-9%), showing an upward trend in baccarat plus two locals-oriented bright spots in the form of Aliante Station and M Resort. It's unclear, though, how much of the growth generated by the last two is new business vs. redistribution of dollars from elsewhere in the valley. The Sun's analysis is far more informative than that found in the R-J.

Wait 'til next year. That's the timeline for casinos in Massachusetts. Even though western Mass looks like slim pickings, lawmakers will probably have to put a casino there just to get the bill onto the floor.

Penn bid falls. Lenders to bankrupt Fontainebleau won a small victory or two, as the judge overseeing the case seems determined to keep lead developer Jeffrey Soffer as far from the disposition of F'bleau as possible. (Soffer is both a debtor and creditor on the project.)

F'bleau, for its part, revealed that Penn National Gaming's offer is now "substantially less" than $300 million, but would include money to replace the windows that are reportedly falling off the building. (One more reason not to build a Strip megaresort tower flush against the "pedestrian realm.")

Groundbreaking today for the long-awaited SugarHouse casino in Philadelphia, under the shadow of a stick-it-to-SugarHouse tax that's been proposed in the Lege. Table games, meanwhile, might be off the table in the face of a $200 million lawsuit. You see, non-racino casinos are allowed to have 5,000 slots (in return for a $50 million fee). Small "resort" casinos -- known as "Category 3" -- only have to $5 million and get 500 slots (accessible only to guests). That's proportional, obviously, and seems fair.

However ... lawmakers want to tilt the playing field by giving Category 3 casinos 30% as many slots as, say, Rivers Casino or SugarHouse, instead of 10% ... and open those games to the general public, not just guests. Of course, the state can't go to the one existing Category 3 casino and ask for another $10 million -- can it? Casino operators are also solidly behind the GOP position on table games: $10 million upfront plus a 12% tax. But, unless House Dems completely capitulate, the gaming bosses are unlikely to get what they want, at least where the tax rate is concerned.

Penn whiffs again. Although Penn Nat'l was supposed to be a bidder in the bankruptcy auction for the Lone Star Park racino, it evidently didn't get into the action and the track went to the Chickasaw Nation for $27 million. (A lot less than Harrah's Entertainment paid to get into Ohio.)

Which means that if/when gambling is legitimized in Texas, the Chickasaws will have a double advantage (parimutuel + tribal status), while Penn will be looking at yet another missed opportunity. Penn's corporate strategy is a baffling alternation of rashness and hyper-caution.

In other tribal news, much-criticized National Indian Gaming Commission Chairman Phil Hogen is gone, thank God, and with him his new, more-restrictive Class II rules. Hogen was justly pilloried for attempting a rollback of hard-won gains in what games tribes could offer. His new rules reflected Bush administration paternalism toward tribes and while they're officially postponed for a year, I think it's safe to say they're dead.* No wonder Rep. Dan Boren (D-OK) is smiling. Watch out for that doorknob, Mister (Ex-)Chairman.

(* It's probable the same thing would have happened under a President McCain, as either candidate would have brought a more enlightened attitude to D.C.-tribal relationships.)

Supporters of video gambling are starting to push back in Illinois, at least in rural, conservative McHenry County. So far it's been the urban areas where this expansion of gambling hasn't been gaining traction.

A repeal of UIGEA continues to gain ground in the House of Representatives, even if it got pulled off the floor in the Senate. (Thanks for nothing, Harry Reid.) The money quote, literally, is a reference to an amendment Rep. Jim McDermott (D-WA) which would would specify that "corporate taxes owed on regulated Internet gambling activities are collected, as they currently are from the land-based casino industry." [emphasis added]

If that means what it implies, it would remove the spectre of industry-wide federal gambling taxation from the discussion and leave taxation to the states. If not, then the nose of the federal casino-tax camel is still sticking through the legislative tent. And you know where that leads.

We've seen a nationwide gaming tax get shot down during the Clinton administration but there are desperate times, obviously. Republicans like Mike Huckabee and Rep. Steve King (R-IA) have been looking to sock it to casinos at the federal level for some years now, so I fear it could have bipartisan support, should such a debate come to pass.

It's playoff time. A tired, flat-footed Minnesota Twins squad looked positively dreaful last night, flailing at outside pitches from C.C. Sabathia (if you couldn't reach that slider in the first inning, your arms aren't going to be any longer in the seventh, son). Cliff Lee made short work of the Colorado Rockies (besides, Jim Tracy can't win in the postseason), the St. Louis Cardinals look set to continue their tradition of postseason underperformance and my Anaheim Angels are forever reduced to a quivering heap of Jello in playoff games against the Boston Red Sox. Why am I having visions of brooms?

Trop, Sands purges continue

Wed, 30 Sep 2009 17:36:00 -0700

It's official: "Pit Bull of Comedy" Bobby Slayton has snarled his last at the Tropicana Las Vegas. Thus endeth a brief, inauspicious reign by Anthony Cools over the Trop's upstairs showroom. A well-placed source advises LVA that Beatles tribute show Penny Lane was pulled after EMI hit it with a cease-and-desist letter. In any event, it left as invisibly as it arrived.

Trop CEO Alex Yemenidjian still has three shows he inherited from predecessor Scott Butera but it's pretty clear that he's going to put his own stamp on the property. As for Cools, well, he'll always have O'Shea's.

Movement at Cosmo. Buried in the Review-Journal (six items deep) is the news that the Cosmopolitan has wooed ~~John~~ Marshall Andrew away from Las Vegas Sands to be its CFO and hired Station Casinos refugee Marshall Andrew as chief information officer. Deutsche Bank looks serious about making that September '10 opening date.

Will the economy have improved sufficiently to have absorbed most of the CityCenter rooms and the Planet Hollywood Westgate ones by then (and maybe, but not very likely, Fontainebleau)? Boyd Gaming is betting otherwise. The Echelon cranes have been seen coming down, marking an additional hiatus in the project, which reportedly will not be resumed until 2012.

Las Vegas Sands: Execs overboard!

Andrew is just the latest exec lured -- or chased -- away from Sheldon Adelson's employ. Former Venetian veep Paul Pusateri (who helped launch Paris-Las Vegas back in the day) was just nominated as president at The Palms and ever-helpful Sands spokeswoman Mindy Eras has gone to Preferred Public Relations. Whether these moves are part of Adelson's promised cost reductions or are a winnowing out of perceived William Weidner loyalists, it must be getting lonely at the top.

There's quite a debate going on at the Las Vegas Sun on the rise and fall of themed resorts on the Strip. Surf over, check it out, maybe weigh in, if the spirit moves you.

Buy our casino, please!

Tue, 29 Sep 2009 14:11:00 -0700

Any well-furnished casino that doesn't try to monetize its fine appointments is missing a revenue opportunity. However, it's one thing to covet the lovely furnishings of, say, the Sky Lofts at MGM Grand. It's quite another to check into a hotel room in a struggling Nevada market (hint: think blood-red aluminum siding) and see the following:

"Take A Little Something Home With You"

... followed by a list of prices for virtually everything that isn't nailed down. At the high end, you could pay $175 for a bed spread or $100 for a phone, while hand towels ($10), washcloths and pillow cases ($5) occupied the bargain end of the spectrum.

In between, you could drop $45 for a Lilliputian coffee maker or $25 for the TV remote. Since the TV was not for sale and remotes tend to be brand- and model-specific, you wonder who'd be fool enough to spring for that last item.

Not only is Casino X clearly desperate for anything on which it can turn a buck, it also has rather inflated ideas of the value of its appurtances. I can see paying $175 for an Encore bedspread, but Steve Wynn doesn't operate out in the sticks, if you get my drift. Oh, and Casino X might want to think about staffing up its players' club and check-in windows, if the length of the lines at both is a telling metric.

Harrahs' new BMOC. The incoming president of Harrah's Entertainment's Flamingo-centered bloc of casinos departs Indiana to rave reviews. Philanthropic, community-oriented and socially aware, Rick Mazer sounds like just what the doctor ordered for Vegas -- to say nothing of being someone upon whom we should keep close tabs.

Justice delayed. Employees of Station Casinos who may (or may not) have been short-changed in their paychecks, will just have to bloody well wait for their day in court, if Clark County District Court grants Station's request for "breathing room." Station is pleading hardship due to its current bankruptcy. Since the company has no one but itself to blame for being in Chapter 11, it's difficult to muster sympathy. But perhaps the judge will be of a more forgiving nature.

Don Marrandino's first coup. The newly installed boss of Harrah's Atlantic City casino quartet inks a new labor pact with Unite-Here. That was a piece of cake. Now, about those dealer-contract talks with the UAW ...

Meanwhile, back in Gary Loveman's 'hood ... You know those on-again, off-again Massachusetts casinos? Well, they're "off." Again. Not that there's any reason to rush, especially as the repeated delays lend additional borrowed time to struggling Foxwoods Resort Casino and Mohegan Sun.

Hell no, they won't; Penghu punk'd; Barbarians at the gates (again)

Mon, 28 Sep 2009 19:12:00 -0700

Pay taxes, that is. Two Indiana racinos are pushing back against a tax rate that averages 38%. Considering that the two tracks -- one run by Cordish Gaming -- are the newbies on the Hoosier State scene, one could fairly ask them, "Didn't you know what you were getting into?" As the article notes, neither Harrah's Entertainment and Boyd Gaming -- both which recently heavily reinvested in Indiana -- aren't whining about their tax rates.

But the racinos have a point. In states where the number of casinos is artificially capped by the Legislature, solons become the custodians of the industry's economic future, like it or not. And it only stands to reason that if the market is going be diluted, tax relief is in order. Considering that same-store revenues in Indiana have been nothing but down since the racinos opened, some push-back on the tax front was probably inevitable.

Hell no, they won't either. Allow casinos in Penghu, that is. Voters on the Taiwanese island voted against gambling expansion there, putting the issue off-limits for three years. The notion of planting mega-million-dollar casinos in remote, hard-to-reach parts of Taiwan never made that much sense to S&G, but big industry players like Sheldon Adelson and Gary Loveman have kicked Taiwanese tires in the recent past.

Did Adelson and Steve Wynn mistime their leap into the Hong Kong stock market? One Wall Street Journal columnist thinks so. Bad timing isn't the exclusive province of the public sector, though: A Washington State tribe borrowed $375 million on the strength [sic] of revenue forecasts that proved grossly over-optimistic. Percentage-wise, neither Harrah's nor Station Casinos missed the mark this badly.

Bob Stupak, R.I.P. The penultimate Vegas maverick is gone, having spent much of the last decade as a recluse. One especially thorough obit contains a quote by former Klondike owner John Woodrum that ought to be engraved on Stupak's gravestone (or at the base of that now-vanished Stupak statue): "If ever there was a guy beyond the rim of reality, there was Bob. But somehow he made reality happen."

Just what we don't need. They're baaaaack. Never mind the smoking wreckage they've made of Harrah's and Station, private-equity firms are rooting amidst the flotsam, looking to extend their morbid clamp on the casino industry. Leading the pack is Leon Black's inaptly named Apollo Management. Both indirectly (Planet Hollywood by way of Harrah's) and directly (Cosmopolitan, Fontainebleau), Black is reported to be scarfing up what few independent properties remain, raising the prospect of a Total Rewards oligopoly stretching from just above CityCenter to the southern frontier of the The Mirage.

There are also a few bottom-feeders in play. Hooters hardly seems worth buying unless Onex Corp. wants to do a tear-down and extend the Tropicana Las Vegas eastward. Current ownership of the Riviera is tapped out but the place still has prospects as a fixer-upper (not something that fits with Apollo's sack-and-pillage business model). If non-bottom-feeder Green Valley Ranch is really on the bubble of insolvency, then Penn National Gaming ought to quit chasing F'bleau, and try to drive a wedge betwixt Station and its Greenspun family partners. Penn would stand to inherit a beautiful property with far fewer problems than Big Bleau.

Gambling scandal ensares eight more

Mon, 21 Sep 2009 18:32:00 -0700

It's not quite on the global scale of the Ultimate Bet brouhaha, but the Tran Organization's conspiracy to fleece dozens of U.S., Canadian and tribal casinos is racking up an amazing head count. To date, federal prosecutors have already nailed 31 scalps to their wall, not counting three other individuals to who pled out to related charges (including one in Canada).

If you thought this was the end of the Tran Organization ... surprise! The feds unsealed another set of indictments this month. Eight more individuals were hit with various counts of "conspiracy to steal money and other property from Indian tribal casinos, and conspiracy to travel in interstate and foreign commerce in aid of racketeering."

At the core of the Tran Organization's scam was the execution of "false shuffles," whereby "slugs" of unshuffled cards were insinuated into blackjack and mini-baccarat decks. This required the cooperation of corrupt casino employees and, from the looks of the Department of Justice's announcement, the core Tran Organization members must be rolling on their casino-employed helpers.

The Tran gang managed to take no fewer than 26 casinos during the life of its scheme, which is a very black mark against the industry's standard of game protection. The dishonor roll is as follows:

1) Beau Rivage Casino, Biloxi, Miss.
2) Casino Rama, Orillia, Ontario, Canada
3) Foxwoods Resort Casino, Ledyard, Conn.
4) Gold Strike Casino, Tunica, Miss.
5) Horseshoe Casino, Bossier City, La.
6) Horseshoe Casino & Hotel, Tunica, Miss.
7) Isle of Capri Casino, Westlake, La.
8) Majestic Star Casino, Gary, Ind.
9) Mohegan Sun Resort Casino, Uncasville, Conn.
10) Palace Station Casino, Las Vegas, Nev.
11) Resorts East Chicago Hotel & Casino, East Chicago, Ind.
12) Sycuan Casino, El Cajon, Calif.
13) Cache Creek Indian Bingo & Casino, Brooks, Calif.
14) Emerald Queen Casino, Tacoma, Wash.
15) Imperial Palace Casino, Biloxi, Miss.
16) Argosy Casino, Baton Rouge, La.
17) Trump 29 Casino, Coachella, Calif.
18) Isle of Capri Casino, Bossier City, La.
19) Agua Caliente Casino, Rancho Mirage, Calif.
20) Spa Resort Casino, Palm Springs, Calif.
21) Pechanga Resort & Casino, Temecula, Calif.
22) L'Auberge du Lac Casino, Lake Charles, La.
23) Nooksack River Casino, Deming, Wash.
24) Barona Valley Ranch Casino & Resort, Lakeside, Calif.
25) Caesars Indiana Hotel & Casino, Elizabeth, Ind.
26) Monte Carlo Resort & Casino, Las Vegas, Nev.

Blimps on the radar

Thu, 10 Sep 2009 14:03:00 -0700

Dipping into the dispatch box, S&G finds the following tidbits, courtesy of the nice people at J.P. Morgan:

Alex Yemenidjian is serious about revamping the Tropicana Las Vegas. He's just inked a contract with Bally Technologies for a player-tracking system and other BYI goodies ...

... fading interest in MGM Grand Detroit has caused MGM Mirage to take it off the market. Also, with the company looking at price concessions to its CityCenter condo buyers (i.e., forfeiting money it was counting on to finance CityCenter), it may need to borrow against its Detroit palace, one of the few MGM properties still unencumbered ...

... Atlantic City, like Macao, is and will probably always be essentially a daytripper market. So there's symmetry in the fact that China State Construction Engineering Corp. has been signed to finish the stalled Revel project on the Boardwalk, to the tune of $1.7 billion. A July 11 opening is predicted. This is the best news to emerge from Atlantic City in quite a long while.

Speaking of good news, gaming revenues for Nevada's July are in and, basically, they don't suck. Yes, the Silver State was down 8% and the Strip was 11%. But June's year/year comparisons were far suckier (-15% on the Strip), so there's some consolation to be had. In fact, compared to a series of truly craptacular year/year comparisons -- all in double digits, except for last May -- it's darn near cause for celebration.

Table game drop was down overall but the casinos played lucky, particularly at baccarat. (Watch the first-season Mission Impossible episode "Odds on Evil," if you need a quick primer on this game. You'll get scintillating performances by Martin Landau and Barbara Bain in the bargain.)

Slot play is way down (-17.5% win on -15% handle) and North Las Vegas, bouyed by Aliante Station, was the only part of Clark County to have a positive month. Laughlin got hammered pretty badly (-19%) and neither Reno (-21%) nor South Lake Tahoe (-33%) seems likely to ever fully recover from tribal competition across the border, Tahoe especially. If there was a moment for some "unbundling" by overexposed companies, this is it.

Didn't get the memo. Would somebody break into the R&R Partners biosphere and let oxygen into the office of Billy Vassiliadis? "Billy V" was the author of this boneheaded pensée, which he shared with the Los Angeles Times:

"You've got to drop your rates, but you don't want to create a sense that this is a discount experience or that the experience itself has been diminished."

What the ... ? Las Vegas' recent success was built on the perception (and actuality) of a "discount experience," and lower prices are unlikely to "diminish" a tourist destination that is now synonymous with exclusivity and unaffordability. Vassiliadis, like Sheldon Adelson and the Las Vegas Convention & Visitors Authority, seems convinced that the current doldrums are -- to use my favorite Internet-board gaffe -- "a blimp [sic] on the radar."

They need to wrap their heads around the reality that 2004-like levels of business were damned good at the time (superb, in fact) and that Vegas needs to get back to the value-based messages that fueled the preceding 15 years of growth. Or, as David G. Schwartz writes in a particularly trenchant DieIsCast.com entry: "Of course, unpredictable events can make a hash of any predictions, so it’s possible that five years from now the casino industry will be employing 100,000 more people than it does today. That would be after the federal government offers Americans a $10,000 annual tax credit against travel to Las Vegas, and Las Vegas alone."

Seems like some folks in the marketing bidness should be taking Dr. Schwartz's classes.

From the mailbag #4: California, tech troubles & 'resort fees'

Thu, 10 Sep 2009 13:02:00 -0700

Reader Kerr Mudgeon is less than amused by a recent dig at the cuisine offered by Commerce Casino to California firefighters. He writes: "The firefighters can go to numerous other nearby eateries if they don't like the FREE meals offered by the Commerce Casino -- same as paying casino customers can eat at other places if they choose. Sound like 'looking the gift horse in the mouth.'"

Good news from IT: Our "austerity regime" of no photos and no links will, it is promised, be ended today. I can think of several potential blog entries yesterday that went unwritten because no linking capability was available, so this should put some wind back in S&G's sails ... although some might say a lack of wind is the least of this blog's problems.

It's absolutely imperative that you read our 9/10/09 Question of the Day. No, I didn't write it. Our hard-working research duo of Jessica & Tanya did. (Also, Steve Friess recently mis-credited me with the Today's News column; that's a J&T Production, too, along with the occasional assist from Anthony Curtis himself.)

Aaaaaaaaannnnyyyyy-way, today's topic (and it's only online for one day) is the pernicious Vegas phenomenon known as the "resort fee." The winner of the Sustained Greed Award goes to longtime gouger Station Casinos. Station's Green Valley Ranch is also the premier resort-fee offender ($25).

Others who provide optional amenities -- of varying desirability -- in return for the fee include Bellagio ($25), The Mirage ($15), Planet Hollywood ($5) and Gold Coast ($3, which actually buys you quite a lot). The geniuses at Morgans Hotel Group get the Steal the Stripes out of Your Socks Award for charging you $7 for "in-room safe, parking, minibar (but not its contents), bath products, and a plasma TV."

There's a word for that Hard Rock Hotel & Casino practice and the word is "chintzy." As our researchers note, "For hotels to presume to charge guests for amenities that they have no intention of availing themselves of, but cannot avoid, seems a very counter-productive measure that can only generate ill-will."

Kudos to the following fee-eschewing properties: Venetian, Palazzo, Wynn Las Vegas, Encore and anyplace owned by Harrah's Entertainment. Yes, Harrah's. I tip my fedora to you, Gary Loveman.

Optimism in Macao, euphoria at CityCenter

Tue, 08 Sep 2009 17:33:00 -0700

Relaxation of stringent visa restrictions from Guangdong Province came a full four months sooner than expected, starting Sept. 1. Now, residents will be able to visit Macao once a month instead of quarterly. While this has prompted J.P. Morgan to raise its price target on Las Vegas Sands stock, analysts also fret that Sands may overreact and go pedal to the metal on its unfinished Cotai Strip™ hotels.

Those same analysts are bullish on the manufacturing sector, though. They think casinos will be more willing to reinvest in the slot base as 2009 draws to a close. Also, the onward march of casino expansion means more jurisdictions and facilities to whom IGT, Bally and WMS can peddle their products. They're 'meh' on regional casino operators like Penn National, Ameristar Casinos and Pinnacle Entertainment, due to flattish performance. (Penn could catch a break in Kansas, though I still think Cordish Gaming has that sewn up.)

But that's a rave notice compared to the long face Morgan analysts pull when pondering Boyd Gaming's prospects. They cite the slow-to-recover, promo-driven locals-casino market in Las Vegas ("trickle-down" economics of the worst sort); Atlantic City's critical condition -- "the best-case scenario here is that [Borgata] would do less bad" than most of A.C. -- those blah regional metrics and new competition for the Blue Chip riverboat in Indiana, which had been looking like 2009's feel-good story.

Intriguingly, the prospect of a Strip acquistion is floated in lieu of a 'stalking horse' bid for floundering Station Casinos. Boyd's still got enough unused borrowing capacity it could even swing an acquisition of The Mirage (with money to spare), not to mention some of the lower-hanging fruit, which now includes Planet Hollywood. But if the J.P. Morgan guys are gun-shy concerning Boyd ...

They're over the moon about MGM Mirage's CityCenter: "we are increasingly under the belief that City Center will be a new must-see property for both domestic and international gamers/travelers that should drive solid visitation volumes to the Strip in 2010. We were impressed with the massive 18m-square-foot complex ... a new type of high-end product for the Strip that should garner increased trips. It has a very contemporary feel that is different than anything else on the Strip, with lots of natural light and high ceilings, interesting room product and, for a massive property, ease of getting around from one 'neighborhood' to the next."

More good news comes in the form of a press release from Commerce Casino (in Commerce, Calif.), which rolled out the welcome mat for a group of undoubtedly weary firefighters. A strike force of 30 Bay Area-based firemen is being housed in the casino's hotel, with the casino comping all meals and picking up most of the hotel tab. Let's hope that such civic-mindedness spreads through the industry like -- if you'll forgive the analogy -- wildfire.

In case it matters, "super-starlet" (yes, that's the official term) Holly Madison has been given a 12-month contract extension at Peepshow, so she's obviously earning her pay. Also, I've heard through the grapevine that she and incoming Aubrey O'Day do not get along, so the timing of the Madison announcement should make clear who's got the upper implant in this situation.

Frank Fertitta Jr., 1938-2009

Sat, 22 Aug 2009 18:25:00 -0700

There's a nice R-J obituary for the Station Casinos patriarch, although you won't find it in Saturday's online edition, inexplicably. You have to go back and root around in the "Breaking News" box from Friday. (By the time the R-J gets "this Internet thing" figured out, it'll have gone out of business.)

Over at the Sun, investigative reporter Jeff German has penned an even more thorough retrospective, with particular emphasis on the late Frank Fertitta Jr.'s philanthropic activities. Considering how many nastygrams have been appended to the R-J valedictory, one is thankful that the Sun elected to disable "Comments" for its obit.

Frank Fertitta Jr., R.I.P.

Fri, 21 Aug 2009 15:00:00 -0700

Bingo Palace: From little acorns did big casinos grow ...

The founder, patriarch and presiding genius of Station Casinos, has died after cardiac surgery at Cedars Sinai Hospital. Confirmation has been obtained by the Las Vegas Sun's Jon Ralston. (The R-J is presently AWOL on the story.) During his lifetime, Fertitta saw the company he founded grow from little Bingo Palace (now Palace Station) to an 18-casino powerhouse. Alas, he did not live to see it re-emerge from the bankruptcy into which his heirs toppled it.

S&G conveys its condolences to the Fertitta family and to Station employees.

Economic recovery in sight?

Wed, 19 Aug 2009 16:24:00 -0700

Vegas casino F&B directors seem to think so. From our trusty LVA research department comes word that The Orleans and Mandalay Bay are ending their one-price-all-day buffet specials. Better/worse still, Palace Station is hiking the price of its buffet -- by four bucks. One doesn't know whether to applaud this apparent harbinger of better times ahead or deplore the swift yanking of the "Welcome" mat out from under customers' feet.

Contract talks with magician Lance Burton, you'll recall, went right down to the wire. One possible sticking point? Burton has lost his 10 p.m. slot, which as of today belongs to Frank Caliendo, who'll be doing a 9:30 p.m. show four nights a week.

Good move. Burton's family-friendly act seems an odd fit with the late-show crowd. Besides, Caliendo is on network TV regularly, which Burton isn't. Between this, recruiting musical act Zowie Bowie and rolling out Hotel32, Monte Carlo is making a spirited attempt to stay in the limelight, even as CityCenter looms larger and larger next door.

Study Hall. Just what Nevada needs, another "study" of the tax structure. What's to study? At least 27% of the tax base comes from gaming revenues, which have been in decline for 18 months. A comparable portion comes from retail sales, which have been down two entire years and counting. The problem is obvious but the will to rethink it is rather less in evidence. Here's a hint: We need a plan which is not simply another variant of "Soak the tourists."

Reality check

Tue, 18 Aug 2009 20:10:00 -0700

It's sackcloth-and-ashes time at the Las Vegas Review-Journal, which ran another "The end is nigh" story about falling gambling revenues. (The Aliante Station Effect appears to have petered out in North Las Vegas.)

Yes, we're all the way down, down, down ... to 2004 levels. If we take the Wayback Machine five years into the past, we find the Nevada Gaming Control Board reporting a 6% increase in revenue from June 2003. And June '04 was an "off" month for a year that was distinguished by double-digit growth in casino revenue.

Aliante Station: played out?

That same August, the cost of the MGM Mirage takeover of Mandalay Resort Group inched past the $8 billion mark. "[B]ut Wall Street analysts ... said the merger still makes sense for investors and the combined company," wrote the R-J's Rod Smith. Weeks earlier, regulators signed off on the $1.3 billion Boyd Gaming/Coast Casinos merger; Station Casinos, Las Vegas Sands and MGM were all recording record-setting financial performances, and Harrah's Entertainment was girding itself for the conquest of Caesars Entertainment. Heck, the industry was feeling sufficiently bullish to absorb a 0.5% hike in the privilege tax. Read one headline, "State gaming revenue on a roll."

Had the industry lived within its means, today's narrative would be quite different. The Las Vegas Sun helpfully charts the inflation and collapse of the casino bubble, which lasted a good three years, peaking in October '07.

Unfortunately, when what went up eventually had to come down, some companies discovered themselves overexposed and with no margin for error. The likeliest victims, though, are the marginal, standalone properties which might find themselves squeezed out of existence as aggressive discounting by MGM and Harrah's brings quality Strip hotel rooms into the "affordable" realm (Or, as Phil Satre puts it, when the A-level product is priced below the B-level product.)

Valuable perspective is to be had by reading (or watching) this roundtable discussion with three men who dominated much of the gaming industry in the Nineties and early into the new century. Ex-Harrah's CEO Satre has earned the right to be a Monday morning QB. After all, he never did anything so stupid as strapping $30 billion in debt onto his company's back.

Former Station CFO Glenn Christenson seems deeply in denial at many points, though even he concedes, "It wasn’t so long ago that we hated conventions as an industry and now it’s critical to our operations. We’re severely damaged by that loss." But ex-Boyd prexy Don Snyder nails it when he describes "a false sense of security" pervading the industry, adding "I think we all got caught up in that."

2004, meet 2009, where "up" is the new "down."

Kitty rescue at Caesars; Stingy Station

Fri, 14 Aug 2009 13:43:00 -0700

As we were driving to LVA HQ this morning, we spotted a disoriented-looking little cat running through the Flamingo Rd./I-15 interchange, across from Caesars Palace. We were in a quandary about what to do until it turned and started ambling down the I-15 "on" ramp, heading straight for certain death. I ran down the ramp after it (the kitty's a fast little bugger), scooped it up in one hand and ...

Well, what to do? I am now the custodian of a small, tuxedo-patterned kitten who may be carrying God knows what infections. It's too docile to be a feral cat but it's definitely going to need a new residence. So if anybody reading this can lend a helping hand to a homeless kitty, contact me at dmckee@huntingtonpress.com. I could just plop the wee bairn out in the LVA parking lot, along with our resident strays, but they're all massive and it would be a very Darwinian situation, I fear.

Cheesparing at Station: The formidable Jean Scott has news of some recent and untoward developments at Station Casinos, as the bankrupt company resorts to new "economy" measures. While the Fertitta clan sinks approximately $90 million into Orange County mansions, they're recouping the cost of their poor business decisions out of their customers' hides.

Random observations: Last night, we celebrated my Better Half's birthday, partly at Cadillac Ranch, which seems to have an identity crisis. Its menu is slightly countrified (in a C&W sense), its walls are covered with photos of Baby Boomer rock stars (think Steven Tyler) and the video feed is heavy on hip-hop. Go figure. The root beer float is very good, though. At 10:30, as though by prearranged signal, an incoming tide of douchebags flooded the joint and we split ...

... the classy southern façade of Mandarin Oriental has now been marred by a building wrap, high up on one corner. It's small by building-wrap standards, managing to both spoil the view and look like a timid half-measure ...

... speaking of building wraps, Criss F. Angel has long since been evicted from the eastern façade of Luxor. A new wrap was placed on the northeast corner of Luxor's ancillary hotel, but it's also smallish and -- due to way the hotel's buttresses jut forward -- hard to see if you're driving into Vegas from the south. Then again, if I were MGM Mirage, I'd probably want to downplay with association with the widely ridiculed Mr. Angel, too.

Neverland Station?

Fri, 07 Aug 2009 10:22:00 -0700

So long Viva, hello Michael Jackson?

According to NBC News, parts of Neverland Ranch are going to be dismantled and moved to -- you guessed it -- Las Vegas. Who owns Neverland Ranch? Colony Capital? Who has amassed enormous tracts of Vegas-area real estate? Station Casinos. And who is the majority owner of Station Casinos? Colony Capital.

NBC reports that New!Neverland would be (re)built "near the Las Vegas Strip." I humbly submit that now we know what "Tropicana Station LLC" is going to be and why it was shielded from the recent bankruptcy filing.

The current home of ramshackle Wild Wild West and proposed future home of $11 billion metaresort Viva, Station's Tropicana Ave. site owns the acreage Colony would need -- and no other Station- or Colony-held asset quite fits the NBC-outlined criteria. Also, if you're feeling peckish, there's an Inn 'n Out Burger across the street. (If the Fertitta clan tried to drive that away, not even their newly acquired Orange County mansions would keep them safe from pitchfork-wielding mobs.)

Get 'em while they're young

Thu, 06 Aug 2009 15:04:00 -0700

One of the Atlantic City Hilton's most valued players was a 19-year-old from Brooklyn. This baby whale was sufficiently lucrative to the Colony C(r)apital property that he received a comped stay and qualified as a "rated player."

Better still, A.C. Hilton execs allowed him to keep playing even after they'd been tipped off to his juniority. Nice work! Step right up, Colony, and collect your reward -- a $115K fine from the New Jersey Casino Control Commission. Apparently the Hilton simply took the youngster's word that he was old enough to gamble before handing him the keys to kingdom.

Colony may be able to buy casinos but it sure as shooting can't run 'em. Frank Fertitta III may not have been the best monarch of Station Casinos but, compared to majority owners Colony, it's another case where the one-eyed man is king in the land of the blind.

One sings, the other doesn't (quite): Not only is Ali Spuck's new Liberace Museum show a real value proposition at $15/ticket but, hot damn, she's Spucktastic. As for Charo in Concert: A Musical Sensation, at the Riviera, it's something for everyone but not that much for anyone. Although Charo "goes to 11" on the Camp-o-Meter, gay audiences (and Baby Boomers, too) seem likelier to flock to Spuck.

Bleary blogger: My apologies for the disappointing blogorrhea of late. I've been immersed in a crash course on the crash-and-burn of Russia's casino industry (R.I.P.). Throw in some computer troubles and I'd conservatively estimate I'm three days behind the rest of the gaming world.

Boyd, Ameristar stable; CityCenter schedule revised

Wed, 05 Aug 2009 11:10:00 -0700

Second-quarter results from Boyd Gaming and Ameristar Casinos gave continued reason to be sanguine about each company. Both reported profits (12 cents per share at Boyd, double that at Ameristar) and both missed their revenue targets by an aggregate of only $8 million. A whopping (27%) jump in Colorado revenues for Ameristar last month was additional reason for confidence, offsetting weakness in Kansas City.

Cost control was credited with helping Boyd's performance, as was much-better-than-expected cash flow at Borgata. The Las Vegas locals market also ran ahead of expectations in that regard, while downtown and the Midwest/South casinos lagged. Bankruptcy filing or no, Boyd maintains that it continues to be a suitor for Station Casinos. Oh, and keeping Echelon mothballed -- while the least expensive of alternatives -- isn't cheap, costing Boyd $3 million a month.

MGM Mirage has sent LVA a revised, official list of dates for the debut of the various bits and pieces of CityCenter. (Excepted, of course, is the Harmon[ini] which, as of last Wednesday, had no firmer opening date than "late 2010.") The openings are as follows:

Vdara (Dec. 1); Crystals (Dec. 3); Mandarin Oriental (Dec. 4); Aria (Dec. 16), while condo closings in Veer Towers are set to "begin in January." When MGM gave a CityCenter dog-and-pony show to the Nevada Hospitality & Lodging Association last week, the computer graphics still showed Baldwin's Bump at its original, 48-story height. Also, the bluish tint that denoted CityCenter's acreage, by quirk or design, extended to embrace the Cosmopolitan. A portent?

McKee vs. Lerner

Mon, 03 Aug 2009 20:01:00 -0700

Actually, the headline misstates what was a very collegial -- if occasionally dissenting -- exchange of views between Union Gaming Group's Bill Lerner and Yr. Humble Blogger on Jon Ralston's Face to Face show. It was only my second-ever gig as a talking head -- and it shows. (Note to self: Consider Botox injections to paralyze overactive facial muscles.)

The ostensible subject of discussion was newly bankrupt Station Casinos, but it ranged as far afield as Singapore and Macao. Actually, we probably could have taped an entire week's worth of shows without exhausting the topic(s).

Lerner was a perfect gentleman, despite all the snarky things I've written about him in S&G (assuming he even reads it, which I doubt). I could certainly learn a thing or two from his poised on-air demeanor. I also found that, if you're in the middle seat on Face to Face, you need to "cheat" a little to your right and downstage or else you'll be masked in all the wide shots. And, as Ira David Sternberg taught me, don't ever look at the camera.

My ex cathedra pronouncements were, however, overshadowed by my alarmingly jowly appearance. When the video is posted, you will see that I look every one of my 200 lbs. -- and quite a few more! Since the episode isn't available on the Las Vegas Sun Web site yet, here's a preview:

Oh, my brain and mouth parted company on at least one occasion. I thought I said MGM Mirage would probably offload The Mirage for "one and a half billion to two billion dollars." What emerged, though, was "a half-billion to two billion dollars." So Jim Murren, wherever you are, I do not think you'd part with The Mirage for a (comparatively) measly $500 million ... just so we're good on that.

At least the high-angle shot at the end missed my bald spot. Thank God for small favors. The rebroadcast is starting; time to find out if I still know how to operate a VCR.

Quote of the Day

Mon, 03 Aug 2009 02:37:00 -0700

Q. Will the slot machines be tighter?

A. Absolutely not! As always, our slot machine payouts remain among the highest in town and in the gaming industry. We will continue to have the best and newest gaming products on our casino floors. -- from a post-Chapter 11 FAQ distributed to guests of Station Casinos.

Quote of the Day

Thu, 30 Jul 2009 14:08:00 -0700

"Privé. Gibbons. Ensign. Rampant foreclosure. Half-built, hubristic casinos. Record unemployment. UFC. Mob Museum. Maybe Las Vegas 2009 is just Tom Wolfe's next novel." -- Las Vegas Weekly Editor Scott Dickensheets, from Facebook.

Case Bets: Hard Rock, Puck, Station, Greek Isles

Wed, 29 Jul 2009 18:55:00 -0700

Morgans Hotel Group has never seemed able to make up its mind about what to do with the Hard Rock Hotel & Casino (one of the stranger acquisitions of recent years). Then-CEO Ed Scheetz came in talking big about classing the place up and raising ADRs. Fast-forward to '09 and the HRH is staking everything on its skanky Rehab parties (does the staff have to don hazmat suits when cleaning up afterwards?) and going for the mid-price market midweek.

One can't fault the latter half of that strategy, especially if you're in an off-Strip location and could use the traffic. However, if Morgans goal was to increase Hard Rock ADRs, perhaps it shouldn't have embarked on a ginormous expansion that practically obliterates Peter Morton's original hotel and dilutes the asking price per room. Also, I don't know whether to praise Morgans for doing the impossible and completing (sort of) its Paradise Tower well ahead of schedule ... or criticize it for being in such a hurry to churn some EBITDA that it's opening it in an unfinished state.

But here's hoping the business model works. The HRH is one of the few places in town that's hiring, not downsizing. At lot of people's jobs are riding on its success.

One less Wolfgang Puck restaurant on the Strip? That's hardly a culinary tragedy, given that he's still got -- what? -- five other places in town and has become the Ronald McDonald of haute cuisine. A laughable poster in McCarran International Airport uses Puck's visage to push the message, "Less celebrity, more chef." Uh, better put that the other way 'round.

The real tragedy here (aside from the loss of jobs) is the temporary demise of Poetry, one of the few venues in town to cater to an upscale African-American clientele. Harrah's Entertainment and the Forum Shops went out of their way to put the dagger in Poetry. Now they congratulate themselves on a job well done. Thanks for nothing, fellas.

Bondholders finally lost patience with Station Casinos, tripping the bankruptcy lever. Interestingly, all Station casinos (small "c") are shielded -- which implies that it's Station's imperial expansion plans which are are shot and that its considerable real estate holdings could be up for grabs. It looks like über-resort Viva, long-suffering Durango Station, Losee Station and umpteen other projects are kaput.

Too bad for Station partner Colony Capital; if the latter goes forward with its Neverland Ranch tourist-trap plans, it may have to disassemble the old Michael Jackson Xanadu and relocate it, lock, stock and menagerie. And what does/did Station have in abundance? Raw land. It was a marriage made in businss heaven but it surely won't reach the altar now.

Speaking of suffering, what's back on the auction block but the Greek Isles, which is $23 million underwater. Even at a revised valuation of $44 million, isn't that far too much to ask for this unremittingly unsuccessful property, the second coming of the Castaways? Perhaps it's time to exorcise this ghost which haunts the dead zone that is Convention Center Drive.

Strange happenings at Penn Nat'l, Harrah's

Wed, 29 Jul 2009 18:31:00 -0700

While everybody's been focusing on the implosion of Station Casinos, the analysts at J.P. Morgan snuck out one of the more unusual (and entertaining) reports I've ever come across. They pored over Penn's 2Q09 filing and had some tales to tell.

The lead was that Penn was falling short of its cash-flow targets for the quarter. That musn't have been a complete surprise, given the incapacitation of Empress Joliet and the swapping out of one Lawrenceburg riverboat for another. However, there was trouble in River City, with Morgan analysts noting "an unexpected spike in large employee medical catastrophic claims at that [Lawrenceburg] property (bizarre), and 4) a less than productive new marketing program at Charlestown (marketing at Charlestown?) that did not produce incremental revs, but increased costs." The medical claims alone were a $1 million black eye.

They counseled against heading for the lifeboats, though, and pointed out that Penn has $795 million in cash in the till. (Do I hear an offer for Beau Rivage?) Morgan is also bullish on Penn's expansion prospects in Kansas (really?), Ohio and Maryland.

There was even some good news for competitor Ameristar Casinos, thanks to continued troubles at Harrah's Entertainment. Wrote the Morgans team: "Harrah's has not increased its promotional activity (comps, spending, reinvestment)," boding well for everyone else.

As Morgan reported earlier this month, Harrah's was -18% in Louisiana in June, by far the worst decline of any operator in the market -- while Boyd Gaming notched a slight gain (but a major victory in that context). Just as I've expected from the start, Texas Pacific and Apollo (Mis)Management are nickel-and-diming Harrah's into the poorhouse.

Double-whammy for Planet Ho

Thu, 23 Jul 2009 18:36:00 -0700

True, Planet Hollywood is feeling some pain in the wallet after the Nevada Gaming Commission approved a $500,000 fine. But it's Clark County Department of Business License which fired the shot across the bow that will really get the casino industry's attention. By scotching the liquor licenses of both Planet Ho's Privé and Living Room clubs, it signed their death warrant. That, more than anything, ought to get scofflaw club owners and laissez-faire casino owners to clean up their act.

It's hardly an excessive move when you consider that the bill of particulars against Planet Ho's clubs included "drug use, prostitution, underage drinking and assault." Besides, if you want those things, perhaps you should patronize one of Las Vegas' many "gentlemen's clubs." Nevada regulators' concern about on-Strip prostitution is laudable, if tardy. When it was rampant at the Tropicana, gaming's policemen snoozed at their posts, otherwise known as "monitoring the situation."

If the message still hasn't sunk in, the Nevada Gaming Control Board's Randall Sayre sent out an "invitation" for casino executives and middle management to discuss a wide range of potential concerns. Gov. Jim Gibbons appointed Sayre to the NGCB with a mandate to beef up its law-enforcement role and Sayre's made good on it. (Even Midnight Jim has his moments of perspicacity.) It's good to see the spirit of Bobby Siller living on in Carson City.

"Damn those customers!" What do you do when business takes a not-unpredictable nosedive during a recession? Blame the customers, of course. At least, if you're Golden Nugget owner Tilman Fertitta, that's what you do. When times were good, Fertitta was bullish on gaming (which was essentially propping up his Landry's Restaurants empire).

Oh, what transformation a few bad quarters brings! Moans the Texas tycoon, “I feel very good about restaurant hospitality, I do not feel very good about gaming.” Hmmm, maybe you should have pondered that change of heart when you were proceeding with a new $150 million hotel tower (opening ~~Aug. 1~~ Nov. 20) in the teeth of an economic tailspin?

As for the patrons, "discounted room rates appear to have attracted a clientele who are spending less on gaming and other amenities," harrumphs a company document. Yes, because in case you haven't noticed, we're on the verge of a depression. People have less money to spend. Period. Like many others like him, Fertitta needs to get hip to the fact that we're entering a period of diminished expectations. Shaking your fist at the rain isn't going to accomplish anything.

Other Fertitta scapegoats include MGM Mirage, for having the audacity to discount its rooms during the downturn. Sounding rather whiny, Fertitta utters, “You ought to go online and look at some of these rates and packages you can get. That is where we are just being murdered, trying to be competitive with the MGM and the Bellagio.”

Welcome to the NFL, man. And if you think -- with all due respect to the downtown Nugget -- that you're in the running against Bellagio or even the Green Monster, well, you're in a world of denial. I've not had time to read the last Landry's quarterly filing but, for once, it sounds like a real page-turner.

Station wins one, albeit on a technicality. All parties involved will be back for a grudge match in local court.

The dream is dying

Mon, 20 Jul 2009 16:07:00 -0700

Just last week, UNLV's historical sage, Dr. Eugene Moehring, was taking a dim view of the fate of Las Vegas' working class. Now comes the Wall Street Journal to back him up with some sobering reportage.

Even at union salaries, Culinary Union-represented employees are hardly living on Easy Street. According to the WSJ's Tamara Audi, a hotel maid can expect to make slightly under $30K/year. She also finds a fry cook who was pulling in $36K annually, before he was laid off. (He's now making much less at union-free M Resort.) This goes to show not only the importance of union representation but also how close many of these people are to the economic precipice.

Many of the causes of our current plight (like real estate speculation) are outside my remit. However, a great deal of the blame falls upon casino CEOs who -- encouraged by banks that pushed too-easy credit like "happy dust" and by cheerleading Wall Street analysts -- succumbed severally and variously to a collective psychosis.

The Plaza: Rooms available, starting the 12th of Never.

The hyper-optimistic mentality that produced a rapid-fire succession of (in no particular order) CityCenter, Cosmopolitan, Fontainebleau, Echelon, Palazzo, Encore, the Hard Rock Hotel acquisition/expansion, and even will o' the wisps like Crown Las Vegas and Viva, rested upon a bizarre assumption. Namely, that the Las Vegas Strip could not only absord literally thousands upon thousands of new rooms (preponderantly at the high end) but could do in a compressed time frame.

A few companies even thought this could be done even after they'd glutted themselves with LBO debt. (True, Harrah's Entertainment now says it never intended to go the metaresort route but the available evidence testifies otherwise.) As I've written before, a bubble was mistaken for a baseline, thereby magnifying the consequences when the economic fundamentals began to crumple.

Distance evidently lends clarity, at least to Harvey Perkins of East Coast-based Spectrum Gaming Group. He calls for a complete rethinking of the luxury-based Vegas business model, repositioning the Strip's posh palaces slightly downmarket. It'll mean eating a lot of pride but what alternatives are there?

It's a glass half-full perspective, which is preferable to the overdose of gloom quaffed by MGM Mirage CEO Jim Murren. He darkly prophesies, "There won't be another property built in Las Vegas for a decade."

Just wait 'til the next economic upturn and see if Murren is still saying kaddish. There will be new casinos in Las Vegas before 2019, I'm fully confident -- but they'll be ones positioned around affordability and (hopefully) generating double-digit ROI. Because, frankly, Las Vegas isn't the investment it used to be.

The St(ump) Regis, as it was to have been.

Then there's the schizoid-sounding Sheldon Adelson, who harrumphs, "I don't see any opportunities for any development in Las Vegas." Emphasis added; the Las Vegas Sands CEO seems to swing from bullish to bearish by the day.) It'd be nice for Sands if Adelson had been vouchsafed this insight before he started work on the St(ump) Regis in the midst of a condo-market meltdown. Now it's big bloody nose right betwixt the eyes of the Venetian and Palazzo.

The polar opposite of Adelson is Culinary Union boss D. Taylor who sounds like a flack for the Las Vegas Convention & Visitors Authority, so giddy is his optimism. Hey, D., have you talked to your workforce lately -- you know, the ones who just had to defer a $710/year pay bump?

At least some amusement is to be had from the Strip map prepared for the WSJ by Bill Lerner's new outfit, Union Gaming Research:

I don't think I'd take investment advice from a firm that doesn't know the correct spellings of "Echelon" or "Caesars." City Center seems to fallen off the map entirely. It'd also take issue with the classification of many sites (like the in-foreclosure FX Real Estate plot) as "ceased or delayed" as there was never any work to cease or delay at, say Elad Properties' "Plaza" site or Crown Las Vegas (aka "Archon"). Ditto MGM/Kerzner, Africa Israel, etc. However, the Cosmo, which really is in limbo, doesn't make onto the map.

At any rate, as land prices on the Strip continue to return to earth, there's going to be plenty of prospective acreage for the company that's ready, willing and able to build a mid-market casino on the Strip.

Case Bets: M Resort, bad debt, Wall Street's bomb

Mon, 20 Jul 2009 14:26:00 -0700

After fairly flying out of the gate, M Resort has hit the wall. Unfortunately, CEO Anthony Marnell III's response to economic adversity has been to sweat the value propositions. Not only is M fretting about card counters (hands down, the silliest preoccupation in the casino industry), it's yanking full-pay video poker machines.

“We are in business to have an edge and these games are nearly break-even,” Marnell tells Liz Benston. Give him points for candor ... but if you didn't want players to have a 50-50 shot, you should never have installed the machines in the first place, fella. This reeks of bait-and-switch. The video poker community is tightly knit; word of this stuff gets arounds fast and will undoubtedly redound to Marnell's disadvantage.

Another thing that might be working against Marnell are M's distinctly underwhelming coupon offers -- far inferior to those from Station Casinos, for one. The Significant Other and I tend to forward our M "offers" straight into the WPB (waste paper basket). I'd also respectfully dissent with Benston re M's casino design: It's a throwback to the old "disorientation" days. For ease of navigation, M's not a patch on Eastside Cannery, to say nothing of Wynn Las Vegas. Heck, even the venerable Sahara isn't the rat maze that is M's gambling floor.

When "whales" attack. Indicted high roller Terrance K. Watanabe is taking on Nevada's casino-debt-collection machine and his lawyer is making some interesting legal arguments. Basically, he's contending that markers are loans, not checks (as longstanding Nevada precedent would have it). Should this argument prevail at trial, it could have far-reaching consequences.

Since markers could no longer be booked as income, Nevada would no longer be able to tax uncollected markers, as it currently does. Since enforcement of the debt is funded by assessing a 10% penalty on the debtor, Clark County couldn't afford to go after delinquent whales, either. And casinos themselves might have to think even harder before (in effect) lending money to players like Watanabe who, his attorney says, accounted for a fifth of The Rio's and Caesars Palace's casino revenue in a two-year period.

Hoist on its petard. In his latest Las Vegas Business Press column, Dr. David G. Schwartz explains how the consolidation mania of the 1990s (spurred by manic Wall Street analysts) came back to bite the casino industry in its ass when times were tough. So tell us, Nevada Gaming Commission, why was it such a good idea to have an oligopoly on the Strip (and in Lake Tahoe ... and ... )?

Quote of the Day

Tue, 14 Jul 2009 20:38:00 -0700

“Did these companies come in and make Harrah’s and Station better companies? Not really. In the case of Harrah’s, they have made things worse.” -- T. Rowe Price portfolio manager Joe Fath on the effects of private equity buyouts on the casino industry.

Fertittas reinvest ...

Tue, 07 Jul 2009 16:22:00 -0700

... not in Station Casinos but in Orange County real estate, it would seem. The neighborhood is popular with casino moguls who have run their companies into the ground: A nearby, $35 million crib is a domain whose master is Jerry Herbst, late of Herbst Gaming, recently surrendered to its creditors.

At least Frank J. Fertitta III can argue that he was bargain-shopping, as his Emerald Beach pied-a-terre was purchased for 24% off list price. Station employees, however, aren't likely to be house-hunting anytime soom.

I'm reminded of something Transport Workers Union representative Joe Carbon said last week: "That's what it's about ... the CEOs making their $25 million and the workers having their health plan cut." He wasn't speaking of Station or Herbst specifically but the consequences of poor leadership at both redound primarily to the workforce -- and the creditors.

House of wax

Fri, 03 Jul 2009 13:05:00 -0700

I call your bluff, comrade. As you may have heard, casinos in Russia can stay open by converting to poker rooms. A tip of the fedora goes to reader mike_ch for pointing out this story, which delineates some of the pros and cons. In Vegas, even the strongest poker rooms don't generate nearly the body count that table games and slots do. But Russian casinos are much smaller and at least a few might be able to hang on, depending on the size of the rake.

It's mighty big of the Kremlin, by the way, to concede that poker is a sport, not a game of chance. Now if only Uncle Sam would do the same ...

Rescue the Riv! Random observation from driving down Las Vegas Boulevard last night: The Riviera suddenly looks so much better and more classic when juxtaposed with the incredible bulk that is Fontainebleau. Land values have fallen, RIV stock is worthless and the property itself provides ready access to the Las Vegas Convention Center.

Time, methinks, for Penn National to get off its duff and make an offer ... unless Penn CEO Peter Carlino is waiting for the Riviera to go into bankruptcy, so he can pluck the carcass at auction. Then again, if Carlino really thinks that Planet Hollywood and some or all of Station Casinos are low-hanging fruit, who am I to second-guess him?

Who's the dummy? The purpose of our excursion was to attend an incredibly pointless media event at Madame Tussauds at The Venetian. If there was a point, it was so that the assembled media hordes would serve as extras for yet another episode of Kathy Griffin: My Life on the D List. A waxwork of Ms. Griffin was being unveiled and suffice it to say that Wax!Griffin looks far better than Real!Griffin. (I must be Officially Jaded, for I scarcely gave the comedienne a second glance.) The various and sundry female impersonators on hand -- led by Frank Marino -- had clearly taken greater care of their appearances than Griffin had of hers. There was, in fact, just about every stripe of LGBT humanity on hand last night, so it was almost more Rainbow Coalition than media event.

What excitement there was went on outside, where a smallish crowd surrounded the Michael Jackson statue. Tributes were in evidence but everything was tasteful and no hysteria was to be seen. As for Mme. Tussauds itself, I've been to the original one in London, and I recall its wax figures as being more believable and the setting itself as more atmospheric (especially the tableaux of infamous British homicides and regicides) ... but that was 35 years ago this month.

Give Vegas Tussauds props for having a Joan Rivers dummy who looks more animated than her real-life counterpart, as seen on the NBC sitcom Celebrity Apprentice. All that's missing is to give the waxwork Rivers a voice box that periodically squawks, "A pokuh playah! A pokuh playah!" Still, we easily spent more time checking out the doodads and gizmos in Brookstone than we did in the wax museum.

S&M at Station

Thu, 25 Jun 2009 14:35:00 -0700

Bondholders of Station Casinos must have an infinite capacity for suffering. Either that or CEO Frank Fertitta III is such a virtuosic Pied Piper that they'll follow him anywhere. It's difficult to rationally explain why they're letting a superior offer from Boyd Gaming collect dust, opting instead for the umpteenth forbearance in six months.

Among the drawbacks to the "prepackaged bankruptcy" that Station is languidly pursuing are that it would leave current Station leadership in place, to say nothing of its enablers at Colony Capital. Also, once Colony's share of the promised $244 million in new equity is subtracted, what the Fertitta clan kicks in is likely to be chicken feed -- at least when compared to the half-billion clams various and sundry family members took out of the company during its catastrophic LBO.

S&G never, ever advocates violence ... but if Station's debtors are getting antsy, we'd completely understand if they took a cue from the Stewie Griffin collection method:

For "fake moustaches," mentally substitute "dog tracks in Massachusetts."

Land of the Pharaohs

Tue, 16 Jun 2009 15:49:00 -0700

My attempt to answer a reader's question about MGM Mirage's franchise deal in Gaza, Egypt, fell victim to LVA's Comment-Eating Server, so here goes ...

Unlike Station Casinos shopping for dog tracks in Massachusetts while it's poor-mouthing employees and investors alike -- or Harrah's Entertainment batting its eyelashes at Stanley Ho -- MGM is doing the right thing, IMO. It's diversifying a revenue stream that's overly reliant on Las Vegas.

True, the official phrase "will provide ... brand fees" is rife with ambiguity (and I've got a query out to New Giza). Obviously, it's a better deal if MGM is the fee collector. Beyond that, I can't see a downside to hiring out the company's considerable hotel experience and pocketing a management fee in return. MGM is being strategically creative and I applaud them for it.

Case Bets: Colony Capital, Siegfried & Roy, Obama smacks poker players

Mon, 15 Jun 2009 12:24:00 -0700

"Bats hang over the doorway to the building that housed Mr. Jackson's private arcade; guano stains the threshold." That's how the Wall Street Journal describes Michael Jackson's decaying Neverland Ranch. It gets even freakier from there, with the WSJ receiving a tour of the compound that might be described as Charles Foster Kane meets Pennywise.

Neverland is the latest can't-miss investment play by Colony Capital, whose crackerjack CEO, Tom Barrack, says: "We think we made a very smart real-estate deal ..." Then again, that's probably how Barrack felt about his acquisition of Station Casinos, which just took a bath on some of its land holdings.

Even by Vegas standards, Neverland is way up there on the Bizarre-o-Meter. Too bad Colony can't find a Native American tribe that can claim it as their ancestral land and have it taken into trust. It'd make a casino-based destination resort so demented and perversely infantile, Sin City would be green with envy.

The most blackly funny line in the video comes when the narrator says Colony is taking steps "to remove the taint of scandal." Man, there's no bleach on Earth powerful enough to eradicate that stain. Infamy, like nuclear waste, has a half life of forever.

A Tiger's Tale: Those cats of Siegfried & Roy's were endangering life and limb almost 30 years ago. And gosh, whatever became of the Siegfried & Roy IMAX movie that never screened locally? CineVegas, how can you let this introuvable escape your programming grasp? Maybe Johnny Brenden will let you rent his IMAX screen ... provided you show the movie at 7 a.m. or thereabouts.

So much for the conventional wisdom that Internet poker, at the very least, might find a sympathetic hearing from our poker-loving POTUS. The Justice Department's jihad against online casinos has taken a particularly nasty turn. The DoJ is striking at the soft underbelly of the business, going after players. So if you won $$ fair and square on the 'Net, too bad: Uncle Sam is going to relieve you of your money and if you don't like it, it's not like you can call the cops.

As I. Nelson Rose points out, we're getting into a legal gray area here -- not least because the federal injunction was brought in New York State, where online wagering isn't illegal. Let's give the banks the benefit of the doubt: They probably had little choice to go along with this draconian and unconscionable action, yet another intrusion by Big Brother. Rep. Barney Frank's proposed UIGEA rollback can't happen soon enough.

Adding insult to injury, the Obama administration is going to the mat on behalf of one of Bill Clinton's worst mealy-mouthed compromises -- the Defense of Marriage Act. In doing so, it's resorting to some of the most troglodytic arguments imaginable. Like: Equal rights are bad 'cause they cost the guvmint money 'n stuff.

Heavens, yes, just imagine how expensive it would be if we'd given women and African Americans the vote. What ... we did? I need to read my memos more closely.

So culturally benighted am I that I had to have someone explain to me who this Jon & Kate are and why they are the object of so much fascination. Sometimes ignorance really is bliss. At least they haven't "hosted" at a Vegas nightclub yet ... have they?

Trump: The Coup

Mon, 08 Jun 2009 14:35:00 -0700

Despite having publicly washed his hands of Trump Entertainment Resorts, timeshare pitchman Donald Trump has been quietly plotting an external takeover. But Trump's former company has no intention of quietly yielding to his embrace.

But they really mean it this time. Despite being not up to regulatory snuff "in every category," Las Vegas Gaming is receiving exceptional indulgence from the Nevada Gaming Control Board. Although, through his attorney, new CEO Jon Berkley basically admits to being overwhelmed and out of his element, he received the NGCB's blessing. True, Chairman Dennis Neilander promised "zero future tolerance. I’m at the end of my rope." But Las Vegas Gaming has been able to get pretty far out of compliance without any evident consequence. Neilander needs to show that his threat is not any empty one.

Satisfy them. A consortium of German lenders find themselves badly upside down on that never-very-likely Elvis-themed high-end resort. If you accept soon-to-be-ex-owner FX Real Estate & Entertainment's revised valuation of the property, center-Strip land has has fallen to $12.4 million/acre. Think what that acreage might have fetched when we were at the height of the Strip bubble.

Schreckliche idée, revisited. Prominent gaming attorney Frank Schreck continues to lug water for one of the less-potable ideas of recent years: Allow institutional investors to own as much as 25% of casino companies without deigning to subject themselves to Nevada scrutiny. In the course of shopping this around, Schreck has either revised his proposal or his sales pitch. He's now emphasizing that these companies would be passive investors.

That may be more palatable to both regulators and the public at large, but I'm not sure it will be much of an incentive to mutual funds, etc. Judging by the tugs of war we're seeing at Fontainebleau, CityCenter and Station Casinos, Wall Street isn't in the mood to fork over even more money to casino developers in return for being at management's mercy.

As for F'bleau, its owners have pressing problems to worry about on the home (i.e., Miami Beach) front.

Making out like bandits

Fri, 05 Jun 2009 13:05:00 -0700

In Business Las Vegas has crunched the numbers in its annual survey of Sin City's most highly paid executives. Not surprisingly, the list prominently features two companies -- Harrah's Entertainment and Station Casinos -- whose overpaid leadership has steered them into the ditch.

In terms of base salary, what's Station CEO Frank Fertitta III doing in the #2 spot, with $2.3 million? The guy must be a legend in his own mind if he thinks he warrants a higher wage than (then-) MGM Mirage CEO J. Terrence Lanni and Harrah's CEO Gary Loveman. (To say nothing of Las Vegas Sands doge Sheldon Adelson, a comparative pauper at $1.3 million.) You might question those gentlemen's business decisions, but they preside over companies far larger and more complex than Station.

Papa Frank belatedly realized he shouldn't have lent the boys the keys to the family car.

After stock-based compensation, bonuses, etc., were factored in, it was one big-ass payday at Harrah's, six of whose executives occupied the top 10. Even as their company groaned and crumpled under the weight of a spectacularly reckless LBO, and 9% of its workforce got the sack, these gentlemen carted home an aggregate $138.8 million. The dishonor roll includes CFO Jonathan Halkyard, regional presidents Carlos Tolosa, John Payne and Thomas Jenkin, and Vice Chairman Charles Atwood.

But even the best-remunerated of these (Tolosa, at $15.7 million) is a piker compared to Loveman's $92.3 million. They don't give pay packets like that at Harvard, do they? Loveman's tenure as Harrah's CEO looks increasingly like all-but-unmitigated reign of error but he's salting away enough wealth that his reputation need not concern him.

Former Harrah's exec John Boushy had a meeting of the minds (as in a head-butt) with colleagues at Ameristar Casinos, the result of which was that Boushy found himself on the street. But we should all be kicked to the curb so harshly: Boushy got $3 million -- including half a year's pay -- to take a hike. As walking-around money goes, that's not bad.

Reid rewarded, Trop rescued

Wed, 03 Jun 2009 15:47:00 -0700

... Sen. Harry Reid's (D-NV) efforts on behalf of the casino industry have not gone unrewarded. If you can follow this formatting garble, you'll see that his donors include not only Tim & Tom, late of the Golden Nugget, but also several reliably Republican casino CEOs.

Even the Fertitta Brothers have chipped in, which is the least they could do after the Senate Majority Leader shepherded a provision that incentivizes companies to buy back distressed debt ... which Station Casinos has in abundance. All of which means that Sharron Angle and any other GOP challenger will have to build up a war chest from other industries. The coffers of Big Gaming -- with possible exception of Sheldon Adelson's kitty -- are slamming shut. The industry has taken sides and put its money on Reid.

Yemenidjian is in the house. Pending the stamp of approval for the Nevada Gaming Commission, all systems are "go" for Alex Yemenidjian to take the reins of the Tropicana Las Vegas. The feeling at the Trop must be akin to that of a besieged garrison finally seeing a relief column marching its way.

The former MGM Grand boss is saying all the right things. His backer, Onex Corp., will invest $100 million (or more) in the property, which has suffered manifest neglect. Current operator Tropicana Entertainment's capex budget was fairly puny, symbolic of CEO Scott Butera's halfhearted commitment to the LV Trop.

Under Yemenidjian, the casino will be extended to encompass the ends of the two pedestrian bridges. Two new eateries and a nightclub are planned. No word yet about a new evening show (or about chasing the prostitutes, pimps and -- worst of all -- timeshare peddlers from the premises). But Yemenidjian has too much reputation at stake to simply continue the stagnation that has been the Trop's status quo for more years than I care to remember.

(Correction: Yemenidjian plans to lower the bridge, not raise the river. Which is to say that the pedestrian bridges will be extended to reach the casino, not the other way around.)

When Yemenidjian was (unsuccessfully) pitching an Illinois casino -- also backed by Onex -- his prospective management team included two Gulf Coast veterans: Joe Billhimer and Karen Sock, late of Hard Rock Biloxi and Harrah's Grand Biloxi, respectively. Both are heavy hitters and Sock, in particular, is overdue for a Vegas posting. Here's hoping Yemenidjian brings them here. Better late than never ... and the Trop needs some serious brainpower.

"We really mean it this time." Another day, another "Las Vegas Sands has the capital to restart the Cotai Strip™" story. Turns out it's the same old same-old. The prospect of asset sales, if not dead, isn't looking terribly hale. After all, who wants to buy a hotel in Macao if you must forefeit the casino action? Where's the fun in that (to say nothing of the money)?

Station 1, Boyd 0

Wed, 03 Jun 2009 14:01:00 -0700

In a North Las Vegas proxy war, Station Casinos handed defeat to Boyd Gaming when its preferred candidate, Councilwoman Shari Buck, trounced a colleague, to become the city's next mayor. Both Boyd and Station contributed to both candidates but slight biases were evident.

Station and partner Greenspun Corp. gave $32,600 to Buck, $28,500 to opponent William Robinson. Boyd and its NLV partner, Olympia Group, gave $37,500 to Robinson, as opposed to $25,000 for Buck.

Hence, the outcome of the election will not be good news for Boyd, especially if Station comes back to the city council, asking for a zoning variance so it can build Losee Station ... right across the street from Boyd's as-yet-untitled joint venture with Olympia. Outgoing Mayor Michael Montandon had opposed expanding the number of casino enterprize zones in NLV until all the existing ones have been developed, a process that might have required waiting until Hell is dripping with icicles. With Montandon out of the picture, all bets -- so to speak -- are off.

Rumble in Macao

Tue, 02 Jun 2009 17:34:00 -0700

Although an oft-promised loosening of visa restrictions by Peking stubborny refuses to materialize, an air of cautious hopefulness has crept back into Macao now that City of Dreams has opened on schedule -- and it looks dazzling. Aggressive revenue projections have literally reversed the fortunes of co-owner James Packer, whose disastrous venture into the U.S. casino industry is now seen by some as a blessing in disguise.

At $2.4 billion, City of Dreams rivals the cost of Venetian Macao and is hoped to equal or surpass the latter's 20% return on investment. One projection has it leapfrogging Wynn Macau into third place, with 20% of the Macanese market.

It also represents a double-edged sword for Sheldon Adelson's mammoth casino-resort. If it draws more punters to the Cotai Strip™, good. If it dilutes Adelson's customer base, not so good, obviously. In comments to the Wall Street Journal, Adelson seemed at pains to temper some headstrong pronouncements he'd offered to Steve Friess. As expected, an Adelson without the restraining influences of William Weidner and Brad Stone, is a pedal-to-the-metal Sheldon, saying Las Vegas Sands should have gone faster, faster, faster with its Cotai Strip™ projects, not slower. (The mind reels.)

"I just came back from Macau and we have five or six different options that we can pursue, each one of which would solve our liquidity problems," the Venetian's doge proclaimed ... which doesn't sound a lot different from what he's been saying for months. That is, until he contradicted himself by buying up a truckload of LVS stock -- something he wouldn't have done were a major deal in the offing.

Adelson predicts all his suspended Macao projects will be back in gear by year's end. He's on the curve in one respect, suggesting that his aborted St. Regis condo-hotel on the Strip could be revived by Sands' acting as lender to prospective unit buyers. Palms Place just started doing that very thing.

Sheldon's Commissariat for Optimism never closes, so one tends to grow skeptical of each new variant of "Victory is mine!" Anyway, Adelson was just off the plane from China, so perhaps jet-lag accounts for this reality-challenged assertion: "Our numbers have been going up and the [Macau peninsula] have been going down."

'Fraid not. Scarcely had that Adelsonian utterance made print than Lusa reported May's revenue numbers. If April had seen Wynn Macau falling back toward the pack, with 13% of market share, it returned with a vengeance in May. Steve Wynn's 18% market share -- with far less capacity than Adelson -- put him only three points behind LV Sands and came at the latter's expense. Stanley Ho still leads everybody with 30% -- as much as Galaxy Entertainment, Melco Crown Entertainment and MGM Grand Macau combined.

A few days earlier came news that visitation from Mainland China to Macao had been -43% in April ... hardly propitious conditions for flooring the Cotai Strip™ gas pedal. Ditto a 10% drop in May gambling revenues. Until that much-mooted visa liberalization actually happens, going apeshit with casino-hotel construction makes no sense whatsoever.

Nor did Adelson do his public image any favors with a gratuitous slam against jilted sidekick Weidner. (The latter, given the opportunity to respond, took the high road.) This 'hit 'em when they're down' move will accrue exactly zero sympathy for Adelson -- and it might have some nasty repercussions should it hamper Weidner's attempts to find another job. Then again, he's as rich as Croesus, so he can probably spend the next few decades on the golf course, should he so desire.

There's been no additional movement on the rumored Genting Berhad offer for MGM Grand Macau. However, even in a $13.8 billion/year casino market, the numbers don't look great for MGM. After it splits its 8% market share with partner Pansy Ho, it would have $55 million from which to pay an onerous tax bill, plus operating expenses. (The ROI must be dismal.)

Borgata, in Atlantic City, does $55 million a month -- in a bad month -- and MGM basically cashes a check from Boyd Gaming. So if MGM elects to stay in Macao and vacate Atlantic City, it won't be because the Chinese enclave is contributing more to the bottom line. Who ever thought MGM Grand Macau would function as a glorified "loss leader"?

Steve Wynn has a dragon ... and now Lawrence Ho does, too.

Back home, MGM is going downmarket at The Mirage. And they didn't even have to sell the place to Penn National in order to get there.

Strangely enough ... Penn's recent expression of interest in both Planet Hollywood and Station Casinos passed with scarcely a murmur of comment locally. You'd think that a well-capitalized company like Penn's hanging of a target on Robert Earl's or Frank Fertitta III's back would make headlines -- or maybe Vegas journos have tired of Penn's endless feints and tuned the company out. Well, almost all of them, anyway.

Planet Hollywood, at least, is acting far more aggressively than one would expect from a property that is contemplating a sale. So perhaps Earl is more pursued than pursuer. However, his conversion of Desert(ed) Passage into Miracle Mile appears to have run out of steam -- or money -- at the halfway point. Try as he might, Earl is never going to completely de-Aladdin-ize that place. A magic lantern and three wishes would come in real handy down there.

Also flying under the radar was former Planet Ho boss Michael Mecca's enlistment with Galaxy. Mecca jumped -- or, more likely, was pushed -- from the Planet right when the Omar Siddiqui scandal was at its height. Informed speculation had it that Mecca was thisclose to being tapped to head up James Packer's projected North American gambling empire. Crown Ltd. CEO Rowen Craigie was noncomittal, though, and Crown's big Cannery Casino Resorts acquisition fell through soon thereafter, leaving Mecca hanging.

Success being the best revenge, Mecca not only landed a prestigious new gig -- it's with one of Packer's direct rivals in Macao. Mecca shoots, he scores!

Which brings us full circle to Macao. That worked out tidily, didn't it?

Super-screwed at Santana

Mon, 01 Jun 2009 13:54:00 -0700

Morgans' gradual obliteration of the Hard Rock Hotel & Casino continues apace, in this February photo. Actually, this was one of the few flattering angles to be found.

Ever since Morgans Hotel Group plunged into the Las Vegas market, first with Echelon and then the Hard Rock Hotel & Casino, it's been in over its head. Latest case in point: trying to run an ostensibly major concert venue like it's the Suncoast showroom.

Based on what we encountered during Saturday night's attempt to see Supernatural Santana, if you're planning to catch a show at The Joint (sorry, "The Rogue Joint"), better get there super-early and pack a picnic lunch, too. At 15 minutes to curtain time, lines both for ticket purchase and for "Will Call" stretched waaaaaaaaaaaaaaaay back into the new convention area. An understaffed box office of (by our count) two ticket sellers was clearly inadequate to cope with the turnout. Knowing defeat when we saw it, we took our business over to The Palms.

Is anybody else fed up with Morgans' make-it-up-as-you-go-along style? Or what about its conversion of the once-elegant HRH into a scrum of buildings that strongly resembles an office park with some light-industrial facilities out front on Paradise? No? Just me? OK.

Speaking of The Palms, the place was crawling with customers, as always -- including a septet of German lager louts (but that's another story). So who does Station Casinos CEO Frank Fertitta III think he's kidding when he writes off the value of Station's minority stake in George Maloof's place?

Maloof takes offense at this diss of his property and rightly so. Fertitta grossly overvalued Station when he took it private and now looks like he's "stashing" some of that excess valuation via this Palms writedown. As feats of ledger-demain go, this one wouldn't even make it as an afternoon magic act at the Greek Isles.

Station: Unleash the hounds!

Thu, 28 May 2009 16:11:00 -0700

So Station Casinos is kicking the tires of dog-racing tracks in Massachusetts (as is Boyd Gaming)? Greyhound races will soon -- but not soon enough -- be illegal in Massachusetts, although the Bay State Lege just gave them a two-year reprieve. So it's a life-or-death priority for those tracks that lawmakers baptize some racinos in Massachusetts, stat.

Boyd, at least, has access to the requisite financing. But what's Station doing poking around the Eastern Seaboard? There are two ways of looking at it. One: How can Station justify spending money in Massachusetts when it can't afford to make its existing creditors whole? Or: Station's Vegas-centric business model has contributed to the deep hole in which the company finds itself and any geographic diversification is welcome.

That's not to imply that one perspective cancels out the other, especially when Station needs every revenue stream it can tap ...

Casino commercial of the month

Wed, 20 May 2009 16:35:00 -0700

For at least the last four weeks, Silverton Casino Lodge has been conducting a hit-and-run campaign of "Livin' Lodge" TV spots. These polished 15-second vignettes concentrate on delivering one message and doing so with humor. That's a refreshing contrast to the now-familiar image barrage (of which both Green Valley Ranch and M Resort have been guilty) which attempts to cram approximately 273.86 discrete ad messages into your cranium in 30 seconds or so. Then there's the CasaBlanca ad which vouchsafes us the sight of Randy Black giving himself a pedicure. My girlfriend's two-word review: "It's disgusting!"

Of course, nobody trying to pass themselves off as a Daddy Warbucks would be caught dead at the Silverton ... but that's an inherent part of the jest.

Enjoy! There are plenty more from whence this came:

Express delivery: It seems like just yesterday I was touting the upcoming release of Arnold Snyder's Topless Vegas. (Oh wait ... it was yesterday.) Well, it's gone from a "Coming Attraction" to "Now Playing" in the blink of an eye.

Due to its file size, Topless Vegas can't be e-mailed, but if anybody is having problems ordering it, please let us know and we'll work out an alternate method of delivery. It's copiously illustrated (hence the hefty megabytage) and Snyder isn't the least bit shy with color commentary or opinions. You'll love it or hate it but you won't be bored even for a moment.

Brooks: Steve Wynn sucks

Wed, 20 May 2009 14:10:00 -0700

State of the art Las Vegas ... if you're David Brooks.

OK, so David Brooks didn't go that far in his latest New York Times think piece, but if you applied his nostrums to the casino industry, Las Vegas would still look a heckuva lot like it did in 1988.

"The methodical executives at successful companies just make the same old four-door sedan, but they make it better and better," he writes. Then, further down: "The C.E.O.’s that are most likely to succeed are humble, diffident, relentless and a bit unidimensional. They are often not the most exciting people to be around. ... the virtues that writers tend to admire — those involving self-expression and self-exploration — are not the ones that lead to corporate excellence."

Hmmmmm. Steve Wynn can be egotistical, assertive, self-contradictory, multifaceted, expressive and reflective -- often all of the above in the space of a few sentences. His business track record must be a complete train wreck, mustn't it?

So hit the bricks, Wynn. You too, Anthony Marnell II & III, Glenn Schaeffer and Jim Murren, you art-collecting college-boy snobs. (They probably sip wine too, doncha bet?) We don't need none of yer out-of-the-box, smarty-pants thinking. Just give us the next iteration of the Boardwalk or Bingo Palace and make it snappy, OK?

The sound of obsolesence: The next time Review-Journal Editor Thomas Mitchell pens one of his endless series of musings wherein be strokes his moustache and is mystified by the decline of the newspaper bidness, he might ask himself this: Why did his paper run this wire-service story when the Sun had gotten to it two days earlier and in far greater detail?

The sad saga of Terrance K. Watanabe is rife with disturbing moral, ethical and regulatory questions. About the only clear-cut conclusion is that Watanabe's defense is a non-starter. (Harrah's Entertainment may be in trouble, but that's a separate issue.) Former Philadelphia Eagles owner Leonard Tose tried the same thing and had even less luck in court than at the tables. Fortunately, David G. Schwartz is right here to provide us with the relevant history and the precedent that augurs so poorly for the luck- and sobriety-challenged Mr. Watanabe.

It must be frustrating to keep trying to influence events and yet events refused to influenced, mustn't it? Let's ask this guy. He doesn't have a Puliztzer Prize, 'tis true. (Running stories two days after the Sun does might have something to do with it.) But some guy in Cedar City, Utah (who apparently couldn't find a copy of the Deseret News) is a big fan.

This just in: Schwartz also has the early word on a proposal to legitimize Illinois' gray-market slot route business. At first blush, this looks like a really good way to drive a dagger into the heart of the state's already-struggling casinos. Maybe Neil Bluhm should rethink that Chicagoland casino he's planning.

Brilliant idea, stupid headline

Wed, 20 May 2009 13:21:00 -0700

Tamara Audi of the Wall Street Journal is one of the two best gaming reporters in the U.S. (The Las Vegas Sun's Liz Benston is the other.) Too bad her story on MGM Mirage's global extension of its brand(s) got slugged with this idiotic faux-clever headline: "MGM Mirage Gambles on Hotels in Mideast, Asia."

Yuk yuk. WSJ headline writers must have really had to put on their thinking caps to come up with one. Except ...

There's no "gamble" here: As long as MGM does its spadework, and budgets so that management fees - costs + franchising fees = profitability, where's the problem? This is a brilliant low-exposure move by a company that's far too vulnerable to the vagaries of one (market) right now.

Both the Sun and the Las Vegas Review-Journal chimed in on this story already, but Audi has far more detail than either. Already, MGM's plan embraces such far-flung and exotic locales as Sharm El Sheikh (Egypt) and Tientsin (aka Tianjin, China), and a stateside push is under discussion.

Kudos to both CEO Jim Murren and MGM Mirage Hospitality supremo Gamal Aziz for devising a means of broadening the company's revenue stream that entails comparatively few upfront costs. MGM may be in stormy weather roughly comparable to what's being experienced by Harrah's Entertainment and Station Casinos. Unlike those two, it's going to have something to show for its troubles when it comes out on the other side of the typhoon.

Surrender in Atlantic City?

Wed, 20 May 2009 12:20:00 -0700

Yesterday, I mis-reported New Jersey state Sen. James Whelan's proposal for downsizing the state's regulatory apparatus. He didn't call for elimination of the New Jersey Casino Control Commission in favor of the Division of Gaming Enforcement, merely an unspecified removal of what he perceives as a redundancy.

(Such are the perils of working from memory. Mea culpa, mea culpa, mea maxima culpa.)

Today's paper has a longer clarification of Whelan's position. He'd like to see a DGE/NJCCC merger, although Gov. Jon Corzine sounds strongly resistant to that and other aspects of Whelan's plan. And, after hearing for years that one of Atlantic City's problems is that it has too few hotel rooms to be destination resort, it's quite a turnaround to hear Whelan advocate a 200-room minimum (like Nevada's), a ~~150%~~ 60% reduction from the current mandate.

What's certain to paint a target on Whelan's back is his endorsement of aggressive employment of eminent domain to clear out distressed properties and encourage development. That's a real sore point in Atlantic City, where Donald Trump once tried to use eminent domain to push an elderly woman out of her home. (He lost.) Also, imagine how confrontational matters might have become if Pinnacle Entertainment had eminent domain in its holster when it was trying to expand its 'sphere of influence' around the old Sands site and was trying to berate the local real estate market into acquiesence.

But ... we're talking about a casino market where emergency measures are required. Would the city be using eminent domain to obtain property and then offer it around? Or would the city be taking sides, using eminent domain to pressure Citizen X on behalf of Casino Z? As craptastic an idea as eminent domain is, generally speaking, it's a good thing Whelan's put it into play, because this looks like a debate that has to be conducted as Atlantic City decides what its future is going to resemble.

However, Penn National Gaming COO Timothy Wilmott is welcome to put a sock in it, at least as regards his own aggressive eminent-domain advocacy. Penn has basically given Atlantic City the finger, bypassing several opportunities to get into the market, so who cares what its braintrust thinks? I dare them to operate there. I double dare them!

Aw hell, I dare them to do anything besides sit on their $1.5 billion hoard of gold and bemoan the fact that they can't obtain Tiffany properties at Walmart prices. Wilmott probably didn't mean to come off sounding like, "Kick some old folks and small businesses out and maybe we'll build something," but Penn needs to clearly state its intentions in re Atlantic City and stop playing subtextual footsie. Otherwise, any further discussion is meaningless.

But the Missing the Boat Award goes to Casino Reinvestment Development Authority boss Thomas D. Carver. OK, he's probably right when he says, "I don’t think we’re going to see $2.5 billion casinos anymore." The market's not going to support and, at those prices, you're not building for the ROI but the bragging rights.

But then we get: "We may see $400 million facilities."

No, no, no, no, no! Four hundred million smackeroos is roughly half -- I repeat, half -- the budget for a Pennsylvania slot parlor. It's a locals-casino budget ... and not a top-of-the-line locals place, either. Maybe some of those creaky old monoliths along the Boardwalk need to go away but replacing them with a bunch of Aliante Stations is likely to hasten Atlantic City's decline.

What do the city's three top performers -- Borgata, Harrah's Marina and Trump Taj Mahal -- have in common? Significant capital reinvestment, that's what. The numbers do not lie: Customers are not flocking to the places that are run on the cheap. If Carver's line of thinking gains currency, Atlantic City can forget about competing with Pennsylvania and just run up the white flag. What he advocates is tantamount to unilateral disarmament.

"Another one bites the dust"

Fri, 15 May 2009 11:15:00 -0700

That's how a reader informed me of Las Vegas-based Golden Gaming's decision to bail on Wyandotte County in Kansas. Considering that you've got Harrah's Entertainment, Ameristar Casinos, etc. firmly entrenched across the state line in Kansas City, Mo., and Isle of Capri making a comeback over there, I don't blame Golden for its hesitation.

Penn National remains in the Wyandotte running but it found no support for its last bid and previous winner Cordish Co. withdrew amicably from its Kansas Speedway project so that it could be downsized. Casino-enabling legislation in the Sunflower State didn't allow Cordish to revise its proposal once it had been accepted by the Lottery Board. But Cordish promised it would be back, and it was.

Lottery Executive Director Ed Van Petten told media Golden wanted to conserve its assets, adding, "They are being conservative and playing it smart. I hate to see it, but I fully understand." Golden executive veep Rod Atamain's diplomatically phrased withdrawal alluded to preserving liquidity, among other motives:

"While we believe in the long-term viability and appeal of our site and project, we are not confident in making such a commitment on our own in the current environment." That's tantamount to an admission that Golden couldn't find lenders, especially considering Atamain's previous reference to "ongoing turmoil in the financial markets."

It would have been a tough call for Kansas. The Cordish and Golden projects were comparable in budget ($700 million vs. $662 million). As appealing as a Tom Watson golf course might be, Cordish's promise of a 50% larger slot base than Golden's would have been sweet music to state officials weathering a deep recession and counting the gambling receipts before even one handle is pulled.

In the meantime, Golden still has that liquidity it wants to preserve -- and its cash flow will improve this summer as liberalized casino rules in Colorado (Golden's primary market) take effect. It could always spend some of that dough close to home: Golden CEO Blake Sartini is the brother-in-law of Frank & Lorenzo Fertitta. What are the odds the Fertitta clan might try to spin off assets to Golden? It would enable Station Casinos to sweeten the offer it's making to bondholders and keep Boyd Gaming at bay, all in one fell swoop.

Just a thought.

Quote of the Day

Thu, 07 May 2009 11:50:00 -0700

"When the Fertitta family started spending Bellagio-size money to create neighborhood casinos, they’d officially drunk their own bath water." -- John L. Smith, bemoaning some of the more self-aggrandizing and pretentious aspects of the casino industry.

LVCVA gets with the times

Tue, 05 May 2009 11:39:00 -0700

Just yesterday, I was comparing a dazzling Macao promotional spot -- one which made the most of what diversity that enclave has to offer -- to the staler-than-stale recent efforts churned out on Las Vegas' behalf by R&R Partners. Little did I know that a topical one-shot ad spot from the Las Vegas Convention & Visitors Authority was running in Monday's USA Today.

Seizing upon Vice President Joseph Biden's recent "gaffe" about steering clear of swine flu, the LVCVA ran a full-page ad featuring Biden's mug and the tagline, "Mr. Vice President, if you had said it here, no one would have known."

Har-de-har. Actually, having worked with quite a few professional singers in a previous incarnation as an arts journalist, I can tell you they'd vouch for Biden's advice re being wary of confined conveyances -- especially airplane flights -- right down the line. As is so often the case in Washington, simple candor becomes a "gaffe." The Naval Observatory (official resident of the Veep) just might be the only place in or around D.C. where Diogenes could safely stop these days.

The Biden ad, of course, rings yet another change on "What happens here, stays here." Well, as the Carrie Prejean kerfuffle conclusively proves, what happens in Vegas has a half-life of forever nowadays. Besides, that "what happens in Vegas" cliché jumped the shark when convicted felon O.J. Simpson tried to employ it to excuse a botched heist at Palace Station. Surely it's time to put that line out to stud or send it to the glue factory, perhaps.

Station ixnays expansions

Mon, 20 Apr 2009 11:08:00 -0700

Stick a fork in Castaways Station -- the forlorn patch of Fremont Street land is on the block ... albeit at a considerable markup. Station Casinos, according to The Associated Press, is asking for $39.5 million on a vacant 30-acre lot for which it paid $33.7 million in late 2004. Good luck finding any takers.

Castaways Station, we never knew ye.

The '04 transaction illustrates Station's profilgate tendencies. Not only did it pay a markup of $900,000 on the Castaways' market value, Station graced the owners of the Longhorn and Bighorn casinos with $12 million more to in walking-away money. After that, Station imploded the rickety old casino, commissioned a rendering of a new, $90 million replacement from local architect Ed Vance and made cryptic noises about redeveloping the site at some unspecified future date. When I asked Las Vegas City Councilman Gary Reese (in whose district the ex-Castaways sits) about the status of "Castaways Station," the company became incredibly umbrageous and all "How dare you?"

In addition to the Castaways site, which Station appears to have grabbed mainly to keep it away from anybody else, ~~two~~ four additional plots are on the market. These ~~are~~ include an eight-acre chunk near Boulder Station and nearly five acres next to Sunset Station. This removes any doubt as to why Station keeps dickering for extensions with its bondholders: It's trying to raise cash ASAP so it can outbid the $950 million hostile-takeover offer that Boyd Gaming's got on the table.

(Click here for previews of Station's big land auction, including sites at the Ann Road/Sloan Land and Sunset & Lindell roads intersections. If the Castaways parcel also includes parking lots that previous owners leased from Jackie Gaughan, that may well rationalize the price increase.)

On the subject of high-speed rail, if you're a skeptic or simply doubt that it's a panacea for choked highways to and from Las Vegas, you'll find some comfort here. Though the writer makes some thought-provoking, however, seems of the opinion that we should do nothing, so I invite him to spend a Sunday in bumper-to-bumper I-15 traffic, heading back into California one inch at a time.

One reader suggests a solution in the form of a drastic increase in high-end buses serving the SoCal-LV corridor. Assuming that's feasible, would you make use of it? (It could do wonders for the rental-car business at either end of the trip.)

Dr. Feelgood is on the case

Fri, 17 Apr 2009 14:37:00 -0700

With Deutsche Bank bailing out of its coverage of casino stocks, analyst Bill Lerner is testing the waters with his own firm. Normally this wouldn't rise to the level of an S&G mention (other than perhaps to deplore Deutsche Bank's cutback) had Lerner not stuck his neck out as follows: "Lerner said Union Gaming will not be a 'cheerleader' for the gaming industry, but views the gaming industry as a long-term opportunity."

That's pretty rich when you consider that Lerner and rival analyst Larry Klatzkin are the "sunshine boys" of the gaming group. There never was a dark cloud from which they've been unable to extrapolate a silver lining. (Though some of the wacky pronouncements emerging from those crazy kids at Sanford Bernstein are starting to make Klatzkin and Lerner look dour.)

One of the all-time best Lerner bon mots came during a Face to Face TV taping, in which he told interviewer Jon Ralston not to worry about Station Casinos' current pickle, it had strong management in place -- you know, that same crackerjack managerial team that drove Station into the ditch in which it's currently spinning its wheels, struggling for traction.

For those who feel there's too much pessimism in current gambling coverage, Union Gaming's research reports should be just what the doctor ordered.

First, some good news

Thu, 16 Apr 2009 18:19:00 -0700

In a refreshing change of pace comes news of a casino that's on schedule for its opening. OK, so it's in Dodge City, Kansas, but we'll take good news wherever we can get it these days. Whoever thought avionics firm Butler National would be the sole casino bidder to make good on its Sunflower State commitment?

How quickly we forget that the original plans for Red Rock Resort called for three condo-hotel towers. Station Casinos was feeling its oats back then, thinking big even as it projected only single-digit ROI at Red Rock as far out as 2011 or longer. Overconfident much?

They like us. They really, really like us. Casinos in Southern Nevada feeling the recession's pinch are suddenly overflowing with newfound lurve for area customers, long taken for granted. Here's what's on offer so far. Satellites like Primm and Mesquite weren't any great shakes during Vegas' halcyon years. Why you'd go out there now when oligopolists Herbst Gaming and Black Gaming have helped run their respective markets into the ground is difficult to fathom. (Primm, at least, has a good outlet mall. Mesquite ... not so much.) Oh, and what's wrong with this "Stay and Play Here" graphic?

Goodman one-ups Adelson. Although he's never exuded warm fuzzies toward the Culinary Union, neither has -- to my knowledge -- Sheldon Adelson called his longtime adversary "evil." So Mayor Oscar Goodman stepped into the breach -- or stepped in something. As for the Culinary, it's got much bigger problems to worry about.

Any company that planned an ultra-high-end Elvis Presley-themed resort (a conceptual disconnect if ever I heard one) doesn't have both oars in the water. This one doesn't have money in the bank, either, and may soon have its Strip parcel sold right out from under it.

Las Vegas' best low-cost attraction is on the move, down the road to 1610 E. Tropicana Ave. If there's a guest list for the grand reopening, Elton John isn't on it.

Case Bets: Seminoles, Iverson, Harrah's, PartyGaming, Station's luck, etc.

Wed, 15 Apr 2009 16:01:00 -0700

Down in Florida, the tide may be turning in favor of the Seminole Tribe. Both the Florida Retail Federation and Restaurant Lodging Association have thrown their support behind the status quo, as represented by Gov. Charlie Crist's Class III casino compact. Crist's unilateral gambling expansion has the not-so-small problem of being unconstitutional but this latest turn of events ratchets up the pressure on solons to pass a version of the compact that meets judicial muster.

That'll be no problem with the state Senate but the uptight House would like to roll back the Seminoles to slots-only status (and would get rid of the casinos altogether, if only they could in their benighted heart of hearts). The table-game genie isn't going back into the bottle -- at least not until the federal courts have their say -- so the Solomonic question at hand is how to level the playing field for private-sector racinos without sacrificing the Seminole tax revenue that Crist secured. Easier said than done, obviously.

"Is too!" "Is not!" Both MGM Grand Detroit and Greektown are refuting a report in the Detroit News (with which MGM has taken issue before) that they'd 86'd former Philadelphia 76er Allen Iverson from their casinos. Let's face it, the man is a boor but he's a wealthy boor, so neither casino is likely to turn him away as long as he only bounces basketballs, not checks.

Headless casino. Not only did Harrah's Entertainment sack the GM and five other execs at Harrah's Reno, it won't be replacing them. At almost any other company, running a casino by remote control would come as a surprise but Harrah's has the reputation of employing a ruthlessly standardized business model. Besides, the company has to free up some dough to pay its new Internet/World Series of Poker guru Mitch Garber, whose former employer, PartyGaming.com, just cut a deal with the feds.

The luck of the Fertittas. Dodging yet another bullet, Station Casinos extended negotiations with its debtors by another month. While some form of bankruptcy at Station is inevitable, the company continues to fend off a takeover attempt by Boyd Gaming. However, Station says that when it comes to the terms offered to unsecured creditors, it's hanging tough. If that's the case, what's to discuss? (Or is Station being more flexible than it's letting on publicly?) My money, so to speak, is still on Station brass and co-owners Colony Capital retaining possession of Station and at a substantial discount to its market value, too.

An obscure racino company is cleaning house and relocating from Las Vegas (where it had no logical business being headquartered) and back East, where all its business is. The board of Empire Resorts really wasn't minding the store, was it?

The company might at least saved a bundle on long-distance charges if it had condescended to have its corporate offices in New York State, where its physical operations were, and not in tax haven Green Valley. But don't cry for outsted CEO David Hanlon, who parachutes out with 100 grand and plus another hundred large for nine months of "consulting services." These days, nothing succeeds like failure -- provided it's done on a grand scale.

Update: These are the same clowns whose Maryland slot application got tossed because they didn't bother to include the mandatory application fee when they filed.

Pennsylvania's biggest gaming screwup is history ... sort of. Former Mount Airy casino owner Louis DeNaples is guilty as hell of hanging out with the wrong crowd but innocent of perjury and will maintain one degree of separation from the casino, which remains in the DeNaples family. The Pennsylvania Gaming Control Board can claim a semblance of victory but the four-and-a-half-year imbroglio is a lingering embarrassment to a body whose vetting process has been inarguably the sloppiest in the U.S.

The PGCB needs to pay more attention to background checks and less to "juice" (see Barden, Don) -- and also to develop questionnaires that aren't so "imprecise and potentially confusing" they could open applicants to charges of perjury. It would also behoove Pennsylvania to quit "stovepiping" PGCB and state police investigations. Were it not for a lack of information-sharing (prohibiting by Keystone Kop, er, State law), this whole mess would probably have been avoided.

A delicate balance

Tue, 07 Apr 2009 17:51:00 -0700

Another day, a little more movement in the CityCenter situation. Well, it's that or talk about tourism and gaming revenue numbers that are too depressing to contemplate for long.

Time was that the American banking industry was practically giving away money, not requiring MGM Mirage to pledge assets for collateral. Lucky for MGM, lucky for us, not so lucky for the banks. That's going to change and Liz Benston delineates the tightrope that MGM will have to navigate to keep both banks and bondholders happy -- a delicate balancing act indeed. The one casino MGM can neither unload nor borrow against is New York-New York, presently encumbered with three-quarters of a billion dollars' worth of junk bonds.

Meanwhile, James Packer continues his CityCenter softshoe routine. According to Bloomberg (see sidebar), while Crown Ltd. may not be talking to MGM or Dubai World directly, it's reported to be exchanging notes in study hall with Colony Capital ... hence the carefully couched denials Crown issued last weekend. Since Colony will be merely lending to MGM, not investing (assuming negotiations bear fruit), that'll spare the fund from having any uncomfortable chats with Station Casinos, which has near-Strip aspirations of its own. Besides, if MGM defaults, God forbid, Colony might find itself with a gem like Slots A Fun or maybe even Circus Circus, and could whistle Station in to run it.

The terms of the alleged deal -- $750 million toward debt structuring -- more than suggest that MGM has given up on any getting any more dinero out of Dubai World. If it can "clear waivers" with its lenders, it looks as though MGM's preparing to shoulder the next $800 million worth of CityCenter costs by its lonesome. Another bit of good news for Kirk Kerkorian's company is that Deutsche Bank analyst Bill Lerner has revised the EBITDA estimates of Beau Rivage and MGM Grand Detroit up a bit. Lerner's new numbers would bring the theoretical asking prices (using 7X cash flow as a baseline) to $715 million and $940 million, respectively. The question of how anybody not named Penn National is going to persuade lenders to underwrite such a deal is still begged, though.

I wonder if Barbara Cappaert of KDP Investments ever tires of having to be the one to point out the elephant in the middle of the room, namely that MGM is pawning tomorrow to pay for today. That $235 million-plus in annual Biloxi/Detroit cash flow is going to be sorely missed.

If anybody ever writes the history of the casino-hotel currently known as the Greek Isles, it'll only have one chapter ... Chapter 11. The Isles has known many incarnations but it always seems to find its way back to bankruptcy court sooner or later (usually sooner). It's eked out a marginal existence for such a long time that perhaps the casino evolutionary process needs to "select out" the Greek Isles, which occupies a forlorn backwater between the Convention Center and the Strip.

Anyway, if you enjoy bankruptcy filings, this one should keep you busy. Since the Isles is more of a slot-route outpost than a casino, the alphabet soup of ownership groups is of debatable relevance to its gambling operations, though. Will the last person to leave the Greek Isles please turn out the lights.

For Rent: One blimp, slightly used. Gets 2.1 MPG. Annual operating cost $1.1 million. Your logo here.

Case Bets: Station Casinos, CityCenter, Pittsburgh, James Packer

Fri, 03 Apr 2009 11:22:00 -0700

Credit-default swaps, some of those financial instruments that have played hob with the U.S. economy, are making a cameo appearance in the tortured saga of Station Casinos. ~~If you insured Station's debt, that insurance is worth more than the paper your CDS is printed upon --~~ ~~but not by much~~.

Congratulations, MGM Mirage. Your probable rescuer is a bottom-feeder who's preparing to root around amidst the dregs of the banking industry. However, with CityCenter as much as $3.8 billion shy of the finish line, MGM isn't in a position be picky about going into business with the K-Mart of casino owners.

Rivers Casino, the former Majestic Star, has some CityCenter-style construction problems. This project has been so vexed and hexed that nothing comes as a surprise anymore.

Interesting business model. Halfway around the globe, Melco Crown Entertainment's got a lot riding on its City of Dreams megaresort. To bring back the whales, it's essentially promising that they can welsh on their markers with impunity. Or, as the company puts it, "Aggressive enforcement actions against a customer [may] unduly alienate the customer and cause the customer to cease playing at our casinos." And, gosh knows, nobody wants to alienate a deadbeat debtor.

The Company That Ate Itself

Wed, 01 Apr 2009 17:29:00 -0700

Perhaps it was with dry irony that the Las Vegas Review-Journal's latest Station Casinos story's subhead read, "Company blames economy, poached customers." And by whom might those customers have been poached? By Station Casinos itself! The company's imperial overreach has reduced it to gnawing on its own femur, as each new Station property cannibalizes business from somewhere else in the Fertitta empire.

Bad as the 2008 financials were, 2009 is going to be that much worse once the encroachment of M Resort begins to be felt. Last year, Station's casino revenues fell by 11% and ADRs were down comparably. A 14% slippage in cash flow from 2007 meant that a deal valued at a rose-colored 9.7X EBIDTA is now effectively over 11X cash flow. Even had the Fertitta Brothers not insisted upon carting home a half-billion dollars as part of the buyout, its valuation would still have been quite over-optimistic.

(Even in a boom year, Station's proposal to dilute Aliante Station's revenues with a nearby "Losee Station" would be inexplicable. Given the company's current financial performance, it's an idea quite a few fries short of a Happy Meal.)

Elsewhere in the casinosphere, the closest thing to good news was Planet Hollywood's disclosure that it shaved 40% off of last year's losses, thanks to a nearly 8% revenue increase. More alarmingly, the Las Vegas Hilton -- seemingly the one casino-hotel Colony Capital couldn't ruin -- has swung from a profit to a loss.

It's a business miracle! Losses at soon-to-be-cleft Herbst Gaming widened by 60%. Most of that was driven by a -33% downward spiral in slot-route revenues. By contrast, the ouster of sundry Herbsts in favor of CEO Ferenc Szony appears to have given the company's 15 casinos a boost because, as dowdy as some of those places are, their revenue actually grew 1% last year.

For most companies that might be unremarkable; for Herbst it's a miracle. It also puts paid to the Herbsts' face-saving insinuation that, by keeping the slot routes and parting with the casinos, the family was hanging onto the real goodies. I can't even remember the last time I went into a Terrible's convenience store and saw somebody playing the slots.

Humpty Dumpty had a great fall. The Nevada state budget is a two-legged stool, balanced upon gaming and sales taxes. That stool is getting wobblier by the day. Unfortunately, if the Lege has any solutions, it's keeping them to itself.

Hooters vs. Riviera

Tue, 31 Mar 2009 18:17:00 -0700

It's a race to Chapter 11 now, with Riviera Holdings in the lead. Its glandular-themed rival down the street is opting out of an interest payment and drawing down the last of its credit, never a promising sign. However, Riviera is forcing a confrontation with Wachovia Bank. Given a choice between hoarding cash on hand and making a $4 million interest payment, Riviera execs chose Door #1. That comes atop some scarifying 4Q08 numbers that included a $13 million loss, plus cash-flow declines of 64% on the Strip and 42% in Black Hawk, Colo. (Those newly enacted rule relaxations in Colorado can't come soon enough.)

Downward pressure on ADRs (not to mention 84% occupancy) and diminished convention trade (-28%) were blamed for the decision to conserve dollars. While the Riv recorded almost as much entertainment revenue as the year before, 27% of that took the form of comps to high-value players and thus came right back off the ledger.

The Riviera's appeal is not likely to be enhanced by the announcement it is renting out space to that bane of Strip visitors -- a timeshare company. "We have implemented and will continue to implement promotions to attract competing hotel customers to our property to enjoy our amenities," Riviera adds. Just don't order the powdered eggs, OK?

Station Casinos, meanwhile, closes the book on a poor-to-awful 2008. Cash flow was below $100 million for the fourth quarter, further underlining how overvalued the company's LBO price was.

No more sports betting ... at least not until football season at Bally's. What the hell. You can't bet on a Boston Celtics game there anyway.

Casino apocalypse

Thu, 19 Mar 2009 13:08:00 -0700

I'm deeply imbedded in other projects today. In the meantime, by way of In Business Las Vegas and GamingFloor.com (source of yesterday's Harrah's Entertainment time warp, too) here's the answer to the question, "How many casino failures can you pack into nine minutes?" Watch it and weep.

Death, taxes and Station Casinos

Wed, 18 Mar 2009 14:39:00 -0700

It's all but certain that the unenviable steeplechase to be the first major gaming company to declare bankruptcy in 2009 will be won by ... Station Casinos!* (On Tax Day, no less.) None of the company's three rescue scenarios does not involve some form of bankruptcy.

(* -- Unless Trump Entertainment Resorts still counts as "major" operator, but I strongly doubt it.)

Potential runner-up MGM Mirage is at least a month behind. Coincidentally or otherwise, mid-May would also mark the point at which the maw of CityCenter devours the $500 million realized in the Treasure Island sale (leaving approximately $600 million in the kitty), should that close on schedule.

Which might be A Good Thing: Another razor-sharp analytical piece from the Las Vegas Sun efficiently lays out the reasons why Chapter 11 is the worst option -- except for all the others. Not only does it keep the companies in one piece, it reduces the incentive to cannibalize capex dollars for debt servicing. Also, the prospect of facing regulatory scrutiny is daunting enough to bankers that they're inclined to keep the status reasonably quo.

Although MGM Mirage has one of the best debt-to-earnings ratios on what I'll call the Benston-Velotta Scale, short-term debt has pushed it far closer to the brink that Wynn Resorts or Boyd Gaming, both of whose ratios look slightly worse on paper ...

But not nearly as bad as the nearly 15:1 debt-to-earnings imbalance under which Las Vegas Sands is crumbling. It really makes you wonder what the Sands-loving analysts at Sanford Bernstein have been putting in their coffee. Running a close second at 13:1 is bankruptcy-bound Station, the victim of cash-flow projections that were extraordinarily far from the mark.

Taxing problems: More numbers are available on the proposed cigarette and liquor tax hikes. They're ugly but I did get a chuckle from the R.J. Reynolds lobbyist who floated the solicitous argument that tobacco taxes are bad because they're regressive. Nice try. (Altruism is not Big Tobacco's strong suit.)

I've also shamelessly swiped these market-cap comparisons, which Hugh Jackson posted today:

Barrick Gold: $27.5 billion

Newmont Mining: $18.72 billion

Wynn Resorts: $2.37 billion

Las Vegas Sands: $1.46 billion

MGM Mirage: $959 million

That's $46.2 billion for just two mining firms vs. less than $5 billion for three of the most significant casino companies. Which of these industries is in the cross hairs for an imminent Nevada tax increase? I'll give you a hint: The answer does not contain the word "mining."

Wynn(ing) Scenario: No matter what he says, people love to speculate that Steve Wynn's going to use his new stock offering to buy another casino. I'm not saying he won't ... but $175 million won't get him far, even in this market. Unless he's got a sudden hankering for the Tropicana or Riviera, that is.

Station vs. Boyd IV: This time it's spite

Mon, 16 Mar 2009 14:23:00 -0700

Inside the wacky world that is Station Casinos' executive suite, business judgment is evidently trumped by getting even with your main adversary. How else to explain Station's eight-month push to get zoning approval for Losee Casino Station? The company is sitting on a 58-acre non-gaming parcel at the northeast corner of Craig and Losee roads.

In addition to needing a zoning variance, Station must also contend with North Las Vegas Mayor Michael Montandon's stated opposition (which has softened a mite of late) to creating new gaming enterprise districts in NLV while several existing ones remain unexploited. Then again, Montandon is running for the GOP gubernatorial nod in 2010 and the Fertitta family are george Republican donors, so a change of heart may be in the offing.

As for this "Losee Casino Station," it's a project Station pulled out of its ass (and rather stealthily, at that). It has every appearance of being done to checkmate Boyd Gaming's adjoining Park Highlands project (the former "North Coast"), which Boyd obtained by agreeing to surrender the gaming entitlement on land it owned further south. As a business move, it makes scant sense.

Architect Ed Vance's design for Station Casinos' quickly forgotten Castaways site.

Surely major casino companies don't act out of pettiness and spite, I hear you say. Consider this: Durango Station remains in decade-long limbo and previously announced projects for Inspirada (in Henderson) and Cactus Lane, near South Point, are in a holding pattern -- as are redevelopments of the Palace Station and Wild Wild West areas. And don't forget the long-mooted, long-deferred Castaways Station (or whatever that promised casino-restaurant will be called). Or that, just a short drive down Craig Road, new $662 million Aliante Station is trying to make its nut.

No, defying all logic, Losee Station has somehow risen to Priority #1 status. I wish I could put it more politely but Station is throwing a "cock block" on Boyd. The company's appetite for brinksmanship knows no bounds.

'M' is for 'mobbed'

Mon, 16 Mar 2009 11:08:00 -0700

Local naysayers have been gleefully predicting the swift demise of M Resort for weeks now. And I'll admit I even entertained a few doubts as we drove out there yesterday morning. I mean, unless you live well south of Vegas proper, you have to drive all to hell and gone to reach M. Was that initial fortnight of frenzied business just a novelty phase?

Boy, were my doubts misplaced. M was crawling with players and other customers at 10 a.m. on a Sunday, with lines soon forming for just about every restaurant on the property. That's to say nothing of the number of people queuing up to join the players' club. That was about a half-hour wait, followed by what must have an even longer one for the buffet, although my bad back was flaring up so fiercely that A) it played hob with my sense of time and B) I was sure I'd be leaving M on a gurney.

That buffet is no doubt one of the main drivers of M's early success. (Savvy marketing is another.) Both in breadth and quality, it rivals the two buffets at The Rio, thereby putting it in the top three among off-Strip buffets. M manages the not-inconsiderable feat of putting Station Casinos' Feast buffets in the shade and the respectable Sam's Town one is left completely in the dust.

Leaving M, you'll pass the once (and future?) site of Gary Goett's Olympia Gaming casino-resort (above, as originally conceived), now retitled Legends at Southern Highlands. One billboard vows an April 2010 opening, which is preposterous, while another -- right next to it -- only promises 2011. As of this writing, not so much as a spadeful of earth has been turned. This project was announced before M but has slipped into the "believe it when it happens" category.

Donald Trump likes to sue but this time he's on the receiving end. Depositors in insolvent Trump Ocean Resort Baja are claiming "fraud, negligence, unjust enrichment and violating federal disclosure laws" after the project blew through $31.5 million worth of deposits with nothing to show for it but a hole in the ground. As is quickly becoming the case whenever a Trump-branded product goes belly-up, the orange-haired TV star is claiming he had nothing to do with it.

Nevada Lege sticks it to you

Tue, 10 Mar 2009 16:52:00 -0700

Although a few Democrats in the state Senate toyed with the idea of growing a spine and opposing raising the hotel-room tax, all of them -- plus several Republicans -- did the easy thing and opted for Plan A: Soak the tourists. Again. So the new top rate in Las Vegas will be 13%. Pardon us while we put this cigar butt out in your face, too.

All the rationale you need can be found in the final line of Ed Vogel's story, where he's told this "may be more palatable than other tax increases because the tax would be paid by tourists." The disdainful tone expressed toward tourists by KVVU-TV talking heads on this morning's 7 a.m. newscast simply drove the point home: Tax that schmuck behind the tree.

Of course, the tax increase was popular with two-thirds of Clark County voters. Wouldn't you love any tax that somebody else has to pay? Despite having booked the revenue already, Gov. Jim Gibbons will take the coward's way out and let the new impost become law sans signature. That hardly befits a decorated military veteran. (Proving yet again that irony is dead, Gibbons reiterated his now-is-not-the-time-to-raise-taxes mantra the very same day.)

The solons' fecklessness is pithily summarized by an understandably exasperated Jon Ralston:

The session is nearly a third over and a pervasive sense of deja vu is settling in. Governor presents controversial idea(s). Legislature declares them DOA. Partisan sniping ensues between lawmakers and governor and among legislators. Final budget/revenue plans are an abomination, some kind of Frankensteinian creation that has no policy underpinnings but fills a budget hole with cobbled together revenue Band-Aids.

While Gibbons' budgetary 'solution' might be dubbed the Nevada Chainsaw Massacre, the Dems' non-response is equally deplorable, consisting as it does of socking it (among others) to the casino industry even more than ever. This approach would simply amplify existing inequities in Nevada's structure, as Hugh Jackson tried to explain to the Lege, throwing in some charts that even a legislator could understand. They neatly highlight the disparity between the enormous revenue contribution made by casinos -- hundreds of millions of bucks -- and the measly input from the mining industry.

Silver Lining Dept.: Amid all those beyond-horrid numbers from the Nevada Gaming Control Board, note that slot hold is down almost a full percentage point. Hopefully the example of M Resort, trading off loose slots for longer play (the old Cactus Jack's philosophy) will find more adherents. Oh, and Washoe County was up. We'll take any good news we can get and this was pretty unexpected.

A reader enlightens me. Among the possible reasons for the increased smoke infestation at formerly respectable joints like Sunset Station (and Eastside Cannery), a California visitor suggests another: The ban on smoking in Nevada restaurants has driven the cigarette-and-cigar crowd to the casinos more than ever, since the latter represent one of the few safe havens remaining. He's noticed a gradual increase in the smokiness of Red Rock Resort and comparable places that provide a one-stop-shop for dinner, video poker and a smokin' them while you've got 'em.

Can't argue with that ... although the rapid declivity of both Sunset and E-Can into mega-ashtrays suggests to me a confluence of factors, all of them untoward.

Boyd cuts through the crap

Tue, 10 Mar 2009 15:44:00 -0700

There's no longer any pretense whatsoever that Boyd Gaming's takeover offer for Station Casinos is being pitched to Station management. In its reply to Station CEO Frank Fertitta III's trash-talking refusal of Boyd's offer, the latter posits that "the proposal outlined in its February 23, 2009 letter offers a superior recovery to creditors when compared to the current restructuring offer Station has proposed."

Boyd's target audience, the Station bondholders, find themselves in the catbird seat. Even if they don't like the color of Boyd's money, the onus is on gambling's best-paid CEO to come up with something better. Responding to Fertitta's jab at Boyd's financial status, the company "reiterates that it has sufficient liquidity under its credit facility to finance a cash transaction, and contemplates that no amendment to its credit facility would be required under the proposed transaction structure."

Translation: There's as much as $2 billion on the table for you ... but not a penny more. Whether or not it's prudent for Boyd to be pushing all its chips into a Station bid (as opposed to finishing Echelon), putting a hard cap on the deal is a wise move, signaling that the company won't be drawn into more than a finite bidding war.

Frank Fertitta III: superfluous?

In Boyd's defense, while Station's cash flow hasn't been what management cracked it up to be, it would still provide Boyd with a means of paying down the acquisition from Day One. In addition to reducing the potential leverage ratio, Boyd would get an immediate return on its $2 billion -- something that can't be said for the project that has been dubbed "Inch-along." Boyd can also make the argument that those returns will look even better once it starts making economies of scale and eliminating redundancies ... starting with the Fertitta brothers and working downward.

Oh ... and if you're wondering who'd get the "Station" name (and the brand equity attendant thereupon), I'm told the answer is: Nobody knows. At least not yet.

Smoky Station

Mon, 09 Mar 2009 01:41:00 -0700

Smoke gets in your eyes ... and your nostrils ... and all up in your business the instant you pass through the doors into Sunset Station. This was the overriding impression left by a Saturday-night visit and it was quite a striking contrast to the older Hooters, which I expected to be smoke-ridden but wasn't. Sunset Station, contrarily, seems to be aspiring to be the second coming of Nevada Palace. This is a recent and unwelcome phenomenon, suggestive of severe maintenance cutbacks and, just perhaps, an underlying assumption that people either won't notice or just won't care.

That's what really reeked when it became obvious that the Harrah's Entertainment and Station Casinos LBOs were going to go through. Because inadvisable debt loads aren't the customers' problem per se. But in order for those newly overburdened companies to make their nut, particularly when it came to debt servicing, it was obvious that customer service, comping and maintenance were going to take it in the neck. Which is, by all accounts, what's happening. But with companies sky-high on cheap credit and banks gleefully playing the role of the neighborhood pusher, high-risk deals were getting made left and right back then (circa 2006) because so many circumstances conspired to 'enable' -- nay, encourage -- them.

At least the downward march of Sunset Station toward grind-joint status is still reversible. And the smell of smoke is a temporary annoyance ... unlike the tooth-grinding dissatisfaction that was tonight's (in)conclusion of The L Word. Oh, the waste, the Indian-giving, the sucktacular-ness of it!

Scant love for Boyd, big love for M

Thu, 05 Mar 2009 12:51:00 -0700

I guess Fitch Ratings doesn't have the stomach for Boyd Gaming's attempt to take over Station Casinos either. It's downgraded Boyd, whose bonds sank "further into junk status."

Locals love M Resort, it would appear. The Anthony Marnell III property has been open less than a week and is already hiring an additional 250 staffers -- after being swamped by early busness. Instead of the projected 5,000 covers per day, M's restaurants have been doing closer to 10,000. Also, the number of sign-up stations for the players club will be increased to 20, the casino having realized 80% of its goal of having 25,000 enrollments in March. (This may explain why furniture was being removed from parts of the main floor.)

Another 100 slots will be added and there will be more sightings of the gambler's best friend: the ATM machine. Obviously, some of the "honeymoon" hubbub will wear off once the curiosity factor has subsided (which is what happened to Red Rock Resort). But good news is at a premium these days, so we shan't look this gift horse too closely in the mouth. That surely goes double over at MGM Mirage, whose minority stake in M looks more and more like one of that company's savviest investments -- not to mention likely to yield the most bang for the buck.

Station vs. Boyd III: This time it's personal

Tue, 03 Mar 2009 21:46:00 -0700

You really have to hand it to Station Casinos CEO Frank Fertitta III. This dude has more lives than a cat. Every time you think his luck has run out, he slips the noose yet again.

So it was Tuesday. FF3 proved that his time at the gym hasn't been wasted, as he applied a one-two punch to Boyd Gaming. While studiously ignoring Boyd's $950 million offer for most of Station, FF3 was persuading his creditors to give him a forbearance that will extend until Tax Day. When it comes to sweet-talking bondholders, this guy is sheer Sheherazade ... especially when you consider that Boyd's offer made the Fertitta family's proposed $244 million cash infusion look like chump change.

Forbearance in hand, FF3 then unveiled a "Don't call us, we'll call you" letter to Boyd. Ker-POW! Fertitta must have been feeling his oats, as he dissed Boyd's offer on the grounds it was "non-specific" and "highly conditional." This was just a tad disingenuous when you consider that Boyd didn't have information that would enable it to make a more specific offer -- because Station wouldn't provide it.

Unsheathing his claws, FF3 then took a swipe at Boyd's soft underbelly (i.e., Echelon), cattily making note of "Boyd’s potential inability to perform due to its own financial position." Meow! Considering that Fertitta's own company is justthisclose to filing bankruptcy itself -- far, far closer than Boyd -- you have seen an instance of the pot calling the kettle black that's so brazen it may never be surpassed.

In fairness to FF3, it's not like he wasn't provoked. Boyd proclaimed its offer far and wide, doing everything short of hiring a plane to sky-write it over Station HQ. Boyd was talking past FF3 and straight to the bondholders, in effect saying, "You're a nice lad, Frank, but you're irrelevant now." So Tuesday was Payback Day.

Fertitta is like the Teflon CEO. No matter how many EBITDA projections Station misses or how outrageous its executive compensation packages are, nothing sticks to him. Not only that, he and brother Lorenzo were able to structure a deal whereby Station insiders only controlled 24% of the equity -- but 60% of the board. Then again, from a strategic and operational standpoint, would you rather put Station in the driver's seat -- or Colony Capital? It's Hobson's Choice but Station wins, hands down.

There's been one immutable bottom line to all Fertitta clan responses to Station's liquidity crisis. As Liz Benston described it:

"The plan would improve Station’s financial outlook and keep the Fertittas at the helm.

"But critics question whether Chief Executive Frank Fertitta III and his brother, co-owner Lorenzo Fertitta, are worth the debts they want bondholders to forgive."

You might call that the $5 Billion Question.

Boyd's suffered a major setback in today's developments. If $950 million isn't enough to persuade bondholders not to heed FF3's siren song and lend an ear to Boyd, what is? Their response to the Fertitta's take-it-or-leave-it March 2 deadline was obviously "leave it" ... but they willing to keep the line open for another six weeks. Boyd's made what looked for all the world like a game-changing gambit and yet the chess pieces have scarcely moved.

While there's just about everything to like about Boyd as a company there's almost nothing to like about its attempted hostile takeover. Try and try, I can't make sense of it. For starters, it would cannibalize at least half of the $2 billion earmarked for Echelon, which raises questions about Boyd's commitment to the project -- or how it would flip the site with a half-built megaresort sitting atop it.

Then there's the problem (if you're Boyd) that your offer doesn't take the Fertittas out of the picture, it simply whittles them down a bit. They'd still have Red Rock Resort and Stations Palace, Boulder and Sunset. That is, unless Boyd is willing to shoulder the elephant-on-its-back burden of the $2.5 billion note with which that casino quartet is encumbered. Could Boyd withstand such an added debt load?

And when you've already put almost half your $2 billion on the table, just for openers, why even talk about buying out the Greenspun family's stake in Green Valley Ranch and Aliante Station, plus a gaggle of grind joints? Why not just stick to Plan A, which from all appearances was to make a wide, quiet detour around the Greenspun Problem and revisit it somewhere down the road? (Unless the 'Spuns are willing to sell out for cheap, in which case Station wakes up to find itself in bed with its archrival. Oh, the awkwardness!)

Which brings us to the even bigger problem that is the Las Vegas locals market. Yes, it may recover sooner than the Strip. But for now it's inelastic, cannibalized and overbuilt. One of the hidden benefits of the Boyd proposal is that would (presumably) alleviate the company of the need to build a North Las Vegas casino.

Trouble is, do you need Aliante Station and Santa Fe Station and Texas Station and the original Fiesta up there? And if you don't, who'll alleviate you of that kind of surplus? By absording even part of Station's portfolio, not only would Boyd be competing with itself sometimes within eyeshot but even right across the street. Also negated is one of Boyd's strengths: the regional balance that has, unlike Vegas-centric Station, shielded it from the recent vagaries of the Sin City marketplace.

Conversely, if you're not going to take the Fertittas off the board altogether, why settle for a half measure? Why leave them with four major casinos and a passel of developable real estate, including the prospective site of long-in-abeyance Durango Station? You'd have a bloodied adversary on the field, still upright, well armed and spoiling for revenge.

$950 million isn't going to buy even partial satisfaction for Boyd unless Station can still be forced into bankruptcy court. That much is now clear. Nor is $2 billion enough to purchase a definitive solution to the problem. For the sake of its shareholders, Boyd needs to rethink its pursuit of Station before it finds itself playing Capt. Ahab to FF3's Moby Dick. Boyd pulled back from the verge once, with Echelon. It can do it again.

This is your industry on crack

Tue, 03 Mar 2009 18:06:00 -0700

Finally, someone (in this case, Liz Benston) has written the definitive user-friendly analysis of how the casino industry crashed and burned. To try and quote the salient points would require little short of reprinting the entire article (to say nothing of its copious charts).

In essence -- as run through the S&G juicer -- we're dealing with an industry that could be said to have lost its marbles four to five years ago. As I've contended on the Vegas Gang podcasts, captains of the casino industry, borne aloft on a bubble of illusory "wealth," mistook a bubble for a baseline. Instead of paying down debt on acquisitions, they doubled down on extra-super-megaresorts and wholly unncessary LBOs.

And now that the party's ended, the resultant hangover is shaking out the business like a case of the DTs. The irony is that Strip revenues have reverted to 2005 levels ... back when business was pretty darn 'phat,' and MGM Mirage and Harrah's Entertainment were so flush they were able to devour Mandalay Resort Group and Park Place Entertainment, respectively, with scarcely a burp.

One of the few things now standing between insolvent casino companies -- a group that may soon include both Harrah's and MGM -- and outright disaster is that gaming has become "too big to fail." In an otherwise normal economy, collapsing companies like Herbst Gaming, Black Gaming, Colony Capital and even big shots like Station Casinos would probably be staring receivership in the face. But extraordinary forbearance -- in more than one sense of the term -- by lenders is keeping the lights on and the doors open. The bankers and bond markets have obviously decided it's better to keep their wobbly dance partners upright than let gravity take its course. Lord knows, the seismic impact of a cascading series of casino bankruptcies beggars the imagination and not in a good way.

Into this maelstrom, is flung the news that two companies are going to miss their scheduled 10-K filings. In the case of Pinnacle Entertainment, they need some extra time to perform mark-to-market ledger-demain, writing down $275 million-$330 million. J.P. Morgan analysts are sanguine, though, partly because of an 18% increase in fourth-quarter revenue. Also, although Pinnacle's net loss may be as high as $308 million, other results "should be above expectations, reflective of PNK’s strong Louisiana performance at Lake Charles, stable New Orleans trends, and a ramp at Lumiere [Place] in St. Louis. Trends that, generally, should continue."

Also playing for time is MGM Mirage. According to the Sun, last week's draw-down of credit has tapped out the company's liquidity, a statement confirmed in a J.P. Morgan note. Contrarily, the Review-Journal implies there's plenty left.

(Update: MGM tells me, no, there isn't and I was wrong to have concluded otherwise last week. Error duly noted. Self-flagellation in progress.)

Whatever the case, Wall Street is sounding like it's accepted that Chapter 11 is all but inevitable. Slightly less apocalyptic scenarios still include potential defaults, debt-for-equity swaps that would surely cost Kirk Kerkorian his majority ownership, asset sales, a restructured balance sheet and a $7 billion note that's less of a balloon payment than an incoming Hindenberg.

Or, as Morgan analysts write, per their wait-and-see strategy: "We expect to hear from MGM over the next few weeks, and suspect it is or shortly will be working with its banks on amending its bank covenants (leverage covenants now likely tripped after drawing down debt last week and hoarding cash) and looking to restructure its bank debt, among the other options MGM is considering (asset sales, amending CityCenter, etc.)."

Emendations to CityCenter? That would be an extremely bitter pill for MGM to swallow. First the Harmon truncation, now this prospect. In a totally unscientific measurement, page views of our online image gallery of Aria and Vdara were barely a ripple compared to the levels of interest manifested in Encore, M Resort and, good golly, even the Cabana Suites at the El Cortez -- all of which have vastly outpaced Aria/Vdara in viewership. Like I said, unscientific but who'da thunk we'd see an El Cortez ≥ CityCenter equation?

And we still haven't touched upon today's earnings report from Isle of Capri (half good, half bad) or the latest round in the Station-vs.-Boyd catfight, chock full of hissing and spitting. We live in interesting times, to be sure, regardless of whether that's a blessing or a curse.

Harrah's enjoys bailout

Tue, 03 Mar 2009 13:27:00 -0700

"Critics argue that the tax-law change rewards companies that took on too much leverage during the credit bubble, such as those that were bought by private-equity firms."

Sound like anybody we know? How about Harrah's Entertainment, which played Russian roulette with the bond market and got its brains spattered all over the wall. Lucky for them, Senate Majority Leader Harry Reid (D-NV) was there with a "Get Out of Jail Free" card -- or at least a tax break that, in effect, rewards morally hazardous borrowing. Thanks to Harry's largesse, it'll be a full decade before Harrah's pays off the gains it's about to realize from buying back part of its $23 billion (!) debt at a discount.

That is, assuming that the crafty Reid hasn't carved out yet another tax exemption for improvident borrowers like Harrah's, Station Casinos and Colony Capital by 2019. And between that gift-wrapped tax deferment and last week's endorsement by Nevada GOP kingmaker Sig Rogich, Reid is as good as re-elected through 2016. (Which must come as a terrible disappointment to Las Vegas Review-Journal Publisher Sherman Frederick, who has been conducting a blushing-maiden campaign for the GOP nod via his blog and Sunday column, trying to draft himself as Nevada's Only Hope of Salvation.) One prospective Reid rival has seen the handwriting on the wall and given up.

As the Wall Street Journal story points out, there are far worse outcomes for Harrah's management, its employees -- innocent bystanders to this debacle -- and its debtors, who'll realize some tax forgiveness themselves. Besides, it's clearly preferable that super-leveraged companies pay back some of their debt rather than walk away from the whole kit 'n kaboodle. That goes without saying.

But what lesson is likeliest to be drawn in the boardroom? Will it be, "Damn, but we dodged a bullet there! Let's not pull an LBO stunt like that again"? Or will executives reach the conclusion, "Hey, that was easy! As soon as we're clear of this mess, let's run up another whopping tab. We won't have to pay off the whole thing and we'll probably get another big-ass tax break from Harry in the bargain. Party on, dudes"?

Recent history does inspire confidence that the former option will hold sway over the latter.

Small victory for Sands: There's a silver lining in the (relatively) dismal February revenue numbers from Macao, which are down 16% from last year, to $1 billion. "Dismal," that is, by Macao standards, which are higher than anybody else's.

While Stanley Ho continues to command the plurality of the market (29%), Las Vegas Sands has clawed back. Its January market share (22%) has risen to nearly 26%. These gains came mainly at the expense of Melco Crown Entertainment (down to 9%) and MGM Mirage/Pansy Ho (bringing up the rear with 6%).

Given the worrisome financial straits MGM finds itself in elsewhere, it's time to think the once-unthinkable: That CEO Jim Murren could decide that $30 million/month in revenue isn't worth maintaining a Macanese beachhead and sells the company's subconcession back to Stanley Ho. Then the elder Ho's tactless references to MGM Grand Macau as "my casino" would achieve the status of prophecy.

M in pictures

Mon, 02 Mar 2009 19:16:00 -0700

Well ... sorta. You'd think a billion dollars might buy a decent press kit but M Resort's didn't arrive at LVA HQ until the day after the opening. To add to the farce, most of the pictures aren't bonafide photos but extremely obvious computer-generated renderings. As a PR effort goes, this was a real face-plant. You know what they say about first impressions and second chances.

Anyway ...

M's overall vibe is one I'd describe as "understated elegance." If the message of Encore is that nothing succeeds like ripe excess, M aims for a decidedly un-Vegas image -- Southwestern simplicity and a moderately upscale position, and oh yes, we do have gambling here.

The foyer of the spa, which wasn't quite finished on opening night. There are, among many other amenities, two heated pools. One is 101 degrees, the other 104 Fahrenheit. I neglected to ask why the three-degree discrepancy was so important.

You wouldn't guess it from this rendering but the Ravello lounge has excellent sightlines and is an intimate -- but not claustrophobic -- venue for live music.

M Resort's eponymous bar. We skipped this one, I think.

Rooftop restaurant Veloce Cibo was closed for a Marnell family event (it's a big family, I hear). The only way you could get that view out the window -- practically atop Wynn Las Vegas -- would be if Veloce Cibo was in the belly of the M Resort blimp.

The foyer of Marinelli's. In terms of decor, this is the fanciest of the M restaurants. Gastronomically, we were too maxed-out to sample the fare.

The Studio B kitchen, just off the buffet. Try as I might, all I could think of was the council chamber in Babylon 5 ("Delicacies by Delenn"? "Noshing with the Narn"? "Lunch at Londo Mollari's"?) We overdid it at the buffet proper but the cooking staff really put its best foot forward for the opening-night crowd.

A standard room. You can't really see it at this size, but the "view" out the window makes the Strip look several miles closer than it actually is.

A flat suite, with another incredible (as in "not to be believed") view.

Partial view of a "Classic" one-bedroom suite.

The lobby of the conference area. Overall, it's almost as swanky as Encore, if not as breathtaking as Red Rock Resort.

Does the billion bucks show up in the final product? Yes. Is it worth the (not inconsiderable) drive? Yes. Hopefully it will stand up to wear, tear and cigarette smoke, as M made a powerful first impression of "affordable luxury," offering a higher-than-average number of amenities in a soothing atmosphere. We'll see how that imprint is sustained once the slot machines start chiming en masse and the players light up in similar numbers ... and let's not kid ourselves: In this economy, large numbers of anything (except foreclosures) tend to be welcome.

MGM Mirage: Uh-oh; "Off the box"

Fri, 27 Feb 2009 16:53:00 -0700

Following in the footsteps of Station Casinos and Harrah's Entertainment, now MGM Mirage is drawing its revolver, so to speak, to fund operating expenses. This is never a good sign. Earlier this week we learnt that all of Kirk Kerkorian's Tracinda Corp. stock (53% of MGM shares) has been pledged against CityCenter. I was guardedly optimistic about MGM's future, but now ... ?

At least if what LVA is hearing about Fontainebleau is true, MGM won't have to worry about competition from F'bleau for as much as 10 weeks after Aria opens.

"Off the box": That's the new coinage for describing public figures who go from being seen as assets to liabilities. It was inspired by Kellogg's dumping of Michael Phelps after those bong photos surfaced.

In the gaming sector, the obvious "off the box" candidate is Donald Trump -- so obvious, in fact, that Trump is trying to get himself off the box, demanding that Trump Entertainment Resorts become Something Else Resorts. Another OTB candidate might be former Cirque du Soleil wunderkind Criss F. Angel.

Anybody else?

Boyd vs. Station II

Thu, 26 Feb 2009 11:58:00 -0700

Well, that was a waste of a good hour. Boyd Gaming teased its Thursday morning conference call with intimations that All (or at least Some) Would Be Revealed about its surprise bid for most of the assets of Station Casinos. Boyd execs made a few pro forma comments about the offer at the top of the show, for want of a better term. They then announced that they would be taking no questions about the Station bid, so don't you be asking any, sonny.

Later, they did relax to the extent of allowing that they assume that Station's management contract with the Thunder Valley tribal casino near Sacramento would be included (but implied that Station's management pact with a Michigan tribe would not). The reason that the general public is in some confusion about what Boyd would be paying $950 million for is: Boyd itself is uncertain. Company officials implied they weren't getting any cooperation from Station -- or to the mythical entity that Boyd's president consistently refers to as "Stations [sic] Casinos." (You know ... the archivals of Boyds Gamings and builders of Red's Rocks Resorts.) After he buys it, of course, he can call it whatever he wants.

One of the many questions begged by Boyd's non-presentation was what's going to happen to Echelon, now that the company proposes to cannibalize its remaining $2 billion in borrowing capacity (against $2.6 billion in debt) to finance the Station deal. That money had been earmarked for finishing Echelon. Seemingly intent on having his cake and eating it too, Boyd prexy Keith Smith said, "We have nothing to report on [Echelon]" but added that having a Strip presence remained a long-term goal. Translation: Don't hold your breath.

Smith also ducked some pointed Larry Klatzkin queries regarding performance expectations at Blue Chip, in Indiana. (He evaded a question about ADRs, too.) ~~CFO~~ COO Paul Chakmak, referring to the expanded riverboat complex as "the new Blue" (do I sense a marketing slogan there?), said that early results are promising if not definitive. He noted that a record 2008 and January '09 performance at Delta Downs in Louisiana "shows the value of our geographic diversity" and noted that Borgata was the only Atlantic City casino to post growing slot win in 2008. Boyd will be taking a variety of one-time charges, including on some of its North Las Vegas real estate, and will be drawing out the payment schedule on Dania Jai-alai, a would-be Florida casino venture that has gone into the freezer, due to a disappointing Sunshine State market.

"Our goal is not just to get by," Chakmak said, while allowing that the Las Vegas locals market "remains challenging." Downtown, he added, was a better scene, given that increased charter flights were offsetting any effect that might be felt from reduced commercial airline service to Hawaii. Why one would want to exponentially expand into a "challenging" Vegas market right now was yet another of those questions that didn't get to be asked.

Good news for bargain hunters in Atlantic City; Smith expects promotional allowances to "stay elevated" in 2009. He also said that, with only two weeks of service so far, it's much too early to prognosticate about the performance of the ACES train (a joint venture with Harrah's Entertainment). Boyd execs did talk up the savings achieved by infusing T.G.I. Fridays, Fuddruckers, Sbarro, etc. into their locals properties. If you were a Boyd restaurant employee whose eatery was displaced to make room for a fast-food franchise, you might not share that enthusiasm.

Cry me a river

Tue, 24 Feb 2009 18:36:00 -0700

From the Man Bites Dog File: Area businessmen -- you know, the prototypical low-taxes/small-guvmint crowd -- are complaining about the stimulus package. Not on account of fiscal-conservatism principles but because they don't get enough Washington moolah. Actually, the appended bullet-point list of stimulus provisions and incentives looks pretty good to me, particularly the part about counting canceled debt as income. That measure couldn't be more timely, seeing as Station Casinos is asking unsecured creditors to eat 83% of what they're owed, for the greater glory of Station.

But please, somebody buy a crying towel for SurePayroll President Michael Alter, who voices this lament: "There's very little, if any, money in the stimulus package for small businesses, and what is there is really sort of a trickle-down from the benefits that go to consumers." Aw gosh, how pitiful.

Seems like it's consumers who keep the Michael Alters of this world in business to begin with but I'm kinda crazy that way. Besides, people of his ilk were all gung-ho about trickle-down economics when they were its primary beneficiaries. Not so much fun to be at the secondary or tertiary level of the trickle-down, you say? Welcome to the world of supply-side economics as the non-business-owning person experiences it. What's sauce for the goose ought to be just dandy for the gander.

Some of the less-whiny businessmen in the story have sound criticisms/suggestions vis-a-vis stimulating the economy. Tax credits for companies that provide health plans for their workers is pure common sense, for one (especially when you consider the costs of health-related lost productivity). Still, this ideological identity-crisis thing seems to be catching.

Speaking of shameless, bankers who are accepting federal bailout money have no compunction about crossing their own palms with silver. One of the institutions in question is Nevada State Bank, where I do my personal business ... and from which I should probably withdraw my deposits. But are any of the alternative institutions less ethically challenged?

This just in: The Nevada Assembly voted 35-7 to jam tourists up with an increase in the Clark and Washoe county hotel taxes. The seven opponents include a couple of the worst pricks in the lower house but they're on the side of the angels this time. Too bad it was a losing cause. Sanity may prevail in the state Senate, though I'm pessimistic.

Station vs. Boyd

Tue, 24 Feb 2009 11:09:00 -0700

Seeing as I'm still trying to make sense of Boyd Gaming's offer to buy much (but not all) of Station Casinos -- and some Station assets may not be worth obtaining -- I'll just pass along Station's response to the Boyd offer:

"We received an unsolicited, non-binding, preliminary indication of interest from Boyd Gaming Corporation to buy some of our company's assets. We intend to continue to work with our lenders and bondholders to pursue our previously proposed plan of reorganization, but we will evaluate the terms of Boyd Gaming's proposal."

In other words, Station is blowing off Boyd ... but Boyd is already talking over Station's head. Its true audience is Station's debtors. And with Boyd putting $950 million on the table (and drawing attention to its $2 billion line of credit), the prospects of bondholders falling meekly in line for that March 2 debt swap suddenly got a whole lot worse. Thursday's Boyd conference call is going to be must-hear podcasting.

Gibbons retreats, sorta

Mon, 23 Feb 2009 12:33:00 -0700

Gov. Jim Gibbons has scuttled away from one of his several proposals to jack up taxes on the only segment of Nevada that's carrying its own weight -- the casino bidness. He's retreating from a demand that casinos pay taxes on uncollected markers (which, in turn, would be certain to cause a tightening of casino credit). Midnight Jim continues, though, to support raising hotel-room taxes in Clark and Washoe counties, and taxing comped meals. The casino industry's love affair with Gibbons -- which helped get him into office -- has so far proven a one-way romance.

Worries about Boyd. Here's why I resist the occasional invitation to give stock picks: No sooner have I sung the praises of Boyd Gaming's sound fundamentals, its diversified casino portfolio and its (Echelon excepted) aversion to risk, comes news that analysts have the heebie-jeebies in re Boyd. A slow-ramp-up at Water Club in Atlantic City and weakness in the Las Vegas locals market are the primary worries.

Advertising during the Oscars: Casinos that ran ads during last night's interminable Academy Awards snoozer included M Resort (twice), Encore, the CasaBlanca in Mesquite and Green Valley Ranch, which has suddenly discovered a great lurve for the local clientele. The latter is quite a turnaround for a property that used to tout its high-end cachet. Oh, and Mickey Rourke got totally, utterly and criminally screwed. Which ruined the evening right then and there.

Atlantic City Death Watch, cont. After taking a long gander at the market, Macquarie Securities analyst Joel Simkins had this to say: “In our view, there is a distinct possibility that one to three casinos could be permanently closed in the next few years, particularly when many older locations are barely breaking even and, we believe, cannot be rehabbed to be economically viable.” [emphasis added]

Anybody care to speculate which casinos Simkins has on the "do not resuscitate" list? Resorts Atlantic City is a no-brainer for the "one." As for the "to three," we could toss in the Atlantic City Hilton and Trump Marina, where the news comes in two flavors -- Bad and Worse.

The Tropicana might also be on the bubble, partly because it's not performing up to its preponderant size and also on account of interim management's inability to restore the business that was lost during the Columbia Sussex reign of error. A veteran Trump-watcher has another suggestion, writing that"his decision to abandon and bad-mouth the company suggests that this may not be the routine Chapter 11 bankruptcy from which the company eventually emerges. Indeed, I wouldn't be surprised if this is the last gasp for Trump's three Atlantic City casinos."

Quote of the Day

Fri, 20 Feb 2009 14:43:00 -0700

“Las Vegas has already been creamed by a biblical real-estate bust and now it may face the loss of its homegrown gambling joints, too. Station [Casinos] ... recently failed to make a key interest payment, which is often one of the last steps before a Chapter 11 filing. For once, the house seems likely to lose.” -- from a Feb. 6 U.S. News & World Report story that listed Station as one of 15 major U.S. companies least likely to survive 2009. Cousin Tilman Fertitta's Landry's Restaurants (owner of the Las Vegas and Laughlin Golden Nuggets) also made the list.

Quote of the Day

Wed, 18 Feb 2009 14:54:00 -0700

“The odd thing about history, which is why I love it, is that things that look like disasters on the surface have bright sides that you can’t see at the time. For example, the Great Depression resulted in the complete overhaul of the infrastructure of America.” -- Vegas-bound singer, songwriter and history buff Al Stewart.

Sludge Report

Wed, 18 Feb 2009 12:37:00 -0700

Kudos to the Las Vegas Review-Journal's Howard Stutz for keeping an eye on an especially skanky provision of the economic-stimulus package, a sweetheart provision engineered by Sen. Harry Reid (D-NV). It awards companies -- like vocal supporter MGM Mirage -- a tax deferral, followed by a drawn-out payback of taxes on gains recognized from buying back distressed debt. (At least in contains a measure to incentivize capital improvements and technological upgrades.)

Don't you wish the IRS was this understanding when your tax bill is due? There is an argument to be made that this encourages companies to at least make partially good on their debt instead of just walking away. However, there's a much stronger case that Reid's Rescue rewards the sort of foolhardly borrowing that now sees Las Vegas Sands, Station Casinos and Harrah's Entertainment, all wheezing from overextended bank covenants or paying the light bill from revolving lines of credit, trying to buy out bondholders at a pittance and fending off investor lawsuits. The lesson learnt, if any, will be that it doesn't matter what trainwreck you get your company into, Washington will gladly step over the bloodied bodies of your debtors so that it can grace you with a tax incentive.

This is a disgrace and it rewards the very companies who were the prime architects of our current mess. But it's great for Harry Reid: Now when potential GOP challengers seek casino industry support in 2010, the Majority Leader can simply remind the normally rightward-leaning casino CEOs just who crossed their palms with silver when times were bad.

Final score: Reid 1, Investors 0.

Stutz is certainly smarter than his boss, who brays anachronistic nonsense about a much-needed rail link to Orange County. (Reid giveth ... then giveth again.) While auto traffic to Las Vegas from SoCal hasn't suffered notably (yet), some forward thinking would be welcome, instead of putting most of the city's eggs in the already congested I-15 basket. The convenience appeal of a high-speed link to the greater Los Angeles area is (or should be) obvious and this is a field in which other nations have made far greater advances than have we. (It would also facilitate my access to Los Angeles Angels of Anaheim games but I don't think that's clouding my judgment. Not much, anyway.)

As for the notion that high-speed rail to Las Vegas is "unproven at best," so was the concept of the casino megaresort 20 years ago, the Las Vegas Strip 60 years ago and the automobile itself ... well, you get the idea. Heck, the printing press was an "unproven" concept once upon a time, as R-J editors may recall from the carefree days of their youth.

One man vs. Station

Fri, 13 Feb 2009 18:36:00 -0700

"Mark my words, one day your uppance will come!" -- Stewie Griffin

It was begining to look like Station Casinos CEO Frank Fertitta III and his Colony Capital associates were going to skate through their current troubles by threatening bankruptcy, as a means of getting unsecured creditors to basically write off their Station debt. The ploy had an undertone of a game of "chicken": "C'mon and force us into bankruptcy court, I dare ya. Nah, I double-dare ya!"

Perhaps Fertitta had spent a little too much time in the gym making the heavy bag his bitch. Either way, gadfly investor S. Blake Murchison isn't cowed. He's filed a lawsuit which even quotes from Leo Tolstoy.

One dissident investor does not an 'uppance' make and the odds still are that the bondholders will get rolled, allowing Fertitta and Colony Capital to keep making the sort of astute decisions that have characterized their LBO and so much else at Station the last few years. But Murchison stands alone, one has to admire his pluck.

Looking for good news in Vegas

Thu, 12 Feb 2009 17:08:00 -0700

If I wanted to drive myself to strong drink, I could write about depressing, atrocious numbers coming out of Nevada casinos in December. But as that great philosopher, Linus in Peanuts, would remind me, it's better to light a single candle than to curse the darkness. (Next panel: Lucy hollering, "You stupid darkness!") Let's just say that December revenues hew to my saw that when Wendover sneezes, Nevada catches pneumonia and move on.

Two Sundays ago, the Review-Journal ran a pair of stories that warranted mention here at the time but got lost in the shuffle. Time to give credit where it's due, especially as these articles highlight some of silver linings inside the present-day storm front.

Boyd Gaming's is the least-sexy brand among the major casino operators ... but sexiness can be overrated. (See: Station Casinos) Unlike a certain crosstown rival which put all its eggs in the Vegas basket, Boyd has always rejoiced in a diversified portfolio. With Wall Street falling in love with the regional casino market, Boyd is likely to experience newfound appreciation on the Street.

Echelon: Stopped in the nick of time.

No wonder CFO Josh Hirsberg strikes such a sanguine tone. He also fesses up to a number of uncertainties, which is a refreshing change of pace. True, the company has halved its 401(k) matches but it hasn't deep-sixed them altogether, unlike several competitors. Also, it stopped Echelon while it still had the ability to alter the scale of the project, whereas Caesar Palace's Octavius Tower had crossed that Rubicon. It certainly doesn't rank anywhere near as high on the Mortification Meter as MGM Mirage's forced truncation of The Harmon (now to be an ungainly stump) or Las Vegas Sands' abrupt cessation of its St. Regis tower. Boyd's ongoing infatuation with fickle Morgans Hotel Group remains a major puzzlement but let's not belabor that now.

Boyd's chances of coming out the economic tsunami intact look good. Besides, the company has surprised people before. Who would have picked it to be the one that would shake up the Atlantic City market and force everyone else to keep pace?

A project that has the makings of a comparable success story in Las Vegas is M Resort, brainchild of the Marnell family. (You know, the folks who gave The Rio its cachet -- before Harrah's Entertainment took over and "geriatrified" the place.) Admittedly, $1 billion for a 390-room hotel/casino doesn't sound anything like optimal bang for the buck, but M Resort has three things going for it that Station's Red Rock Resort and Aliante Station don't: location, location, location.

Strategically, M's site is killer. It sits just north of the pass through which I-15 flows into the Vegas Valley, as you head in from California. In fact, you see the M tower even before you reach the pass, stunningly framed between the canyon walls. The vista from the north side of M ought to give it must-visit cachet when it opens in two weeks (March 1). The relative paucity of hotel rooms may bespeak caution over whether the stay-off-Strip/commute-to-Strip business model has worked yet. As they say on Wall Street, "visibility is limited" because like-minded Green Valley Ranch and South Point have gone private.

Also, by limiting their exposure on the hotel side -- where so much of the rest of the market is overexposed -- the Marnells should have supply/demand dynamics in their favor. A place like Morgans' Hard Rock Hotel, which only drew a third of its cash flow from gambling before Morgans went on a frenzied expansion binge, is super-exposed in the area that's most sensitive to price fluctuations -- hotel rooms -- and soon to become even more so. (The HRH puts a brave spin on it but it's no secret why the project is fully funded: It's 85% owned by the bank which, like the pig in the ham-and-egg-breakfast analogy, is committed while Morgans [i.e., the chicken] has but an interest.)

One also has to laud CEO Anthony Marnell III's incremental preparation for the Vegas market: a stint managing a tribal casino (giving him experience in the drive-in market), followed by acquisition of the Saddle West in Pahrump (ditto the locals market), then Laughlin. So his $1 billion dice-throw was approached via a circumspect route. George Maloof has already shown that a steady locals/hipsters mix can work as a business model. M Resort is the first project since The Palms to wholeheartedly go that route.

With nearby Olympia Gaming and Station (Inspirada) casino developments on indefinite hiatus, Marnell should be firmly entrenched before anyone else in the area gets a shovel in the ground. It's a serendipitous combination of preparation and circumstance. Of course, M could be either a succes d'estime or an outright bust, but the buzz I've been hearing is strong.

Tamares Group giveth (booking a new magic show into the Las Vegas Club) and Tamares taketh away, pulling back on a planned art museum (above). So if this is no time to invest $12 million in an art museum, maybe Tamares might want to invest it in its casinos. Comic relief is supplied by Mayor Oscar Goodman, who's been exceptionally obtuse this week. (See: President Obama, Silly Feud with)

Casinos in Texas are one of the longest of long shots but Galveston's name keeps coming up. The whole thing screams "Tilman Fertitta!", especially since we know he's wanted a casino there and was even rather colorfully accused of surreptitiously installing casino infrastructure in his Galveston convention center. He got a good chuckle out of that one, as I recall.

Irony is Dead Dept. II

Thu, 12 Feb 2009 12:38:00 -0700

Our local newspaper has dispatched its resident anti-union correspondent to gnash out more propaganda about "forced union membership." Had this person any sense, they might realize that, were the Las Vegas Review-Journal a union shop, its employees wouldn't have been summarily subjected to a 401(k) suspension ...

... just like non-union employees at Harrah's Entertainment. As with their opposite numbers at Station Casinos, leaders of Harrah's probably wouldn't have gotten into this pickle were it not for a near-insane LBO. At the time of both management-led buyouts, the question of how these companies were to exponentially increase their indebtedness, pay it down, build all the new projects they were touting and generate positive ROI was simply begged. We were loftily assured that it could be done, although in my head I could always hear my Mom's voice, asking her favorite rhetorical question: "Using what for money?"

At least some of that "what" is now going to come from the 401(k) kitty. Oh, there'll be some give-backs at the managerial level, too. (Update: Said to be numbering in the "thousands." At least Harrah's did the right thing and told workers first, then the media -- unlike Wynn Resorts, which did it the other way around.)

CEO Gary Loveman made out like a bandit on the LBO, to the tune of nearly $100 million. So perhaps he could emulate Chuck Mathewson's old example at IGT and work for a dollar a year, plus performance-based bonuses. I'll even donate the dollar. Just tell me where to send the check.

At least I'm not enough of a cynic to think that Harrah's and Station screwed the pooch deliberately. Not yet, anyway.

False economies

Mon, 09 Feb 2009 11:16:00 -0700

In today's edition of "You Know What Really Grinds My Gears?" ...

As counterintuitive as it seems, one of the first things to take it in the neck during the present recession is customer service; cleanliness is the other. (Jean Scott has some thoughts on this today). Two examples should suffice.

Can't-See-the-Sunset-for-the-Cigarette-Smoke Station

Last Tuesday, the Significant Other and I decided to take advantage of a bingo promotion at Sunset Station. Now, if you're running a promotion for which you've barraged the area with coupons, you'd be prepared for a big turnout, right? Not Station Casinos. There were but two people manning the booth and the parade of would-be customers stretched well across the room even after the session had started. We left.

On Friday, I went for lunch to the neighborhood Quiznos. One person was manning the entire counter as the conga line backed up. Even after seeing a man about a horse, I found that the queue had not budged appreciably. I took my business -- and my $10 -- next door. We ran into a similar phenomenon yesterday at Best Buy, so fewer employees/longer lines looks like the trend du jour.

In the first two cases, we have businesses that saw money walk off the premises because of mingy, corner-cutting thrift moves. At Sunset Station, the down-at-heels impression was amplified by a casino floor that reeked of cigarette smoke to a degree that might make Arizona Charlie's blush. At least the latter is a grind joint that knows it's a grind joint. Ten years ago, Sunset Station was the flagship of the Station fleet. Now it's just another Boulder Strip casino. Even the older Boulder Station is holding up better.

Wells Fargo: Block that myth!

Fri, 06 Feb 2009 14:58:00 -0700

A spirited debate on the Wells Fargo-at-Encore brouhaha is playing out at The Movable Buffet. The "pro" side is gaining the upper hand -- offering better-reasoned arguments will do that for you.

Let's accept for the moment that the junket was highly justifiable (as increasingly appears to be the case) and that Vegas is a highly affordable convention market (opinions differ). Was Wynn Las Vegas/Encore a bargain in and of itself? Compared to the rest of the Strip, no. Is it a bargain compared to the price niche Steve Wynn coveted? Yes ... dependng on when Well Fargo booked the trip. Is it preferable for Wells Fargo to hold this event in the good old U.S. of A., as opposed to such previous locales of Cancun or the Bahamas? Mais oui, bien sur, which I believe is French for "Like, duh!"

What's disturbing is the emerging tendency to link the cancellation of the Wells Fargo event with coinciding salary and benefit cuts at Wynn Resorts. First the Las Vegas Review Journal's more-clownish-than-usual editorial did it. So did the same paper's "Business Matters" blog, which one holds to a higher standard than the R-J editorial page. So too has Richard Abowitz. Neither he nor anyone else is making an explicit linkage between the two stories but we're seeing the coalesence of a new urban legend.

To wit: Steve Wynn got the cancellation notice from Wells Fargo, flew into a panic and imposed a wide-ranging series of stringency measures. Is that possible? Yes. Is it either plausible or likely? Not in the slightest, IMO. But it's certain to become the new received wisdom if this implied causal relationship keeps being floated in the media.

A penny for your thoughts, Steve? No fool he, Steve Wynn loves free media. But I'd pay (well, a buck or two anyway) to know how he feels about being at or near the center of this particular story. Since it's his property they're talking about and not, say, Sheldon Adelson's, he's probably remembering the old saw that there's no such thing as bad publicity.

You know you're in trouble when there's turmoil at your casino and you look for rescue from Station Casinos. That's like sacking the captain of the Titanic in favor of the skipper of the Exxon Valdez.

Federal casino bailout

Thu, 05 Feb 2009 14:22:00 -0700

An indirect one, to be sure. The Wall Street Journal has the details. Let's just say that if Senate Majority Leader Harry Reid (D-NV) gets this through, execs at Harrah's Entertainment and Station Casinos will breathe a sigh of relief. Heck, the Station braintrust (which is somewhere to the right of Gen. Curtis LeMay) might even feel compelled to make a campaign donation or two to Reid's 2010 reelection effort.

Wynn: an afterthought

Thu, 05 Feb 2009 11:15:00 -0700

What was initially most striking about Tuesday's "orange alert" at Wynn Resorts -- and what got crowded out of my mind while I was writing -- was the irony of it. Prior to Encore's opening, Steve Wynn was telling anyone who would listen how financially sound his company was, had money in the bank, had fully financed its projects, etc., etc.

Now this: A belt-tightening regimen more draconian even that ones we've seen at Station Casinos or Trump Entertainment Resorts, two companies that are -- unlike Wynn's -- mired in deep mierda.

Que pasa, Steve? The saving grace, of course, is that the loss of full-time jobs has been avoided. There have been allegations of extra boards and part-timers being let go, but no official confirmation. It wouldn't be at all surprising: With non-union hourly employees seeing their work week shrivel from 40 hours to 32, it shouldn't be difficult for Wynn's managers to find full-timers willing and able to fill the odd, suddenly vacant shift here and there. And even if fewer lights are on or the floral arrangements are thinned out, Encore will still be the premier resort on the Strip.

There remains a disconnect between exuberant Steve Wynn's pre-opening rhetoric and the dose of cold, hard reality that was dispensed on Tuesday. Unless he had no idea what was coming at him, Wynn probably should have toned down the opening-week verbal bravura. Whatever the actuality inside Wynn HQ, the company looks like it got caught unawares. Which isn't a good perception to have out there when you've been lecturing the rest of the Strip on the error of its ways.

Station afterthought: It looks as though the Fertitta clan and Colony Capital may have backed their bondholders into a corner, at least for the moment. The latter group is stuck between a variety of rocks and hard places, and a dime on the dollar might actually look good to them. Should the matter go to bankruptcy court -- and once the secured creditors have cherry-picked all the goodies from the Station tree -- what guarantee exists that the bondholders will wind up with anything?

Black Tuesday: Station Casinos

Wed, 04 Feb 2009 18:30:00 -0700

Yesterday's Chapter 11 proposal by Station Casinos was paradoxically both inevitable and premature. From the day Station drew on its revolving line of credit to fund operational expenses, the handwriting was on the wall. However, Station chose to precipitate a crisis by opting not to make an interest payment ... even with $350 million in the bank.

Already one is hearing grumbles that Station ownership is trying to bust the balls of its bondholders, who balked at the last refinancing plan, to put it kindly. In return for an accelerated redemption date, senior debtors are being asked to take 50 cents on the dollar (mostly in the form of more paper), while junior debtors will have to settle for 10 cents on the buck -- a considerable premium to the current value, one must in fairness note. Or they could call Station's bluff and send the whole kit 'n kaboodle into bankruptcy court.

Aliante: A Station too many?

The Fertitta clan, Colony Capital (co-owners of Station) and the secured lenders have all signed off on this ... of course. They're the ones with the least to lose, should it go through. Colony and the Fertittae are sweetening their previous offer with a promised $244 million cash infusion. It would be cricket if Frank III and Lorenzo Fertitta ponied up $60 million -- if said contribution is proportional to ownership stake -- considering that they've taken considerably more than that out of the company in recent years. Together with their sister and brother-in-law, the boys toted home nearly $495 million from the buyout alone.

What's not on the table are asset sales, even though Station has more undeveloped real estate in the Vegas Valley -- plus the Reno area -- than you can shake a stickman at. (Not to mention that expansion is currently pointless in a market that has lost its elasticity for the time being and is, in fact, constricting). Evidently call-center employees and 401(k) contributions are expendable but pipe dreams like Viva are sacrosanct.

Investment service Moody's estimates that as many as 17 casino companies are at risk of default right now. (Scary!) Should Harrah's Entertainment fall, the enormity of ensuing "SPLASH!" will drown out the Station fiasco -- but it shouldn't. In effect, if not in intention, private equity buyouts of casino companies have become a sham whereby management gets its company back for pennies while leaving bondholders holding the bag, too. That's disgraceful.

Speaking of Moody's, the Las Vegas Review Journal's "Inside Business" blog has an amusing Wall Street-into-English translation of a Moody's investor note on Landry's (owner of the Golden Nuggets) that's a dense thicket of cover-your-ass verbiage. I was going to say Moody's "waffled all over the place," but I don't care to insult waffles.

As for Landry's CEO Tilman Fertitta, he has more reason than most to delve into today's coverage of the calamity at Station. After all, the Fertitta brothers helped Tim Poster and Tom Breitling "play" him during his bid for the Nuggets. So, no love lost there. In fact, I'm sure that Tilman is sitting down for an extra-large schadenfreude supper tonight.

Penn Natl' > [your company here]

Wed, 04 Feb 2009 11:44:00 -0700

Wall Street remains gung-ho on at least one gaming stock: Penn National. Vegas-based casino owners who are pining for Penn to buy one of their assets may have to possess their souls in patience. Joseph Greff writes that Penn is keeping its powder dry "given the belief that market clearing prices for single asset acquisitions will dip lower in 2009. We are not expecting any acquisitions any time soon." The restraint displayed by Penn's board of directors stands in silent reproof to the sheeplike tendencies displayed at other casino companies in the recent past -- the manner in which the calamitous Station Casinos buyout was rammed through is one of the more egregious instances.

The real kicker comes toward the end of a J.P. Morgan research note, which lauds Penn's all-regional portfolio, which is expected to outperform the Las Vegas and Atlantic City markets. As LVA Editor Deke Castleman put it, who'd have thought we'd ever see the day when Wall Street likes Keokuk, Iowa, better than Las Vegas?

How bad is it at Riviera? All buffets have been closed and an eyewitness tells me that only two outlets are still open in the food court. It sounds like they're just hanging on by their fingernails until Fontainebleau opens and (we hope) stimulates business up thataways.

Another sign of the times

Thu, 29 Jan 2009 14:06:00 -0700

Station Casinos' billboard near LVA HQ is now proclaiming "SENIOR TUESDAYS!" at Palace Station, accompanied by a big picture of Jerry Tiffe. Buffet, bingo and points specials are promised. I guess there's nothing like a recession to remind you who your bread-and-butter customers are.

(When we get the promised LVA digital camera, I can actually show you this stuff instead of just telling you about it, which would be an improvement, I think you'll agree.)

Fertitta vs. Fertitta

Wed, 28 Jan 2009 14:06:00 -0700

After years of seeing players flee in droves to Lake Charles, Shreveport and Oklahoma, businessmen in Texas have finally had enough and are stumping for a vote to authorize casinos in the Lone Star State. It's a long shot but in these desperate times, I'd no longer bet heavily against it. Prudently, the proposal would redress a longstanding wrong (and sidestep a lawsuit or three) by restoring gambling rights to Texas' Native American tribes, some of the many victims of l'affaire Abramoff.

The Las Vegas Review-Journal's Howard Stutz adds that the Frank Fertitta Jr. clan (including presumably Frank III and brother Lorenzo) is in on the action. True, Station Casinos itself is tapped out but the Fertittas are sitting upon bushels of money made either through the UFC or the Station buyout.

If the Las Vegas Fertittas really do have their eyes on Texas, it'd not only present a business opportunity but a chance to stick it one more time to cousin -- and rival -- Tilman Fertitta. The latter, a scion of the Galveston Fertittas, has coveted a Texas casino for some time. One can only imagine how the irascible Tilman might take to seeing young Frank III and Lorenzo setting up shop in his backyard, especially after they covertly helped Tim Poster and Tom Breitling run up the price of the Golden Nugget purchase.

Regulation? Who needs it? If, as Nevada Gaming Control Board Chairman Dennis Neilander maintains, his agency is operating at 1991 staffing levels, then Gov. Jim Gibbons proposes to take the NGCB back into the 1980s. Perhaps Midnight Jim is feeling nostalgic for the heyday of Lefty Rosenthal. Who knows?

Whatever the case, Gibbons' proposed cuts would make it more difficult for the Control Board to account for the tax revenue that Midnight Jim claims he is at such great pains to conserve and maximize. Then again, trying to reconcile what Gibbons says with what he actually does has been an impossibility from the get-go.

Bargain$ tonight in Vega$

Tue, 27 Jan 2009 11:37:00 -0700

Suppose that you got a sudden urge to visit Vegas on a Tuesday night ... tonight, to be specific. You'd find that the customer is king, at least as far as pricing goes. A few minutes spent browsing Travel.Ian.com yielded the following revelations.

The exception that proves the rule is Red Rock Resort, which is advertising rooms at $160/night. Better you should drive the extra couple of miles to Suncoast, where they're charging half as much.

• Downtown, believe it or not, is commanding a slightly higher price point that some well-regarded off-Strip and near-Strip locals casinos. Rooms at Boyd Gaming's California Hotel and Fremont are going for $40 while The Orleans is fetching but $34.67. The "Off-Strip Bargain" award has to go to Boyd, which can put you up at Sam's Town for $21. True, you can stay at Fitzgeralds for $22 ... but it's Fitzgeralds. 'Nuff said.

• Honorable mention goes to Palace Station, where $29.99 gets you a room, just a walk (admittedly a rather hazardous walk) from Rat Pack hangout The Golden Steer.

• Conversely, the "Don't They Know There's a Recession?" award goes to our old friends, Columbia Sussex, who obliviously charge $159* at the Westin Casuarina at a time when you might stay at adjacent Platinum or nearby Paris-Las Vegas for $129, Bill's Gamblin' Hall or Bally's for $69, or even the Flamingo for $50. Then there's the "On-Strip Bargain" winner ...

• Caesars Palace at $90. The Caesars price was hardly the lowest one found on the Strip, but if you were graphing room rate vs. quality of property, the two lines would intersect fortuitously at Caesars. It sure beats ...

• Staying at Circus Circus for $24.95 (assuming you're not going the Airstream trailer-in-the-RV park route; $45 a night in the depths of winter -- such a deal!). Though Harrah's Entertainment is, in our one-night snapshot, getting clobbered by MGM Mirage in terms of price points, it can at least take bragging rights in the "For the Truly Desperate" award category, offering Imperial Palace for $32.53/night. Clowns or bad karma: The choice is yours.

Without belaboring the exercise any further, there is one lesson to be drawn ...

Where Steve Wynn goes, the money follows. The rising tide that lifts all nearby boats is called "Encore." While Encore itself is a relative bargain at $169 tonight, Wynn Las Vegas is listing rooms at $299 (surpassed only by the Four Seasons, $319 at the other end of the Strip), Palazzo/Venetian is up to $199, as is Treasure Island, while even Trump International is able to eke out $109.33/night. And despite being the oldest of the Wynn-authored properties, The Mirage is kicking butt at $229 tonight. If it's true that MGM Mirage CEO Jim Murren is driving a hard bargain for that place, can you blame him?

* -- The local papers are constantly filled with rants about how much more affordable Vegas would be if got those damn unions out of here. Odd then that the Westin, a non-union shop, has some of the highest rates on or near the Strip, huh?

Slumdog billionaires

Thu, 22 Jan 2009 13:00:00 -0700

Local publisher Sherman Frederick's man-crush on Frank III & Lorenzo Fertitta is taking on groupie-like proportions. He devotes today's edition of his blog to a gooey ode to les freres Fertitta and their UFC, "Las Vegas' No. 1 business success story." (For my own feelings about the UFC, I yield the floor to the senior senator from Arizona, the Honorable John McCain, who once described it unforgettably as "human cockfighting." And that guy knows a thing or two about brutality, having been an extended-stay guest of the Hanoi Hilton.)

"Even with the economy going to hell in a handbasket," Frederick swoons, "the guys at Ultimate Fighting Championship seem to have caught lightning in a bottle. While casinos, real estate and retail are on bended knees right now in Nevada, the business of mixed martial arts is jumping through the roof."

And you know whose casinos are among those "on bended knees" right now? The Fertitta Bros., that's who. An ill-advised LBO (~~at a mind-boggling 17X EBITDA, according to a Morgan Stanley research note~~ at 9.8X the company's 2007 EBITDA) has Station Casinos teetering on the precipice of Chapter 11. Reservationists have been sacked and their jobs offloaded to the Third World; 401(k) contributions have been halted; the company's revolving line of credit has been raided to pay operating costs; ownership's proposed rescue plan was so disadvantageous to debtholders that they all but spat upon it. Just part of "the biggest Las Vegas business success story" of the 21st century, I guess.

Kill Mojave Max! Who needs desert tortoises? Not Frederick's editorial braintrust (now there's a contradiction in terms), who ridicule attempts to preserve Nevada's second-most beloved species ... "whales" being the first, of course.

Quote of the Day

Thu, 22 Jan 2009 12:55:00 -0700

"That's cheaper than Sunset Station!!!" -- shocked e-mail reaction to news of a $39/night (plus $25 "resort fee" add-on) offer at Red Rock Resort.

Atlantic City Death Watch IV

Wed, 21 Jan 2009 17:49:00 -0700

Although Resorts Atlantic City, the Atlantic City Hilton and Trump Marina continue to circle the drain, they may have company. To wit ...

The fourth time's the charm. After three stints in Chapter 11, what's one more for Trump Entertainment Resorts? Something a journalist friend said six years ago remains as true as ever: "All Trump ever does is restructure his debt because that's all he can do!" Even if an(other) extension is granted, this company's obstacles look insuperable. And, pardon my saying so, but predicating your future in Atlantic City on building a casino in your primary feeder market (Philadelphia) makes almost as little sense as a cat chasing its own tail. Harrah's Entertainment tried something very much like that and it didn't work.

Layoffs return to Trop. This time it's dealers who'll feel the brunt. In Tropicana Atlantic City management's defense, it's wielding the cost-cutting knife far more judiciously than did its predecessor. Employee matching contributions to the health plan may be going up, but the lower-paid workers can still expect a salary increase. The more stringent belt-tightening is reserved for the top of the Trop food chain, with senior execs suspending their own 401(k) matching contributions. That's leadership by example, something a few other companies (coughStation Casinoscough) ought to have considered.

Bader Field -- to sell or not to sell? He may act crazy as a loon sometimes but Mayor Lorenzo Langford isn't wrong to want to take Bader Field off the market at a juncture when interest in the site has evaporated. Dangling it out there another six months is hardly likely to entice better offers.

Besides -- and much to Langford's vexation -- the State of New Jersey can nix any sale for which it doesn't care. That already happened when Penn National had an $800 million offer on the table. Penn thought there was enough Bader acreage to carve out four or five casino sites, keeping one for itself and making a tidy profit from the transaction.

Unlike the days of Steve Wynn's abortive Marina District venture, nobody's in the mood to give away land in Atlantic City anymore. At least Wynn -- presuming he's even still interested -- wasn't looking at it as a blatant 'flip' (an indiscreet admission by Penn that probably cost them the deal). And he can make a persuasive case, if he so chooses, that the economic benefits of a Wynn Resorts property in Atlantic City considerably outweigh the immediate gratification of an $800 million-$1 billion upfront payment.

Heck, given the farce that has befallen Pinnacle Entertainment's Boardwalk project, it'd be worth calling Dan Lee's bluff to see if he'd really take his ball and go home. Like Macbeth, Pinnacle is in so deep right now that it doesn't have much choice but to keep going forward. As for Wynn, he hasn't evinced much interest in Atlantic City lately. If he's gone cold on it since August of '07, he's got lots of company.

In retrospect, should the state have held its nose and signed off on the Penn National/Bader deal? The way history is trending, it's now looking like New Jersey cut off aforesaid nose to spite civic face. But it seemed like a good idea at the time: If Penn thought it could recoup $800 million-plus from reselling 75%-80% of Bader Field, legislators had reason to believe Atlantic City was getting lowballed.

The prodigal son

Mon, 19 Jan 2009 18:03:00 -0700

Poor Kerry Packer; the late Australian mogul and famous high roller must be doing all his rolling in the grave now. Reputed for being daring at baccarat and cautious in business, the media baron is at least spared the indignity of seeing son James Packer blow through his patrimony at a record pace.

Going is the $33 million yacht; on hold is the $40 million corporate jet. Even work on the $2.5 million backyard swimming pool has been suspended. (Don't you hate it when that happens?) At least the pin placements on Packer's Greg Norman-designed golf course are still "changed every day at massive expense," reports Rupert Murdoch's News.com.au.

More seriously, Packer is reported to be suffering from depression, though other media reports dispute this. Given the debilitating, even paralyzing nature of the disease (something for which I can vouch firsthand), it puts a potentially very different cast upon Packer's December no-show for a Nevada Gaming Control Board hearing.

When Packer did turn up, Chairman Dennis Neilander admitted to being somewhat foxed by Packer's acquisition of Cannery Casino Resorts (for $1.8 billion). "You and me both," I thought. As Packer seemingly played Pin the Tail on the Donkey, buying not only Cannery but positions in Fontainebleau, Station Casinos, Harrah's Entertainment and the flaccid Crown Las Vegas 'failsino'-tower, I tried to convince myself that an overarching strategy was at work. In retrospect -- especially after the writedown of the Station and Harrah's investments -- what we were witnessing was James Packer, Shopaholic. (How did he manage to miss out on the Cosmopolitan?) One begins to see why Steve Wynn steered clear of Packer, back when the talk of a Wynn-Packer joint venture was the buzz du jour on the Strip.

Even the Crown Macau cash spigot has been sputtering, although Melco Crown CEO Lawrence Ho keeps insisting that Chinese access to Macao will improve in time for the City of Dreams opening. (Either he's whistling past the graveyard or he knows something for which others would pay a very great number of patacas.) Market share is down at Crown Macau and the Macanese government is predicting a serious diminution of gaming revenue for for the overall market in 2009, placing it somewhere near $10.7 billion.

Plus, the ripple effect doesn't stop there. Aristocrat Leisure, which could really stand to have some good news, had been hoping for a fivefold increase in its installed slot base in Macao over the next two years. Not only is that unlikely, operators are trimming their existing slot inventory.

Underscoring their pessimism regarding reduced visa restrictions, Macanese tourism officials are turning their gaze at least partly away from China. Among the newly coveted markets are Singapore's presumed feeder markets -- India, Indonesia, Malaysia, the Philippines, Thailand, and even Australia and New Zealand -- to say nothing of Singapore itself. It's long been presumed that Singapore's got a tough row to hoe when its casino megaresorts come on line and it just keeps getting tougher.

Case Bets: CityCenter, Detroit, Boyd in Indiana

Mon, 19 Jan 2009 15:03:00 -0700

CityCenter: Cash cow or calf of gold?

It's received wisdom that, in its worship of the Golden Calf known as CityCenter, half-owner MGM Mirage is prepared to sacrifice some of its high-value properties, including MGM Grand Detroit, even in the face of numbers like these. Perhaps a history lesson is in order.

After the 9/11 attacks and the crippling blow they dealt to the Vegas economy, one of the ways companies like MGM stayed afloat (and, in MGM's case, profitable) was that their Vegas operations were backstopped by regional footholds in markets like Detroit and Biloxi. Now one keeps hearing that MGM is bent upon putting all its eggs in the Vegas basket, with even MGM Grand Macau possibly to be had.

(A moment of levity: A Dutch casino executive, speaking at G2E, suggested in all seriousness that MGM buy Station Casinos or Boyd Gaming and transplant their [locals] customer base to CityCenter. Which shows almost as little understanding of the Vegas market as I have of Holland's casino business.)

If this is an accurate reflection of the corporate thinking at MGM, shareholders should be alarmed, at the very least. A CityCenter-centric strategy concentrates risk, rather than spreading it across multiple markets. The kind of pullback that's being mooted in the blogosphere and podcast cosmos would be so irresponsible that it would call the judgment of MGM leadership into question. However, so long as said management is answerable only to Kirk Kerkorian, that question may never be called.

Don't look for rescue from Foxwoods or Mohegan Sun. Their slot revenues have been sucking wind this year. Also, salary cutbacks to 9,800 Mohegan Sun workers bode very poorly for further expansion by the casino, which was bullish on the Kansas market not so long ago.

Boyd fights back. The opening of nearby Four Winds Casino really did a number (as in approx. -40%) on revenues at Boyd's Blue Chip riverboat in northeastern Indiana. Watching double-digit revenue declines, month after month, might spur those of us with lesser intenstinal fortitude to cut and run.

Not Boyd. It's reinventing its business model for Blue Chip, in best "adapt or die" fashion. The three-pronged response of a new hotel, spa and concert venue is an aggressive pushback. It probably won't restore Blue Chip to former levels of glory, at least where gambling revenue is concerned (Four Winds still has the "convenience factor" going for it with Michigan punters). However, it does fling a strong challenge at its adversary. Four Winds, the ball is now your court.

Fertitta scores own-goal on stock

Tue, 13 Jan 2009 13:51:00 -0700

Shares of Landry's Restaurants (LNY) ended trading Friday at $12.35/share and opened Monday at $7.16 -- a 42% plunge. Starting the week by telling investors that your latest takeover attempt has gone belly-up will do that. Although the relevant SEC filing was posted on Thursday, amazingly the market didn't react until Monday morning's press release.

This is CEO Tilman Fertitta's second busted effort to take Landry's private (the first was priced at $21/share, the second at $13.50). If he keeps at it, pretty soon he'll be scarfing up stock at a dime per share. Doing the same thing over and over but expecting a different result is the standard definition of insanity but in this case Fertitta may be crazy like a fox. Taking a pummeling on his personal worth might be an acceptable tradeoff for him if the result is sole control of Landry's at a steep discount.

Heaven knows, the SEC was right to balk at secret clauses between Fertitta and his bankers. Regardless of how innocuous these top-hush provisos might have been, if something of a material nature can't be disclosed to shareholders, such "unusual circumstances" are sufficient motive to nix the deal.

Given the outcome of the last three gaming-sector LBOs (Harrah's Entertainment, Station Casinos and an aborted one at Penn National), you might question the advisability of attempting yet another, especially now. But, amazingly enough, Fertitta is able to keep lining up the requisite capital, so his bankers must like what they see on his balance sheets ... propped up in no small measure by the two Golden Nugget properties, which represent a considerable plurality of Landry's revenue.

Lanni: The official story

Mon, 12 Jan 2009 17:27:00 -0700

My favorite exchange in one of my favorite current TV series, Mad Men, takes place when weasel-like junior exec Pete Campbell (Vincent Kartheiser) goes to rat out his boss, Donald Draper (Jon Hamm), to company owner Bertram Cooper (the cunningly cast Robert Morse). "Draper" is, Campbell has discovered, a Korean War deserter who has risen to the upper reaches of Madison Ave. circa 1960 under an assumed identity.

Cooper takes all this in imperturably, bestows upon the youngster a pitying gaze and says, "Mr. Campell ... who cares? This country was built and run by men with worse stories than whatever you've imagined here. The Japanese have a saying: ‘A man is whatever room he is in' — and right now, Donald Draper is in this room."

Which was pretty much my reaction to the J. Terrence Lanni resumé-inflation flap (it came and went too quickly to qualify as a scandal). The casino industry was built by men who did far worse things than list a nonexistent MBA on their curriculum vitae. Heck, Harrah's Entertainment is operated by a Ph.D late of the Harvard University faculty and it's not exactly an advertisement for fiscal well-being these days ($415 million lost in 2008, and counting). For that matter, we've entrusted our country for the last eight years to men with MBAs who said they'd run it like a corporation. How'd that work out?

And even if Lanni deliberately padded his resumé to get ahead ... who cares, Mr. Campbell? At worst, the reins of MGM Mirage might have gone to somebody more obviously "qualified" ... like a Gary Loveman or a Frank Fertitta III. MBA or no, Lanni was good enough for owner Kirk Kerkorian, a man with a Ph.D from the School of Hard Knocks.

Simply put, at a time when Mob-tainted Clifford Perlman is in the American Gaming Association's Hall of Fame (presumably soon to be joined by the late Lefty Rosenthal) and when Columbia Sussex CEO William J. Yung III got run out of New Jersey for running a rogue outfit in Atlantic City, but retains casino licenses in Nevada, Louisiana and Mississippi, outrage is difficult to muster.

Which is not to excuse the whitewash (Steve Friess has an even harsher term for it) that ran in Sunday's Las Vegas Review-Journal. Basically, the story amounts to a regurgitation of MGM's company line, which boils down to, "We (sort of) planned it this way." Less charitably, the R-J lends its credibility to an attempt to sweep Lanni's speedy and inglorious exit under the nearest available rug.

"(T)here is never a perfect time" for MGM's CEO to step down, we are told. No, but ringing up Kerkorian on the evening of Nov. 12 and giving him two weeks' notice is something less than the "smooth transition" MGM and the R-J are trying to depict. CEO-in-waiting Jim Murren stepped gracefully into Lanni's shoes but the timing and alacrity of Lanni's departure leave many questions hanging.

Given the extreme proximity between the Wall Street Journal's exposé on Lanni's credentials and his resignation, the official stance that it was all just a big coinky-dink, while possible, is difficult to swallow. (After all, a plan for Lanni to remain on the MGM board was quietly withdrawn when casino-oversight three states, including Nevada, began to probe the academic-credential issue.)

But let's give everybody the benefit of the doubt on that one and consider what else might have propelled the CEO toward the exit:

Perhaps Lanni, a man well-served in Asian sensibilities, was falling on his sword for the good of the company. After all, Nov, 12 marked the first time in at least five years that MGM stock closed at $10/share. Maybe, as Jeff Simpson has suggested, Lanni placed a "sell" order on himself once the stock price hit that inauspicious threshold.

The massive Harmon screw-up was already known to him. Or perhaps the sale of Treasure Island and writedown of $1.2 billion related to the Lanni-supervised takeover of Mandalay Resort Group were already done deals, and Lanni foresaw himself presiding over the partial dismantling of an empire he'd helped build.

Or maybe he just woke up that morning and, channeling Danny Glover in the first Lethal Weapon movie, growled, "I'm getting too old for this shit." That, at any rate, is The Official Story (minus the scatology).

It appears we will never know what ultimately prompted Lanni's leap ... or at least not for a long time. I'm with those who say, "he will be judged on his leadership." He certainly did much more than any executive I can think of when it comes to making diversity a priority in a boy's-club industry. He extended the company's reach into new overseas markets. And if MGM's reach exceeded its grasp toward the end of the Lanni Era, it did not do so to the extent that has Harrah's, Station Casinos and several other companies presently skirting the edge of bankruptcy.

Heck, we only demand honesty from CEOs on a selective basis. On Oct. 29, Lanni said no asset sales were on the table at MGM. Two weeks after Lanni left, Phil Ruffn plunked down $775 million for Treasure Island. Perhaps that deal really did come together in a fortnight, although it's not been MGM's style to move so fast. If, for purposes of argument, Lanni had been in talks with Ruffin in late October and told the press that asset sales were being discussed, what would have happened? MGM stock might easily have dropped like a brick. So if Lanni did fib about the Ruffin talks, do we further discount his credibility or do we say that it was his fiduciary duty to fudge the truth every so often?

One could go further about Lanni's accomplishment (which also include the complete domination of the Detroit market and the development of a strong executive team), but let it suffice to say that J. Terrence Lanni was "in the room."

Nor did he deserve the non-person status he fell into upon his resignation. His name was scarcely even mentioned at the most recent G2E and, when it was, it was sort of muttered in the corners of the press room. Honestly, there was neither a death in the family nor anything about which to be embarrassed -- and casino regulatory bodies have matters more material with which to deal than with the occasional fudged resumé. The probity and financial solvency of the mergers and alliances they are asked to bless might be a good place to start.

Good thing they don't gamble ... do they?

Fri, 09 Jan 2009 18:09:00 -0700

(Well, only with their shareholders' money, perhaps.)

Huffington Post, with the considerable assistance of VegasTripping.com, has sifted through the contributions of casino industry moguls during the last election cycle and all I can say is I'm sure glad these folks' business acumen (usually) exceeds their political prescience. Overwhelmingly, the captains of our industry backed loser after loser, with a preponderance of contributions to going to newly unemployed Jon Porter (R-NV) and to the vaporware presidential candidacy of Rudy Giuliani.

Las Vegas Sands President William Weidner has a truly dreadful political batting average. Boss Sheldon Adelson can gloat that he connected with more pitches than Weidner did. (Since the RNC and RSCC failed their main tasks in '08, I'm counting those as "strikes.")

William Weidner exaggerates the extent of his political acumen.

Former MGM Mirage CEO J. Terrence Lanni more or less "broke even," while Wynn Resorts Director Elaine Wynn's early and frequent support of President-elect Barack Obama gives her the Prescience Award. (Husband Steve didn't do too badly when it came to picking winners, either ... especially if one counts his primary-season support of Sen. Joseph Biden toward the latter's eventual vice president-elect status.)

Harrah's Entertainment CEO Gary Loveman is the closest thing to a liberal -- with donations to Sens. John Kerry and Christopher Dodd in '04 and '06, respectively -- and the only consistently Democratic donor in the bunch. Columbia Sussex CEO William J. Yung III (three Dem donations to one GOP one) went 0-2 at the federal level and 2-0 at the state one ... though it still hasn't gotten him a Kentucky casino.

Still, given the number of times this roster of CEOs and presidents (including multiple Fertittas [Fertittae?] and a Maloof) rolled snake eyes, you wouldn't want them placing bets on your behalf.

Happy New Year

Fri, 02 Jan 2009 18:14:00 -0700

Will it be a happy new year for the Strip? In terms of "supply shock," the timing could be a lot better, let's put it that way. Back on Aug. 14, JP Morgan issued an analyst report which showed 11,412 hotel rooms and 7,546 condos hitting the Las Vegas Valley in 2009. Aliante Station and Encore (an aggregate 2,235 rooms) relieved some of the pressure by opening sooner than Morgan analysts anticipated. But that still leaves a lot of product in the pipeline, headed right at us.

Persistent rumors have MGM Mirage's The Harmon, part of CityCenter, paralyzed by construction problems and perhaps deserted by operator Light Group. Even if that proves to be both true and a blessing in disguise, we're only talking 400 units. Seriously, we could stand to have a few more big projects (Cosmopolitan, anyone?) fall behind schedule.

After all, 2010 was to have been an absorption year, with only the St. Regis condo tower (300 units) at Palazzo slated to open. Now that's on indefinite hold, so the deck is clear for developers who'd like to push their opening date back. Any takers?

21

Wed, 31 Dec 2008 11:39:00 -0700

That's the number of predictions for 2009 issued by Spectrum Gaming Group, an Atlantic City-based outfit. They are, in no particular order:

• Advancements in technology that impact revenues and cut costs will continue to be attractive to operators even in an economic downturn.

Continued ...

• ... conversion of racetracks to racinos, as well as non-gaming expansions to existing racinos.

• ... elimination of jobs, both through cuts and attrition.

• ... moratorium on development of big-box gaming resorts due to economic downturn.

• Convenience-based gaming continues to achieve better year-over-year results than destination-based gaming.

• Corporate and property debt restructuring in wake of declining revenues.

• Eastern European countries will increase their efforts to meet EU regulations, including smoking bans.

• Gaming companies increase efforts to export their brands globally.

• Gaming equipment manufacturers continue to invest in games that appeal to a younger demographic, including lotteries, bingo and server-based technology.

• Increased legislative acceptance of allowing the deduction of issued electronic promotional gaming credits from the gross revenue tax/fee calculation.

• Increased use of electronic games, including the emergence of scalable electronic table games in which players at different locations on the floor wager on a single outcome.

• Increasing alliances between commercial gaming operators and outside investors, as well as between commercial and tribal operators.

• Internet gambling in U.S. will be a hot federal issue for the new administration and Congress; gaming companies will fund lobbying efforts on both sides.

• Major gaming operators commence deleveraging by selling off properties to emerging operators.

• More pronounced shift in market share among suppliers as operators attempt to shift away from IGT participation games.

• Native American tribal gaming revenue estimates remain on track to surpass U.S. commercial gaming totals.

• Prices for hotel rooms, shows and food and beverage will return to lower levels at large gaming resorts as operators need to fill their properties.

• Slow but continual advancement toward server-based gaming, as operators remain skeptical as to the potential financial returns on investment.

• States consider expanding or legalizing casino-style gaming to help fill state budget gaps.

• Support from China to ease visa restrictions, increasing flow of visitors into Macau.

• Uncertainty in various European countries concerning regulation, thus increasing cases being referred to the European Court of Justice.

We'll have to check back in a year, God willing, and see how clear Spectrum's crystal ball proved to be. There's nothing on that list that strikes me as off the beam and much of its seems dead on target. The only "WTF?" comes courtesy of a Spectrum exec who told a reporter, "In times like this, it's not like these are company-specific problems that can be attributed to some glaringly bad decision by the company."

I respectfully beg to differ. Choosing unreliable and/or overcommitted business partners (Boyd Gaming) was a decision. Opening in far-flung markets while your core properties were losing market share (Isle of Capri) was a decision. Taking on preposterous amounts of debt (Harrah's Entertainment) or simply assuming more debt than your cash flow and lavish spending tendencies can support (Station Casinos) were decisions. Trying to build metaresorts all at once (Boyd, MGM Mirage) was a decision. Rashly demolishing the Atlantic City Sands and thereby leaving yourself with empty, non-revenue-producing land (Pinnacle Entertainment), that's a decision.

Launching major projects that aren't fully capitalized (Las Vegas Sands, Cosmopolitan, Majestic Star) is a decision. Stubbdornly jeopardizing the license of the property that generates 40% of your cash flow (Columbia Sussex) is a decision. Making not one, but two major acquisitions at a time when your cash cow -- slot routes -- is giving less milk and then overpaying for some of the new assets (Herbst Gaming) is a decision.

Opening a $2.3 billion, years-in-the-making megaresort at the nadir-to-date of the economy (Wynn Las Vegas)? Now that, that was not a decision. That's playing the hand you were dealt.

Analyst: Station, Harrah's "worthless"

Tue, 16 Dec 2008 13:22:00 -0700

James Packer can kiss $414 million goodbye, according to a Citigroup analyst who writes that Crown Ltd.'s ownership stakes in Station Casinos and Harrah's Entertainment are now "worthless." That's according to a Sydney Morning Herald story picked up by the Las Vegas Review-Journal. (The R-J needs to retitle its "Business Matter" blog "Gaming & Tourism," because the rest of its business desk isn't doing squat, blog-wise.)

Harrah's, Station, Isle of Capri Casinos and a few others are in the situation faced by the submariners of Das Boot. Their U-boats are stuck in a crash drive, headed for the bottom of the Straits of Gibraltar and nearing "crush depth." Those three have got some time but Herbst Gaming is probably hearing the hull plates crumpling right about now. Whoever believed that three mostly rundown Primm Valley casinos were worth $131 million apiece (on top of an undigested $119 million Sands Regent acquisition, to boot) certainly ought to be shot out the nearest torpedo tube.

Station caves

Mon, 15 Dec 2008 13:50:00 -0700

One business day after announcing yet another extension of a debt-swap offer that its debtors roundly rejected, Station Casinos is throwing in the towel. I guess it finally found a part of "no" that it understands. Here's hoping that Station's next offer is more equitable to the debtholders.

Station taunts debtors

Fri, 12 Dec 2008 13:23:00 -0700

Its recent debt-swap offer having laid an egg, is Station Casinos withdrawing it in favor of one that debtors are more inclined to like? No. It's extending the consent date on its existing offer (for a second time) until Dec. 19.

It's one thing when Harrah's Entertainment extends a debt-swap offer because it's oversubscribed. Station's problem is that it can't find many takers. It looks like this is Station's way of saying, "So there!" to all those spoilsport debtholders who don't like the terms on offer. It's brinksmanship, but trying to running out the clock could still work to Station's advantage.