David Mckee's Stiffs & Georges - Indiana

Case Bets: Net bets, Mohegan Sun & What's F'bleau worth?

Tue, 13 Oct 2009 12:46:00 -0700

You can't play poker for money on the Internet but you can now play the ponies in Illinois via the Web. This is yet another example of legally enshrined hypocrisy under UIGEA, the parting gift of "Slick Billy" Frist and Jim Leach to the American people. (Speaking of Dr. Frist, M.D., if we must, he just sat like a bump on a log when Bill Maher stupidly railed against the swine-flu vaccine last week. Thanks, doc.)

Setting Sun? The incoming chief of the Mohegan tribe is saying the right things about the imminent need for diversification. Specifics, however, are few on the ground. Mohegan Sun, meanwhile, finds itself between several rocks and hard places: potential competition from Massachusetts and Long Island, $1 billion in debt, falling revenues and the economic inability to finish planned improvements. Depending on how quickly Massachusetts gets its act together, Mohegan's moment in the sun could soon pass.

You've heard of "pocket pool," now the Review-Journal's intrepid Howard Stutz reaches deep into the demimonde of PocketCasino, the new, portable sports-betting technology in play at Venetian/Palazzo. No word yet on whether excessive play causes blindness or hair growth on one's palms.

(Seriously, as a longtime skeptic of Cantor Gaming's portable-gambling applications, I have to say it looks like the Cantor boys have come up aces this time. As for handheld substitutes for table games, the jury is still out on that, four years after their legalization.)

Fontainebleau Las Vegas from Running Bull Productions on Vimeo.

Pennies for F'bleau. What's Fontainebleau worth? Jack shit, according to Penn National Gaming (aka, 15 cents on the dollar). In return, Penn is willing to accept a 10% return on investment ... provided it can bring the project in a no more than $1.5 billion (not counting the billions already spent and written off).

This remains an iffy proposition, in part because it's predicated on increased profitability at Penn's patchwork assemblage of casino properties. Those have to be welded into a Harrah's Entertainment-like loyalty program that drives visitors to Las Vegas. This is a huge "if," as Penn currently has no casinos in major destination markets, unless you stretch that to include recently singed Empress Joliet. Bringing customers to Vegas or even Atlantic City is terra icongnita for Penn.

To put it bluntly, Penn was a third-tier operator -- mainly of racinos -- that "married up" by taking over Argosy Gaming, the classiest of the riverboat operators. However, the Vegas market is notoriously unforgiving of new-to-town operators and Penn will have a very steep learning curve. Also, Penn is not associated with upscale properties, so F'bleau will either have to be repriced downward to reflect the Penn customer base or may need to offer promotional allowances up the ying-yang (more likely both).

If that weren't sufficient cause for concern, Penn's oft-brandished $1.5 billion (the breakup fee from an ill-advised and abortive LBO) is covering multiple bets. Penn is the primary mover behind a pro-casino ballot initiative in Ohio -- partly to protect its Hollywood Lawrenceburg investment just across the border in Indiana. It also recently bought out Cordish Gaming in hopes of getting piggybacked onto the Kansas Speedway casino license, should the Sunflower State's lottery board approve.

At least Penn is working on ways to trim the completion price of F'bleau. Costs to date -- and projected ROI -- being what they are, it behooves Penn CEO Peter Carlino to get this rampaging beast under some semblance of control.

Leaving Las Vegas

Mon, 12 Oct 2009 18:17:00 -0700

At least 28,000 have done so over the two years-plus (probably more when you allow for the people still moving here). What are the likely consequences of Las Vegas' pegging its future on a one-trick economy? And is it going to be like one of those Rust Belt cities (like Pittsburgh) that turned it around or one of those (say, Detroit) that continues to decline?

Those questions and others are posed in a splendid article that connects most of the dots regarding Vegas' economic plight. One of the most disturbing points raised by Las Vegas Sun reporter J. Patrick Coolican is that cities doing well at present tend to be ones that possessed robust institutions of higher learning -- and invested in them. Neither can be said of Nevada's dismal education system, the recipient of savage budgets, thanks to our governor and the ever-feckless Lege.

If Las Vegas' future hinges on well-funded and -respected academic institutions, then the near-term prognosis is grim.

Speaking of Detroit, casino owners and politicians there may be casting a wary eye on rising pro-casino sentiment in Ohio. In whichever form casino gambling is legalized by Buckeye State voters, it stands to take a big bite out of Motown casino receipts -- and sap state and local revenue collection, too. A helpful Detroit News map shows precisely which Detroit, Indiana, Pennsylvania and West Virginia casino operators have reason to be fretful about the emergence of a casino industry next door.

Like their Strip brethren, tribal powerhouses Mohegan Sun and Foxwoods Resort Casino went all-in ... into debt, that is. Now that it's time to pay the piper, they find themselves in binds comparable to those facing non-tribal casinos. However, they have fewer options for relief, as they discover the downside of being a tribal operation.

Dog's breakfast at Tiffany's. Few readers of this column can probably afford to buy anything at the Tiffany mega-boutique that will be part of the Crystals mall at CityCenter. However, it will make for some lovely window-shopping. (Click on the pictures to see them in a larger size.)

Atlantic City reprieve. Although New Jersey's three-way gubernatorial race is up for grabs, casino owners can take one consolation. Whichever of the two leading candidates is elected, continued opposition to racinos is promised.

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.

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.

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.

Competition forces sanity

Mon, 13 Jul 2009 18:50:00 -0700

While the Bible Belt may hold out until the bitter end, we may finally be seeing the demise of the "boats in moats" arrangement, a fig leaf that enabled Midwestern states to blushingly accept casino money. Illinois has started phasing it out. Ohio Gov. Ted Strickland's decree today that seven Buckeye State racetracks can go to racino status may be a real game-changer for neighboring Indiana.

First, a word on the Strickland move. It anticipates legislative passage of a package deal that would require tracks to pay $65 million upfront and the usual usurious tax rate (48-50%). However ... slot machines would be purchased by the state (and run under the auspices of the Ohio Lottery), which softens some of the pain. Racino facilities would have to be periodically upgraded, too, at an average of $16 million/year.

All this has spurred (well, slowly prodded) Indiana's Lege to take a second look at the Hoosier State's riverboat regime. This could mean everything from on-land casinos to free drinks for players. There's also talk of "simplying" taxes and admission fees. How about simply eliminating the latter? It's a paternalistic anachronism that needs to go away.

Don Barden's two Majestic Star boats will likely prove an impediment. Some solons want any arrangement to include moving one of them out of Gary, Ind., to better the chances of both. Whatever the case, don't expect any action until next year.

The recession is catching up with regional casino markets. Even the loosening of operating rules in Missouri wasn't enough to stave off a slippage in revenues. Chrysler and Hummer plant shutdowns might explain a -1% shift in St. Louis, but what about a -2.5% June in Kansas City? A 2% drop in statewide slot win was almost countered by an 8% jump at the tables, where higher betting limits are now in force.

Ameristar Casinos took the hit in K.C., down 12%. All other three major boats posted growth, led by Isle of Capri, up 5%. With a $19 million June, the Ameristar boat still led the market in dollar volume but both Harrah's Entertainment and Penn National are closing the gap.

In the greater St. Louis area, both Harrah's and Ameristar fell by an average of 5%, while Pinnacle Entertainment's Lumiere Place gained almost 6%, really starting to give the two older casinos a battle. Even the snake-bitten President had a good month, chipping in nearly $2 million to Pinnacle's kitty.

Further good news came in the form of the bulletin that Isle of Capri had eked out a month in the "plus" column. So even an outwardly disappointing June in the Show-Me State cosseted some significant tidings of comfort and show.

Rough trade

Mon, 13 Jul 2009 18:09:00 -0700

May wasn't great for Las Vegas, to say the least, with hotel occupancy -6%, a figure somewhat amplified by the presence of 3% more hotel rooms. The local ADR of $96.96 would have been regarded as real money back in the day. Hoteliers now are more likely to look at it in the context of the -28% shift from last year's rates. More worrisome is that convention attendance (-33%) outslid the number of conventions held (-26%), whereas it used to be the reverse.

Indiana has absorbed the effect of its two new racinos. Casino revenues were flat in June, a decline at most boats offset by the extra dollars generated at Harrah's Entertainment's Horseshoe Hammond (+13.5%) and Boyd Gaming's Blue Chip (+4%), both of which recently expanded. Penn National was hurt by the switchover to Hollywood Casino Lawrenceberg, its new vessel, and Ameristar East Chicago (-15%) withered under the glare of Horseshoe Hammond.

Illinois is scraping along, having evidently struck bottom ... for now. Once the impact of a fire-closed Empress Joliet was backed out, Illinois was down a mere 3%. That's practically a moral victory. Of course, with the institution of slot routes en route and the Lege contemplating a huge casino expansion in the state, any celebration will be short-lived. Harrah's Joliet was the logical beneficiary of the Empress Joliet shutdown (+5%), while MGM Mirage's Grand Victoria spiraled -17%.

There were a few gainers, ranging from miniscule (Boyd's Par-A-Dice) to massive (+109% at independent Casino Rock Island). East St. Louis-based Casino Queen finally lost a significant chunk of business (-11.5%) to its augmented Missouri rivals, while Penn's Alton Belle kept its leakage to -3%.

It's not a free market. Lawmakers in the Land of Lincoln have not only introduced slot routes, they may add four more casino licenses to the state. Factor in Neil Bluhm's casino project in Des Plaines (license #10), and the gambling market in Illinois becomes seriously diluted. However, no compensatory tax reduction is on the table.

When it comes to casinos and taxes, solons think simply that more = more. However, in a state where competition is limited by statute, not only does guvmint control the levers of the market place it has an obligation to take the economic consequences of its actions into account. This is not being done and the repercussions are likely to be severe.

Harrah's takes out the garbage; Yemenidjian's return

Tue, 05 May 2009 14:53:00 -0700

Congratulations -- I think -- to new Harrah's Entertainment General Counsel Timothy R. Donovan. A graduate of The Ohio State University, Mr. Donovan comes to Harrah's by way of the garbage industry. Considering that picking up the trash around Harrah's properties has sunk to a very low order of priority, maybe he can put CEO Gary Loveman in touch with an affordable waste-disposal provider. In any event, bringing a veteran of the garbage-removal business into a trashed company is priceless in its symbolism.

The man who wouldn't leave. In case you hadn't heard, not only is the bankruptcy auction for the long-suffering Tropicana Atlantic City expected to drag into the summer, that won't be the end of Gary Stein's dilly-dallying trusteeship. No, not by a long chalk! After all, the new buyer will have to be vetted by the New Jersey Casino Control Commission, which means that Stein's sinecure will become a two-year gig, extending into December ... at least.

In the meantime, the splitting of Tropicana Entertainment into components that can be termed "Las Vegas" and "Everything Else" continues apace. It's being underwritten by $150 million from Carl Icahn. But there are limits to Icahn's generosity, as his loan comes attached with a 15% interest rate.

Remember how S&G predicted that transfer of management of the Tropicana Las Vegas to former MGM Grand boss Alex Yemenidjian looked like the start of a sale. Sho' nuff! Yemenidjian's backers, Canadian Onex Corp. will control the majority of the board. The LV Trop has been a manifestly low priority for TropEnt CEO Scott Butera, who been's primarily fixated on Atlantic City (and secondarily on Indiana). A shift of directorship to a company whose first and only priority will be Las Vegas is to be welcomed.

Trop snoozes, loses

Thu, 26 Mar 2009 15:23:00 -0700

Like a hot potato, the Tropicana Las Vegas continues to bounce from Columbia Sussex to Tropicana Entertainment and now maybe into the hands of Alex Yemenidjian. (This management-contract arrangement looks more like laying the groundwork for a sale ... if so, thanks for taking S&G's advice, guys. It's worth what you pay for it.)

A top price of $380 million can be viewed either as a bargain -- $11 million an acre, a long way down from the berzerk price paid by ColSux two-plus years ago -- or a boondoggle, seeing as even $380 mil represents an 84X cash-flow multiple. Somebody's got a job ahead of them.

Unfortunately, TropEnt CEO Scott Butera hasn't had his eye on the ball. Now, there wasn't anything he could do to keep the Titanic and Bodies exhibits from jumping ship to Luxor. But he pulled the plug on Folies Bergere and the Comedy Stop. Then, having given magician Dirk Arthur the boot, Butera's minions had to reverse field and grant the illusionist a reprieve through September. (So if you go to the Trop in April, the only entertainment offering will be an afternoon magic show. That's it.)

Just another day at the Trop.

As of Sunday, the Trop will have no (as in "zero") marquee attractions to tout. So it's an understatement to say that an agreement "in principle" with comedian Bobby Slayton doesn't come a day too soon and a formal contract needs to be inked yesterday.

When Nero played an as-yet-uninvented instrument, Rome burned. Whilst Butera fiddles, the Trop merely continues fade. Unless TropEnt's song and dance about repositioning the Trop is just a softshoe act, playing for time until the whole problem can be deposited in Yemenidjian's lap.

Ever since he took the reins at TropEnt, Butera has been fixated upon getting the Tropicana Atlantic City back (which he should) and, secondarily, with regaining Casino Aztar in Indiana (which he did). But the LV Trop has clearly been a low priorty and now he's washing his hands of it. Which means the real problem won't be Yemenidjian's but that of Trop employees and their equally neglected customers.

Patience, thy name is a Harrah's Entertainment bondholder. A surprisingly large number of these long-suffering souls are willing to wait just shy of a decade to redeem their distressed Harrah's debt. They're better men than I.

This book looks like a must-have. And, no, Huntington Press didn't publish it. But we do have a nifty new edition of Whale Hunt in the Desert, thank you for asking.

Casino commercial of the year

Wed, 04 Mar 2009 17:43:00 -0700

Although Sheldon Adelson's taunting of the president may have seemed very clever at the time, the joke might be on the mogul. Check out this inspired TV spot, dreamt up for the grand opening of the permanent racino at Indiana Downs:

A tip of the sombrero to the reader who clued me into this brilliant ad, which has supposedly stirred a ruckus in the Hoosier State. It's the brainchild of Cordish Gaming CEO Dennis Gomes (the once and would-be future boss of the Tropicana Atlantic City), who is also credited with instituting the greatest casino promotion of all time, the Trop's tic tac toe-playing chicken.

I hear the chicken had been given its walking papers long before Columbia Sussex got ahold of the Trop. A good thing, too. Knowing ColSux, CEO William J. Yung III probably would have had the chicken killed, fried and served for lunch.

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.

Going down in Illinois

Tue, 10 Feb 2009 17:56:00 -0700

When it comes to Upper Midwest casinos, there's Illinois and then there's Everyone Else. Except that, in this case, you want to be "Everyone Else." Being Illinois sucks.

January numbers for Missouri aren't out yet but Iowa is up 3%, Indiana is seeing a 12% surge ... and Illinois is -9%. That's on top of the -18% hammering the Land of Lincoln took a year ago, when smoking in casinos became a no-no. Whatever impact the recession is having on neighboring states' casinos, refugee players from Illinois riverboats are more than compensating.

The news isn't quite as good as it could be for Indiana, where the gain is more than offset on a same-store basis by the dilutive effect of two new-ish racinos and Harrah's Entertainment's Horseshoe Hammond behemoth. These ill-timed (for their competitors, that is) expansions have left everybody else slicing the ham thinner, in Fred Harvey's dying words. (The restaurant mogul's last utterance was alleged to be, "Slice the ham thinner." And, no, he wasn't an F&B executive at Station Casinos.)

Some salient Indiana facts ...

• Expansion of Horseshoe Hammond is not only a positive (+16%) in itself, it's more than making up for softening at Horseshoe Southern Indiana (-3%). Was taking the Caesars brand off the latter a good idea? Just asking.

• French Lick is licked (-14%). Somebody has to be in last place and Indiana's only land-based casino is "It."

• Ameristar East Chicago is feeling the Hammond Effect (-4%) but surpasssed analyst expectations nonetheless.

• Grand Victoria is in freefall -- eight straight months of double-digit declines, including last month's -26%. Will it hit bottom before it passes French Lick on the way down? Speaking of the bottom ...

• Congratulations to Boyd Gaming's Blue Chip (-2%), which is finally pulling out of a protracted skid. If Boyd can live with 65-70% of Blue Chip's pre-2008 performance, the future -- thanks to a newly augmented casino-hotel -- inspires hope.

• Majestic Star II needs to be moved (an idea that's getting kicked around by various governmental bodies). While its sister ship is hanging in moderately well, Majestic II's year/year comparisons are almost as dreadful as Grand Victoria's.

• The turnaround of Casino Aztar (off but three-tenths of a point) remains 2008's #1 success story in the industry.

Racinos were less of a factor in Iowa, were they were flat while riverboats nudged their revenue up 4%. The three tracks, though, do generate roughly a third of the state's casino revenue, while 14 riverboats divvy up the rest, not counting tribal casinos (which don't report revenue).

• Harrah's Council Bluffs (+4%) stole market share from Ameristar's rival facility (-6%), but the latter still does nearly double the business ($13.4 million to $7.7 million).

• Positive comparisons at two of Isle of Capri's four Iowa casinos were more than offset by declines at the other two, for an aggregate of -2%.

• Two smallish riverboats, Diamond Jo and Mississippi Belle, enjoyed spectacular improvements in January, +104% and +51%, respectively.

All generalizations about Illinois are false in the sense that there are exceptions that prove the rule. For instance, while the smoking ban has quantifiably been death for Illinois casinos, the first one to open as a non-smoking casino -- Casino Rock Island's new facility -- has been up 118% and 112% in the last two months. Is there something about not being able to smoke in a casino that still smells of cigarettes that's worse for business than not being able to smoke in a nice, fresh facility?

Another paradox is that the casino one would think most likely to feel the brunt of St. Louis-area competition, East St. Louis-berthed Casino Queen, was the last to experience the downturn that was sweeping the rest of Illinois and is now almost back (-3%) to year-ago figures, which themselves were only -2% from January '07.

With Boyd's Par-A-Dice (-5%), Harrah's Metropolis (-9%) and Penn National's Hollywood Aurora (-7%) decelerating from last year's precipitous declivity -- when they were -10%, -19% and -16%, respectively -- one would like to believe that the bottom is near for Illinois, but the Penn boat is the only bright spot in Chicagoland and the same company's Alton Belle (-15%) is still taking it on the chin from Missouri.

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.

Case Bets: Chicago, Wyndham, Harrah's

Fri, 16 Jan 2009 12:37:00 -0700

Anybody who still frets about "criminal elements" in Las Vegas casinos ought to turn their gaze toward Chicago instead, where such issues continue to dog the state's 10th casino license. The citizens of Waukegan lost their shot at a casino because the would-be owners had juiced an indicted businessman into the deal, despite representations to the contrary.

And the winner is ... Des Plaines.

Also, the amounts of the various bids have been revised. Favorite son Neil Bluhm's winning offer was $272 million (quite a bit more than previously reported), while Waukegan Gaming brought up the rear with $216 million. Alex Yemenidjian's bid has been revised slightly downward, to a still eye-popping $406 million. Maybe Yemenidjian, who made one previous run at Tropicana Entertainment, ought to take that $406 million check to Scott Butera's office and ask for the Tropicana Las Vegas in return. And if were Butera, I'd have that check to the bank as fast as my legs could carry me.

Wyndham's latest Las Vegas project, just up the block from LVA HQ, has ground to either a halt or an extremely slow crawl. But Wyndham is going great guns in the Bahamas, where its Wyndham Nassau Resort & Crystal Palace Casino opened yesterday. Assuming Harrah's Entertainment can ever pull the trigger on a sale of The Rio, the latter has quite a bit of acreage (36.73 acres, to be pedantically precise) out back that's being underutilized as surface parking. Any prospective owner ought to consider cannibalizing that for additional casino/restaurant offerings, piggybacked onto the rear end of the existing Rio. It could synergize quite nicely with the Wyndham's timeshares, once they're eventually up and running just across the street, and capitalize on a steady stream of Twain Avenue traffic.

(Just for perspective, El Ad Properties only has clear title to 18.4 acres for its Plaza metaresort, although it may hold options on adjacent land; there's still $615 million in that acquisition that hasn't yet changed hands, judging from property records.)

Speaking of Harrah's, whether due to its new bean-counting ownership or a surfeit of other pressures, its media site has fallen into a state of semi-neglect. For instance, Harrah's southern Indiana casino hasn't been Caesars Indiana for some time now. The newly Caesar-ized Casino Windsor doesn't even merit a Web page of its own, nor do the oft-disrespected Imperial Palace and Bill's Gamblin' Hall on the Strip. The former Barbary Coast would have been a prime spot for reintroducing the Horseshoe brand to Las Vegas, but exploiting the power of the Horseshoe name is one of many ideas that have fallen victim to Harrah's ADD-afflicted corporate style in the post-Phil Satre era.

From A(ztar) to Z(ilch)

Tue, 13 Jan 2009 16:05:00 -0700

If Tropicana Entertainment management's bankruptcy plan is accepted by the courts (one bond analyst thinks otherwise), former CEO/sole owner William J. Yung III will be left with -- what's the technical term? -- diddly squat. (So will his unsecured creditors, alas.)

Actually, he'll have less than nothing because he'll not only be forfeiting the remnants of his Aztar Corp. acquisition but also six TropEnt properties whose purchase predated the ill-starred Aztar buy. A portfolio cobbled together in bits and pieces over several years will be gone with the thwack of a gavel.

In which case, it will essentially close the book on The Worst Casino Acquisition of All Time, Bar None. Since Yung swung the Aztar deal by cross-collateralizing his motley fleet of casinos and riverboats, losing the Tropicana Atlantic City meant putting the whole kit 'n kaboodle up for grabs. Yung's dismissive attitude toward New Jersey casino regulations came with a $2.8 billion price tag.

Lighthouse Point: Last voyage departs soon.

I was going to write that no one in the casino industry will miss Yung, but he still owns the odd non-Trop casino, like the Westin Casuarina. So he's not going anywhere anytime soon.

The plan being for the secured creditors to roll their debt into TropEnt equity, one can see why CEO Scott Butera was at pains to complicate, stymie and/or outright thwart various asset sales initiated either by Yung or the New Jersey Casino Control Commission. As a Jan. 2, 2008 Morgan Joseph report pointed out, casino companies sell for higher cash flow multiples when peddled en masse, not piecemeal. For instance, Yung paid a whopping 11.3X EBITDA for Aztar, as compared to the 8.4X he plunked down for a Penn National castoff, the Belle of Baton Rouge.

So maybe Butera really thought he could land a higher price for Casino Aztar than Eldorado Resorts was offering or perhaps he just wanted to queer the deal that was on the table. Either way, the endgame was the same: more money. Since his plan hinges partly on regaining control of cash cow A.C. Trop and Casino Aztar, neither of which is a given (and one of which is exceptionally unlikely), TropEnt is still a long ways from being out of the woods.

Tropicana Las Vegas: Same this year, same next year, same in 2013.

Thinking positively, if Butera can't -- as seems inevitable -- get the Boardwalk property back, he can redirect money planned for Atlantic City upgrades into that eternally deferred Tropicana Las Vegas facelift. There's a case to be made, if not much of a case, for New Jersey to brush aside the $550 million offered by Cordish Co. for the A.C. Trop -- particularly if Butera were bound to the same conditions the Division of Gaming Enforcement recommended imposing on Yung 14 months ago: a one-year probationary license and a 26-point set of benchmarks.

But the Garden State is so revenue-parched that it's unimaginable it will tell Cordish to keep its money. And whatever tenuous faith the NJCCC might have in Butera won't necessarily be bolstered by his turnaround plan. The document makes some concrete promises (including $153 million in A.C. Trop upgrades), and its property- and market-growth projections are mostly conservative. For instance, Butera clearly harbors no illusions about the difficulties ahead in Baton Rouge, where Pinnacle Entertainment has a new riverboat coming over the horizon. God bless him, he's an optimist, though: Who else would postulate five straight years of single-digit revenue growth in Atlantic City?

But Butera's strategy posits revenue growth within the context of relatively flat operating and maintenance budgets. Some outright reductions, at least, can be attributed to the cessation of operations at Lighthouse Point in 2009 and Horizon Tahoe two years later. Were it not for that, Butera's numbers would look like something out of the Bill Yung playbook. In fact, certain of the promised reforms, like "Optimize [read: "tighten"] ... slot hold," centralized corporate purchasing and "utilizing third parties for certain services" are purest Yung. Others, such as a Nevada-wide loyalty-card program, appear to be new. (But why stop at Nevada?)

As for a reinvention of the Vegas Trop, don't expect anything before 2014, at the earliest. Likewise, the overdue replacement of Casino Aztar just isn't in the budget. It's a lean regimen for grim times, but give Butera this: He's not spending money he doesn't have and now the creditors to whom he is answerable will be literally invested in improving TropEnt's performance ... if they hope to see their money again.

A house divided

Wed, 07 Jan 2009 11:54:00 -0700

Give credit where it's due to the Las Vegas Review-Journal for today's interesting revelation that Columbia Sussex had been running the Las Vegas Tropicana with rival GMs overseeing the casino and hotel operations, respectively. This appears to confirm rumors I'd heard that ColSux likes to 'silo' the gambling and lodging aspects of its casino-hotels into separate profit centers which compete against each other instead of operating symbiotically.

With corporate thinking like that, it's no wonder that even Global Gaming Business Editor Roger Gros said, at G2E, that ColSux "didn't understand the [casino] industry." A newspaper interview with Casino Aztar interim skipper Tom Dingman details the decimation that took place there on ColSux's watch. Given how rundown the Casino Aztar infrastructure was when Dingman arrived, his ability to turn around business there is all the more impressive. Whoever succeeds Dingman shouldn't tinker with his business model, as it's proven to be an indisputable success.

Further down in the same assemblage of news briefs is the announcement of Brooke Dunn's New Years Eve resignation from Shuffle Master. The former Shuffle Master senior VP has been under a cloud ever since the SEC recommended civil prosecution against him for allegedly passing privileged information to an unrelated third party. Dunn's resignation was sadly inevitable, as he can neither fuufill his job responsibilities nor be entrusted with sensitive information as long as the SEC's accusations hang over his head.

Also out the door is the Ameristar Casinos Chief Accounting Officer Thomas Malone "who has resigned to pursue other opportunities," such as the opportunity of not having the doorknob hit you in the butt. Former Progressive Gaming CFO Heather Rollo replaces Malone. Given the performance of its casinos despite the recession, Ameristar has been unaccountably jittery of late, with Malone's abrupt departure being merely the latest tremor.

Update: Yet another executive who is choosing to "pursue other interests," like updating his resumé, is Tropicana Entertainment CFO Robert Kocienski. After a brief tenure in the job, he's been shown the door in favor of ex-Shuffle Master CFO Richard Baldwin, a long-tenured slot industry executive. Combine this with the hiring of Ron Thacker to run the LV Trop and it's one ex-Cosmopolitan executive in, one out. So I guess they can put that big Cosmo Class of '08 reunion on hold.

What'$ in a name?

Wed, 10 Dec 2008 14:59:00 -0700

A reader recently enquired as to what became of the plan to re-name Harrah's Entertainment as Caesars Entertainment. When I asked Harrah's as to whether that was still on, no response was forthcoming.

My questioner wanted to know, "Do you think Harrah's shelved the plan to rename the company to Caesars partly because they might like to sell Caesars if the price were high enough ... Does going up market with the company image become a hindrance in these tough times?"

Second question first: This is actually a great time to be a casino patron, provided you've got a modicum of discretionary income. I was working on next year's iteration of the Pocketbook of Values today and the offers for 2009 are much better, IMO. Also, we've been seeing a barrage of bargain-oriented marketing messages from MGM Mirage, "freecations" at Herbst Gaming's Primm Valley trio of casino-hotels, plus a Harrah's Las Vegas promo for its comedy club that -- after you factored in the value of Improv tickets and buffet admission -- actually paid customers to stay there, to the tune of $1.50/person. (Some will argue that Harrah's should pay people to stay at its titular Las Vegas property.)

So, yeah, unless you're Steve Wynn, a "snob appeal" message doesn't have much traction these days. The people who can afford a high-end Vegas experience are already here; it's the other demographics we have to worry about. Even Las Vegas Sands -- hardly the image of a consumer-oriented company -- is expanding its loyalty program (Club Grazie) beyond a casino-only proposition. Expenses charged to your Palazzo or Venetian room will now earn points as well.

As to the greater fungibility of the Caesars name if it's only attached to single properties and not the whole company ... absolutely. Who'd want to buy a spun-off Caesars Atlantic City, say, if you had to forfeit or sub-license the Caesars brand? Putting any Harrah's-to-Caesars plan on hold avoids all manner of red tape and legal rigamarole, as well as keeping the option open of unloading those lucratively branded Caesars properties.

Of course, given that a strategy at Harrah's these days has the lifespan of a soap bubble, who knows if that just another of CEO Gary Loveman's will o' the wisp ideas, flung out for public consumption, then quickly forgotten. Indeed, to speak of "strategy" in the same sentence as "Harrah's" is oxymoronic, as the company doesn't evince any -- unless flailing about in every direction like a spastic octopus constitutes "strategy."

Which brought to mind another Loveman idea, mooted and apparently discarded, that of concentrating Harrah's around three brands (Caesars, Harrah's and Horseshoe), which would be designated as its "core" brands. It currently carries 11 on its masthead and has several others. Re-branding Bally's Las Vegas as a Horsehoe was floated -- though mostly razzed -- and Harrah's squandered a capital opportunity to bring the Horseshoe name back to Vegas when it redubbed the Barbary Coast with the generic "Bill's" brand.

An effort to maximize the Caesars brand moved but in fits and starts. So far it's consisted of taking it off the Glory of Rome riverboat casino in Indiana and putting it onto the former Casino Windsor, in Ontario. Harrah's Jacqueline Peterson says, "I can't put a price tag on how much it costs because so much more went into these properties than just marquee and business card changes ... there were new spaces created and upgrades made throughout."

Asked about the "core brand" concept, she was understandably flummoxed. "We have no intention of becoming three brands and we need look no further than Las Vegas to understand why that wouldn't work[:] we have eight distinctive properties here and renaming those into just three names would be silly and really confusing for customers." Of course, during the five minutes that the Harrah's/Caesars/Horseshoe-centric strategy lasted, it was thought that Imperial Palace wasn't long for this world (this was back in 2005, remember) and the Barbary Coast was still firmly within the Boyd Gaming orbit.

If Loveman has more brands than his company can exploit, he's neither alone nor the first. What used to be Caesars Entertainment (née Park Place Entertainment) went through three CEOs without ever cracking that particular nut.

So, is the Caesars brand up for grabs? I'd be very much surprised if it weren't, although that would be one of the most extreme measures Harrah's could take in order to lighten its colossal debt burden.

Indiana: It's all relative

Tue, 11 Nov 2008 13:07:00 -0700

Sifting through my massive pile of unwritten Questions of the Day and unstudied analyst reports, we come to Indiana's October revenues. Ultimately, whether any particular metric is good or bad depends on context and perspective.

To start with the big number, revenue was up 14% from October '07. But that turned into a 1% decline once new racinos Hoosier Park and Indiana Park were sifted out, and goes even lower if you minimize the numbers from the recently augmented Horseshoe Hammond. So, whatever "bounce" Indiana is getting from the smoking ban in Illinois, it's being diluted by gambling expansion within the Hoosier State. So it's good for tax coffers, not so good for individual operators.

Harrah's killed with Horseshoe Hammond, which is more like an aircraft carrier with slots than a casino. But it proved a potent "one-ship task force" (a sometimes sacrcastic nickname given the U.S.S. Boise after it claimed to have sunk six Japanese ships at the Battle of Cape Esperance), more than making up for declines at Horseshoe Southern Indiana. Hammond revenues went up 52% and Harrah's overall take rose 20%.

Despite the panicky attitudes manifested of late at Ameristar Casinos, its East Chicago property was off but 3.5%, despite the Horseshoe Hammond factor, which ate far worse into Don Barden's Gary, Ind., flotilla.

What to make of Blue Chip? To see the glass as half-full, the double-digit revenue declines that began in August '07 are slowly starting to narrow. Business has been off as much as $10 million year/year, and October's 18% decline comes atop a 22% declivity the year before. But it looks like Blue Chip is going to bottom out at 60%-65% of its former market share. And it was Indiana's seventh-winningest casino in October, keeping Boyd Gaming out of the bottom tier.

Down south, only Casino Aztar showed revenue growth (5%), which continues to validate current management's aggressive mindset -- but business still hasn't returned to pre-Columbia Sussex levels. As for French Lick, so long hyped as a casino destination, so greatly anticipated, it has proven Indiana's most disappointing market. It's the least-lucrative in the state and continues to give indications of having peaked.

Slots are tight at Belterra. How else to explain a 10% win increase on -14% handle? The last time somebody managed a feat like that He fed a large crowd with but a few loaves and fishes.

Aztar sale flops

Fri, 07 Nov 2008 15:25:00 -0700

Tropicana Entertainment President Scott Butera had a $225 million deal to sell Casino Aztar in hand. Not good enough, he said. Thus, a second round of bids was solicited. The grand total number of offers received: one.

This lays the groundwork for Butera to do what I think he's been meaning to do all along: Declare the lone bid inadequate (maybe even a "fire sale"), much like the previous Eldorado Resorts deal he's trying to vacate. The next step would be to petition the State of Indiana to be allowed to resume control of Casino Aztar.

Whether the state plays ball is another matter. Evansville's mayor, Jonathan Weinzapfel told WEHT-TV he "looks forward to a new owner." Maybe my English is rusty, but that sure sounds like he wants no part of TropEnt, even in its post-William J. Yung III incarnation. Having been singed aplenty ever since the Aztar Corp. sale went through, Weinzapfel's "once burned, twice shy" frostiness is quite understandable. Butera's persuasive skills are going to be tested in the weeks ahead.

Having also scuttled the sale of Horizon Vicksburg, Butera's plan is obviously to reconstitute TropEnt at full strength (including the Atlantic City Tropicana). Not only would this increase the potential for cross-marketing the merged Columbia Sussex/Aztar portfolio to consumers, it's undoubtedly crossed Butera's mind that TropEnt is a much better resale proposition if kept intact ... not peddled off piece by little piece, as Yung was doing.

Casino Vote '08: Dan Lee's the big winner

Wed, 05 Nov 2008 16:36:00 -0700

JP Morgan has proclaimed Pinnacle Entertainment "the biggest winner this election day." By voting to both lift the cap on buy-ins and the close Missouri to additional casinos, Show-Me State voters delivered a gift to Pinnacle CEO Dan Lee, who has massively invested in the greater St. Louis market and can now reap the benefits of higher wagers and artificially limited competition. Anybody contemplating the investment risk that Pinnacle has been lately (with at least $2.85 billion in outstanding projects) can sleep a little more soundly tonight.

But, as Morgan analysts point out, the stomping of a pro-casino initiative in Ohio redounds to the benefit of Pinnacle's Belterra casino (and Penn National's Argosy Lawrenceburg riverboat). While the Ohio vote reflects a certain amount of anti-casino sentiment, this was one of those ballot measures where the devil was in the details. It polled well in the immediate region, which has been hard-hit with job losses (5,000 of which casino backers promised to replace) but it was "no sale" upstate. An otherwise leftward-trending electorate was unpersuaded.

Specifically, there was a "trap door" in the enabling language that might have let Lakes Entertainment slip its tax obligations if tribal casinos open in the Buckeye State (a long shot, but one voters weren't willing to hazard), not to mention that the casino was to be allowed to operate with scant oversight. Oh, and the license fee ($15 million) wasn't chicken feed, but it's considerably less than what casinos are ponying up elsewhere -- like Kansas -- where no monopolies are promised. The face-saving spin was that "misleading ads" were to blame -- like that's anything new in politics.

Details were the bane in Maine, too, where Olympia Gaming found itself on the losing end of a casino plebiscite. Maine voters have taken a go-slow approach to casino expansion in their state, also voting down a racino at Scarborough Downs. There also seems to have been some "payback" involved -- from Down Easters who had seen their own casino aspirations crushed five years ago. If they couldn't have a casino, those upstart resort communities were going to be SOL, too. So there!

Pat LaMarche expresses her considered opinion of Maine's electoral process.

Lowering the legal gambing age to 19 stuck in voters' craw, as did certain other special privileges which were to be extended to the Oxford County casino and to Gary Goett's Olympia. Project booster Pat LaMarche sniffed that folks in Maine were "very unfriendly" and says she's going to take her ball and LaMarche right next door to New Hampshire.

On the other hand, LaMarche is the bete noire of intolerant religious wack jobs, so that's something in her favor.

Having a win/win day, was also the good fortune of Ameristar Casinos, which will see some relief in Colorado, in addition to prevailing in Missouri. In return for helping the state's community-college system, Colorado casinos get some new goodies that -- we hope -- will ameliorate the effects of the state's smoking ban.

It's a mixed bag, albeit more positive than negative, for Penn National. It headed off the Ohio threat but finds its flagship property in West Virginia facing competitive pressure not only from Pennsylvania but soon from Maryland, even though the latter's ramp-up is roughly four years away. Penn astutely protected its flank by optioning strategically placed real estate near Baltimore, in its first move after its LBO imploded last summer.

(Amusingly, both sides in the Maryland fight used President-elect Obama as a "product placement" in their literature. They knew a good "branding opportunity" when they saw one.)

Hopefully the Maryland Lege will revisit (read: reduce) the confiscatory 67% tax rate. Otherwise, brace yourself for Ye Olde Shack O'Slots, as no sane businessman would invest heavily in a casino with such a narrow operating margin. By establishing a Maryland beachhead, Penn is probably thinking more in terms of capturing "leakage" from its other nearby properties, not having visions of $$$ dancing in its head.

Former governor, sometime racino proponent and "Casino Jack" Abramoff beneficiary Robert Leroy "Bob" Ehrlich Jr. (R) hoped to "see us kill this turkey," but that sounds like sour grapes from the one-term blunder, er, wonder. Gov. Martin O'Malley (D) moved the ball across the goal line with 59% support, whereas Ehrlich couldn't get it upfield in four tries -- even in the post-9/11 economy. It may nearly be Thanksgiving but the only turkey in sight is Ehrlich (or is that a thinly disguised Steve Carell?)

Speaking of "Casino Jack", add him to the "losers" column of our S&G "Winners & Losers" with a capital "L." From the jailhouse, convicted felon Abramoff tried to 'Swift Boat' his archnemesis, John McCain, but the effort sank without leaving the pier. What a schlemil.

Loose change: Voters also gave their assent to a lottery in Arkansas and expanded table games at Greenbrier Resort in West Virginia. So I'd score that as two lost battles (Ohio, Maine), one decisive victory (Maryland) and incremental wins in four other skirmishes.

On balance, a good day.

Missouri amendment to pass: JP Morgan

Mon, 03 Nov 2008 13:36:00 -0700

Analysts at JP Morgan like the chances for a Missouri constitutional amendment largely bankrolled by Ameristar Casinos and Pinnacle Entertainment. While Ameristar stands to benefit in tangible ways, JP Morgan focuses on what it could for Pinnacle: a 15% increase in Lumiere Place cash flow and perhaps another $2 per share (at $5.41 as of this moment).

Other takeaways from today's investor note: 1) Lake Charles, La., which Pinnacle dominates, looks good to buck the national trend and keep growing its casino revenue; 2) the heretofore disappointing Lumiere Place is at "an inflection point" in which its Four Seasons hotel starts to become a contributor instead of "a drag on earings"; 3) Pinnacle is holding its ground, at Belterra, better than most of its southern Indiana competitors -- Penn National's Argosy Lawrenceburg in particular.

There's still the matter of the $600 million River City project in suburban St. Louis and Pinnacle's stymied Atlantic City megaresort. Pinnacle appears to have let spending get pretty exuberant (only in its $250 million Baton Rouge riverboat casino do budget and market really seem to square up), so it'd premature for CEO Dan Lee to take any victory laps -- not that it would be in his nature.

Update: Only in the convoluted logic of the Las Vegas Review-Journal would a constitutional amendment that bars new casinos from Missouri be blithlely described as "Gaming expansion." So, if Ohio voters approve Lakes Entertainment's proposed casino, will that be "gaming contraction"?

Just as I suspected ...

Wed, 27 Aug 2008 11:10:00 -0700

... and tried to imply the other day, we have two conflicting agendas in the ixnayed Casino Aztar sale. One is that of the creditors, who think the boat can fetch a higher price than the $220 million for which Columbia Sussex CEO William J. Yung III had to settle. (You will recall that prospective buyers were distinctly thin on the ground at the time.)

They're walking a tightrope, as they don't want to alienate putative buyer Eldorado Resorts and, should Eldorado walk (having already been told its money's not good enough) they don't want to be stampeded into a fire sale before Sept. 28. That's when disposition of the vessel passes into the hands of the State of Indiana.

The other endgame, as I tried to hint earlier, is that of Tropicana Entertainment CEO Scott Butera. He, creditors fear, may be trying to hang onto Casino Aztar by putting it back on the market and then saying -- as was already bruited in the Wall Street Journal -- that no offer is good enough, so TropEnt is keeping it. Which means creditors, instead of getting hundreds of millions of dollars now, would be asked to settle for a dribble of cash over the long haul. Butera seems able to charm the birds off the trees, but that might be a tough sell, even for him.

(The Evansville Courier Press story comes with a helpful timeline. Note the succession of three general managers in 14 months -- a period in which Casino Aztar's revenues sank lower and lower and lower, only beginning to rise again in May.)

Then again, the would-be casino titan whose company managed to lose $1 billion-plus in a year still has his fans. Raves Courier Press reader lmajors_koch, "[Bill] Yung is the smartest man alive!!!! He's going to end up keeping Casino Aztar before this is all over with. You guys just watch."

Yeah, we will.

On the other hand ...

Mon, 25 Aug 2008 18:01:00 -0700

... if Illinois casinos are sucking wind (which they are), why hasn't this redounded more to the benefit of neighboring states? For instance, it looks like Indiana had a good July, but once you back out two new racinos, a 2% gain turns into an -11% retreat from last year's numbers.

And the northern Indiana boats ought to be doing better, even if Horseshoe Hammond's revenues (-18%) were depressed by a temporary closure and Boyd Gaming's beleagured Blue Chip (-40%) is a drag anchor on the regional average. Still, a -15.5% year/year comparison -- even with those two factors taken into consideration -- doesn't suggest floods of nicotene-deprived gamblers storming the gangways.

Only Majestic Star, of all unlikely vessels, had a revenue-positive July. Year to date, Ameristar Casinos is doing the best of any single company, which makes its recent decision to run up the white flag and sack 244 employees, fretful over a newly expanded Horseshoe Hammond, look doubly defeatist. Current Ameristar management just doesn't look like they're in it for the long haul (read "not cut out for it" or "lack the stomach for it").

A change of brand, to Horseshoe, isn't doing the trick -- yet -- for Harrah's Entertainment's Glory of Rome. The glamorously named Horseshoe Southern Indiana (formerly Caesars Indiana) is the only casino in the Hoosier State's southern reaches to post negative revenue comparisons for every month of 2008. The others either swing like weathervanes or, in the case of Casino Aztar, improved dramatically with a change in management.

If French Lick isn't licked, it appears to have crested. The turnaround at Casino Aztar (currently under state trusteeship) blunted its revenue growth, as did the debut of the Indiana Live and Hoosier Park racinos. Until the economy improves, it looks like it's maxed-out at $8.5 million-$9 million per month.

Missouri is another puzzle, down 3% once the effects of Pinnacle Entertainment's nascent Lumiere Place are subtracted. The St. Louis market, closest to Illinois, was -8%, while Kansas City -- the market with the least to gain from Illinois' troubles -- was up 2%. Go figure.

All companies except Harrah's had a revenue-positive July, even Isle of Capri Casinos. Harrah's lost market share in St. Louis and Kansas City, and Ameristar gained in both markets. (See previous comments about unwarrantedly panicky Ameristar execs.)

And see them again once we note that Ameristar had the best July of any publicly traded company in Iowa, +3%. (Harrah's and Penn were flat, Isle down almost 6%.) Ameristar had the third-highest performing casino in the market, trailing Harrah's Horseshoe-branded racino and the Prairie Meadows track. A good month at the tracks offset a flat one on the riverboat, making Iowa revenue-positive for the month.

This was the first full month of year-over-year comparisons for Isle's newest casino, in Waterloo, which was down over 13%. Wow. The bloom went off that rose fast. The previous Isle regime's business model of growing revenues by opening more and more casinos is well and truly out of gas.

Isle's Bettendorf casino, however, was the only one of the company's quartet of Hawkeye State riverboats to increase revenue in July. Could it be ... the Illinois smoking ban coming into play? I'm going to opt for Occam's Razor and say, "Yes."

Trop to Eldorado: "Never mind"

Mon, 25 Aug 2008 11:26:00 -0700

In the strongest sign to date that company owner William J. Yung III has been banished to the doghouse, Tropicana Entertainment formally reneged on its sale of Casino Aztar to Reno-based Eldorado Resorts. The latter could walk away with as much as $7.1 million for its troubles, but appears determined to enforce the sale. Tropicana, meanwhile, already has its bankers out beating the bushes for prospective buyers.

“We are committed to obtaining maximum value for our assets and doing what is right for all of our constituents,” declared Trop CEO Scott Butera, sounding for all the world like ornery debtholders have him at knife point. If they're convinced they can get more for the asset than the $220 million that Eldorado offered, they may right. After a full year of mostly horrendous year/year comparisons (as much as -19.5% at one point), Casino Aztar has been the only Indiana casino to post three straight months of year/year growth ... an improvement that occurred not long after Yung's people were shown the door in favor of trustee Robert Dingman. Coincidence? I think not.

Eldorado's best hope probably lies in the Indiana Gaming Commission, which might still say "nyet" to Butera's proposed re-bidding, according to one report. It could also restart its own probe into the way Yung ran Casino Aztar, something that seems even more likely now that Butera is making noises about Tropicana hanging onto the boat (which appears to be the endgame). Butera's considerable skills of persuasion will get a good workout as he tries to steer Casino Aztar past that shoal.

Vote of (limited) confidence. In this morning's news roundup from JP Morgan, analyst Joseph Greff notes a hiccup from the Kansas Lottery Gaming Facility Review Board that connotes fears about belt-tightening at Harrah's Entertainment. The company "was informed by the attorney for the board that it would be in default of its contract if it did not build the $560 million contract in full, including a development of a retail shopping area with hotels/residences."

Hmmmm ... Harrah's and the State of Kansas have just gotten hitched and we're already hearing the rustle of divorce papers. As the saying goes, even a majority of one vote is a mandate of sorts, but this goes a long way toward explaining why Harrah's wasn't a prohibitive favorite, winning its bid by a margin of 4-3.

Trop sale stumbles forward ... sorta

Mon, 18 Aug 2008 12:42:00 -0700

If Justice Gary Stein, the state-appointed trustee for the Atlantic City Tropicana Casino & Resort, isn't the most inept public servant in America, it's not for lack of effort. Add nepotism to his string of failings, as his ever-less-credible pronouncements now emerge from the mouth of his son, Martin Stein, a lawyer who has apparently joined Dear Old Dad at the public trough.

The Steins' latest bit of boobery involves not re-starting the bidding process for the Trop until sometime (as yet unspecified) after Labor Day and then having it wrapped up on Oct. 16, six weeks later. Their excuse for this foreshortened timetable is that advisers Moelis & Co. are "just beginning their work," even though they've been on the payroll for over a month and a half. I'm not necessarily saying the Stein-supervised process is slow, but I've seen glaciers that moved faster.

The Steins also continue to evince boundless optimism that they're going to get better offers the second time through the process. Considering that Atlantic City's revenue numbers have continued to weaken and the economy has not improved, I'd sure like a sniff of whatever "happy dust" they've been inhaling. Of course, the blame ultimately redounds to the New Jersey Casino Control Commission for appointing Justice Stein to perform a task for which he has proven, by all outward appearances, manifestly ill-equipped.

On other Trop-related fronts, the prospect that Tropicana Entertainment may renege on its sale of Casino Aztar is stirring up alarm in Evansville, Ind. As revenues predictably plummeted under the slash-and-burn regime of Columbia Sussex (TropEnt's parent), so did Evansville's revenue share: -27% the first year, with incremental decreases projected through 2009.

There's no guarantee Eldorado Resorts will reverse the slide, but this may be one case where the devil you don't know is distinctly preferable to the one you do. ColSux is playing with fire, too, because a nixed sale could (and probably would) re-start Indiana's investigation into its operation of Casino Aztar, an investigation that was forestalled only by the Eldorado deal.

Would you buy a used casino from this man?

What do you call a casino exec who loses $1 billion in a single year? Columbia Sussex CEO William J. Yung III, that's what. (Also "sucker".) Yung's also suffered the public indignity of having himself and his properties dissed by rival CEOs Gary Loveman, Penn National's Peter Carlino and Pinnacle Entertainment's Dan Lee, not to mention the private one of having other Atlantic City casino operators quietly encourage Unite-HERE in its get-Yung-out-of-town campaign. Clearly, the man had a facility for making enemies in the industry.

In today's Las Vegas Sun, Liz Benston takes a look back at Yung's Aztar Corp. acquisition, a deal so expensive and so elaborately collateralized (not to mention one that put a walloping financial burden on a grab-bag of second- and third-tier casinos) it was all but predestined to fail. Unfortunately, Benston buys into some of Tropicana President Scott Butera's revisionist history, particularly his fish story to the effect that: "When the economic decline began to hurt earnings, Yung was forced to make cuts that eventually proved counterproductive."

That's a face-saving spin Butera has been shopping around since he took the Trop job but the fact is Yung's Aztar purchase was in some respects predicated on making those cuts. They were part of his "road show" presentation to would-be financiers (despite representations to the contrary to New Jersey regulators) and he even hinted broadly at what was coming in a Casino Enterprise Management interview where he talked about making hotel maids do double-duty on the casino floor. The ColSux supremo had to promise savage payroll and personnel reductions if he was to persuade investors he could make this turkey fly -- and now he's got a slew of age-discrimination suits to show for it.

And let's not forget that while Yung no longer has a title or a board seat at Tropicana Entertainment, he's its sole shareholder, the power behind Butera's throne. Until this spectacularly maladroit casino operator liquidates the last of his TropEnt shares, presumably in a debt-for-equity swap, his bad karma will continue to dog the Tropicana and Aztar brands.

Casino CEO disses own games. "They're boring." Yes, that's really what Trump Entertainment Resorts CEO Mark Juliano said about the very sort of electronic table games he installed at Trump Plaza. Combine this with the imminent demise of live dealers at Excalibur's poker room and you've got the beginnings of a trend in the major resorts that appears both inevitable and discouraging.

More bankruptcies predicted

Tue, 12 Aug 2008 12:26:00 -0700

Financial Week weighs in the casino industry's current doldrums, amplifying the newly recurrent refrain that the revenue diversification which we thought would shield Las Vegas and other destination markets from the bad times is instead increasing its exposure to same. A gentleman over at RateVegas.com/blog was asking why Boyd Gaming said Echelon didn't "make sense" without its retail-mall and boutique-hotel components.

I was a bit stumped for an answer. Aesthetically, Echelon might have looked lopsided if it had opened without those amenities. But, with a bit more foresight, Boyd might have advisedly split the project into phases and mothballed the more troubled southern half before any significant work was done. (Sort of the way Sheldon Adelson once planned to launch successive "Venetian" and "Lido" resorts -- a plan that came a-cropper betwixt the Venetian's craptacular opening, the '01 recession and the post-9/11 blight.)

Such a bifurcation of Echelon would have left the core of the project, including the casino and the Anschutz Entertainment Group-steered concert hall, intact. Hugh Jackson's previously-cited analysis that Boyd got caught up in emulating CityCenter and consequently bit off more than it could chew seems especially pertinent to this aspect of Echelon's freeze. Or, as my Mom used to tell me at the buffet line, "Your eyes are bigger than your stomach."

Of course, we don't have access to whatever financial models Boyd used to determine that the mall, and the Mondrian and Delano hotels planned by attention-deficient Morgans Hotel Group were essential to project's fiscal health. Morgans' contribution can't have been that integral, seeing as Boyd stated publicly that it wasn't necessary that Mondrian and Delano open alongside the rest of Echelon. (Of course, that was back when there was still a slim hope that Morgans could raise the money, so positive thinking was the order of the day.)

Boyd ultimately made the right call and is, again, to be congratulated for going through with what could have been a humiliating decision. I just can't help wondering if coming to that realization sooner might have meant keep at least part of Echelon moving forward for the time being.

Does this look like a $5 billion project to you?

Further down in the Financial Week piece, it forecasts bankruptices for Indiana's usual market laggard, French Lick Resort & Casino, and for Herbst Gaming, which has missed two interest payments. (News that got little, if any, play around here.) Meanwhile, Elad Properties and IDB Group must know something we don't, because they've got their Plaza project budgeted at $4.75 billion-$6.75 billion, once land costs are backed out.

Whatever crystal ball they're using, some folks in Las Vegas would like to borrow it, probably starting with Jim Murren. After all, Moody's is predicting we're going to have endure another year of this slump before the good times return.

Knee-jerk Journalism 101. Our local papers don't usually make it a practice to deride the very conventioneers upon whose patronage we're so reliant. However, exceptions are annually made for the people attending the porn-industry show and the ones who turn out for the Star Trek Convention at the Las Vegas Hilton.

Hence the Las Vegas Sun is treating us to the obligatory "Let's make fun of these strange Trekkies" story. What really puzzles me is that a story about a concert that took place on Saturday didn't run until Tuesday morning. Evidently the rapid-response capabilities of a Web-based business model are as nothing when pitted against human indolence.

Update: The Las Vegas Review-Journal's Doug Elfman shows how this kind of story can and should be done. Bravo, Mr. Elfman.

Case Bets: MGM Mirage, Ameristar, Penn Nat'l

Tue, 05 Aug 2008 11:20:00 -0700

It almost goes without saying right now that any earnings report is going to come in slightly below Wall Street's consensus. That's just the way the dice are bouncing these days. Such is the case with MGM Mirage, where Strip revenues are down 6% year/year, but JP Morgan finds some pleasant surprises in the Beau Rivage and MGM Grand Detroit numbers.

The Strip results also bear out what Majestic Research has been diligently reporting all along -- a separation between MGM's highest-tier properties, Bellagio and Mandalay Bay, which continue to ascend to the top (+14.4% at M'Bay) while the others lag, "especially the lower end." MGM's buyout of Mandalay Resort Group looked better on paper than the Harrah's Entertainment/Caesars Entertainment one because MGM's risk was spread between all price categories, including the bargain niche. Who could have foreseen this turn of events?

But there are glimmers of light at the end of the tunnel, particularly with regard to convention bookings. Also, CityCenter looks to be $1.65 billion closer to closing that $3 billion gap in its financing.

Ameristar cutting comps. It's hardly "death spiral marketing," but Ameristar Casinos' response to a below-expectations earnings report is to start whacking away at comps, "as they now believe incremental revenue growth via promotional expenses is no longer prudent." Expect to start feeling it this summer and even more so in Oct.-Dec., eventually returning to '07 levels. A big springtime promotional push (+30%) didn't produce significantly improved results, hence the rollback.

Still, with Harrah's rolling out a gargantuan new, $550 million riverboat in the Hammond, Ind., market this hardly seems the time for Ameristar to be playing possum, raising again the question of whether the fellows at the top are in it for the long haul. Also, Ameristar is holding the line (in terms of revenue, less so in cash flow) pretty well in all its markets except Black Hawk, Colo. (-10%), so why the apparent defeatism? The company was sufficiently aggressive to make capital improvements to several of its flagship properties. Ergo, the sudden volte-face comes as a surprise.

Management also says that $20 million in payroll, in the form of 394 jobs, has walked the plank. The brunt of the cuts fell upon Ameristar's East Chicago boat, yet another move that seems to wave the white flag. Heck, if you went by the Ameristar Web site, you'd be forgiven for thinking that property doesn't even exist.

A hotel tower in Black Hawk has also been moved to the back burner, but the Colorado market's future is so clouded that Ameristar's decision is prudence, pure and simple. While revenue and profit expectations have been revised downwards, increases of 3% and 11% respectively are expected next year.

JP Morgan analysts are also bullish on the stock because, as they note, Penn National has "dry powder" in the form of as much as $1.475 billion in breakup fees from its aborted LBO. The expectation that Penn has Ameristar in its sights "will likely drive ASCA higher as investors speculate on a potential transaction."

Speaking of Penn ...

Less room at the top. With former Harrah's COO Tim Wilmott aboard as president/COO of Penn, that left Leonard De Angelo, the company's executive VP of ops, on the outside looking in. Wilmott was quite a catch for Penn after he left Harrah's as part of an executive exodus. But it seems that, in order to give Wilmott a portfolio commensurate with his stature, De Angelo was rendered rendundant. Been there, done that. Mr. De Angelo, you have my sincere sympathies.

The Ameristar war begins

Thu, 17 Jul 2008 18:49:00 -0700

Just a quick hit on my way out the door to spend an evening prepping for The Dark Knight by watching Batman Begins ...

Ameristar's in play. No news flash there and, for the life of me, I can't figure out why the Motley Fool thinks MGM Mirage will be the ultimate acquirer. The company doesn't seem particularly interested in regional markets these days and has been pulling back from some of them -- the same outstate-Nevada kinds in which Ameristar currently operates.

On the other hand, as the article points out Crown Ltd. has $5 billion burning a hole in its pocket after the Las Vegas Tower deal went limp. I don't know offhand what the seven-times-cash flow number for Ameristar is, but $5 billion should cover it with room to spare. The Fool lays out a compelling case for how Crown could use Ameristar's properties to funnel customers to Fontainebleau -- much as Harrah's Entertainment did with The Rio, back in the Phil Satre era.

Then again, there's Penn National, which has about $500 million in mad money (after stock buybacks) right now, thanks to the breakup fee from its busted IPO. With another $775 million promised to Penn, it ought to be able to ante up the acquisition fee without breaking a sweat. Ameristar's Missouri properties have been money-spinners and, as the Fool points out, the acquisition of the Ameristar brand would enhance Penn's persistent second-tier image. A combined Penn-Ameristar would give Pinnacle Entertainment a run for its money in St. Louis, and could regain ground being lost to MGM and Harrah's in the greater Chicago market.

Whoever loses needn't feel too bad. The Atlantic City Tropicana is still out there and debtors will probably force a sale of the rag-tag remnants of Columbia Sussex's casino 'empire.' With its market cap languishing around $837 million, Boyd Gaming looks vulnerable and if you're in a thrift-store mood, Isle of Capri's fallen to near-micro-cap status, at $157 million. Then again, you have to figure out how to turn around 'Pile of Debris.' So maybe it's not such a bargain after all.

Indiana: It sure could be worse

Tue, 08 Jul 2008 21:00:00 -0700

... because you could be Illinois, where June gambling revenues went into the toilet (-21%). Which isn't to say that Indiana's numbers look good only by comparison. In fact, the Hoosier State may be benefiting from the Land of Lincoln's misery. It's sort of a "Yes, but ..." situation.

Yes, Indiana would be a lot worse off (-12%) without two new racinos, Hoosier Park and Indiana Live. Their addition has kept gambling revenues virtually flat from June '07. And that's two flat months (as in variance of less than 1%) after eight months of declines. In terms of gross, Hoosier Park vaulted into the #5 spot, while Indiana Live checked in at #9.

Yes, northern Indiana initially looks like it got clobbered (-11.5%). But once you back out Boyd Gaming's Blue Chip riverboat -- which is something of a special case -- the picture improves considerably. All northern riverboats except Resort International's are down, but not on average as much as the southern Indiana riverboats.

All of which suggests that gamblers fleeing Illinois' new smoking ban are taking refuge aboard the northwest Indiana boats. Blue Chip, which is the closest one to the tribal Four Winds Casino Resort, across the Michigan state line, is really taking it on the chin: -39.7% in June. Boyd's struggles here -- and with its Florida parimutuel (which isn't even shown on the company's official Web site) -- make it tempting to call for retrenchment. But, in the case of Blue Chip, it's on pace for $190 million in revenue, which is scarcely chump change ... good enough for the #6 spot in statewide gross.

Dollarwise, Harrah's Entertainment's Horseshoe Hammond now enjoys the top spot, once the exclusive preserve of Penn National's Argosy Lawrenceburg. The latter, however, still has bragging rights to the largest slice of market share (just under 12%, according to the Indiana Gaming Commission) in the state.

Amongst the southern Indiana casinos, only Pinnacle Entertainment's Belterra enjoyed [sic] a single-digit decline in June, while almost everyone else suffered double-digit slumps.

The lone gainer was -- surprise! -- Columbia Sussex's Casino Aztar, up 2.5%. A recent, regulator-placating, promotion-friendly change of administration at Casino Aztar may be the X factor here, as the riverboat followed January-April declines with two months of gains ... the only casino in the state to post that pattern. (Resorts Int'l must really be onto something, what with five straight months of growth in the teeth of an adverse economy.)

Casino Aztar's gain appears to have been French Lick Casino's loss. The lowest-grossing casino in the state, its novelty factor may have worn off, as it's down by almost 25% in June. Then again, French Lick's numbers have been all over the place this year, so who knows? However, it was perceived as the primary competitive threat to Casino Aztar, a challenge that may now have been blunted. We'll see.

And can anybody tell me why two adjacent casino boats, owned by the same company (Don Barden's Majestic Star and Majestic Star II) can have such disparate results? One is off by 4% while the other is down 13%. Then again, who can explain anything Barden-related these days?

"Casino Bonds Crush Harrah's"

Tue, 03 Jun 2008 17:13:00 -0700

That's Bloomberg, bearing the dire news that casino junk-bond debt is "generating the worst return for investors as companies from ... Harrah's Entertainment Inc. to Herbst Gaming Inc. risk bankruptcy under the weight of their debt." With a return of 10%, casino junk bonds "are the biggest losers this year."

Who knew? "It was viewed very much as a safe haven," says one portfolio manager, referring to an industry long perceived as recession-proof -- a bubble that has burst this year. Aforesaid manager has seen his company take a bath on Donald Trump's casino debt, and is foreswearing taking on any Harrah's or Station Casinos bonds, given the size of their respective debt loads.

Other clunkers are identified as Columbia Sussex (whose debtholders want CEO William J. Yung III's head on a platter), Greektown Casino (scrambling to keep its license) and Herbst Gaming, which has received a "going concern" notice from Deloitte & Touche, and whose debt is plunging in value.

In the cases of Harrah's and Station, one of the rationales for privatization was that it would enable the companies to pursue new development at their own discretion, without having to answer to Wall Street. Instead, each is handcuffed. Given the evidence of market glut on Las Vegas' locals scene, maybe it's best for Station that there will be a four-year lull after Aliante Station opens. But it's a shame that the company's push into the Reno market -- one that could use new product of Station-level quality -- is now on indefinite hold.

$1 billion for the Trop? Although that nice, round number was floated by Larry Klatzkin recently, there's no evidence (yet) that the New Jersey Casino Control Commission has cracked the "B" mark in its attempts to re-sell the once-lucrative resort. And while Tropicana Entertainment co-President Scott Butera may scapegoat Garden State regulators for not getting a higher price point for the Trop, one analysis places the blame for the mammoth hotel-casino's reduced curb appeal on Columbia Sussex's reign of error, which cratered revenues at the property. That erratic interregnum certainly infuriated a veteran regulator, who takes a few swings at 'ColSux' on his way out the door, saying "They flunked Casino Management 101, as far as I'm concerned."

Third time's the charm. Two general managers fled Casino Aztar during Columbia Sussex's first year of ownership. Now a third has jumped ship ... but merely to another ColSux operation. Considering that Mike Jones was back in Lake Tahoe by the time the news broke, and that he used to be Bill Yung's GM of the MontBleu and Horizon casinos there, one's best guess would have to be that he's been putting in charge of turning those two around (especially the embattled Horizon), but I'll let you know for certain as soon as I do.

No official announcement has yet been made. (But you can find the settlement of the Columbia Sussex/Park Cattle litigation, posted under a rather odd link.)

Steve Friess continues to poll his readers on the coolest names in Vegas. Interestingly, nobody has yet voted for Ka, the narrative-driven Cirque du Soleil show directed by Robert LePage that even Cirque-skeptics like myself can enjoy. But apparently there is no "Ka" in "cool."

It reminds me of one of the most famous lines from Stargate SG-1 (in the episode, "The First Ones"), where we learn that the primitive race of Unas express their displeasure with vehement utterances of "Ka!", prompting the ever-patient Dr. Daniel Jackson to reply, "Now don't say 'ka!' until you've tried it."

Columbia Sussex quickies

Wed, 07 May 2008 15:59:00 -0700

Tropicana Entertainment Co-President Scott Butera has really been working the phones -- a salutary, welcome change from the truculence and stonewalling reporters came to expect from Columbia Sussex.

(Apparently Las Vegas Tropicana execs were among those left in the dark about the impending bankruptcy, even though the company was clearly ramping up for it well in advance. With a forbearance, a court date and a labor negotiation all impending between May 5-15, the timing of the Chapter 11 announcement looks less and less coincidental by the day.)

Butera tells GlobeSt,com, the company was caught in fiscal triple-pincer movement consisting of an economic downturn that curtail traveling and gambling (i.e., "an unprecedented drop in the debtors' revenue"), a plummeting real estate market (i.e., a dwindling asset base), and "dislocated" credit markets (i.e., nowhere from which to borrow more), all of which effectively increased the company's already high leverage.

But when he says that the higher leverage was responsible for the workforce reductions in Atlantic City (over 900 employees), that's just B.S. -- to put it very kindly. As documented by the New Jersey Casino Control Commission, a central point of CEO William J. Yung III's "road show" presentation to sell bonds that would finance his Aztar Corp. takeover was the elimination of $35 million or more in salaries (a plan carefully concealed from New Jersey regulators). He also didn't waste any time bringing out the chainsaw in Las Vegas, either -- long before any downturn in the leisure sector was evident.

Butera was also wrong when he said Columbia Sussex was forced to sell its Indiana riverboat. It could have fought the (probable) loss of its license. But if that course of action was contemplated, it wasn't for long, as Yung pledged to sell Casino Aztar to pay down debt immediately after his New Jersey license was yanked.

And, if you're a fan of irony, you'd have to enjoy Butera's description of the NJCCC as "arbitrary and capricious" -- the exact same words the NJCCC used to describe the decision-making process at Columbia Sussex. Coincidence? I think not.

According to GlobeSt.com's Brian K. Miller, the Atlantic City Trop sale can't close escrow until Columbia Sussex's appeal runs its course. The latter's case may have merit (especially if employs some of the arguments UNLV's David Schwartz has propounded in the pages of the Las Vegas Business Press and his DieIsCast.com blog -- now sporting a new design).

But if "Attila the Yung" wins, God help the poor Trop employees -- and customers. Yung: The Sequel could give new meaning to "back with a vengeance."

The bottom line of Butera's ongoing saga of spin, spin, spin is that the blame for this debacle never, ever rests with Columbia Sussex or Bill Yung. It's always those Family Circus poltergeists "Ida Know" and "Not Me" who are culpable.

Unimpressed with Butera's analysis is Tom Weston, who argues that the Trop co-president's analysis is pretty much ass-backwards. Money quote: "But the truth is that Columbia-Sussex operating policies, including massive layoffs and declining standards, caused problems throughout the casino empire long before the New Jersey license was revoked."

Boardwalk Bargain: Is the bidding process for the Atlantic City Trop still open? Trustee Gary Stein implies as much -- or that the two or three known bidders are haggling, seeing a chance to snap up a distressed asset from a bankrupt company at a fire-sale price. Stein's remark that he's ready to re-start talks with "interested parties" strongly suggests that he's lost patience with Cordish Cos., the New York mystery bidders and maybe Colony Capital. Anybody want a little (OK, huge) fixer-upper on the Boardwalk?

An anonymous reader of the Las Vegas Sun (who appears to be an employee of either the Tropicana Express or River Palms, in Laughlin, alleges (see "Discussion") that management has raised the possibility of cutting employees back to 32 hour weeks, potentially triggering the loss of health benefits.

Then again, an R-J reader once claimed to have official, inside, black-and-white corporate knowledge that Paris-Las Vegas would be split off from Bally's and one of them would be sold. That'd be a neat trick when you consider that the two casino-hotels share a Siamese-twin sort of physical plant, which was why Hilton Gaming (remember them?) was able to build Paris-Las Vegas for considerably less than a billion dollars.

Tahoe: Scratch one casino

Tue, 06 May 2008 15:00:00 -0700

Part of the ongoing fallout from the Tropicana Entertainment bankruptcy is an even more dire forecast for the Lake Tahoe market. How bad is it? Well, even though Columbia Sussex has an option to renew its lease on the Horizon, the property's owner, Park Cattle Co., says it intends to take possession of the property when the lease is up (in three years) and "expects to convert the Horizon into something other than a casino when the property changes hands."

I guess you know things are bad when casino gambling ceases to be the highest and best use of a Nevada resort hotel. And you have to love the quote from the hospitality consultant who says Tropicana's Chapter 11 filing won't hurt the Horizon and sister property MontBleu so long as they don't "have to start cutting corners."

Man, you're talking about Columbia Sussex! It's what they do! (Bill Yung used to brag about it.)

Rounding up the rest of the Columbia Sussex reportage for the day, the admirably optimistic Scott Butera says his company is entering bankruptcy "from a position of financial and operational strength." Minus the Atlantic City Tropicana, Casino Aztar (sold) and Horizon Vicksburg (sold), and with Horizon Lake Tahoe now on borrowed time? And with Trop bonds trading at half their face value?

Yesterday's Wall Street Journal story can now be presented in its entirety. (Plus some analyst bloggery on the subject.) The WSJ calls Columbia Sussex owner of "a small casino kingdom." Fair enough, although some of us think of it more as a relatively minor principality whose castles are crumbling.

And did Butera really say Tropicana Entertainment wasn't planning to sell any of its 11 casinos, or did the WSJ reporters simply misconstrue his words? I mean, he did get the memo about Casino Aztar and Horizon Vicksburg having been sold, yes? (Both transactions are in the regulatory-approval and closing processes.) Elsewhere, he implies that Tropicana Entertainment may be out of Chapter 11 by year's end.

Here in Las Vegas, the Culinary Union may have reason for anxiety, but Casino Aztar's workforce has been assured that pay and benefits will continue as before. If all goes according to plan, Evansville employees should be out from under Tropicana cloud in a month or so, when Eldorado Resorts' application for ownership is expected to go through.

The endgame? By pumping up the volume of anti-New Jersey Casino Control Commission rhetoric, blaming it for Columbia Sussex's fiscal predicament and asking the NJCCC to hold off selling the Atlantic City Tropicana until market conditions improve, one possibility suggests itself.

Perhaps this is too Machiavellian by half, but is Yung and Butera's goal to wrest the A.C. Trop away from the State of New Jersey via the courts (thereby reconnecting Tropicana Entertainment to its primary lifeline) or at least keep it ensnarled in liitgation to kingdom come? Maybe even extract a nine- or 10-figure settlement from the state, thereby erasing much of their debt?

Yes, this is a crummy time to be selling a casino in Atlantic City. Even the Bader Field fever has abated, for the nonce. And yes, the longer Butera and Yung can get the NJCCC to draw out the sale process, the better their chances of getting the forfeiture of the A.C. Trop before a court.

But the NJCCC isn't in the business of running casinos and it has an obligation to the taxpayers to unload it (and the attendant costs of trusteeship) sooner rather than later. Not to mention that union talks are in abeyance as long as the Trop's status remains in limbo. As for getting the highest value for the property, how long would the NJCCC have to wait for market conditions to return to the fevered climate of 2006?

Still more updates!

Tue, 06 May 2008 13:27:00 -0700

Another day, another default. Tucked snugly at the bottom of Tropicana Entertainment's notice of default is another news nugget. Seems that the City of Evansville has informed the Columbia Sussex subsidiary that it's defaulted on certain terms of its lease with Evansville (including minority-hiring obligations). That sale of Casino Aztar to the Caranos undoubtedly can't close fast enough, bringing an end to 16 months (and counting) of recriminations along the Ohio River.

Spoke too soon? Did I say that the year-old Tropicana Casinos & Resort (TCR) Web site was finally finished? Wrong again. At least it's easier on the eyes than the brutal-looking Columbia Sussex Web site, a relic of the Pleistocene Era of Web design.

About that Chapter 11 filing. During yesterday's taping of the next "Vegas Gang" podcast, we were under the impression that the Tropicana default took the company by surprise. But lookee here. Could ColSux have been planning this move long in advance? Naaaaaaaaaaaaaaah!

If you're a vendor and made delivery before Cinco de Mayo, take a number and go to the back of the line. (See FAQs #1 & 2; most of the others are just boilerplate happy talk.)

The Trop Has Two Daddies. If a company has two presidents, which one is really calling the shots? Just wondering.

"Why," you might ask, "are certain casinos [see bottom of page] excluded from the Chapter 11 filing?" Good question. The Atlantic City Tropicana is under trusteeship of the State of New Jersey (and I'll bet the New Jersey Casino Control Commission is real happy it didn't return the property to Columbia Sussex, as requested by CEO William J. Yung III and trustee Gary Stein a few weeks ago).

The Westin Casuarina in Las Vegas and the Amelia Belle riverboat (above) are owned by Tropicana Entertainment CEO Yung's TCR. Tropicana Entertainment is a discrete subsidiary of TCR, separated by a pair of holding companies. (And, just to make matters even more opaque, the Amelia Belle is scheduled to be swapped out with the Belle of Baton Rouge, which is part of the Chapter 11 proceeding; I wonder how their respective parishes will sort that one out?)

As for Greenville, Miss.'s Lighthouse Point Casino, it's severally owned. One percent is held by Yung personally, 79% by Tropicana Entertainment and one of its subsidiaries, and 20% by unrelated third party Rainbow Entertainment.

I apologize for not being able to share the Columbia Sussex corporate chart with you. Our PDF-making capacity is offline for the day, but I hope to have it for you soon.

Another reality check; Gambling in Jamaica

Tue, 22 Apr 2008 13:47:00 -0700

National Public Radio affiliate KNPR, which occasionally airs news programming between endless bouts of mendicancy, is currently in its second week of rattling the tin cup on air. Which meant that, while morning-TV viewers may have been watching an ABC News report about gas prices shooting past $4/gallon, and families having to choose between food and fuel, KNPR was asking local schoolteachers to dig into their pockets to keep Prairie Home Companion and its ilk on the air. At a time when people are having to give up driving altogether, I think it would only be decent of public radio and TV to cut back on their "more, more, more" money-mantra.

Then again, they're no more out of touch than the Washington resident who says not to worry, "We are in a slowdown."

Tell that to some of the hundreds of recently cashiered casino workers. And if people are cutting back on driving and eating, it's a lead-pipe cinch they're not putting the savings into a slot machine. These are scary times.

Good news for Harrah's. OK, so maybe the bulletin from Macao wasn't so encouraging, but Horseshoe Casino, in Hammond, Ind., is preceding well ahead of schedule and is on track for a 3Q08 opening.

Roulette and reggae. Federal endorsement of Jamaica's first legitimate casino is expected today. It's a 3,000- to 4,000-room Montego Bay project, to be built and owned by "an international group with a good track record of developing hotels and casinos."

Hmmmmm ... sounds like MGM Mirage. Or maybe Wynn Resorts. Perhaps even Kerzner International (whose joint-venture partners include MGM) or Melco PBL. Who am I leaving out?

MGM Mirage: What's it all about?

Wed, 16 Apr 2008 13:19:00 -0700

By now it's old news that MGM Mirage took a paring knife to its personnel roster and gave 440 staffers the sack on Monday. Admittedly, saving $75 million seems like trimming a fingernail off a company whose 2007 profit was $1.58 billion (nor has the company acted as though in peril of dire penury).

Then again, MGM Mirage didn't do a Columbia Sussex and take it out on service-level employees, choosing instead to thin the ranks of middle management. And, truth be told, I've run across some bureaucracy there that might be fairly described as "bloated."

But MGM Mirage must have decided that Version 1.0 of its downsizing didn't play so well, especially with its target audience, Wall Street. A downward skid in MGM stock accelerated before stabilizing today.

Hence, President Jim Murren rolled out Version 2.0: No, it wasn't a reaction to the darkening economy (which at least Sen. John McCain is willing to call a recession, even if the occupant of the White House is boating on DeNile), contrary to what Alan Feldman had said previously. And the projected savings had risen overnight to $200 million.

OK, Murren's the numbers guy, so let's go with the larger figure. But what about this spin that the sudden exodus (abruptly announced to the affected employees mid-Monday) was the elimination of "redundancies" from MGM's takeover of Mandalay Resort Group?

Does it really take three years and "months of analysis" (at God only knows what cost) to identify a few hundred redundant employees (a seemingly disproportionate number of whom are in the Mississippi market)? Then again, if you're trying to make the case to your shareholders that you're running an less-than-optimally-efficient company, "streamlining" that moves with the speed of a Galapagos tortoise constitutes mighty convincing evidence, IMO.

(Steve Wynn is right on the money, I think, both in terms of the deleterious psychological effect and the failure to use subtler methods, like attrition.)

MGM is far from alone in this situation (even if its newly restated motives may be disingenuous) and -- given the alarming erosion of gaming stocks in the last six months -- perhaps we should heave a sigh of relief that the cuts haven't come sooner and in larger chunks. That's not much comfort if you're among the newly unemployed or contemplating the ripple effect on the local economy, but the industry is reacting with much greater circumspection than it showed in its panicky overreaction to the 9/11 crisis.

MGM Mirage will probably continue to be about as profitable as it is now. And if there's any villain in this scenario, it's those shareholders who whinge if their EPS is off by so much as a fraction of a penny (it does look as though MGM is going to miss its quarterly target) and devil take product quality. Fortunately, MGM is run by people for whom quality matters.

Speaking of Columbia Sussex, new Tropicana Entertainment President Scott Butera (no stranger to financially troubled companies, having served at Trump Entertainment Resorts and the Cosmopolitan), has been making the rounds and putting a friendlier face on his company's oft-truculent public posture. He places the best spin possible on the collapse of his company's Lake Tahoe lawsuit (in which Columbia Sussex at least eked out a three-year stay of execution, with hope of an eventual pardon).

He's also managed to gain a 25-day reprieve from Wilmington Trust Co., contingent upon various conditions which include essentially pledging the Las Vegas Tropicana as collateral. I'm not sure that 25 days counts as "significant" given the number of things which would have to happen in order for Wilmington Trust to be assured that its $960 million was safe.

The proceeds from the sales of the Horizon Vicksburg (above, $35 million), Casino Aztar ($220 million) and Atlantic City Tropicana (unknown) have already been pledged to other debtors, and the pace at which the latter two sales close is now up to regulators in Indiana and New Jersey. Columbia Sussex's cut of the A.C. Trop sale will have to come to $747 million to reach even the bottom of analyst Barbara Cappaert's $982 million-$1.34 billion aggregate price. It'd be a heck of a time for Butera to have to hang the "For Sale" sign on the LV Trop, but with Wilmington Trust breathing down his neck, he may have little choice.

High spirits in Evansville

Mon, 07 Apr 2008 11:49:00 -0700

The acquisition, by Reno's own Eldorado Resorts, of the Casino Aztar riverboat, is playing to the expected hosannas. Interestingly, while 21% of the workforce was pink-slipped by outgoing owner Columbia Sussex, that seems to be the least of players' concerns. An unscientific online poll has that coming in fifth of five priorities, far behind expanding the entertainment options available at the casino. Whatever the case, the prospective owners are accentuating the positive.

Memo to Dawn Gibbons: Don't quit your day job (fourth item).

Tax increases could be life or death to rural Nevada casinos, Bill Bible says, making a compelling argument. Which raises a fairness question: Should the privilege tax be applied at a uniform (i.e., regressive) rate to all Nevada casinos or should it be graduated to better reflect the market disparities between, say, Elko and the Strip? Whatever the case, smaller casinos are between a rock (the lobbying power of their bigger brethren) and a hard place (public support for hiking the privilege tax).

Players or profits? That's a dilemma being faced by Atlantic City casinos as they tighten up on comps. So, if you're a bused-in player and you think you're not feeling as much love as in the past, you're probably right.

Analyst Nick Danna says comp-addicted customers need to get the "just say 'no'" treatment for casinos. As he puts it, "There are certain customers that Atlantic City really shouldn't attract anymore because they're just not profitable." Translation: Retiree players have outlived their usefulness to the Boardwalk and need to make way for bright young things with disposable $$.

That's cold.

A small collection of imperfect shows: The never-ending mutation of Le Reve is chronicled. If you're like me and suspect that Franco Dragone just keeps throwing random junk at the wall until something sticks, this article will only bolster that suspicion. As the headline says,the show "reveals itself slowly." Three years of tinkering and they still haven't got it right? Yeah, you could call that "slow," I guess.

Typo of the Day: In the Las Vegas Sun, "Possible hostage situation diffused." I suppose they mean "defused." I'd sure hate to contemplate the alternative: possible hostage situations spreading throughout the Las Vegas Valley.

Columbia Sussex sinks to new low

Wed, 02 Apr 2008 15:55:00 -0700

Let's say you're Columbia Sussex, owner of the Westin Casuarina and notorious for your pinch-penny ways. What do you do if a convention organizer can't pay up on its $50,000 tab? Why simply -- and sneakily -- bill it to the attendees, of course!

That's the rude surprise that dental trainee Don Dible got when he received his bill from the Westin: an extra $665 charged to his credit card -- five months after the fact. According to the AP's Kathleen Hennessey, who has seen the offending document, 'ColSux' hit Dible up for "pro-rated amount per attendee." A Houston dentist got socked for $1,027 ... presumably penalized the extra $362 because he had the temerity to be a speaker at the conference, not just an attendee.

House of shame

The Westin's invoices are written so that it can pass the liabilities of companies like Coaching Center of Austin onto third parties. Besides Dible, at least 20 other complainants are reported to have surfaced -- some of whom the Coaching Center says it has reimbursed.

"Columbia Sussex owns 13 casinos and 80 hotels in the United States and abroad, pulling in revenues of some $3 billion a year," writes Hennessey. Small wonder, with tactics like these, which came as quite a surprise to the Las Vegas Convention & Visitors Authority's Erika Pope.

Congrats to the AP for snagging this story, stealing a march on both the Las Vegas Sun and its sleepier crosstown competitor.

More Trop trouble. The New Jersey Casino Control Commission has to decide whether to place the Atlantic City Tropicana back in the hands of ColSux affiliate Adamar of New Jersey to shelter the asset from a Delaware lawsuit. Wilmington Trust Corp. is suing ColSux for $960 million upon which it alleges the Kentucky hotelier has defaulted.

Trop trustee Justice Gary Stein finds himself in the awkward position of having to advocate that the NJCCC undo his own conservancy lest a court-ordered bankruptcy "affect my ability to sell the asset," a process that hasn't exactly had potential buyers beating down the door so far. My guess is that the NJCCC will feel boxed in and have to go along, but it doesn't sound like NJCCC Chairwoman Linda Kassekert is any too happy with the situation -- or with the behavior of Tropicana Casino Resorts CEO/President/Secretary/Treasurer/Sole Director William J. Yung III.

News flash: I was wrong. If ColSux goes belly-up that's just too damn bad, says the NJCCC. Or words to that effect. Stein's proposed solution would left him only nominally in the driver's seat, with Yung regaining title to the A.C. Trop. The NJCCC also dealt a verbal smackdown to Stein, partly for exceeding his mandate -- not to mention his employment of a car service to ferry him to and from Hackensack.

Meet the new boss, quite different from the old boss. "In 25 years I never had a layoff, and I don't intend to start now." With those words, Robert Dingman (above) got off on the right foot as trustee of Casino Aztar. (Dingman says he might even -- Gasp! -- increase staffing. That sound you hear is Bill Yung reaching for his defibrillator.)

The Evansville riverboat is entering an odd interregnum in which it will be run by the State of Indiana on Columbia Sussex's dime (and I use "dime" advisedly) while the state vets would-owner Eldorado Resorts, whose interests include co-ownership of the Silver Legacy -- an exceptionally comfortable casino-hotel, the nicest in downtown Reno, when I was hosted there ... admittedly, back in the last century.

Having faced off with the Carano family during his Harrah's Entertainment years, Dingman gives them the thumbs up as "great operators ... our nemesis in Reno."

The latter ponied up $220 million* for the gaming vessel ($5 million less than expected) on the very day Columbia Sussex was likely to be stripped of its license. Yung's company had reneged on commitments to the city of Evansville, both in terms of employment levels and bringing in a new boat. It also ceased Aztar Corp.'s practice of supporting local charities and vendors.

Eldorado -- which evidently relishes challenging riverboat markets -- plunked down $169 million two years ago (plus an additional $9 million last month) for a Bossier City, La., boat and that would put Casino Aztar within its price range. Still, with credit markets being what they are, I'm awaiting disclosure of the terms of sale with bated breath.

"Our long nightmare is over," added Dingman. Although he's worked in some of Harrah's most far-flung markets, from Vicksburg to New Zealand, serving in the Vietnam War will probably turn out to be Dingman's best preparation for dealing with the scorched-earth tactics of Bill Yung. (As more than one Courier-Post reader points out, the new casino resort in French Lick has leapfrogged past Casino Aztar while Yung was busy subdividing pennies.) Apparently Yung's can't-fail business strategies included eradicating or severely diminishing promotional allowances.

No wonder Casino Aztar is 11th out of 11 Hoosier State casinos. (Only third-lowest in revenue, though.) In FY07, French Lick was breathing down Casino Aztar's neck, $111 million to $123.5 million.

This Should Be Interesting Dept. The Courier-Press adds that "Dingman has been granted broad powers to spend Columbia Sussex's money on operating and improving the casino," which apparently suffers from a shortage of dealers, among other things. But has he been granted broad Columbia Sussex money to spend? Yung is notoriously loath in that respect, so Dingman can probably look forward to having to play hardball with the corporate colossus of Fort Mitchell, Ky.

Bottom line: I've seen how the Caranos operate and I've seen how Bill Yung operates. Eldorado in/ColSux out is a happier ending to this story than we could have hoped for, say, two months ago.

* -- The price is sometimes reported as $245 million because of a conditional $25 million Eldorado will kick in if it hits certain (undisclosed) metrics. The two companies are essentially making a wager that Eldorado can do something comparable to what it did in Bossier City, where it grew revenue 18% over a two-year period, in a declining market.

Columbia Sussex loses one, wins another

Mon, 31 Mar 2008 14:36:00 -0700

Where to start? Well, Gov. Steve Beshear is about to throw in the towel on his casinos-for-Kentucky push, having decided he couldn't get it past the House. And remember: That was supposed to be the easy part; the state Senate's approval and popular ratification were considered to be much greater long shots.

So it's off the table until 2010, meaning that Columbia Sussex CEO William J. Yung III, having shoveled hundreds of thousands of dollars in Beshear's direction, has nothing to show for it but some empty buildings in Covington, Ky.

Then today, the Indiana Gaming Commission had to weigh whether to allow Yung to keep his Casino Aztar riverboat (above), in Evansville. Quoth the Courier-Press of Evansville: "By law, the Indiana Gaming Commission may not license a company that has seen one of its gambling licenses revoked in another state." The vessel's been on the market since December and no buyer had been identified, perhaps because -- under Yung's errant captaincy -- aged Casino Aztar has become the least-visited casino in the Hoosier State and lost almost 250 employees.

IGC Executive Director Ernest Yelton, got his wish though. Just minutes ago, the Carano family's Eldorado Resorts came to the rescue, bearing a $245 million purchase offer (possibly less, if Casino Aztar doesn't meet certain benchmarks). Although this spares the IGC from having to actually strip Yung of his license, commission members did split the baby, after a fashion: Columbia Sussex will relinquish day-to-day operations to state-appointed trustee (and former Harrah's exec) Robert Dingman.

This is something of an experiment for the IGC. A bill that "would have set up a procedure for operating an Indiana casino temporarily if the owner lost its license, filed for bankruptcy or abandoned a riverboat" died in this year's Indiana Lege for mostly unrelated reasons. So the commission has to move forward into uncharted waters, reliant on a gentleman's agreement (and power of attorney) from Columbia Sussex.

About the new owner: In addition to owning an eponymous casino in Reno, Eldorado Resorts recently was awarded full ownership of a former Hollywood Casino riverboat in the Shreveport market, which it is currently operating under the Eldorado brand.

And a Columbia Sussex that was puffing with pride a year ago, having won a runaway bidding war for Aztar Corp., now must look upon a much-shrunken version of its merged C.S./Aztar empire. It had to surrender Aztar's Carurthersville, riverboat to Missouri regulators right out of the gate, then lost the Atlantic City Tropicana last December. Now Casino Aztar is going bye-bye, leaving only the LV Trop and a former Ramada Express in Laughlin (above) as the only remnants of Aztar.

For the upside, what the Courier-Press' editorial page describes as Yung's "short, unpleasant tenure in Evansville" is fast nearing an end.

On other fronts ... The largest loan in a pool of cross-collateralized hotel loans held by Bear Stearns Commercial Mortgage Securities happens to be that of -- you guessed it -- Bill Yung! Here's the techno-speak:

The Columbia Sussex Portfolio (93%), the largest loan in the pool, is collateralized by 14 full-service hotels located in 13 major urban markets with a total of 5,821 rooms. At issuance the portfolio occupancy was 76% with an average daily rate (ADR) of $131 and revenue per available room (RevPAR) of $99.6. At year end (YE) 2007 the portfolio occupancy declined to 65.2% with an ADR of $158.9 and a RevPAR of $99.4. Fitch stressed YE2007 net cash flow (NCF) also declined 6% compared to issuance NCF. The initial maturity date was October 12, 2007. The loan has three one year options to extend, and is currently in the first of the one year extensions with a maturity date of October 12, 2008 and mortgage rate of 6.3%. As a condition of the extension the loan was converted from interest only to amortizing.

A.C. Tropicana workers want a say in who their next boss turns out to be. While I sympathize, given what they've been through, New Jersey regulators need to tell Unite-Here Local 54 to take a step back: This is what Justice Gary Stein and, through him, the New Jersey Casino Control Commission get paid to do. After the fiasco that was 'ColSux,' they're unlikely to make the same mistake twice.

Plaza still a "go", Tropicana gets new boss, Gibbons still irrelevant

Thu, 20 Mar 2008 14:10:00 -0700

It's Day Five of the "Hell No, We Won't Go" crisis and Nevada State Board of Medical Examiners members Drs. Daniel McBride and Javaid Anwar continue to thumb their noses at Gov. Jim Gibbons. As does board Executive Director Tony Clark. There's little I would I like to see much more than watching a pack of dobermans chase McBride, Anwar and Clark from their offices.

Then again, it's quite a spectacle to see Nevada public officials not only recognizing that The Gibber is a paper tiger but openly daring him to do something about it. For now, we've got a Nevada governor who looks increasingly ineffectual -- with 2 3/4 years to go on his term.

"Forging ahead as planned." That's the word on Elad Group's Plaza project, budgeted at $6 billion -- with 6,700 units and a casino floor larger even than the MGM Grand's -- slated to open in 2011. The Clark County Commission gave Elad the green light yesterday. So, anybody got $6 billion these chaps can borrow?

(For the absolute latest in Plaza designs, see VegasTodayandTomorrow.com)

Columbia Sussex Watch: The first day of Spring also means that William J. Yung III has 12 days to find a buyer and consummate the sale of Casino Aztar, in Evansville, Ind., or risk having it taken away from him when Indiana's gaming commission meets to reconsider Columbia Sussex's license, on March 31.

Meanwhile, Yung has enlisted some adult supervision (and relinquished one of his 21 corporate titles) by installing Scott Butera as president of Tropicana Entertainment. Butera has bounced around these last five years, from UBS to Trump Hotels & Casino Resorts to working for local developer Brett Torino and thence to 15 months with the runaway Cosmopolitan Resort Casino.

To say that Butera's got his work cut out for him at the remaining Trops is a considerable understatement. But he does know the casino business, which appears to be more than can be said of the crew currently calling the shots from Fort Mitchell, Kentucky.

Chips ahoy! Following a well-publicized rollout in Las Vegas, Harrah's Entertainment is taking its $25K gold chip gimmick to Caesars Atlantic City. Hey, if it's working, more power to 'em.

Man bans himself from Atlantic City casinos for life, but wants to play elsewhere, then finds he can't. What part of "self exclusion" do bozos like this fail to comprehend?

Shameless Self-Promotion Dept.: Like real estate ads, I'm inescapable in the Las Vegas media this weekend. So if you're not glutted already, you can read my takes on the new movies Look and Under the Same Moon, not to mention UNLV Opera Theatre's recent staging of Mozart's Cosi fan tutté. Oh, and did I mention last week's DVD review? I didn't? How remiss of me.

Columbia Sussex strikes back

Wed, 05 Mar 2008 16:11:00 -0700

This could become a Hammer Studios-esque series of updates. Just contemplate the possible titles: The Curse of Columbia Sussex, Columbia Sussex Has Risen from the Grave, Taste the Blood of Columbia Sussex, Columbia Sussex and the Monster from Hell, Columbia Sussex Must Be Destroyed, Brides of Columbia Sussex, to be followed of course by Son of Columbia Sussex or even Jesse James Meets Columbia Sussex's Daughter ... culminating in the inevitable I Was a Teenage Columbia Sussex.

(OK, so Jesse James Meets Frankenstein's Daughter wasn't a Hammer movie, even if it was a real one, directed by the infamously expedient William, "One Shot" Beaudine. But you get the idea.)

Aaaaaannnnyyyyyway ... you'd think William Yung III's debt-lumbered lodging/casino company, with bondholders nipping at its heels, would be glad to get the cash it's due from the upcoming sale of the Atlantic City Tropicana. You would think wrong. Yung has thrown another hissy fit, in the form of a 60-plus page lawsuit. He wants that casino back and accuses the New Jersey Casino Control Commission of lacking impartiality, and also of "ad hoc rulemaking and standard-setting."

Barring a full reading of the complaint, the best line has to be the accusation that the NJCCC behaved in an "arbitrary, capricious and unreasonable" manner. Pot, thou hast called the kettle black! If anybody's operating methods are "arbitrary, capricious and unreasonable" it is those of Columbia Sussex, at least if its own testimony before the NJCCC is any yardstick.

"The one-member audit committee that Tropicana put in place in June of 2007 has been in widespread use by other New Jersey casinos," whines a company press release. Maybe so, but the problem with the Trop's ostensibly independent committee of one is that it consisted of an attorney (Jeffrey Silver) who was on retainer to Columbia Sussex, a conflict of interest that did not emerge until later that summer.

Oh, and anyway, "such a requirement is not sufficiently spelled out in the New Jersey Casino Control Act, and therefore is not something Columbia-Sussex could have complied with," according to a Philadelphia Inquirer report.

In other words, 'We didn't break the rules. And if we did, it's because we didn't know what they were.' (Funny how Columbia Sussex has butted heads with regulators in almost every state -- New Jersey, Indiana, Missouri and Nevada -- where it sought casinos of late. Must be a vast conspiracy, no?)

Another non-argument is the contention that the NJCCC didn't take into account a 94% occupancy rate. So? Harrah's Atlantic City runs at 90%+ but at least 70% of those rooms are comped. The company also complains that the NJCCC overlooked "the firm's financial stability," which may be a tough case to make when you're staving off bankruptcy.

In a final, maudlin touch, Columbia Sussex ends its press release by "decrying the virtual absence of interrogation about the company’s business plans and aspirations that is ordinarily a staple of renewal hearings."

Oh dear, this is too tragic. Yung is conveniently forgetting that his stewardship of the Trop was hanging by a thread when he came before the NJCCC. The latter had been presented with a recommendation from the New Jersey Division of Gaming Enforcement that Columbia Sussex be allowed a provisional, one-year renewal -- based on the satisfaction of 26 conditions. In other words, Yung's best hope was to get off with probation, and he didn't. (Trop lawyers asked for a five-year, unconditional renewal but, given the circumstances, that was an unrealistic expectation.)

What might those "aspirations" have been? Yung had already sent the property Columbia Sussex described "as key to the company's future, generating more than a third of total operating revenue and 36 percent of total operating profits" into a tailspin, off $19 million in the first six months of last year.

His Tropicana Entertainment casino portfolio was down -5.6%, year over year, for that same period despite adding four ex-Aztar Corp. properties to its stable. What The Press of Atlantic City called Yung's "slash-and-burn business model" was fluffing up profit margins in the short term, but at the price of depressed revenues.

By the third quarter, not only were revenues down even further (-9% Y/Y), so were profits (-8%). In what looked like a desperation move, Yung started to peddle the Atlantic City Trop's most highly praised asset, its $280 million The Quarter, to pay down debt. (He was subsequently dissuaded, perhaps because the first offer he got was for only $70 million.)

Anyway, it seems that Columbia Sussex's attempted default on its $750,000 fine to the State of New Jersey was just a ploy to buy time until its lawsuit was filed. If so, the NJCCC has decided that two can play that game. Overruling its own conservator, it has ordered Columbia Sussex to pay up, starting now -- even if it means dipping into the Trop's cash flow. Such regulatory choler is not difficult to understand, as it appears that stalling on the initial $125K payment was yet another chapter in a long history of Yungian dissembling when it comes to cooperating with the Garden State's regulatory structure.

In the most recent issue of Casino Lawyer, respected attorney Frank Catania uses Columbia Sussex as "a textbook example of how to lose a casino license." Catania's analysis doesn't bode well for Yung's chances in a court of law, as he finds that Yung's "arrogance was reflected in [Tropicana Casino Resorts'] poor presentation at Tropicana's licensing hearing, where the testimony of the company's witnesses was found to be poorly prepared, inaccurate, evasive, unbelievable, hollow and, in one instance, perjurious."

Or, as one NJCCC member wrote, "I was left with the impression that the applicant felt that the process was just an inconvenient formality."

Yung might also want to stock up on ginko biloba before he gives any further testimony, too. Before the NJCCC, he pleaded to being ignorant and out of the loop on how his company operated -- a sorry performance by the president, CEO and sole director of Tropicana Entertainment.

However, before Yung gets his day in court, he's got until the end of the month to A) restructure $690 million in debt or face Chapter 11 and B) sell his Casino Aztar riverboat before the State of Indiana seizes it. So what's Yung's endgame?

That's a subject for another day ... although a small casino up at Lake Tahoe could hold the key to Columbia Sussex's fate.

Columbia Sussex dodges bullet

Mon, 03 Mar 2008 11:31:00 -0700

Yes, Columbia Sussex is in default on $960 million in debt, says a Delaware court. But it's not in immediate default, giving the hotelier at least another month to wriggle out of that tight spot. However, a source for the Las Vegas Sun says the verdict "is probably the death of Columbia Sussex's equity interest" in the Las Vegas Tropicana.

If a receiver has to be appointed, it won't happen a moment too soon. The LV Trop has fallen into dire condition, seemingly more through indifference than anything else, and parts of it are appallingly filthy and/or dilapidated. It's several decades behind the rest of the Strip. Even though people like to deride Circus Circus, Jay Sarno's labyrinthine monument to coulrophobia, it's at least 100X nicer than is the Trop at present.

One potential buyer Casino Aztar, in Evansville, Ind., has been tipped. Racino owner Centaur Inc. could make a logical suitor for the riverboat. The Indiana market has been diluted by the addition of racinos and a casino resort at French Lick, the latter hitting Casino Aztar fairly hard. And Centaur's Jim Brown used to run Casino Aztar.

But Centaur is apparently close to exhausting its $1 billion gaming-acquisition fund; with Kentucky taking a good, hard look at legalizing casinos, a Hoosier State riverboat on the Kentucky border just might not be the prize purchase it once was. And Columbia Sussex may have less than a month to cut a deal before its Indiana license is yanked. (Currently, Casino Aztar is operating with a staggering number of job vacancies, including internal auditor and director of security.)

More and more, Columbia Sussex's overambitious attempt to absorb Aztar Corp. is looking like one of the biggest debacles in casino history.

MGM Grand to make a big splash

Thu, 28 Feb 2008 11:13:00 -0700

Our "ace in the hole" source has caught wind of a major expansion of the pool area and water features at MGM Grand, extending toward the Signature condos. The official verbiage is as follows:

The plans depict a recreational area that includes pools, spas, cabanas, and accessory buildings in conjunction with the MGM Grand Resort Hotel. The new recreational area is located on the north side of the existing pool complex and in between the Signature resort condominiums and the Convention Center building. Along with the pools and spas, 4 independent manmade decorative water features are proposed that range in size from 40 square feet to 496 square feet for a total of 1,227 square feet of water features. The water features according to the applicant cannot be used for human contact due to the small size. The applicant has attempted to integrate the pools and spas with the water features, but due to design and engineering constraints it was determined to keep them as separate features. Per Title 30, the MGM Grand Resort Hotel is allowed a maximum of 25,699 square feet of water features; however, the resort is under the allowed limit for water features.

Indiana passes "Bill Yung" bill: The Columbia Sussex fiasco in New Jersey caught the Hoosier State flat-footed. What if a casino owner were to either A) lose its license, B) go bankrupt or C) simply flee the state? A bill to designate state-appointed trustees just passed the Indiana House overwhelmingly and now goes to conference committee. An additional provision in the law would prevent the Indiana Gaming Commission from imposing further "transfer taxes," as it did in the sale of Indiana Downs.

Rashomon Dept.: A source says local impressionist Larry G. Jones is packing it in tomorrow night after a 1,600-show run at what used to be Fitzgerald's, to return at an unspecified Strip venue sometime in the near future. The Fitz's official site offers no elucidation but an affiliated Web site has him there at least through March 4.

Turns out ... our source is right. Which means you've got two nights left to see Jones in action. And if that Strip thing doesn't pan out, I hear Tilman Fertitta has a showroom to fill over at the Golden Nugget.

Columbia Sussex roundup

Mon, 18 Feb 2008 11:40:00 -0700

It's difficult to figure out CEO William Yung III's endgame in his high-profile pursuit of a casino in Kentucky, as it could potentially further complicate the attempted sale of Casino Aztar in Evansville, Ind. So far, suitors have proven to be thin on the ground.

It actually might be in Yung's best interest if the Kentucky state senate ashcans Gov. Steve Beshear's proposed casino legalization. After all, the closer Kentucky gets to casino gambling, the more it inherently depresses the value of Casino Aztar in an, um, watered-down market. There's a reason Columbia Sussex was able to buy its Vicksburg casino for $28 million and re-sell it for $35 million: Ain't no casinos coming to Arkansas now or in the foreseeable future.

Meanwhile, the Tahoe Daily Tribune has an eyewitness report of the opening salvos in a lawsuit whereby Columbia Sussex seeks to hang onto its lease on Horizon Casino Resort. As in Atlantic City, the perceived failure to maintain a "first-class facility" is a central point of contention. To that end, landlord Park Cattle Co.'s lawyers produced photos of Horizon that may be worth several thousand words (or dollars). Also, a former casino operations manager averred that Yung "was past trimming off the fat and had resorted to whacking at the bone." (Sound familiar?)

There's a possibility that the payroll hiccups at the Las Vegas Tropicana may have been caused by miscommunication between Columbia Sussex HQ, back in Kentucky, and local management. Hypothetically speaking, Friday's payroll may have been handed on Wednesday, which might explain the "Don't cash for 48 hours" scenario. If this is the case, an innocuous explanation from Columbia Sussex could have doused the fire. Instead, the company chose to get all shirty about the matter. God knows why.

If you need a laugh (or several), check out new Planet Hollywood headliner David Spade doing Daniel Plainview in "There Will Be Oscars." It's a riot. He drinks your milkshake!

That other Trop letter

Thu, 14 Feb 2008 13:54:00 -0700

S&G has obtained a copy of the 15-page complaint letter from the National Environmental Health Association to management of the Atlantic City Tropicana, alleging substandard conditions and service at the hotel-casino. Excerpts from this letter pretty much convicted the Tropicana and its owner, Columbia Sussex, in the court of public opinion. Trop execs, for their part, deemed the NEHA "scammers." Read it and decide for yourself.

I'll confine myself to two observations. One is that the tone of the letter is remarkably conciliatory in view of what it alleges.

Secondly, as much as the Trop takes a walloping herein, the NEHA complaint reflects just as badly -- perhaps worse -- on the work ethic and customer-service attitude of Trop employees, who include many members of Columbia Sussex detractor Unite HERE.

The Trop's ownership has now paid the penalty for its mistakes. Those mistakes helped place the Trop at the forefront of Atlantic City properties that are currently experiencing a serious downturn. I said "helped." Because Unite HERE clearly needs to take a look in the mirror and ask what part it played in this debacle.

Elsewhere ... the legal wrangle between Park Cattle Co. and Columbia Sussex, who are suing each other up in Tahoe over the Horizon Lake Tahoe, has made the newspapers as far away as Houston. Based on the legal filings I've read, this Associated Press story encapsulates the entire conflict superbly in a mere six paragraphs.

Columbia Sussex is apparently having trouble scaring up potential buyers for its Casino Aztar riverboat, in Evansville, Ind. You'll have to persist past the ho-hum dog-bites-man angle of the Evansville Courier & Press story, as the good stuff is buried at the bottom. There's a slim ray of hope for Casino Aztar, in the form of racino exec Jim Brown, who knows the Ohio River market well.

Then again, to quote my favorite Babylon 5 line, "I've never known hope when it wasn't on a diet."