David Mckee's Stiffs & Georges - Boyd Gaming

Adieu F-bleau, hello Hollywood?

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

Look what just fell into the S&G mailbag:

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

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

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

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

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

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

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

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

Night of the living dead

Thu, 15 Oct 2009 13:06:00 -0700

Will the last person leaving the Riviera please take down the Charo in Concert, Abra-ca-Sexy! and Tom Stevens posters? Everything about last night's visit to the casino suggested a business that's died but doesn't realize it. Not that it helps to be literally in the shadow of the rotting whale carcass that is Fontainebleau. Between it, Echelon and the apparently defunct Plaza project, that neighborhood is one giant buzz-kill.

Still, even on a Wednesday night one does not expect to see such a thinly populated casino floor. There were more players around the electronic table games than the real ones. In the parking-garage elevator, one of the braille "3" panels was missing from the keypad. Management's solution? Scrawl "3" in red ink where the braille pad should be. (ADA non-compliance much?) If the Riviera is blowing off its interest payments in order to use the money on operating costs, it's not going very far, from the looks of things.

The moribund feeling extended to the upstairs showroom, where Charo has given way to Andrew Dice Clay (or, as the Riv bills him, "Andrew DICE Clay"). Even with a 90-minute cocktail party as an inducement, Clay rolled snake eyes in terms of media turnout. It was a small crowd [sic] and even ~~some~~ many of the local bloggers blew it off, so scant was the event's cachet.

Maybe they were at the Tropicana, checking out Wayne Newton, whose new show ...

Features Rich Natole. This confirms well-sourced reports LVA had been receiving that the impressionist would land a new gig at the Trop and it was merely a question of when. Natole, who was subletting a time slot from Anthony Cools, got caught in the crossfire between Cools and Trop CEO Alex Yemenidjian. When Cools, Bobby Slayton and the Penny Lane show were sent packing, Natole found himself briefly at loose ends, too. The Natoles are nice people, so I'm glad this Vegas saga has a happy ending. On a sadder note ...

Lanni ailing. Former MGM Mirage CEO J. Terrence Lanni has an undisclosed form of cancer. The news comes almost a year to the month since he abruptly resigned from the gaming giant. At the time, Lanni denied that health problems were involved but he also said it had nothing to do with a resumé-inflation scandal that threatened to bring him under investigation in New Jersey, Illinois and Nevada. (Another possible motive for Lanni's abrupt departure: MGM stock had just sunk below $10/share.)

S&G sends wishes for a speedy and full recovery to Lanni, and to his family. I've lost a couple of friends to cancer, so I can imagine the ordeal the Lannis are experiencing. And, if it's not inappropriate, a tip of the Panama hat to low-budget broadsheet Gaming Today, which beat all major news outlets to this sad story.

Reality bites. At least if you're trying to maintain your price point at Aria. The megaresort has cut rates to $159 -- and thrown in a $75 amenity credit -- to entice two-night stays, through April 1. Wouldn't it be ironic if, instead of cannibalizing Bellagio, as feared, Aria wound up gravitating toward the mid-market crowd?

Please spare a thought for the Queen of Comps, the beloved Jean Scott, who's in her sixth week of convalescence from the flu. First, a hepatitis scare, now this. Let's hope LVA's most popular blogger catches a break -- and soon.

Hope for Boardwalk?

Tue, 13 Oct 2009 16:08:00 -0700

As you know, S&G puts more stock in year/year comparisons than sequential ones, but the most recent set from Atlantic City affords a slender reed of hope. With the help of tighter slots, A.C. held its September decline to 6%, the lowest of 2009 and the smallest drop in over a year. Even perpetual dog Resorts International had a good month, up 4% y/y.

Both in dollar volume ($63 million) and growth (6%), the leader was -- no surprise -- Borgata. In fact, the Boyd Gaming property made more than the four lowest-grossing properties (Resorts, Atlantic City Hilton, Trump Plaza, Trump Marina) combined. The two lesser Trump properties slipped below the Colony Capital ones, so one doesn't know whether to feel good for Colony or sorry for Trump Entertainment Resorts. The handover of Resorts Int'l continues to proceed slowly, as regulators enter uncharted waters with understandable caution.

Percentage-wise, Showboat, the Hilton and the Plaza had the worst of it, while gainers included Harrah's Atlantic City (3%) and even the Tropicana (1%). But the bloom is off the Trump Taj Mahal rose; it fell back to the middle of the pack, grossing $36 million.

One unexpected factor in the city's bump was a late-September, gay-themed promotion at the four Harrah's Entertainment properties. For all the lip service paid, year after year, to diversifying Atlantic City's appeal, Don Marrandino and his Harrah's colleagues backed up the talk with meaningful action.

Dead casino walking: Trump Marina

Back at Trump, its CEO, Mark Juliano declares "The real question is how long until we get back to the results we saw in past years, which is the question everyone in every business has." No, the real question is: On what planet is Mr. Juliano living? And: Do they have oxygen up there?

The math is inexorable. Excluding three months of sub-2% growth, Atlantic City's revenues have going one way -- down -- for the last seven quarters, often by double-digit margins. Casinos in Pennsylvania continue to ramp up, Delaware is talking very seriously about casino expansion, slot parlors in Maryland are in train and then there's prospect of additional competition from the greater New York City area.

Instead of asking "Where are the snows of yesteryear," S&G modestly suggests the Boardwalk's casino braintrust ought to be thinking about how to move forward into a future of diminished (i.e., more realistic) expectations.

Up the road, now that the novelty factor has worn off of Sands Bethlehem (above), the $724 million casino remains mired in fifth place. The solution? More and bigger promotions, it would appear. Judging by the lukewarm response to Sands and to Rivers Casino, the Pennsylvania market isn't big enough to support casinos built with Vegas-sized budgets.

Case Bets: Corzine, Penn vs. MTR, Pinnacle, Manilow & strippers

Wed, 07 Oct 2009 15:06:00 -0700

Forbidden by New Jersey law from directly contributing to political campaigns, casino companies are making an end run through Virginia. Harrah's Entertainment, Boyd Gaming and IGT are among those funneling campaign cash into a reverse version on the Underground Railroad. No wonder Gov. Jon Corzine (D) is able to carpet-bomb his opponents with advertising, if he so chooses.

Hey, big spender. The New Jersey gubernatorial race may be chump change compared to the cash being expended in the battle over Issue 3, which would permit four Vegas-style casinos in the Buckeye State. This is boiling down to a proxy fight between Penn National Gaming (pro) and racino specialist MTR Gaming (con). You'll recall that the Ohio Supreme Court nixed Gov. Ted Strickland's plan to unilaterally add slots to the state's horse tracks, which might have given MTR a level playing field with Penn.

While I can understand why Penn or Harrah's would be willing to pay 23% in taxes in Iowa or 27% in Kansas, it's mind-boggling that Harrah's would be chomping at the bit in Rhode Island, where the rate is 73%. Oy vey!

A green shoot. The Baton Rouge Business Journal reports that Pinnacle Entertainment is inking contracts to begin driving piles for its Lake Charles project. Called "Sugarcane Bay" and budgeted at $407 million, this is the first positive movement we've seen out of Pinnacle in a while (unless you count its hijinks with the President license up in Missouri). Good on them.

Manilow on the move. The Las Vegas Hilton has confirmed what all suspected: Barry Manilow's contract expires Dec. 30 and will not be renewed. As we reported in Question of the Day, it's nearly a done deal that he will now set up shop at Paris-Las Vegas, whose main showroom has gone long unused.

Good luck trying to get the Vegas constabulary interested if your car is stolen or your home burglarized. They're too busy going undercover to get lap dances. As Richard Abowitz notes, rampant prostitution on the Strip goes unchecked in the meantime. It's an open secret around here, although many of the "working girls" look downright scary, so you have to wonder how they turn tricks, especially in this economy.

Trop, Sands purges continue

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

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

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

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

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

Las Vegas Sands: Execs overboard!

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

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

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.

Terror at Sam's Town?

Thu, 17 Sep 2009 17:33:00 -0700

On Sept. 15, local blogger Flipchip reported that Sam's Town was being swept by a crime wave. There was, he wrote, a "rash of robberies," including two perpetrated against his wife. She was, he wrote, "then berated by the on-duty slot manager and he implied that since this was her second time to be robbed it was something she was doing that was causing the trouble."

Flipchip's entertainingly lurid chronicle describes the Boyd Gaming flagship property as having "fallen into a state of dereliction along with the surrounding neighborhood" (and I was just looking at houses near there), plagued by an "apparent lack of adequate security has made the joint easy pickings for the fleet of foot crooks." The blogger has subsequently been inundated with "horror stories of robberies, purse snatchings, and threats from the gangs often seen trekking through the casino."

Having been put wise to this story by Jean Scott, S&G rang up Boyd spokesman David Strow, who had seen Flipchip's posting and called it "highly, highly exaggerated." A Sam's Town crime wave? "That's ludicrous," said Strow, who described the problem as being confined to a lone snatch-and-dash bandit who was grabbing small amounts of cash from patrons (ranging from $3 to $100+, in one instance) before getting away. Security officers have long been in place at every Sam's Town exit, Strow added -- although that still begs the question of how the Boulder Highway Bandit manages to keep eluding apprehension.

"Some of this language is completely false," Strow said of Flipchip's narrative, noting in particular the allegations of gang activity. That, he said, is apparently a reference to the casino's younger patrons and "is ludicrous."

As for the Boulder Highway Bandit, "We are on the lookout for him," stated Strow. "Sam's Town patrons have nothing to worry about when they're on property."

Well, except for that one guy running around grabbing cash. Moral: Keep your friends close and your money even closer.

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

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

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

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

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

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

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

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

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

Optimism in Macao, euphoria at CityCenter

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

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

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

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

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

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

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

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

Colony Capital comedy

Fri, 21 Aug 2009 13:29:00 -0700

Having borrowed money to buy the Las Vegas Hilton five years ago at a dirt-cheap $200 million, Colony Capital -- those financial wizards -- borrowed $250 million more to retire the first loan. (Does Colony intend to pay off the second loan by taking out a third?)

At some point, Colony may have to start like, you know, paying down these loans ... but not yet. It's extended the maturity on Loan #2 into 2011. The story (second item) is somewhat confusingly worded, but it sounds like Colony is down to its last extension. And the LVH is now losing money. Perhaps Colony should ring up Penn National Gaming and see if CEO Peter Carlino wants to talk "flip." It's still a classy property with a wealth of history and unbeatable proximity to the Las Vegas Convention Center. There are much worse deals to be had out there (*cough* Fontainebleau *cough*).

Also: LVH headliner Barry Manilow is reportedly mulling a leap over to Paris-Las Vegas, another augury of trouble for Colony. Manilow's departure would leave the LVH with some tight trousers to fill.

Another setback for Ed Ad. Its attempt to lease the southeast portion of its ex-New Frontier acreage to a "Dinner in the Sky" outfit (complete with a 160-foot crane) got the back of the hand from the Clark County Commission. Both Boyd Gaming and Wynn Resorts balked at the prospect of diners dangling high above Echelon and Wynn Las Vegas. However, there's some pretty freaky shit on the Strip already and this seems tame by comparison. God knows, it couldn't be worse than the lametastic "Sirens of T&A" or whatever Phil Ruffin's nautical titty show is called.

Economic recovery in sight?

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

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

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

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

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

Just what the doctor ordered

Wed, 19 Aug 2009 14:29:00 -0700

With Eastern Division President Carlos Tolosa calling it a day, Harrah's Entertainment is dispatching Atlantic City native Don Marrandino to try and turn things around out there. (No word on whether the Alizma triplets will accompany him eastward.)

Marrandino's portfolio will encompass far more than Harrah's quartet of A.C. properties but his entrepreneurial flair is something that the Boardwalk and Marina districts could sorely use. Gross profits were down 20% in 2Q09, with only Boyd Gaming's Borgata (+8%) bucking the trend.

S&G wishes Marrandino luck in his new assignment. He'll certainly be missed back here. One doesn't know what to expect from successor Rick Mazer, currently Harrah's top man in Indiana. Following an exponential expansion of Horseshoe Hammond, it's become The Casino That Ate Everybody's Lunch. However, the re-branded Horseshoe Indiana, at the southern end of the state, has been losing market share. Maybe taking the Caesars name off the place wasn't such a good idea, after all? Harrah's bought a brand (Horseshoe) with great equity but has mostly bumbled thereafter.

Did you know that the Greek Isles is a gold mine just waiting to tapped? So says a flack for the new owners, who enthuses, "Although the current environment in Las Vegas is challenging, the property’s exceptional location, as evidenced by its proximity to the proposed Convention Center expansion and recent hotel/casino developments on the north end of the Strip, should provide the new owners with significant upside potential through a redevelopment or repositioning of the hotel as the market recovers."

Yup, between stalled, bankrupt Fontainebleau and a proposed Convention Center addition (unlikely under current austerity budgets), the Greek Isles is a can't-miss investment. Where else can you see so many parking lots and garages from the comfort of your hotel room?

But seriously, folks ... how did anyone ever get a $120 million appraisal (or an $83 million purchase price) on a hotel-cum-slot route that's losing over $1 million a year? If the Greek Isles were a dog, somebody would have put it down by now.

That half-assed wrap on the would-be-classy Mandarin Oriental has also drawn the attention of Steve Friess. And it turns out that The Rio isn't the only Harrah's property in Vegas badly needing a paint job, either. The Paris-Las Vegas balloon has seen better days, too. This sort of chintziness was only to be expected once Texas Pacific Group and Apollo Management got their claws into Harrah's, but nobody wanted to hear about it back in the day when the words "private equity" sent analysts and regulators into a delirious swoon.

Reality check

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

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

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

Aliante Station: played out?

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

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

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

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

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

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

Greek Isles sold, few care

Tue, 18 Aug 2009 19:23:00 -0700

Vegas' hardest-luck casino changed hands ... again. Short of another irrational spike in off-Strip land valuations, Canpartners Realty Holding Co. IV LLC is never going to see its $67 million again. The Greek Isles is in a dead zone, a block too far north (being a block away from Encore doesn't do you any good if you're on the wrong side of the block) and two blocks too far east.

Ah well, kinda serves Canpartners right for lending $56 million against a property that was never worth but a fraction of that amount. And until Canpartners gets a gaming license and captures the casino revenue, instead of leasing out the space as a big-ass slot route, it might as well buy a Motel 6 instead.

Had enough? You'd think that after spending six of the last eight years being used as a doormat by the opposition, congressional Democrats would be saying, "It's payback time." Not yet. If anything finally gets their back up, it may (ironically) be a President whose desire for comity too often translates into giving the store away.

There are still a few crumbs left upon the table for those of us who are uninsured, afflicted with pre-existing conditions or laboring under onerous co-pays. But that'll probably be bartered away, too, and we'll be left at the mercy of people like this s,o.b. M.D. who says it's a "privilege" to be healthy. So I'm guessing he's not down with that Hippocratic Oath stuff, either, huh?

Hard Rock overextended. Having doubled down on its costly purchase of the Hard Rock Hotel & Casino, manager/minority owner Morgans Hotel Group finds itself playing for time with its lenders. Reinventing The Joint proves to have been a good idea; ditto the new convention space -- both are helping to stave off catastrophe.

But it was sheer pigheadedness of Morgans to push ahead with not one but two new hotel towers amid declining ADRs and slippage in occupancy. When Boyd Gaming called a timeout on Echelon (partly due to partner Morgans' fecklessness), it should been a cue to "wrap" the megaresort-sized expansion of the Hard Rock, at least for the time being.

Colony Capital strikes (out) again; Big Bleauh

Mon, 17 Aug 2009 17:02:00 -0700

Despite taking a 22% gouge out of expenses, Colony Capital and its Goldman Sachs sidekicks managed to convert a 2Q08 profit to a $10.5 million 2Q09 loss. Revenues were down $30 million (or 40%), half of that from diminished room bookings. Could the service cuts be driving the revenue plunge? It wouldn't be the first time we've seen "death spiral" management be a company's undoing.

It's certainly interesting to see the bracing effect the recession has had on Vegas casino execs. They, who once took convention business for granted and looked upon conventioneers as less desirable than gamblers, have had a salutary wake-up call ... hopefully not too late.

Colony also threw in the towel on Resorts Atlantic City, although it left CEO Nicholas Ribis behind to run the place. That means he will serve two Boardwalk masters: The Resorts mortgage holders and Colony, with whom he co-owns the Atlantic City Hilton and which Ribis has also been running (into the ground, some charge). What happens if it's in Resorts' best interest to steal business from the A.C. Hilton?

It's difficult to decide who was more foolish here: Colony, for borrowing 2.5X the value of a casino whose best days were behind it, or the bankers who secured $360 million in loans with a $140 million casino. Let the floggings commence!

Speaking of death spirals, when you can get an Imperial Palace room for $18 (as an acquaintance recently did), who'd stay in Mesquite? That exurb's travails continue drag Randy Black's oligopoly down with them. Scant competition appears to have bred slackness and complacency in the Mesquite and Primm markets. It may be mere coincidence that the competition-rich Laughlin market has suffered to a much lesser degree ... but I don't think so.

Defaulted interest payments, renegotiated loan covenants, drawn-out cash reserves ... these are some of the unappealing alternatives facing Planet Hollywood. No property's struggle is fun to watch but this one is sadder than most because there's been considerable reinvestment (and some stunning redesign) made to turn the ex-Aladdin into something viable. However, all Robert Earl's horses and all Robert Earl's men have come up a bit short.

Plummeting ADRs have precipitated this crisis and, although losses at Planet Ho have consistently narrowed (and continue to do so), this isn't the first time we've heard that Earl's place was really struggling. And, no matter what Earl does, his casino-hotel has intractable, customer-hostile design flaws that cannot be solved by any means short of implosion.

I've been given reason to believe that whoever ends up owning the physically and fiscally bloated ($4.4 billion, at latest count) Fontainebleau, it won't be Penn National Gaming (at least not unless it's free and clear, and presumably cheap -- a tall order). If Steve Wynn has indeed already spurned F'bleau that'd leave Apollo Management, which never saw a bad casino investment it didn't like, and this one's nearly $1.8 billion underwater.

F'bleau would also give Master of the Universe Leon Black a de facto Harrah's Entertainment property on the north Strip, although Harrah's needs to fill thousands more hotel rooms like it needs a gaping hole in the noggin. Considering that it costs Boyd Gaming $3 million a month to keep Echelon on ice, preserving the F'bleau monstrosity until such time as new rooms can be absorbed seems a better use of capital than trying to finish the accursed thing.

Shakeup at Sands. Geez, you don't think executives on the chopping block could have anything to do with Genting Bhd's rival project getting ahead of slow-moving Marina Bay Sands, do you? Naaaaah! After all, the executive situation at Las Vegas Sands has been so very tranquil this past year. Just ask William Weidner ... or Bradley Stone or ...

I was just saying ...

Wed, 12 Aug 2009 12:55:00 -0700

... to a colleague that, given Atlantic City's dismal July numbers, a plea for governmental assistance had to be just 'round the corner. Well, whaddya know? In at least five instances, Atlantic City's casinos are run by companies that just reported profitable quarters, while four more just changed hands for pennies on the dollar. Not to mention that Colony C(r)apital, owner of the remaining two, supposedly was willing to put some or all of $244 million into bankrupt Station Casinos.

I don't mean to sound unsympathetic, but ... considering that Garden State citizens are being asked to tighten their belts, forego tax rebates and the like, if the casino industry needs $20 million to market itself then it can damn well pass the hat and raise the cash in-house. Besides, there's something unseemly about "pull yourself up by your bootstraps" capitalists clamoring for guvmint subsidy, especially in a state filled with people who are in much greater need. (Yes, I know these are interconnected issues but we're talking casinos that gross hundreds of millions of dollars every month. They're not exactly paupers.)

The article's final paragraph (misleadingly) implies that Trump Entertainment's three casinos, the Tropicana Atlantic City and the two Colony properties are all in danger of closing. But might Atlantic City be better off with five -- or six, if Revel can be finished -- strong casinos, whilst the sicklier ones are put out of their misery?

A reader posed that question to me ... and now I pass it along to you.

Boyd, Ameristar stable; CityCenter schedule revised

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

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

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

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

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

McKee vs. Lerner

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

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

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

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

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

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

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

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.

God, save the Queen!

Mon, 27 Jul 2009 12:28:00 -0700

Another victim of the Comment-Eating Server, Jeff in OKC, writes:

Isn't the Queen of Hearts property part of what is to become the new City Hall? I know the Nevada Hotel and Casino isn't pretty, but it is the first casino built by Sam Boyd as owner, I think I read, and was owned for many years by Downtown icon Jackie Gaughan. That would be enough to give it preservable cachet in most cities.

IMO, Tamares has been a bad landowner in Las Vegas, having done nothing to enhance their properties, and barely doing any maintenance. I recall reading that they let the unrestricted gaming license on the Nevada lapse. I think the City should pressure them to sell out (The Stevens family's Desert Rock holdings that owns half the Golden Gate could tie the Nevada Hotel tastefully into a complex with the Golden Gate) to others who have a desire to invest in the City. The Siegels have done a miraculous transformation of the Gold Spike, showing that it is possible to do business in the City of Las Vegas.

The Plaza [Hotel] and Las Vegas Club are two properties that have beautiful 1970's and 1980's charm, which are rapidly disappearing in Las Vegas. Their time in the sun is coming, and a fiscally responsible touch up would be in the best interest of the operators and the City. I wish the Mayor was as interested in appropriately keeping what is 30 years old as much as instilling his vision of 30 years into the future.

The dream is dying

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

It's Gaughan

Thu, 16 Jul 2009 11:53:00 -0700

Congratulations to South Point owner Michael Gaughan, the 2009 inductee to the American Gaming Association Hall of Fame. An industry "lifer" who worked his way up from the Royal Inn to the CEO's chair at Coast Casinos, Gaughan has been one of the most consistently successful operators in the business. After 9/11, when other operators were slashing jobs, Gaughan actually added employees. That practically qualified him for on-the-spot sainthood.

He briefly succumbed to the siren song of consolidation and merged Coast with Boyd Gaming. It was a rocky marriage and Gaughan soon decided that the world of publicly traded casino corporations was not his bag. But the "divorce settlement" gave him South Point free and clear, and he maintains a lucrative ancillary revenue stream through 1,308 slots (give or take) at McCarran International Airport.

Gaughan is a man of few words -- but many deeds -- so we hope he's not forced to make a speech. But S&G applauds the AGA's excellent selection of its '09 inductee.

(And there we thought they were going to give it to James Packer.)

It's lonely in the bunker; Luxor gets its groove on

Wed, 15 Jul 2009 17:35:00 -0700

Two resignations made the news today. First, the publicist for Criss F. Angel took a hike. Given the choice between the much-reviled Angel and unlikely rising star (and reportedly much, much nicer person) Holly Madison, Fantasy flack John Flynn left the sinking Angel ship.

With Guy Laliberté literally fleeing to outer space, defenders of Angel and his Believe debacle are growing fewer and fewer. (Hey, Cirque du Soleil, keep the title and redo the show as a Cher tribute. It can only be an improvement.)

"Would the last person to leave my office please turn out the lights?"

In an unrelated but symbolically parallel development, yet another high-ranking staffer has joined the exodus from the office of Gov. Jim Gibbons. Departing exec Mindy Elliott managed to drag Midnight Jim into yet another scandal when she persuaded the Gibber to exert influence on behalf of Boyd Gaming in a dispute with state OSHA. Unfortunately, the state's burgeoning jobless population will now have to deal with Elliott in her new role as head of the Dept. of Employment, Training & Rehabilitation. Is this a case of "failing upward"? "Sideways"?

Luxor? Sexy?!? It seems that the answer is, "Yes," judging by this creative marketing ploy: "Singles in Sin City." People come to Vegas to hook up, however briefly, so why not A) organize a promotion around it and B) class things up a bit? The four packages are, in ascending order of sexytime, "Get a Room," "Get Lucky," "PDA" and "The Player."

Well, it sure beats "First Base," "Second Base," etc., no? (If the funky vocal stylings of Robin Thicke don't make you want to get busy, nothing will.) And with the Strip currently floundering in disgrace -- and deservedly so -- Luxor's promotion is high heavens above, for instance, the cattle call that is Rehab at the Hard Rock Hotel. When they (foolishly, IMO) bought the place, Morgans Hotel Group claimed they were going to go upscale. Instead, by all accounts, they dove headfirst into the deep end of the cesspool.

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.

The Trop heist that wasn't

Fri, 26 Jun 2009 14:49:00 -0700

"An improvident indictment." That's what New Jersey officials are calling a case that was quietly quashed in May. Sacked Borgata veep John Conklin and two other men had been charged with plundering the Tropicana Atlantic City's database when they were in the Trop's employ (and when the Trop was still owned by Aztar Corp.).

Closer examination revealed that nothing had been purloined and the data in question was not particularly sensitive, either. All three indictees have been exonerated ... but where does John Conklin go to get his career back?

Phantom redux: Defying the odds, the Venetian's production of Phantom of the Opera celebrated its third anniversary Wednesday night. I jotted down a few observations for CityLife. (Tina Walsh fans, take note.) Having seen the Broadway production -- albeit many years ago -- I'll be the first to allow that it actually improves on the original in a respect or two. Oh, and my CityBlog entry misspells choreographer Gillian Lynne's last name. My apologies.

Two titans of American popular music "played Vegas" last weekend. Actually, Loretta Lynn was in North Las Vegas and Aretha Franklin all the way out in Primm ... not remotely near the Strip. What's wrong with this picture? Or this one ...

Midnight Jim: taking down Big Oil

It's summer and gas prices are -- like, duh! -- on the increase. Gov. Jim Gibbons doth suspect that dark, foul, untoward schemes are afoot. But Midnight Jim assures us he is on the case. I feel safer already.

Gay cowboys. They're queer, they're here and they're at The Rio specifically. A straight-gay coalition turned out in force last night to celebrate its victory over Midnight Jim's benighted opposition to domestic partnerships. (Because that's not how he rolls, y'see.) Speakers included Harrah's Entertainment Vice President Jan Jones, who led the charge on Carson City.

For all the failings of CEO Gary Loveman's stewardship of Harrah's, on his watch the company has expanded its already-enlightened attitude on social issues. It's not just a question of being gay-friendly; it's good business.

Worth -$23 million?

Isle of Blight. Is the woebegone Greek Isles casino-hotel worth less than nothing? In a sense, yes, since it owes $67 million on a book value of $44 million. Even a resale price at book value seems wishful thinking, considering the Isles' chequered history.

Asserts the Las Vegas Sun, "With its strategic location near the Las Vegas Strip and the Las Vegas Convention Center, the Greek Isles and its associated real estate are seen as having long-term value after the recession ends."

Yeah, but it's had that "strategic location" for as long as it's been in existence and the Isles' progress has been a steady one from Bad to Worse. I wouldn't give a plug nickel for the place -- not with Strip land prices in freefall and vast acreage there lying fallow.

Miracles are possible. Work on Marina Bay Sands is, believe or night, a fortnight ahead of schedule. Next step: Hold the line on that (already swollen) $5.4 billion budget.

The waiting continues in the great state of Kansas. Its lottery commission wants another two months to review applications for the Wichita and Kansas City markets. Considering the recent flurry of dropouts (including Vegas' own Golden Gaming), you'd think this would expedite the process. Instead, the coronation is six months away.

Squeeze play. No time is being wasted as Pennsylvania rushes toward expanding into Class III casinos. Two rival proposals to add table games are presently on the table. Casino lobbyist Steve Rittvo is forwarding a plan that would tax new games at 12%. This is projected to generate $165 million for the Keystone State (assuming that slot play concurrently increases sufficiently to generate a $61 million impost).

House Whip William DeWeese (D) counters with a 21% tax, combined with a one-time $10 million/casino fee, for a potential Year One windfall in excess of $300 million. I wish Rittvo luck but fear that solons will -- as they so often do -- gravitate toward the bigger dollar sign. It's an institutional failing.

Neil Bluhm, Philadelphia's Sugar[House] daddy

On a happier note, Neil Bluhm's revised design for his Sugarhouse Casino, on the Philadelphia waterfront, has received the green light from the City of Brotherly Love. Barring further legal mischief by sore loser Donald Trump, this means the project can finally move ahead, with a temporary, 1,700-slot casino slated for a Spring 2010 opening. Hallelujah!

S&M at Station

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

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

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

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

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

By request ...

Wed, 24 Jun 2009 13:40:00 -0700

'Tis another day of hopscotching betwixt the doctor and the dentist, which sure cuts into quality blogging time (as did a nasty attack of fibromyalgia yesterday). However, by reader request, we present this special, (not) exclusive S&G photo of a special plenepotentiary Apollo [Mis]Management representative -- perhaps Leon Black himself ...

... contemplating piling additional money into Fontainebleau.

Serously, overspending -- not lack of business -- is what really got this town into its present pickle. Profligacy and/or dangerous incompetence at the highest levels are the true culprits for the Vegas meltdown. Yet it is people like maids, cocktail servers, security staff and -- by extension -- customers who are literally paying the price for clownery in the executive suites.

F'bleau and Cosmopolitan need to take a page from the Echelon playbook: Say "that's a wrap" and wait 'til the economy improves, attendant litigation is settled and the tsunami of new hotel rooms that is CityCenter has ebbed a bit. We don't need multiple new megaresorts now for the simple fact that the market will not support them.

Then again, if Harrah's Entertainment or Wynn Resorts wants to sail its luxury liner straight into the Big Bleau iceberg (or the Cosmo) ... it's their money. Just don't complain to the press when you can't get triple-digit room rates, 'kay?

"Peep" slow

Mon, 22 Jun 2009 02:44:00 -0700

Saturday night's 8 p.m. performance of Peepshow played to an audience one might describe as "pitiful." If the auditorium was even half-full, I'll eat my hat. Planet Hollywood has got to be beseeching the heavens that the curiosity/trainwreck factor of adding Holly Madison will get bums in the seats and that Shoshana Bean will keep them coming back. We're talking wing + prayer, folks.

Rump faction: Mel B. with the star of Peepshow.

If you've not seen "original cast" Peepshow, I'll confine myself for now to two observations: A) it's a 75-minute tribute to Mel B.'s derriere -- which is admittedly spectacular -- and; B) Kelly Monaco has the easiest paycheck in show business. Her once -- and future? -- General Hospital costar Nancy Lee Grahn was sitting in front of us.

As star sightings go, that wasn't quite up there with Rita Rudner taking in Sunday night's performance of Patti LuPone: The Gypsy in My Soul at The Orleans. If a meteorite had, God forbid, fallen on the Orleans Showroom, Las Vegas' gay community would have been annihilated. The same projectile could strike Peepshow and miss all four spectators in attendance.

Station 1, Boyd 0

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

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

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

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

Rumble in Macao

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Macao: Genting in, MGM out?

Fri, 29 May 2009 13:22:00 -0700

I've speculated elsewhere -- I believe it was on the TwoWayHardThree forum -- that Genting Bhd might be a logical, even inevitable successor, should MGM Mirage bail out of Macao. Seems that while I was laid up, news surfaced that Genting insiders are selling shares and rolling up a $425 million nest egg. They've also snapped up $100 million in secured MGM Mirage notes.

MGM Grand Macao co-owner Pansy Ho's dad, Stanley Ho, has played footsie with Genting in the past -- something the Singaporean government frowned upon fiercely. Hence the delicate footwork that key Genting players will have to execute if they're to convince Singapore (where Genting is building a multi-billion-dollar resort) that there's more than an arm's length between any potential dealings with the Ho family and Genting's investments on Sentosa Island.

That'll be a difficult minuet to dance but for what's been called "the golden ticket" -- entry to Macao -- Malaysian investors would surely find it worth twirling an ankle or two. Unless Boyd Gaming has waived its right of first refusal on Borgata, this sudden accumulation of Malaysian cash can have one purpose only.

Station: Unleash the hounds!

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

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

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

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

Pansy Ho: time for Plan C

Fri, 22 May 2009 18:12:00 -0700

In my usual cart-first, horse-later fashion, I elicited a legal opinion regarding the scenario I postulated the other night: MGM Mirage spinning off either its Atlantic City holdings or MGM Grand Macau into a quasi-autonomous entity, much as Sheldon Adelson proposes to do with his Macao properties.

Well, unless Pansy Ho can sit down with the New Jersey Casino Control Commission and charm them into turning a blind eye to the penumbra of unsavoriness that surrounds her father, Stanley Ho, MGM is up against a wall. It could put MGM Grand Macau into a limited partnership in which it would have equity but no power.

Did MGM spend so much time and money getting into Macao just so it could be a passive investor? Probably not. So either MGM has to scrape together the cash to buy out the Ho family or Pansy and her sister can exercise their right of first refusal on the property.

Likewise, Boyd Gaming holds the prerogative of acquiring MGM's Borgata share, but of all the possible scenarios on deck, that appears the most unlikely. Here's why:

Borgata represents no ongoing cost to MGM. It can sit back and collect 50% of the profits in perpetuity, while Boyd does the heavy lifting. In Macao, not only does MGM have to run the place, it's in a market with narrower profit margins, thanks to a confiscatory tax rate and the commissions charged by junket operators -- to say nothing of the draconian meddling of the Chinese government. And if it's relying solely on mass-market play, it's not enough to get MGM out of single-digit market share.

MGM took too long and spent too much getting into Macao to be happy with being stuck in sixth place among operators. If it's going to have to amputate a limb, losing Macao may be the less painful cut.

It could also be the more lucrative one because, even in a down market, Macao has two very price-boosting qualities: a finite number of casino concessions and a comparable limitation on casino-zoned land. Neither freeze is likely to thaw anytime soon.

Macao is still a seller's market. But if Boyd were to decline its option on MGM's half of Borgata, other suitors are going to be very hard to find. Nobody wants in on Revel or Bader Field and the Tropicana is essentially being given away. The accomplished Ms. Ho could still pull MGM's chestnuts out of the fire but if she can't, her family could wind up with 2.5 of the six casino concessions in Macao.*

* -- slightly more, actually, as James Packer's stake in Melco Crown Entertainment is exceeded by that of Lawrence Ho.

Quote of the Day

Thu, 21 May 2009 18:09:00 -0700

A certain casino.

"The old timers will remember the time, and not that long ago, when casinos just looked at your action and rewarded you accordingly. They figured everyone wins at least part of the time, and they knew that if they cultivated the customer and encouraged him to continue to play, they would usually still make money on him in the long term. Bean counters are big on looking at the short term!" -- Jean "Queen of Comps" Scott on certain casinos that are sweating slot-club points and bounce back something fierce.

Surrender in Atlantic City?

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

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

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

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

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

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

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

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

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

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

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

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

The MGM/Pansy Ho verdict: It's in and it's bad

Tue, 19 May 2009 11:15:00 -0700

After nearly four years of investigation, the New Jersey Division of Gaming Enforcement has released its long-awaited "suitability" findings on MGM Mirage joint-venture partner Pansy Ho. As MGM itself reported to the SEC yesterday, "While the report itself is confidential, at the conclusion of the report, the DGE recommended, among other things, that: (i) the Company’s Macau joint venture partner be found to be unsuitable; (ii) the Company be directed to disengage itself from any business association with its Macau joint venture partner; (iii) the Company’s due diligence/compliance efforts be found to be deficient; and (iv) the New Jersey Commission hold a hearing to address the report."

The grinning ghost of MGM Grand Macau

While the reason for the DGE's disapproval isn't given, it's also not difficult to guess. When someone with the sleazy reputation of Stanley Ho has an interest in your casino -- by dint of loans to two of his daughters -- a jurisdiction that takes probity as seriously as New Jersey is unlikely to give its benediction.

Slightly further down in its SEC bulletin, MGM offers one of the most Pollyanna-ish statements of recent memory: "The Company does not believe that the report will have a material adverse effect on it."

Let's back up a second. The matter of Ms. Ho now goes to the New Jersey Casino Control Commission for adjudication. The NJCCC is not obligated to act on the DGE's findings. However, the last time it exercised such discretion, it was to override the DGE's recommended probation for Columbia Sussex in favor of kicking ColSux out of the Garden State forthwith.

So the likelihood is that MGM will be faced with a choice between liquidating its New Jersey holdings or its Macao ones. The latter include a 50% stake in Borgata (and Boyd Gaming can afford to buy its partner out), plus some undeveloped land, which will be a much tougher sell.

As for MGM Grand Macau, it would revert to the Ho family. MGM could still, in all probability, count on an ongoing stream of revenue by leasing out the brand name or even by negotiating a management contract for itself (although management is rumored to have been the casino's Achilles heel).

Unless the NJCCC grants clemency (in which case, MGM loses face but nothing more, as one analyst puts it), "material adverse effect" is inevitable. But there may be a silver lining for CEO Jim Murren. He was able to get debt-covenant violations waived in return for an accelerated repayment of the company's whopping debt load. The diñero from a Borgata or MGM Grand Macau sale would come in mighty handy as the company tries to de-leverage itself.

Walking (out) in Memphis. A 21-year veteran of the Harrah's Entertainment hierarchy resigned last week, another casualty of the company's downsizing.

And then there were 135. It used to be the execs jumping from the sinking Cosmopolitan ship reached for a lifeline from Fontainebleau. Now they'll be looking for another rescue vessel. (Hey, the Tropicana may be hiring soon.) A F'bleau spokesman says negotiations with Deutsche Bank are continuing, in a notable ratcheting-down of the bellicose rhetoric that's been lobbed to and from F'bleau of late.

Heard last night as part of an act at Sin City Comedy, re the Vegas Trop: "A $20 bill and all my teeth -- I'm a whale!" Conclusion: Alex Yemenidjian cannot arrive soon enough.

(Slots A) Fun Fact

Fri, 15 May 2009 12:22:00 -0700

I've just read that the 2008 cash flow for Slots A Fun, the crown jewel of what used to be Circus Circus Enterprises, was $2.8 million. Which means that current owner MGM Mirage could justify a sale price of $22.5 million-$28 million. (Penn National CEO Peter Carlino, this is your chance!)

Then again, MGM could sell Slots A Fun four times over and probably still not recoup the cost of its Criss Angel vanity project, Believe.

Atlantic City gets a monorail. And other infrastructural-type stuff. That $3.6 billion would probably be better invested into building two or three new casinos, not to mention getting rid of those Colony C(r)apital grind joints.* New Jersey Gov. Jon Corzine (D) thinks Atlantic City's recovery is on the way. But as long as the market breaks down -- as its revenues do -- into Borgata and Everything Else, "recovery" will just be a euphemism for "much slower rate of decline."

* -- If banks won't underwrite new development there, why -- laws permitting -- shouldn't the state? I'm just askin'. The alternative is pretty bleak.

This just in: Yes, TV ads for impotence drugs (think of "Viva Las Vegas" debased to "Viva Viagra"), with their tacky innuendi, are embarrassing (albeit not as much as those for incontenince drugs). But Congress has slightly better things to do that adopt the proposal of Rep. Jim Moron, er, Moran (D-VA) to force them off the air ... least not untl it's amended to outlaw any TV programming featuring the bloated visage, voice and ego of failed casino boss Donald Trump. (Sorry; can't link to the Yahoo News video. I tried.)

"Another one bites the dust"

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

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

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

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

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

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

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

Just a thought.

Perp Show

Thu, 14 May 2009 12:38:00 -0700

If you're bald, weight 285 lbs. and have one arm in a cast, you're not exactly inconspicuous. So how was it that that such a hefty man was to infiltrate a VIP area of Planet Hollywood and bust into Peepshow headliner Kelly Monaco's suite? It gets weirder: Merrill Wetter was a long-term denizen of Planet Ho and had been 86'd last month for following a money cart around. And yet his reappearance on the 50th floor didn't raise any alarms, literally or otherwise. This new information suggests a serious lapse of security at Planet Ho, something that the Nevada Gaming Control Board might want to investigate.

April in Atlantic City. The numbers are out and they suck. Again. Unless you're Borgata, which was basically flat with April '08 -- a veritable triumph in this context. The Showboat didn't do too badly (-7%), pushing ahead of the larger Tropicana Atlantic City (-21%). However, another Harrah's Entertainment property, Bally's Atlantic City is way off last year's pace (-19% YTD) and risks joining the Dead Man Walking quartet of Trump Marina, Trump Plaza, the Hilton and Resorts.

The partial reinvention of Trump Taj Mahal continues to pay off, with gaming win down less than 1% through the first four months of the year. Don't you wish we had this kind of reporting transparency in Nevada?

Reid's smooth ride: Would-be GOP challengers to Sen. Harry Reid (D-NV) are not only thin on the ground they're probably hearing casino-industry check books slam shut after the Senate Majority Leader jawboned banks on behalf of CityCenter and Fontainebleau. (It was a futile effort but, at this particular moment, that says more about the lending-averse banking industry than Reid.)

Party leaders say a "highly motivated" "strong GOP challenger" is out there and will emerge ... in five months or so. The only person shaking the money tree so far is former state legislator Sharron Angle. She'd rough Reid up, to be sure, but has an Achilles heel or two. To date she's been a single-plank candidate -- property taxes; not what you'd call a senatorial issue. Also, state GOP chairwoman Sue Lowden doesn't want a divisive primary ... and Angle was very divisive when she ran against Dean Heller (R-NV) three years ago for the congressional seat Heller now holds. She even tried to have the primary results overturned in court. But for now she's the only game in town.

Double duty: For the unforeseen future, I'll be spelling the estimable Dave Surratt as CityLife's theatre critic. First up is a show directed by Zumanity emcee Christopher Kenney. Called The Facts of Life: The Lost Episode it's ... it's ... well, it's different.

Quote of the Day

Wed, 13 May 2009 12:31:00 -0700

"We don't see them getting worse. The problem is we don't see them getting better." -- Boyd Gaming CEO Keith Smith on 2009-10 tourism statistics for Las Vegas.

Station ixnays expansions

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

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

Castaways Station, we never knew ye.

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

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

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

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

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

Exit, pursued by a bear market

Fri, 17 Apr 2009 17:39:00 -0700

Aside from the occasional murmur by Wynn Las Vegas prexy Andrew Pascal, executives at Wynn Resorts keep a low (read: invisible) profile. Even the most assiduous follower of the casino industry would have trouble naming Wynn's CFO off the cuff. If you answered, "David Sisk," as of last Monday you'd be wrong. The contours of his golden parachute strongly suggest an involunatry exit, softened by at least $767,000 worth of severance pay, plus a limited-time offer of stock options.

One can't fault the generosity of Mr. Sisk's deal: He's to be paid a year's salary at pre-rollback rates and, from what little information is disclosed, it doesn't appear that he's bound to a non-compete clause. Odd that Wynn would do this without having a successor in the wings. Of course, there are more than a couple of ex-Las Vegas Sands and Harrah's Entertainment executives updating their resumés these days.

"Encore, me no like!" According to Majestic Research analyst Matthew Jacob, customers are having a tizzy over Encore's "chambered" casino layout and gravitating back to more traditional Wynn LV. So what plays in Macao may flop in Vegas, huh? You can't fault El Steve for trying. Jacob is predicting a squishy 1Q09 for Wynn Resorts, compounded by a first-ever patch of adversity at Wynn Macau.

Jacob is also the star of this CNBC segment on the gaming group, politely wiping the floor with Gabelli Global Multimedia Trust's Larry Haverty. The latter's declaration that resiliency in regional casino markets bodes an imminent recovery of Las Vegas, though we all wish it were true, is a textbook instance of 2+2=5.

Barring Atlantic City and the wholly aberrant phenomenon that is Illinois, regional markets have never slumped as badly as Vegas is doing and were much quicker to recover. Regional diversification is a double-edged sword for gaming: It's a valuable hedge against a wipeout in one key market, but it also gives customers that much less incentive to travel to Vegas or the Boardwalk when big-budget casino properties are coming closer and closer to home.

Haverty also goes off the rails vis-a-vis MGM Mirage's Aria and server-based gaming, predicting successful adoption at CityCenter will spur a wave of emulation. Yes, but ... not so fast. First, the economy will have to come firmly out of its present nosedive before casinos contemplate capex spending of that magnitude. Secondly, some of SBG's largest potential consumers -- like Harrah's Entertainment, Station Casinos, Las Vegas Sands and even MGM are so badly in hock that they're in no position to participate in a major replacement cycle. Furthermore, I don't believe International Game Technology expects more than, at most, an initially slow and incremental adoption of SBG -- an infiltration of casino floors, not a blitzkrieg. But if you're looking at IGT as a long-term investment, a drawn-out replacement cycle would probably be a more desirable scenario anyway.

There's nothing in exceptionable in Jacob's half of the interview. His more finely shaded and detailed observations contrast favorably with Haverty's scattergun generalizations. And while I agree with the latter's enthusiasm for Boyd Gaming, it's a mite premature to be toasting Pinnacle Entertainment. If Pinnacle hadn't gotten bogged down in Atlantic City and were making a more appreciable dent in the St. Louis market, then I'd raise my glass without reservation. When Pinnacle was in acquisition mode there were few assets for the taking. By the time that buffet was replenished, Pinnacle's plate was full to overflowing.

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

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

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

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

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

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

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

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

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

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

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

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

Leper Colony

Fri, 03 Apr 2009 17:05:00 -0700

Or, in lieu of "Atlantic City Death Watch VII," maybe "Colony Death Watch." Scarcely had S&G dubbed Colony Capital's East Coast casino portfolio "Colony Crapital" than came affirmation in the form of the latest set of numbers from the Boardwalk.

First, the good news. Everyone in Atlantic City reported a profitable operating margin last year as well as a gross operating profit. As the Press of Atlantic City explains, "Net income, however, is not considered as important as gross operating profit, which is seen as the best way to measure a casino’s financial strength."

For instance, Harrah's Entertainment had the two best operating margins in the city (at Caesars A.C. and Harrah's Marina) and four of the top five. In gross operating profit, the Harrah's-owned quartet held the #2-3 and #6 spots, bested only by Borgata (#1, of course) and Trump Taj Mahal. However, thanks to some accounting jiggery-pokery back at corporate HQ, all four posted year-end losses -- some of them gargantuan, like the -$355 million charged against Caesars. Only Boyd Gaming's Borgata reported a profitable 2008. In terms of revenue, it was so far ahead of everybody else -- by $280 million -- it's not even funny.

For Harrah's Marina, the good news was triplefold. Not only did it have the smallest diminution of gross operating profit (-1%), it was also the sole casino to record an increase -- 8.5% -- in revenue.

Harrah's operational skill aside, UNLV's David Schwartz found another silver lining. To wit, "I’m surprised that gross gaming revenues fell by only 7.1%. For all of the belly-aching about the partial smoking ban and competition from Pennsylvania, Atlantic City’s gaming win actually declined less than Nevada’s, which shrank by about 10%. People are still willing to come to Atlantic City; they are just gambling less." [Emphasis added.]

Now for the bad news. The two lepers in the A.C. colony are -- you guessed it -- Resorts Atlantic City and the Hilton. Those two Colony Capital casinos posted extraordinarily dismal numbers, even by last year's low standards. Their operating profit margins were less than 2%, against a market average of 21%, and their gross operating profit was $6.3 million ... combined. In a year when the average Atlantic City casino saw a gross operating profits fall 25%, Colony's duo crash-dove -88% and -89%, respectively.

Compare this to Trump Marina. Even in a semi-orphaned state, as its sale dragged on (and on), the future Margaritaville garnered superior operating profit margin -- 7.5% -- and a far bigger operating profit on the smallest revenue base in the market. It reported gross operating profit of $15 million on revenues of $195 million. Somebody's doing something right and it's not Colony's Atlantic City braintrust.

Does Colony know how to pick 'em or what? And is MGM Mirage sure it wants to get into bed with these guys? They're starting to make James Packer look like a sagacious casino mogul. As for the Hilton, which used to be Steve Wynn's Atlantic City Golden Nugget, suffice to say it's seen better days.

Casino apocalypse

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

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

Death, taxes and Station Casinos

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

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

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

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

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

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

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

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

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

Barrick Gold: $27.5 billion

Newmont Mining: $18.72 billion

Wynn Resorts: $2.37 billion

Las Vegas Sands: $1.46 billion

MGM Mirage: $959 million

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

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

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

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

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

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

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

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

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

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

'M' is for 'mobbed'

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

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

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

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

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

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

Quote of the Day

Wed, 11 Mar 2009 14:19:00 -0700

"If only Boyd had thought of this! They could have had tourists PAYING to help them complete Echelon. The only thing I don't get is the air-conditioned cabs. That hardly seems like a realistic adventure." -- Steve Friess on the newest Vegas attraction, "Play with our Cats," in which you pay for the privilege of tooling around in construction vehicles.

Boyd cuts through the crap

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

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

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

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

Frank Fertitta III: superfluous?

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

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

Scant love for Boyd, big love for M

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

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

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

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

Harrah's new Atlantic City pitch

Wed, 04 Mar 2009 11:56:00 -0700

Harrah's Commercial 1 from emily chang on Vimeo.

Two minutes of Asian American-oriented marketing messages, all of which boil down to, "Atlantic City: It's not just for gambling anymore." Lots of Total Rewards pluggery, as you'd expect, but oddly no mention of the new ACES train, of which Harrah's Entertainment is a co-sponsor (with Borgata).

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

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

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

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

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

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

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

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

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

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

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

You might call that the $5 Billion Question.

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

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

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

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

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

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

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

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

This is your industry on crack

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

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

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

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

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

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

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

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

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

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

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

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

"Sin City Express"

Fri, 27 Feb 2009 13:37:00 -0700

Expect to be hearing that catchy new canard a lot, not to mention the "Las Vegas to Disneyland" little white lie that Gov. Opie Jindal (R-LA) trotted out in his Tuesday-night audition for the 2012 presidential nomination. "Vegas to Disneyland" is, of course, a linguistic formation sure to stoke the ire of the "family values" crowd far more than the fiscal-restraint one. A jab that might possess some heft were it coming from Vegas-friendly Sen. John McCain (R-AZ) rings hollow when spouted by politicians who are anti-gambling cranks opportunistically masquerading as fiscal conservatives.

Then there was the Tennessee congresswoman whose official Web site informed constituents that the train would run from "Los [sic] Vegas to Las [sic] Angeles." Your tax dollers [sic] at work, folks. Perhaps federally funded literacy programs should start with remedial classes at the Capitol.

As for "Sin City Express," if the feasibility study goes well and if the Anaheim-to-LV route is approved and if it can be financed (a whole lotta "ifs"), we ought to call the mag-lev train precisely that, just to make its detractors suck on it. For that matter, why is the need for high-speed rail of any sort open to debate? Do we pride ourselves on taking a back seat to other industrialized nations?

In the meantime, deficit hawks and pietists bicker amongst themselves. And Howard Stutz makes a trenchant observation: The fortunes of Lousiana -- where Harrah's Entertainment and Boyd Gaming are major employers -- are tied to those of Las Vegas. Maybe Jindal would like to take a long, slow ride on Amtrak and think it over.

"Singapore City Express": No cost overruns at Sands Marina Bay, quoth Sheldon Adelson. Unfortunately, his "no significant changes" comment begs the question of whether the $5.4 billion figure represents the actual budget or whether the tab is still in the neighborhood of $3.2 billion. If it's the latter, perhaps Sands still can make this mega-gambit pencil out.

An anonymous Harrah's bondholder

No harm, no foul: At first blush, Harrah's Entertainment has lined up strong arguments for dismissal of a bondholder lawsuit. The only non-starter would be appear to be Argument #1 -- the assertion that bondholders have suffered no harm -- which, at minimum, "assumes facts not in evidence," as the saying goes. When debt is being swapped out at a 40% writeoff, somebody's taking an uncomfortably close shave, to say the least.

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.

Gibbons retreats, sorta

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

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

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

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

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

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

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

Case Bets: Penn in Vegas, Fontainebleau, Fine Cotton R.I.P.

Sat, 21 Feb 2009 15:05:00 -0700

Phil Hevener, the guy who was onto the Imperial Palace sale before anyone else, says Penn National pitched offers for not only The Mirage but also Caesars Palace ... at insultingly low EBITDA multiples (see bottom of story). The Strip has seen much better days but it's not a flea market.

Et tu, F'bleau? It hasn't even opened and already Fontainebleau's viability as a going concern is in doubt. Those thousand condos represent a giant millstone around the resort's neck; the relationship between Vegas casino operators and the condo business has been akin to that between lemmings and the sea. Already, it's looking like a rerun of the Harrah's/Station scenario: Partial recovery for senior debtors and a dime on the dollar for junior ones.

See no evil, speak no evil. A robbery was committed at a casino "in the 4000 block of West Flamingo Road," an address that just so happens to exactly coincide with the Gold Coast. (The Palms is in the 4300 block.) This is at least the third time that I can recall offhand in which the location of a casino robbery was obfuscated by local law enforcement -- nor the first time that Las Vegas Metro has placed a higher priority on protecting casinos' images than on solving crimes. It might be easier to find witnesses if you told the public where the crime took place, no?

I got a horse right here, his name is not Paul Revere and if you backed this horse you had quite a lot to fear. A quarter-century ago, literal also-ran Fine Cotton wound up at the center of a bizarre racing-fraud scandal involving a -- get this -- impostor horse. Could Dick Francis have dreamt up a better yarn than this?

Station to the rescue. With Thunder Valley execs given the chop and new managment parachuting in from Station Casinos, work has resumed at the Sacramento-area casino-resort -- after some downsizing of the original expansion plans. Kudos, Station.

Joint 2.0

Fri, 20 Feb 2009 16:48:00 -0700

Yesterday, a large gaggle of local media traipsed through the Hard Rock Hotel & Casino's in-progress new version of The Joint (or Joint 2.0, if you will). Those on hand included Mike Weatherford and Jason Bracelin from the Las Vegas Review-Journal, City Life's Mike Prevatt and Dave Surratt, as well as a gushy, gung-ho reporter from KLAS-TV, among many others (but not "the Hindenburg," thankfully).

As is the case with many a hard-hat tour it bordered on pointlessness, in that you're looking at an empty concrete shell much of the time. Only the stage (40 feet deep, with a 69-foot proscenium) actually resembled what it will eventually become. The stage's dimensions, we were informed, match those of the Aladdin Theater for the Performing Arts ... site of ABBA's only Las Vegas appearance, by the way.

Why these preview tours aren't given when the facility is in some semblance of finality is one of the enduring mysteries of Las Vegas. Hence, computer-generated renderings will have to provide an idea of the finished product, which ought to look very much like this:

All those seats can be stored beneath the stage on a series of beds that roll out at the touch of a button, yielding this look:

As you'll see, the sound-and-lighting booth has been moved to smack-dab in the middle of the main floor. Not only will the stage be flanked by giant video screens, a third, even larger one (18' X 24') will hang at the rear of the set. Other technical specs include:

• A 96-channel mixing board • 12 subwoofers, distributed in clusters of three apiece • 23 "delay" loudspeakers (presumably to simulate the resonance that is being soaked by the acoustical-absorption material that will cover many of the surfaces) • 38 small-ish flat-screen TVs • four video projectors • 28 moveable lights • a live-blogging station for media coverage • WiFi access throughout.

As big as it looks, the furthest seat is 155 feet from the stage and I can report that the sightlines are excellent (something that could not always be said of Ye Olde Joint, with its flat main floor). If your taste runs to blood sports, Joint 2.0 can be rejiggered to host wrestling, boxing and mixed martial arts, like so:

HRH exec Paul Davis said the goal of the new facility was to cosset "arena-sized productions in a small-capacity [4,000-seat] venue." Why upsize the old Joint? The market has changed, particularly in terms of the size of the shows -- and the guarantees demanded by the artists themselves. ("We're doing our best to keep ticket prices in check," Davis promises.)

Aforesaid artists shan't have to mingle with regular people, as they can go straight from a loading dock that accommodates three buses or trucks to a four-dressing-room backstage area, augmented with a luxurious green room. The latter is connected via a spiral staircase to Wasted Space, if the artist feels like a late-night jam session.

Keeping with the current Vegas spirit of pointedly sequestering the haves from the have-nots, the second floor of Joint 2.0 is all-VIP. The side balconies will be outfitted with highboy tables (it's standing-room only one floor up) and the middle of the tier is given over to seven luxury suites, approximately 430 square feet apiece. Some can be made even larger still, thanks to retractable walls. There is seating for 12 or ...

... an ottoman-laden lounging area, if you can't be bothered with watching the concert. Back on the main floor ...

... the foyer and back-bar area are spacious indeed. The style of the railings (not shown) is carried over from the previous Joint. The walls are done in the style of a guitar fretboard, one which we were assured is musicologically correct.

The HRH was able to obtain Paul McCartney as its first superstar act because -- as Davis put it -- "He wanted a down-and-dirty, old-fashioned rock 'n roll show," where he could see "the fans right down in his grille" The fact that the Joint's opening coincides with McCartner's Coachella gig didn't hurt either. General Manager Yale Rowe said "all the stars aligned" to land McCartney in the HRH's lap. "We were quite conscious of having multiple styles [of music]. We wanted to have a mega-concert that was going to open The Joint."

Open the doors and see all the computer-generated people!

Back when Ed Scheetz was still calling the shots at HRH minority owner Morgans Hotel Group, he identified Priority One as raising ADRs at the property. Rowe says that goal met with "great success" initially, when the Vegas market was at its zenith. "The consumer is almost dictating what the price points are going to be [now]," he added, noting that the Hard Rock's room rates aren't as resilient as those for most Morgans properties, though not as depressed as those of Vegas in general.

The Joint represents $60 million of a $750 million expansion, stacked atop the $770 million Morgans (or rather, its bank) paid to acquire the HRH. Much of that money is also going toward 60K square feet of convention and meeting space. Hence the 860 additional hotel rooms, in two towers, that are coming on line in August and December, respectively.

Another reason for the more-than-doubling of the property's room capacity is that, according to Rowe, the HRH has been doing spectacularly well with high-end play, save one respect: "We haven't had the room space that satisfies their discerning requests." And anyone who's followed the "Omar" Siddiqui* scandal knows just how unpleasant a dissatisfied high roller can be -- sort of like unfed infants, only more hysteria-prone.

(* -- Turns out Siddiqui's luck wasn't entirely bad. It seems he cleaned the clocks of Tim Poster and Tom Breitling back when they owned the Golden Nugget.)

HRH officialdom keeps voicing the refrain that their project has been "fully financed" since Homer was a pup. In light of this, a question was irresistible: Why didn't Morgans finance its pre-existing commitment to Echelon instead of channeling all that dough into the Hard Rock? How did the latter jump to the head of the financing queue? (It was Morgans' terminal fecklessness that helped send Echelon into cold storage, though that may yet prove a blessing in disguise.) Morgans says they'll get back to me on that but I'm not holding my breath.

While gambling still represents but a third of the HRH's cash flow, Rowe adds that he "always gave Hard Rock the credit for debunking the theory that all the revenue had to come through the casino." He also praises Peter Morton's regime for proving that the pool could be a major source of lucre. As for the current decline, he says it's consistent across all departments of the property. Allowing that it's "tough not to clamor up and play defense all the time," Rowe says, "We still succeed in getting volumes of people" into the place ... although the casino floor was utterly dead on Thursday. It can't help that construction has rendered the HRH damn near inaccessible.

The only bad news regarding The Joint is that, from the outside, it looks like somebody has flung a big-ass, off-white warehouse on the Paradise Road side of the HRH. Between that and a new parking garage and hotel tower on Harmon Avenue, Morton's original boutique hotel is almost completely masked from the street. A couple of Hard Rock neon icons on the exterior of Joint 2.0 will provide scant relief from what can only be described as a ghastly design miscalculation.

At least this will remove any ambiguity from giving directions to the HRH in the future: "It's the huge, fugly jumble of stuff down there; you can't miss it."

Looking for good news in Vegas

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

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

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

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

Echelon: Stopped in the nick of time.

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

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

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

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

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

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

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

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

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

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.

Boardwalk bummer

Tue, 10 Feb 2009 15:42:00 -0700

In short, January's Atlantic City revenue numbers are -9% at the tables and -10% in slots. The glass-half-empty spin is that this is the third straight year of decline. The glass-half-full perspective would be, yes, but it's -9% the fifth-highest January in Atlantic City history (with '06 being the high-water mark). And if you were at Trump Taj Mahal, you had no complaints whatsoever.

In sheer dollar volume, Bally's Atlantic City got hammered, down from $45 million to $37.6 million. Only the newly revamped Taj posted an increase in revenue, going from $38 million a year ago to $42 million this year. The in-flux Trump Marina (-8%) has at least temporarily bottomed out -- at last place in dollar volume, behind even insolvent Resorts Atlantic City. (Because of disparities of scale, this can be a deceptive metric, though.)

Aside from the Taj's non-aberrant 10% gain, the closest thing to victory could be declared by Harrah's Marina, only -2%. Both properties cleaned up at the tables (+22% and +19%, respectively), while Borgata did so at the slots (+16%) -- a good thing in the latter case, because the Boyd Gaming property got slaughtered in table play, -26%. However, it could take cold comfort in the fact that Trump Plaza (-29%), the Atlantic City Hilton (-32%) and Resorts (-36%) all fared worse. Luck just isn't with Resorts/Hilton owner Colony Capital these days.

The second-best showing in slot win was the Taj (+2%), with the Tropicana Atlantic City in third place with -6%. The worst clobberings were absorbed by Resorts again (-22%), Bally's (-23%) and Showboat (-24%). Overall, the Taj edged Caesars Atlantic City (-8%) out of the top tier, back toward the Trop (ditto). Thanks to the Taj makeover, Atlantic City has four "haves," four "have-nots" and a couple of Harrah's Entertainment properties that could go either way. Plus the ever-mystifying Trop, of course.

Bargain$ tonight in Vega$

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

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

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

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

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

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

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

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

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

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

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

Atlantic City Death Watch V

Mon, 26 Jan 2009 18:08:00 -0700

Joys, Shakespeare famously wrote, come as solitary spies while griefs arrive by the battalion. So it is with Atlantic City, where the bad news washes up along the Boardwalk in bunches. If you picked Resorts Atlantic City as the Casino Likeliest to Be Seized, you've just won the office pool.

In what would be an historic first, Resorts' mortgage holder wants Colony Capital -- which has missed three straight payments -- to surrender title to the property. Failing that, the New Jersey Casino Control Commission has been asked to sanction the seizure of the casino. And if Plan B doesn't work, Column Financial threatens to dispatch its agents on "cash sweeps" across the property. That's right, money could be commandeered straight from the casino floor in a forcible attempt to hold Colony to account.

If that seems harsh, imagine what might happen to you or I if we skipped 90 days' worth of house or car payments. Having snagged Resorts for a bargain-basement $140 million, Colony Capital proceeded to lumber it with 2.6X debt. It's the classic American story of our decade: mortgaged to the hilt, maxed out on the credit card and with no way to pay.

Should Column be successful in either of its first two proposed scenarios, it won't mean the end of Atlantic City's oldest casino. Colony's loss would become a nice little management contract for somebody else. (Maybe thrift-consicous soon-to-be-ex-Cannery Casino Resorts owners William Paulos and William Wortman should volunteer for the gig.)

With insolvency literally at Resorts' doorstep, the Tropicana in Chapter 11 and three Trump Entertainment Resorts casinos headed that way, Atlantic City faces a depressing prospect: Five of its 11 casinos could easily be in either bankruptcy or foreclosure by the end of next month. The market has boiled down to the Haves (Boyd Gaming, Harrah's Entertainment) and the Have-Nots (everybody else). As David Schwartz points out, while Pinnacle Entertainment may not have done itself a favor by tearing down the Sands, it probably kept the other small fry afloat that much longer.

Quote of the Day

Mon, 26 Jan 2009 15:03:00 -0700

"This was one of the smartest decisions Boyd ever made. They lost $500 million by stopping the project. If they had gone forward, they might have lost $5 billion and the company." -- Macquarie Capital analyst Joel Simkins on Boyd Gaming's stoppage of Echelon last summer.

Sign of the times

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

Today we honor Dr. Martin Luther King Jr. and his ennobling vision, which finally appears to be within reach. Of course, some have a different way of celebrating this ...

I think I missed the part of the "I have a dream" speech in which Dr. King foresaw 6X points in America's future. Anyway, we've heard and read about "The dream deferred." This year it seems to be "The dream downsized." Here's last year's MLK Day promo from the same casino chain:

So 1X fewer points and two fewer days in which to earn them. Don't tell me they're not sweating the comps here in Vegas. And that is something upon which men and women of all creeds, colors and nationalities can agree.

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.

Harrah's Chapter 11 Watch

Mon, 12 Jan 2009 17:02:00 -0700

Wait 'til the sun shines, Caesar.

Every so often there's a news story to which the only appropriate response is, "Holy shit!" Then again, it wasn't so long ago on the Vegas Gang that Jeff Simpson was reporting finding whole floors of Caesars Palace's prime real estate, its Augustus Tower, locked down. Harrah's Entertainment's decision to summarily pull the plug on the Octavius Tower is disturbing in one sense, as this will be the third stuck-in-the-mud project on the Strip (joining Echelon and the St. Regis). At least MGM Mirage is finishing the exterior of The Harmon before putting it onto the back burner.

(Update: Harrah's Jacqueline Peterson says, "The exterior will be finished.")

Then again, if the best rooms at Caesars are going unsold, Harrah's is hardly to be chided for choosing not to throw more money into a hotel tower that could easily be more of a liability than an asset, had it opened on schedule.

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

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

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

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

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

William Weidner exaggerates the extent of his political acumen.

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

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

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

21

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

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

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

Continued ...

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

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

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

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

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

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

• Gaming companies increase efforts to export their brands globally.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Scary clown at Echelon!

Tue, 16 Dec 2008 11:24:00 -0700

Let me say at the outset, I do not like Ronald McDonald. He gave me creeps as a child and still does. (The thought of him wanting to buddy up to you ... it's just disturbing.) The Ronald McDonald Houses, on the other hand, are a great and good thing.

However, after tasking MGM Mirage -- perhaps excessively -- over its $5K donation to Clark County's Music in the Schools program (a drop in the bucket in a year when Gov. Jim Gibbons is taking a flamethrower to Nevada's education budgets), some perspective is in order. MGM's donation absolutely blows away the meager $1,576.10 donated to Ronald McDonald House Charities of Greater Las Vegas at the opening of Viva McDonalds, the only part of the Echelon master plan to open as ... as ... well, as planned. (See the yellow box, halfway down the "Echelon" page.)

The guy in the goofy suit to Ronald McD's right is Mac King, magician and fellow alumnus of Macalester College. (He was two years ahead of me scholastically and remains light years ahead of me career-wise.)

At least RHMC of Greater LV doesn't need to feel quite so bad. It made out like a bandit compared to Mayor Oscar Goodman. He got a shoe.

Case Bets: Stanley Ho in Vegas?, HRH grows but Morgans shrinks

Thu, 11 Dec 2008 13:47:00 -0700

A local columnist raises the spectre of Stanley Ho getting back-door access into Las Vegas via James Packer's acquisition of Cannery Resorts. This isn't the first time I've heard this question raised and, call me complacent, but I believe it stems from confusion. Namely, a conflation of Crown Ltd., the umbrella under which Packer's U.S. casino investments are huddled, and Melco Crown Entertainment, his joint venture with Lawrence Ho, son of dear old Stan.

While the Packer and Ho heirs do business together in Macao (and belatedly tried to get into Singapore), there hasn't been a whiff of Lawrence Ho being involved in Packer's U.S. ventures. (Obviously, because we're talking about discrete companies here.) Concern about Stanley Ho getting his mitts into Cannery are not only a stretch, but far more of one than the worries that were aired when MGM Mirage built a casino in Macao that was half-financed with money borrowed -- by Pansy Ho -- from the ancient casino vizier.

Doom, gloom in context. While the headlines are full of apocalyptic pronouncements on the subject of October's Nevada casino revenue decline, note where it says these numbers are the lowest "since April 2005." That was when the Las Vegas economy was on an upward trend that would make "bargain" and "Strip" virtually oxymoronic. So 2005's good numbers become 2008's panic-inducers ... of course, Las Vegas' ability to sustain its ensuing merge-n-splurge spree (and the ensuing Excedrin headache of ebt) on 2005-level revenues is a whole 'nother story.

April '05 would postdate the point in our economy where Americans started saving money at a negative rate and living off credit. At the time (i.e., March of that year), then-Council of Economic Advisers Chairman Ben Bernanke said, as recounted in the Dec. 1, 2008 issue of The New Yorker, "the main source of imbalance in the global economy was not excess spending at home but, rather, excess saving in China ... "

Darn those party-pooping Chinese! Everything would be just ducky if it weren't for them! But seriously, folks ...

Hindsight being 20/20, this was probably the point where the casino industry ought to have recognized that the U.S. economy (goaded by three-plus years of easy-money policies at the Federal Reserve) was on an unsustainable course and started curbing its growth projections -- and development plans. Instead, it stomped on the gas pedal and we got (in no particular order) leveraged buyouts of Station Casinos and Harrah's Entertainment, crazy land inflation on the Strip -- peaking at over $40 million/acre, CityCenter, Echelon, Palazzo, Viva, umpteen failed or undersold condo projects, bankruptcy at Tropicana Entertainment and the Cosmopolitan, potential bankruptcy at Herbst Gaming and Isle of Capri, and now a loud screeching sound as the brakes are belatedly applied.

Morgans' Faustian pact. What doth it profit Morgans Hotel Group to acquire the Hard Rock Hotel & Casino only to sell it back to the bank in little bits and pieces? Morgans' stake in the exponentially expanding HRH barely exceeds 14% and is on track to get smaller still. Some of us thought from the start that Morgans had bitten more than it could chew. Or, to look at it another way, what a long, strange trip Morgans has taken to wind up with a glorified management contract.

Chrysler cars getting worse? Yup, it looks like another triumph for private equity buyouts.

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.

Case Bets: Hooters; Defection at Borgata; Yung vs. Butera

Tue, 25 Nov 2008 14:56:00 -0700

"All of the economists who gave us information predict 2007 is going to be a year where the economy slows throughout the country and Nevada. Then we will see a pickup in 2008-09." — Deborah Pierce, CFO, Hooters Hotel, Las Vegas, November 2006

With prognositication like that, no wonder Hooters has consistently fallen short of expectations.

Mullin mulls Oz offer. Shortly after he had to pink-slip several hundred employees, Borgata COO Larry Mullin relieved himself of duty. He's not falling on his sword but moving to greener pastures instead, becoming CEO of the casino division of Australian gambling firm Tabcorp. Which means he'll have four casinos to operate, not just one. Boyd Gaming's Bob Boughner, left twiddling his thumbs after Echelon's plug was temporarily pulled, will fill in at Borgata. Congratulations to Mr. Mullin on his new opportunity.

Leap of faith. Sure enough, it looks like any hopes Tropicana Entertainment CEO Scott Butera had of getting back into the good graces of the New Jersey Casino Control Commission took a massive hit below the waterline. They were torpedoed when Columbia Sussex CEO William J. Yung III unexpectedly paid a visit.

Why U-Boat Yung surfaced at the New Jersey Supreme Court hearing and where the heck Butera was is a good question -- as is how Butera managed to get blindsided by this PR disaster. Does Yung still fancy himself the string-puller at TropEnt? Was he trying to stick it to Butera somehow? Or was this merely another example of Yung's professed -- and sometimes demonstrable -- cluelessness about virtually everything on Planet Earth, up to and including documents he signs.

In any event, the sole shareholder of the company Butera ostensibly controls just trampled him like a rogue elephant. The odd Yung-Butera dynamic suggests conjoined twins who aren't on speaking terms but can't be surgically separated either.

If the NJCCC can somehow ignore the Yungian elephant in the middle of the room, there's a good argument to be made for letting Team Butera have a crack at the Atlantic City Tropicana ... especially after a state-appointed trustee left hundreds of millions on the table in a bungled sale of the property. But that's a mighty big "if" and the NJCCC probably hasn't the faith sufficient to make that leap.

Atlantic City Death Watch

Fri, 21 Nov 2008 17:38:00 -0700

New Jersey's Casino Control Commission has come out with a grim set of numbers regarding gross operating profitability in Atlantic City's casinos during 3Q08. And, as bad as these numbers sound, once the cost of operation is subtracted, a $121 million collective net profit in 3Q07 dissolves into a an aggregate loss of $78.5 million (a -$199 million swing, year/year).

If, to borrow a phrase from Chuck Monster, "flat" is the new "up," there's one clear winner in this bunch, a clutch of casinos that are doing about as well as could be hoped, a few that are cause for concern, and two that need to be rushed to Intensive Care. Without further ado ...

1. Harrah's Resort Atlantic City: -2% ($52M profit)

2. Trump Taj Mahal Casino Resort: -13.6% ($35M)

3. Trump Plaza Hotel Casino: -15% ($17M)

4. Borgata Hotel Casino & Spa: -17% ($61M)

5. Bally's Atlantic City: -19% ($43.5M)

6. Caesars Atlantic City: -22% ($49M)

7. Showboat Hotel Casino: -35% ($24M)

8. Tropicana Casino & Resort: -43% ($22M)

9. Trump Marina Hotel Casino: -36% ($7.6M)

10. Resorts Atlantic City: -62% ($3M)

11. Atlantic City Hilton Casino Resort: -73% ($3M)

The argument could be made that Trump Plaza and the Taj were low on the food chain already and had less room to fall. But that could also be said of Trump Marina and Colony Capital's two bottom-tier properties, not to mention the ailing Trop. The fact that Trump is maintaining its margins relatively well (except at the discarded Marina) also supports CEO Mark Juliano's contention that he's operating as thriftily as possible already.

With Station Casinos losing money, Colony can't look elsewhere in its casino portfolio for cash with which to prop up the Hilton and Resorts. Will they still be around when Revel opens? For the sake of their employees, I hope so. But it's not looking good.

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.

Gaming bosses step up

Fri, 07 Nov 2008 18:33:00 -0700

While some casino companies we won't name (coughBoyd Gamingcough) are responding this week to the bad economy with downsizing their workforce, others are setting a nobler example.

Executives at both Isle of Capri Casinos and Trump Entertainment Resorts are literally taking it in the wallet, sharing the pain that is customarily meted out to line employees. Trump spreads the sting of a 5% salary decrease across 21 executive positions. But even that noble gesture pales next to what happened at Isle. CEO James Perry, COO Virginia McDowell, Chairman Bernard Goldstein and Vice Chairman Robert Goldstein imposed a 25% -- 25%!!! -- pay cut on themselves, retroactive to Nov. 1. (You see why these are some of the most admired executives in the casino biz.)

Both companies are in serious turnaround mode and leadership is really putting its money where its mouth is with these sweeping moves, which should be a tonic for corporate morale. Isle will also be a little heavier in the wallet now that Executive Vice President Allan B. Solomon has stepped down and no replacement has been named. Solomon was part of the old Goldstein crew that led Isle to prominence but arguably stuck around too long while other companies caught up with and passed them.

Recently, MGM Mirage made a big show of forgoing end-of-year bonuses but, as you read here, that was a sham. Show me some Vegas bigwigs who did what the Isle and Trump brass did and then we'll talk. So might ex-Borgata dealer Stanley Silow, who took issue with management's resort to the meat-cleaver approach: "They're kind of cold about it. I know business has declined and all that, but they didn't even attempt to reduce hours. They just cut."

The morale-boosting gesture at Trump couldn't come at a timelier juncture. Third-quarter numbers were horrible, representing 74% of the $188 million TER has lost this year, including a $46 million markdown on the sale price of Trump Marina and a further $62 million, Marina-related writedown. The company says it hasn't laid off any employees this year (though some attrition appears to be taking place), which bolsters CEO Mark Juliano's contention that staff can't be reduced any further without shuttering big chunks of the operation. If there's a silver lining, it's that most of the lumps taken were in the nature of one-time charges and most of whatever bruising is likely to be done to TER this year has been done.

A guy who 'gets it.' Few TV reporters display any degree of expertise when covering the casino industry. A sterling exception is KVBC-TV's Steve Crupi, as this report on the potential collapse of Las Vegas Sands demonstrates. Very thorough. Crupi really knows his shit -- though I don't think he'll put that quote on his resumé.

Sanguine in Singapore

Fri, 07 Nov 2008 11:34:00 -0700

Marina Bay Sands: proceeding on schedule.

Las Vegas Sands executives huddled with Singapore officials yesterday earlier this week to, as JP Morgan puts it, "discuss topics ... including the pace of construction." In other words, they were bracing Singaporean leaders for yesterday's SEC bombshell.

As far as discussing "the pace of construction," normally I'd take that to mean that a delay in the schedule was about to be announced. But the tea leaves indicate the message was that Marina Bay Sands is still Project Numero Uno for the company.

It's unclear whether Venetian doge Sheldon Adelson was at the aforesaid meeting (the wording is fuzzy but implies he wasn't there). However, he did release a statement in which he characterized work on MBS as "rapid." He also heard the good news that Singaporean regulators have deemed the MBS slot floor up to snuff. Already Sands is talking about going from 600 to 1,000 slot machines, so they must be pretty sanguine about their prospects along the Johore Strait.

At least Boyd Gaming execs can take some solace from Adelson's plight. Sands has raised the prospect of putting its unfinished "St. Reggie's" condo literally and figuratively under wraps for the time being. That'd be a broken front tooth on the Strip possibly even harder to ignore than the partial skeleton that is Echelon.

Wisdom from Wall Street

Thu, 30 Oct 2008 15:17:00 -0700

"Any gaming operator that postpones spending and preserves capital in this environment should be rewarded, in our view." -- Stifel Nicolaus & Co. analyst Steven Wieczynski, reacting to news that MGM Mirage had put its Atlantic City and north-Strip projects onto the back burner. Boyd Gaming has extended the hiatus of Echelon and Las Vegas Sands is curtailing its Sands Bethlehem project.

I.O.U.S.A. Making a movie on the subject of the national debt seems like exercise in masochism. Making an absorbing and readily comprehensible film on that abstruse subject is a signal achievement. For those of you who object to my pro-Obama leanings, I should point out that -- based on the facts and figures put forward by filmmaker Patrick Creadon (he did Wordplay, for you Will Shortz fans), the Democratic economic plan wouldn't do much more than nibble around the edges of the national debt burden.

Boyd Takes Sanity Pill

Wed, 29 Oct 2008 17:22:00 -0700

After insisting right up to the bitter end, and then some, on going full-tilt with Echelon, now on hiatus for 7-12 months, Boyd Gaming CEO Keith Smith is modulating his tone. According to Reuters, "He emphasized that Boyd remains 'committed to having a meaningful presence on the Las Vegas Strip,' and is now looking at alternatives including opening the project in phases, modifying its scope or entering into other partnerships."

Far be it from me to mention that *cough* certain blogs *cough* have been urging all or most of the above for a while now. Especially the "entering into other partnerships" part. As far as Echelon's retail mall is concerned, the collapse of General Growth Properties renders the question moot -- and gives Smith an excuse to put it indefinitely on ice.

This might be a good time to ease out flibbertygibbet Morgans Hotel Group, which has been almost as big a drag on Echelon as GGP -- but I won't press the point. Whatever Boyd comes up with may not be a second Borgata, but it will still elevate the company's image in Las Vegas. There never was any discernible point in trying to do a CityCenter and build everything in one great gulp. That was stepping a little out of Boyd's league. Smith's pause for reflection will undoubtedly result in a more prudent and affordable -- and soundly capitalized -- Echelon 2.0.

Putting the "monitor" in Christian Science Monitor. The respected newspaper is going to a Web-based publication model. I wonder if a certain local publisher still thinks it will literally be two generations before Americans regard the Internet as their primary news source?

Reader recommendations

Tue, 28 Oct 2008 11:55:00 -0700

Last week, I solicited recommendations for affordable hotel rooms, on behalf of a reader. For those of you who don't monitor the "Comments" threads, here's what some readers had to offer ...

• Why not the Main Street Station; it's downtown, clean and comfortable with nice beds including down comforters. Decent food and not bad gambling! Rooms are reasonable.

• Hooters, it isn't the most modern, but it's probably the prototype of what people mean when they babble about "boutique" hotels. Not too large, intimate feel, and balconies that still be accessed.

• I never stayed there in its heyday, but I think the criticism of the Plaza is a bit unwarranted. Is it top quality, no, but it is a fun place to play, great sportsbook, and you don't have to worry about spilling a drink on the carpet. I really believe some critiques I read online are from people who do not realize that in a town where one room may cost you $199 a night, the hotel with the $35 room for the same night might not be of the same quality.

We also got a must-to-avoid missive about Imperial Palace, known to locals as "Impotent Palace." Vox populi, vox dei.

Seen last weekend at Caesars Palace: "On Friday, a substantial amount of water was leaking from the ceiling in the Caesars Palace Forum Casino. Four large wastebaskets were hastily placed in the middle of the casino floor to catch the water--which made Harrahs premier property look like a low-rent grind house. The problem was resolved by Saturday, but it illustrated what happens when you're almost $25 billion in debt and losing money every day: You opt for what's euphemistically called 'deferred maintenance,' which means you don't spend any money on repairs until the pipes break."

Quote of the Day

Fri, 10 Oct 2008 12:29:00 -0700

“It really wasn’t about a quarter. It was really a matter of understanding the slot payout tables.” -- Boyd Gaming spokesman Rob Stillwell, on the subject of a 25-cent dispute that began at The Orleans and ended in front of the Nevada Gaming Control Board.

Bonus Quote (since we didn't have one yesterday): "The Vegas economy is built on human stupidity and irrational thinking: it'll always be safe." -- Las Vegas Review-Journal reader Michael Wertman, sounding a perversely sanguine note on local economic troubles.

Old school. If you relish old-fashioned, fire-breathing populist rhetoric (I certainly do), then check out the stemwinder below by AFL-CIO Sec'y-Treasurer Richard Trumka. And if that's not your thing, maybe you'll enjoy David Schwartz's latest takedown of public-policy absurdities or, as he calls it, "good old-fashioned municipal ineptitude."

Buddy, can you spare six billion?

Tue, 07 Oct 2008 13:02:00 -0700

Chuck Monster of VegasTripping.com is a man of few words, but he doesn't miss much (and his Dodgers are four wins shy of the World Series). He's run the numbers on Dubai World's purchase of MGM Mirage stock and found that the sovereign fund's $8.15 billion stake had lost $6,012,496,598 of its value by Oct. 3. To illustrate his point, he's whipped up a graph that puts it in terms that are, well, pretty graphic.

Is this going to end up as yet another saga of overseas investors coming to Vegas and getting taken to the cleaners (Swiss Casinos, London Clubs, Tamares Group, El-Ad Properties, etc.)?

What's in a name? A big headache, possibly. Chuck has also been compiling "Trippy" award nominations and Glenn Schaeffer may want to rethink that Fontainebleau moniker. Chuck's readers have written in with at least nine different spellings, not counting the only-too-inevitable "Fountain-blow." Boyd Gaming's in-abeyance Echelon doesn't prove very spelling-friendly, either. Six different spellings were offered, my favorite being "Echolon." Lord knows, Boyd's found the project to be no small pain in the butt.

Happy anniversary, you're fired

Mon, 06 Oct 2008 15:48:00 -0700

That was essentially the message conveyed to several dozen workers at MGM Grand Detroit as the hotel-casino passed its first anniversary. Such cutbacks are usually routine in the industry and this one affected but a fraction of a percentage of the casino's workforce. But it's a heckuva way to say, "Happy anniversary!"

It's also an indicator of how much our economy has soured that MGM Grand Detroit is having to curb staffing even though it's by far the dominant player in the Motown market. Still, its workforce reduction is microscopic compared to the cuts coming up at Harrah's Entertainment (whistleblower Fred Frazzetta, who knows a thing or two that Harrah's management wishes he didn't, says 20% of Harrah's Vegas-based workforce will be decimated). Then there's Mill Casino, in Oregon, which opened a new hotel tower in the teeth of a recession. The result? A 7% workforce diminution, the first in the casino's 13-year history. Small wonder that Atlantic City is preparing to backpedal on its Oct. 15 smoking ban.

Wall Street has been no help. Liz Benston explains why several gaming companies' market-cap value is a fraction of that of their asset base. The casino industry's debt loads and ambitious construction plans are giving investors jitters, Benston reports. Ironically, the same Wall Street that has loudly pined for a never-ending stream of megaresort openings would now be happier if those same companies were doing nothing. Worse still, the gaming group is one of the few sectors that can be shorted with impunity. So if gaming stocks continue to plummet, it's partly because it's in some investors' interest that they do so.

Boyd's Michigan nemesis, Four Winds Casino is profiled by the Columbus Dispatch. It's a close-up view of the tribal casino that's taken a whopping big bite out of revenues from Boyd Gaming's Indiana riverboat, Blue Chip, basically by pre-empting the latter's Michigan-customer base.

Second wind in Maine. While developer Gary Goett's Olympia Gaming may have found the Las Vegas and Kansas markets too rich for its blood, at least for now, Maine is a whole 'nother story. Since Olympia threw in its lot with a pro-casino initiative, momentum has shifted in the project's favor.

Steamed at Suncoast

Tue, 30 Sep 2008 18:23:00 -0700

Every so often, both Jean Scott and I yield the floor to casino customers who have a beef with The Man. One such gentleman approached me today and, with his permission, I am reprinting his letter, which he has also shared with Jean and with the Las Vegas Review-Journal's Heidi Rinella. I've made a couple of discreet elisions and bold-facings but otherwise you are reading the letter as I received it.

"I had a major incident concerning a comp/coupon I received in the mail early in September that I feel I need to relate. This incident made me 98-degrees angry. Please read the following as I attempt to explain ...

"Early in September, I received a coupon from Suncoast for a $50 credit for dinner at the newly-opened Salvatore's Restaurant in the Suncoast Casino. I decided to go over there tonight to redeem this coupon, have a nice dinner and gamble for a few hours afterwards. When I approached the maitre d', I asked for a table for one (I am single) and informed them I had an offer I received in the mail. After about a 10-minute wait, I was ushered to a booth located in the back corner of the room, a location I really did not mind. I was brought a menu and wine list and a glass of water. The restaurant was not crowded ... However, I was refused service: I waited a good 25-minutes before I walked out without having anyone approach my table to take my order. As a matter of fact, no one approached my table. No waiter/waitress. No busboy. No bread sticks. No acknowledgement. I was left there and forgotten.

"I then went over to the Club Coast booth across the casino floor and asked to speak to a manager. I was given a Supervisor after I was told the manager was off-duty. Not a problem. The Supervisor offered to make a call to the restaurant owner and I was told to wait a few minutes while a representative from the restaurant would come over to offer an explanation/apology.

"Finally, after several long minutes, the Assistant Slot Shift Manager came over to apologize. The restauarnt [sic] personnel didn't even care enough to come over to discuss this matter. The Slot Shift Manager ... was gracious and apologetic, and offred [sic] to comp me and a friend a meal on a subsequent visit. I told him -- and on this I will stand on -- that I would never step foot in Salvatore's again, and I will not come back to gamble at any Coast Casino as long as that restaurant remains in the confines of Suncoast. I then proceeded to go to Red Rock Casino, where I had a quick meal and gambled a few hours.

"I cannot believe how I was treated at Salvatore's. If they didn't want to serve me, they should not have shown me a table. And, they should not have been part of this comp! I am not only angry, but offended, and consider this offer a cheesy way of getting me into the casino.

"They have lost a valuable customer."

Pinnacle: "We're the boss here!"

Fri, 26 Sep 2008 13:46:00 -0700

"Pinnacle tells store owner to lower his price" reads the headline in the Press of Atlantic City, and it's no exaggeration. Although the owner of the Atlantic City News Agency (a bookstore) has dropped the asking price for his property by 29%, that's just not good enough for Pinnacle Entertainment, which balks at paying more than $2.3 million. The store's owner wants $3.9 million.

"I think we have to be more realistic on price. They have a written offer. That's the way it is," huffed Pinnacle's viceroy for Atlantic City, Kim Townsend. Yup, Massa Pinnacle's giving the orders here and those pesky locals better fall in line, pronto. Although Pinnacle CEO Dan Lee has slammed the News Agency as "tawdry" because it sells adult magazines, the real tawdriness is Pinnacle's attempt to dictate market values and its picking a fight over $1.6 million in the larger context of a project on which it will spend at least $1.5 billion.

Pinnacle execs would undoubtedly reply that they're simply being fiscally responsible, and I'm sympathetic to that. But projects like Pinnacle's Atlantic City megaresort tend to be advanced with the argument that they will improve property values. Well, property values have improved -- and Pinnacle should have expected this scenario when it pushed past the boundaries of the old Sands site.

Strong language: Never have I seen a journalist who regularly covers the casino industry unload on it in the terms employed by Jeff Haney in a recent excoriation of a Boyd Gaming parlay-card promotion. While the latter's "best parlay cards on the planet" verbiage is obvious hyperbole, Haney ran the numbers and found Boyd's cards not even to be remotely the best in downtown Vegas. Haney called the claim "a blatant lie that goes beyond the usual bluster and hype and reflects poorly on legal gambling in Nevada" and "an out-and-out falsehood."

He said it was even worse than the "sleazy and demeaning to customers and visitors" promos that audaciously touted 6-5 blackjack as a "whopping" advantage. (To the casino, maybe. To the player ... not so much. You should hear the suppressed anger in former dealer Dennis Conrad's voice when 6-5 blackjack is the topic.)

Haney also opened a can of verbal whup-ass on "the bizarro realm of corporate doublespeak, where gambling is 'gaming,' the Super Bowl is the 'professional football championship contest,' and rank suckers (such as those who think Boyd has the best parlay cards) are 'valued guests.'"

His thesis boils down to a central paragraph that reads as follows: "Touting parlay cards as the best on the planet while offering average or below-average odds serves to lower the discourse on the business of state-regulated legal gambling toward the level of a big con."

Players have few advocates more outspoken than Jeff Haney. Bettors are fortunate to have such one-man truth squads on their side.

Station gets it; In defense of Boyd

Thu, 25 Sep 2008 16:56:00 -0700

Kudos to Station Casinos for agreeing to give its employees first dibs on apartments to be built near Fiesta Henderson. This is a story that fell through the cracks recently but deserves to be highlighted. The land was originally set aside for expansion of Fiesta H., but the locals-casino market is pretty saturated at present. (And, one suspects, Station could probably use the capital that can be realized by selling the land to developer Trammell Crow.)

Affordable housing, on the other, has been in short supply in the Vegas area. This is probably a crackpot suggestion, but I've often wondered if Harrah's Entertainment was ill-advised to start shuttering and razing the myriad apartment complexes it bought up behind its Barbary Coast/Flamingo/Imperial Palace/Harrah's Las Vegas agglomeration.

Construction workers have been an underserved market for housing (many were hanging their helmets at the Klondike before it closed). Even if only Harrah's Caesars Palace expansion is still in train -- and that's a big "only" -- the company might have been able to turn a dime or two off of all those newly acquired domiciles, as well as giving its workforce a place to live that's within a stone's throw of the Strip.

Like I said, probably cockamamie, but it's been rattling around in my brain for so long that I thought I'd fling it out there for the heck of it.

Another good Station idea is to 'double up' on its concert bookings once Aliante Station's Access Showroom opens its doors. At least some acts will be shared between Aliante and either Green Valley Ranch or Boulder Station (whose Railhead is currently suffering the indignity of being pressed into service as a temporary buffet; it's not one of the comfier dining experiences in town).

As Mike Weatherford notes, with gas prices being what they are, it's an iffy proposition whether Station patrons will drive 25 miles or so to see a concert; Station's solution effectively halves the problem. It also means that, as it seems to be my karma that Station books jazz-piano stylist Keiko Matsui for dates when I'm either out of town or sick, my odds of actually catching her in performance have slightly improved.

Boyd Gaming's Morgans deal defended. A reader writes, "I can't blame Boyd for wanting so badly to open the whole [Echelon] at once. All they have to do is look down the street at the Palazzo chaos to see what a disaster it can be to open in stages or half-assed (and remember that the Venetian had the same problem).

"Venetian has obviously overcome it but who knows how much of Palazzo's current problems have some basis in the fact that when the hotel opened the sign wasn't even built and there was still a huge construction project in front. I think the only thing that a resort can get away with opening in stages these days would be the hotel itself -- nobody cares if half the rooms are yet to be built ... when the resort is otherwise functioning at 100%.

"Steve Wynn didn't open his doors until everything was in place, and look at the attention and publicity he got for it. Palazzo was exactly the opposite."

Those are all excellent points and well worth considering. Boyd's prostration before fickle Morgans Hotel Group is still embarrassing, though.

Boyd & Morgans: co-dependency and abuse

Thu, 25 Sep 2008 11:41:00 -0700

Where is your pride, Boyd Gaming? After being kicked in the teeth by Morgans Hotel Group last summer (when Morgans leaked the news of Echelon's suspension before Boyd's planned announcement), the casino company is crawling back for more.

Today's announcement by Morgans extends the life of a deal that was set to expire on Rosh Hashanah (Sept. 30), but at terms that represent a total capitulation by Boyd. In addition to receiving an extra 15 months to finance its two-hotel commitment to Echelon, Morgans: A) gets its $30 million deposit back, stat; B) is released from $41 million worth of funding obligations toward Echelon; C) obtains complete control of how the Delano and Mondrian brands are used in connection with Echelon, and D) is not required to guarantee its construction loan.

That's one sweet deal -- for Morgans. Boyd gets bupkes. Clearly, it was negotiating from a position of extreme weakness. Is it so hard up to find a hotelier as a joint-venture partner that Boyd must assent to such a lopsided deal? In spite of having taken a 9-12 month pause for reflection on Echelon, Boyd has obviously not backed off from its Ahab-like determination to build the whole thing in one great gulp.

Meanwhile, the other JV partner, General Growth Properties, continues to melt down. It'll be interesting to see whether Boyd continues to pursue that dysfunctional relationship also. If Boyd felt -- as it said -- that it could open Echelon in stages, then there's no reason it can't build the metaresort in the same way, mothballing the mall/boutique hotel aspects of Echelon until more reliable partners can be found. It's difficult to read the present course of action as anything other than sheer obstinacy ... with perhaps a large portion of masochism mixed into it.

Penn impresses analysts

Fri, 12 Sep 2008 18:09:00 -0700

Penn National threw open its doors to Wall Street and JP Morgan, for one, came away impressed by what it heard. Basically, management is charting a fiscally conservative course, even though it could eventually reap $1.2 billion from its busted LBO. For instance, whereas Penn was formerly willing to plunk down $800 million for Bader Field in Atlantic City, now it's halved its valuation of the site.

Now Penn has turned its focus to some abandoned land west of the city (which would give it a "choke point" for traffic headed into A.C.) and Morgan seems to agree. It advises against buying an existing casino (read: Tropicana). It also found Penn bosses unconcerned with the narrow prospects for casino approval in Maryland and Ohio, writing: "our sense is that management would be content to see both [initiatives] fail." (If that were the case, it would be five rebuffs of casino legalization in one year; is the U.S. industry at or near a saturation point?)

Largely, this stems from concern about how both markets would sap traffic to Penn's flagship property in Charles Town, W.V. The proposed 67% (!) tax rate in Maryland is no small disincentive, either, although Penn has covered its butt -- should the pro-casino measure be passed -- by obtaining a site east of Baltimore. It's also moving to protect its Charles Town business by pushing for table games, something else that requires voter approval.

Looking down the road, Penn's capital projects appear to proceeding on or under budget, its debt is projected to decline by 44% over the next two years, while its cash flow increases 16%. And while Penn says it "can't get the returns or free cash flow" that would justify building in Las Vegas, it continues to contemplate scarfing up other companies' downgraded debt. Morgan thins Penn will either pursue a pure Vegas play or "another regional operator with LV exposure."

I'm thinking "Boyd" but remember that Penn has made one run at Harrah's Entertainment already and might well turn the latter's debt-strapped situation to its advantage. In any event, Morgan reports, Penn will bide its time, "as it feels asset values may get cheaper, and will take its time to evaluate opportunities given other casino operators' leverage. Just visualize a buzzard sitting on a tree branch in the desert, waiting for some poor, dehydrated soul to collapse.

By the way, Penn is proud owner of Bullwhackers Casino, a property whose name suggests nothing so much as the performance of unnatural acts upon livestock. But, if you want to know whatever became of Erin Moran, it's the place to go.

E-Can debuts

Fri, 29 Aug 2008 17:27:00 -0700

We got out of the way of the front doors of Eastside Cannery last night just in the nick of time. For all the apprehension about opening new casinos in the current economy (especially when locals' gambling budgets have taken a big hit), patrons were out in force for the opening, literally charging the casino floor when the doors swung wide. Whether by car or by foot, it was impressive turnout -- not the mob scene that greeted The Palms in 2001 -- but quite a heartening sight nonetheless.

E-Can is yet another nail in the coffin of the old "entrapment" theory of casino design. The entryways are airy and easily visible throughout the casino floor. Aisles are wide and, even with 2,100-plus slots, one gets that sense that Cannery Casino Resorts could have jammed in quite a few more but elected not to. Good on them.

Ceilings aren't so low as to be oppressive, but not so high as to engender the "slot barn" feeling of Palazzo or South Point. The various eateries are distributed in a "restaurant row" along the east wall. The sports book is very open and spacious, and wouldn't look out of place at a Strip casino -- and is far superior to some Strip books I could name, but won't.

We gorged a little too much early in our go-around, so we didn't do justice to each restaurant's offerings. (Though, for the record, oysters on the half shell and covered with chives and melted cheese tastes a helluva lot better than it probably reads. Kudos on the sausage-stuffed mushrooms, too.) If what was on display -- and in our stomachs -- last night was a representative sample of the everyday fare, my biggest concern will be whether such a high standard can be maintained over the long haul.

If you grew up in the Sixties, as I did, the prevalent color and décor schemes will have a comforting familiarity. The overall aesthetic could be called 'Light Industrial,' and I don't mean that in a cute or pejorative way. Exposed pipework appears to be part of the statement, although I'm not so sure about the lack of drop ceiling. I couldn't tell whether the acoustical tiling has simply been omitted or is going to be installed later.

There's not a lot of fine detailing; strong colors, acute angles and long, undulating curves all typify a casino where the design elements are writ large. Sometimes form takes precedence over functionality: Stools in the sports book and one of the restaurants may be pleasing to the eye but they're distinctly unforgiving to the ass. On the other hand, the keno lounge is as classy and comfortable as any I've seen in Vegas.

Given the unbelievable thrift with which "the dollar Bills," Messrs. Paulos and Wortman* pulled E-Can off, one does feel the compulsion to scan the place for obvious economies, trying to figure out how they did it. The exterior is pretty Spartan; big, sharp and sweeping lines (and a wraparound neon display after dark) endeavor to divert one's attention from an otherwise utilitarian look.

Inside, certain of the wall coverings and materials screamed "Cheap!", especially around the proscenium in Marilyn's, the live-entertainment lounge. Some upfront savings will probably mean frequent-replacement costs on the back end. Then again, I heard similar criticisms of The Palms when it opened (and George Maloof arguably overcrowded his slot floor in the early going -- a mistake not repeated here), but keeping construction costs low was one of the cornerstones of that place's success.

Paulos and Wortman's heir, James Packer, will be in profit on E-Can a lot more quickly than will any recent or forthcoming Station casino, given the latter company's current tendency to spend lavishly and then scrimp down the road. Assuming that maintenance is proactive and frequent, I don't see any downside for E-Can.

Despite my longstanding fondness for Sam's Town, the pioneering Boyd Gaming property will seem that much more like a crowded and badly laid-out warren of gambling rooms -- definitely Old School, if that's what you dig. Given the two casinos' proximity, I can see Sam's Town evolving into a "dormitory" where people stay or park their RVs, take advantage of the movie theaters, etc., but do their playing at E-Can. Plus, the cheerful, retro Cannery "brand" has struck quite a chord with Las Vegans. Aggressive counter-marketing will have to be the order of the day.

* -- "The dollar Bills" was Hollywood's nickname for producer William Pine and his business partner, William Thomas, so named for their budget-conscious tendencies. It seems affectionately apt for the Paulos/Wortman duo, who balance fiscal conservatism with quality.

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."

This is news?; plus Station/Harrah's/Echelon notes

Tue, 12 Aug 2008 16:47:00 -0700

Way back when Vestin Group made a loan to the Castaways that exceeded the doomed casino's appraised value (as revealed by a Vestin-commissioned appraisal that miraculously emerged when the Castaways filed for bankruptcy*), I did some digging into Vestin's financials. As of late 2003/early 2004, roughly one in four of Vestin's high-interest/high-risk loans was non-performing. There was some other odd stuff going on, too, but Greenspun Media -- my main freelance outlet at the time -- ultimately didn't want to hear about it.

Flash forward four-plus years and Greenspun's crosstown rival is belatedly discovering that it's the same old same-old at Vestin. Which, had a few daily-paper business reporters done their jobs sooner, might have saved a Vestin investor or two from taking it in the shorts. I wonder if they're still on the hook for Vernon Downs, that long-suffering racino in upstate New York into which Vestin threw tens of millions of dollars?

* -- the loan was initially made on the basis of a Castaways-supplied appraisal whose valuation was contingent upon a series of contingencies all falling into place.

Station Casinos isn't staggering under its newly acquired debt burden the way that Harrahs' Entertainment has been (see sidebar). While Station picked a bad time to lever up and one layoff is usually one too many -- at least if you've ever been in those shoes -- it's commendable that Station is concentrating its economies at the corporate level, rather than taking it out on customer service. The same cannot be said of some rival firms.

Speaking of Harrah's, it's actually getting some reporters to buy into its spin that a doubling of its debt-servicing costs (to $468 million) wasn't the reason it lost almost $98 million last quarter.

Let's see ... You go from being $237.5 million in the black, this time last year, to $97.6 million in the red -- a $335 million-plus swing, roughly $235 million of which is gobbled up by increased interest payments on your $29.7 billion debt load -- and that's not your main problem? (coughbaloneycough)

After beating up on the Dogpatch Daily, I'd like to make partial amends by pointing out an excellent piece of enterprise reporting that raises additional questions about Boyd Gaming's due diligence when assembling its Echelon team. The problem? An excessively leveraged General Growth Properties. (Too much debt? Where have I heard that before?)

"A closer look at General Growth then could have shown potential for trouble down the road," writes Benjamin Spillman of Boyd's May 2007 recruitment of GGP. One of his sources, BoomBustBlog.com continues to keep tabs on insider transactions at GGP which, says blogger Reggie Middleton "smack of desperation on the part of the CEO and CFO."

The gracefulness with which Boyd extracted itself from a deteriorating situation at Echelon might not have been necessary had the company been a little choosier on the way in. Maybe Morgans Hotel Group and GGP were the best dance partners Boyd could find; or perhaps it noted Morgans' limited borrowing capacity and GGP's heavily encumbered balance sheet, then hoped for the best.

In the end, it was that choice of partners that would let Echelon down. Morgans squandered money on the Hard Rock Hotel & Casino (the phrase "mid-life crisis" suggests itself) it should have been putting toward less-sexy Echelon, and GGP's business model clearly wasn't built for adversity. KVBC-TV recently described the company's Shoppes at Palazzo as "struggling," so we may see some additional fallout ripple down the Strip. Let's hope not.

Trop turnaround?

Tue, 12 Aug 2008 13:14:00 -0700

While the New Jersey Casino Control Commission continues to bobble the sale of the Atlantic City Tropicana, at least its stewardship has arrested and perhaps finally the property's decline. While a 5.5% decline in business is nothing to crow over, only Caesars Atlantic City lost less ground, down 4%.

Of course, nobody did remotely as well in dollar volume as the newly augmented Borgata. Whatever struggles Boyd Gaming has experienced in cracking the top, er, echelon on the Las Vegas Strip, it's had the rest of the Atlantic City market playing catch-up, mostly without success, for five years now.

As for the Trop, its gambling revenues are still just keeping pace with Showboat Atlantic City, a property with 7% fewer slots and half the poker/table game capacity. So, while the NJCCC has largely stanched the bleeding, the problem of an attenuated market share remains. Thanks, Columbia Sussex. Don't let that doorknob hit you on the way out.

But the Trop's doing way better than Trump Marina, whose owners -- coming off a wretched quarter and not yet having booked the $316 million they're getting for Trump Marina -- are merely considering using the money to pay down debt. After all they could "look elsewhere for growth opportunities" -- like Panama. (I kid you not.) That's quintessential Donald Trump: Don't address your problems; just run away.

(Presumably the new "Chairman" tower at Trump Taj Mahal is supposed to evoke the glowering, orange-haired Trump himself. But, if you grew up in the Sixties, "the Chairman" was Mao Tse-tung or maybe -- if you were just a few years older -- the Chairman of the Board himself, one Francis Albert Sinatra. I guarantee that no one will ever call Trump "the Chairman." Ever.)

Golden Heartland: Coming soon-ish to a Kansas near you?

Golden Gaming's PR peeps contacted me to very politely dispute my characterization of Golden as a probable also-ran in the Kansas casino sweepstakes (see "Don't tax me, bro!"). They pointed to CEO Blake Sartini's 15 years in the upper ranks of Station Casinos, his 40-tavern operation in Nevada, the Pahrump Nugget and a trio of Black Hawk, Colo., casinos (with an aggregate of 778 slots and no table games).

I would respond that Golden's most imposing rival in Kansas, Mohegan Sun, probably has a larger installed slot base in its Connecticut casino alone (a mind-boggling 6,199 one-armed bandits) than Golden probably has in all its 40-plus properties rolled together. That Colorado is the minor leagues, casino-wise. That all those taverns, nice as they are (and they're some of the very poshest in Nevada), amount to one big-ass slot route -- no disrespect intended. And that we're talking about a $600 million casino-resort contract -- far, far bigger than anything Golden has attempted.

Bottom line: I still think Golden is very much the underdog in Kansas. In fact, I'm even more convinced of it. Which isn't to say it won't pull off a stunning upset. But, given the scale of operation that the State of Kansas wants to see, Mohegan Sun's resumé makes the most logical fit.

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.

Quote of the Day

Mon, 11 Aug 2008 13:08:00 -0700

"Something which is fairly unique to a city the size of Las Vegas, is that the decisions of one or two individuals have the power to destabilize the entire city. We’re a one trick town … with only a few magicians." -- Blogger 'Vegas Rex' on the Echelon shutdown (with video).

Case Bets: Luxor, Excalibur, Cannery East

Fri, 08 Aug 2008 11:32:00 -0700

MGM Mirage has provided a little more insight into just how much it's doing in terms of spending on renovations to Luxor and Excalibur. "We are spending around $100M in improvements on each of these properties this year, and we have invested millions more since the 2005 merger," writes a company representative (emphasis added).

You could argue that Excalibur needs a lot more than that -- or maybe just some well-placed dynamite -- but it's good to see something being done. It's an open secret that Mandalay Resort Group let things slide at its Strip properties while MGM's buyout was in progress, leaving the new owners with a lot of remedial work to do.

Out-of-towners who haven't seen Eastside Cannery arising along the Boulder Strip may enjoy this funky montage of its nightly light show. The building is an extremely striking addition to the eastside, dominating the landscape for miles around much as Sam's Town used to do. Poor Sam's Town: It used to look so monumental and now it's dwarfed by the upstart down the street. (For the record, Cannery Casino Resorts only manages Rampart Casino and it's [CCR] being bought out by Crown Ltd., not Melco PBL.)

Isle reduces risk in Florida

Tue, 05 Aug 2008 15:37:00 -0700

As we're seeing, it's not always a bad idea to scrap or delay an expansion. Such is the case with Isle of Capri's decision to allow the expiration of an agreement with Florida Gaming Corp. to turn Miami Jai-Alai into a slot parlor. Isle couldn't even be bothered to announce the news. (Can't imagine why.)

With the various Seminole casinos ramping up their offerings something fierce, Isle has its hands full defending market share at Pompano Park. The non-tribal Florida market just hasn't been the bonanza anyone expected and Boyd Gaming's decision to hold off converting its own jai-alai fronton now appears prescient. Wall Street reacted favorably, with ISLE continuing to trend upward.

Perhaps we should have foreseen this. The Seminoles had a track record, a customer base, a brand name (Hard Rock) -- and now they have table games. Newcomers to the market had a tough row to hoe before and now it looks darn near impossible, unless the Seminoles have to revert to Class II gaming (and that's unlikely to happen anytime soon). Florida Gaming Corp., meanwhile, will try to find other takers for its faded fronton. Good luck with that.

Bury this in Boot Hill. It looks like yet another Kansas casino proposal may be about to bite the dust. Butler National Corp., a manufacturing concern that's trying to take a flier into casino ownership (shades of Galaxy Entertainment, right to down to renting the Navegante Group braintrust) is pitching a low-budget, smallish (800 slot) casino. Trouble is, Butler's a wee bit short on cash and needs an equity partner who will rescue the project but agree to take a back seat.

From Rick Alm's description, this is a Hail Mary play by a penny-stock company -- a big red flag. However, the Boot Hill Casino that Butler is proposing for Dodge City sounds far more aesthetically appealing that the tacky-looking, theme-park-ish competing proposal. But the latter has the not-inconsiderable advantages of a larger upfront investment and previous in-house casino experience.

If would-be casino operators keep dropping out at the present rate of attrition, the lottery commission's selection process will become downright Darwinian.

Man Bites Dog Dept.

Mon, 04 Aug 2008 12:25:00 -0700

A Republican senator running for reelection on the strength of his good relationship with ... Sen. Barack Obama?!? Between that and the strong possibility that Sen. John McCain could win the presidency and yet see the national GOP sustain tremendous losses, it's the topsy-turviest election year I've ever seen.

Silliest Echelon Objection Yet. While Boyd Gaming's decision to mothball Echelon for a year has played to across-the-board raves in the financial community, not everyone agrees. A union exec pouts that the unfinished project will be an "eyesore" that will affront the delicate sensibilities of visitors. (Having 800 of his men suddenly idled surely plays more than a peripheral role in Mr. Ross' sudden concern for aesthetics.) Heck, there are several eyesores along the Strip already -- and they're open for business.

Update: An analyst for BMO Capital Markets seconds the "eyesore" sentiment regarding Echelon, adding "embarrassment" for good measure. But his overall verdict can be summed up as, Better a loss of dignity now than a loss of money further down the road.

Boyd Has Brass Balls

Fri, 01 Aug 2008 18:37:00 -0700

Yesterday, I got a hint that Something Big was going to be announced in today's Boyd Gaming earnings report. Little did I suspect it would be the completely unprecedented (in my recollection) step of halting a megaresort project in mid-stream and taking 9-12 months to see how the tourism and credit markets shake out. This was a gutsy call, one certain to provoke depression in the local media and perhaps panic investors.

To its great credit, Wall Street not only rolled with the news, it even heaved a collective sigh of relief, rewarding Boyd with a 20% stock price increase in a single day's trading. Seems that analysts not only doubted Boyd's ability to pull the project off but feared it would capsize the company, never mind adding to a coming capacity glut along Las Vegas Boulevard. (Perhaps those are the same analysts who want Boyd to sell the land -- worth as much as $3 billion -- and quit the Strip.)

If I had to guess -- and I do, because Boyd is being a bit coy about the timeline of its decision -- I'd hazard that it was General Growth Properties' 18-month postponement of the High Street mall component that forced the issue. The planned mall anchors the southeast corner of the project and its absence would leave a conspicuous gap, to put it mildly. Then subtract the Mondrian and Delano hotels on the property's south side, and you've wiped the slate clean of most everything on the left side of the above rendering (borrowed from VegasTodayAndTomorrow.com).

Morgans Hotel Group has thrown in the towel on obtaining financing for its two-hotel commitment, making Morgans the skunk at the picnic. It played tattle-tale, rushing out the news of Echelon's freeze 90 minutes prior to Boyd's own announcement. The high-end hotelier even had the gumption to issue a press release implying that it was Boyd's fault the pieces didn't come together. Boyd came through with its equity, in the form of the land, but Morgans could never get its ducks in a row.

In a sense, the fate of the Mondrian/Delano component was sealed when playboy (ex-)CEO Ed Scheetz went haring off course and bought the Hard Rock Hotel & Casino, for reasons still unclear. (It goes with the rest of Morgans' portfolio about as well as white shoes with a charcoal gray business suit.) Maybe Scheetz felt a need to outdo predecessor Ian Schrager.

Ed Scheetz, master of disaster

Extended to the limit by its Hard Rock purchase, not to mention a costly series of upgrades and expansions, Morgans seemed to lose sight of its preexisting commitment to Echelon. Instead of wrapping up financing for Mondrian and Delano while the markets were still flush, the company dithered around with trying to fix a property (the Hard Rock) that wasn't broken and pursuing a Nevada gaming license.

Boyd has indicated that it's in ongoing talks with Morgans, but that sounds like whistling past the graveyard. Morgans was the first of Boyd's joint-venture partners to drop the ball, long before GGP did, and Boyd would be well shot of the hotelier that can't make up its mind. Even now, after initially talking about jacking up ADRs and repositioning the Hard Rock for Morgans' customer upscale base, it's done a full 180 and is going into business with porn stars.

If you can filter out the anti-casino rhetoric, Hugh Jackson has an interesting take on What Went Wrong: "... over the years, as Boyd kept making noises about what it would ultimately do with the Stardust site, the company's eyes just kept growing and growing, and the obsession to become one of the cool kids on the Strip became, well, palpable. It was almost as if Boyd somehow felt that its hitherto dependable revenue model .... was somehow inferior, or distasteful, and in any case not snazzy and glamorous ..."

That analysis assumes that something like Stardust 2.0 would cut it on today's Strip and I don't for a minute think it would. Just remember what an anachronism the New Frontier became: a stinky dive that was like a B- or C-level locals joint that had been supersized and mistakenly plunked across from the stylish Desert Inn. I don't know if Boyd bit off more than it could chew (at least in an inflationary market driven by myriad rival condo and hotel markets) but its JV partners sure did.

With Borgata and Water Club in Atlantic City, Boyd has proven twice over that it can execute a high-end property. And even if it were to throw in the towel on Echelon (possibly forever dooming the company to second-tier status in the eyes of the industry and media), this is the worst time to fling 65 acres or so of Strip land onto the market, especially with other properties -- Riviera, Tropicana, San Remo/Hooters -- going begging.

It took some cojones to make this move. But it was the right one and it's good to see Wall Street lining up in support.