David Mckee's Stiffs & Georges - Penn National

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?

Quote of the Day

Wed, 21 Oct 2009 17:28:00 -0700

Penn National Gaming "has not lost its senses and, [contends] that at the right price and through the right vehicle (and only with a sizable strategic partner who would bring something special to the project, presumably some hotel experience), its involvement in Fountainebleau could make sense.” -- quote from Penn's 3Q09 earnings report, according to J.P. Morgan analyst Joseph Greff. This is the first we're hearing about joint-venture F-bleau partners, though.

MGM: CityCenter worth $4.88 billion

Tue, 20 Oct 2009 15:37:00 -0700

MGM Mirage has announced that it's writing off approximately $1.3 billion (i.e., taking an "impairment charge") against CityCenter, with $348 million of that chalked up to falling real estate values. (Some $174 million of that will apparently be fobbed off on MGM's partners, bringing MGM's writeoff down to $1.1 billion.) The value of MGM's half-share of the project has been restated at $2.44 billion (a 31% decline). No word yet from Dubai World as to what it thinks its half of CityCenter is worth.

Kirk Kerkorian's Tracinda Corp. shook a rhetorical fist at Wall Street, stating in a press release that there is "substantial unrecognized value in MGM and CityCenter that is not reflected in the market value of MGM’s stock." It's nice to know that even mega-corporations can feel underappreciated.

Bottoming out? Air traffic into and out of Las Vegas was almost flat, year over year, -1.2% in September, helped by passenger-load increases -- and I don't mean those hefty people who take up two seats -- on nearly every domestic carrier not named US Airways (-26%). Considering that international traffic was -21%, this is augurs well for a return of domestic consumer confidence in Sin City. And, yes, flat is the new "up."

Pennsylvania: Rendell intervenes. Never accuse the Keystone State Lege of acting in haste. The table games bill is still mired in conference committe, prompting Gov. Ed Rendell (D) to wade into the fray. Rendell's magic number for the amount of revenue table games must yield in fees and taxes is $200 million. To get there, the guv believes the tax rate must be 16%. But he's closer to the GOP position, warning that the higher levies favored by Dems would "kill the golden goose" and deprive Little Johnny's school of needed funding. Meanwhile, Rivers Casino continues to disappoint, with the lowest revenue-per-slot in the state.

Finally, a taker! Out of left field, a contender has emerged for the orphaned casino license in Cherokee and Crawford counties in Kansas. You'll recall that it was awarded to Penn National Gaming, seemingly ages ago, but Penn -- spooked by nearby tribal competition -- all but spat on the license before leaving in a huff.

Enter Ozark Trail Gaming, a consortium of Kansas businessmen, offering to build a $225 million, 900-slot, 30-table casino. After some bad experiences with carpetbagger casino developers trying to dictate terms to the Sunflower State, you have to think the Kansas Lottery Board will look kindly upon this native-son effort.

ColSux loses again. A $41.5 million summary judgment has been slapped on Columbia Sussex for abrogating its purchase of the President riverboat in St. Louis (now the property of ColSux arch-foe Pinnacle Entertainment). Regulators for Missouri didn't like the looks of ColSux and its CEO, William J. Yung III (above). The latter pulled his license application and used that as an excuse to void the President purchase, but a federal district judge wasn't buying it.

The former President owners were also suing ColSux for jacking up parking rates for casino patrons by 560% (no, that is not a typo), a truly Yungian move. If poetic justice were served in this case, the court would award the ship to ColSux. Since the President's days on the water are numbered and Yung will licensed in Missouri only in his wildest dreams, trying to dispose of that near-worthless asset might be the aptest punishment of all.

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

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

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

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

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

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

Fontainebleau Las Vegas from Running Bull Productions on Vimeo.

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

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

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

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

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

East Coast antics

Mon, 12 Oct 2009 13:55:00 -0700

Wrong again. There I was, thinking the proposed $10 million upfront fee for table games in Pennsylvania was a done deal when the GOP-controlled state Senate upped it to $15 million (and if you don't pay by June 1, it goes to $20 million). Chalk that up as a "loss" for casino owners.

The latter did, more or less, get what they wanted on taxes, where they'll pay an aggregate state/local rate of 14%. Despite publicly requesting a 34% tax rate, Dems in the lower house are muttering that one in the "high teens" might be acceptable. The question is: In return for what?

Casinos also banked a "win" when the state Senate ashcanned an amendment that would have tripled the slot base at "resort" casinos. Since this amounted to preferential treatment for a tiny percentage of the Keystone State casino industry, it's good to see it get the back of Lege's hand.

Power play in New York. In the competition for the racino contract at Aqueduct Race Track, those in the hunt include MGM Mirage, Penn National Gaming, Harrah's Entertainment and Seminole Tribe-owned Hard Rock Entertainment, along with numerous and sundry joint-venture partners.

But none of the seems to have the juice of Larry J. Woolf's Navegante Group. After the New York Lottery Division had deemed Aqueduct Entertainment Group (in which Navegante is a partner) unqualified, Gov. David Patterson's underlings put the word out that the five-member consortium is indeed qualified. Somebody in Aqueduct Entertainment's got pull, that's for sure.

A win for Adelson. While no casino company was remotely near the top of Newsweek's ranking of the 500 greenest companies, Las Vegas Sands can claim a victory of sorts. Sheldon Adelson's firm clocks in at #128, well ahead of MGM Mirage (#164) and Wynn Resorts (#176). Given the extent to which MGM has publicized its green-friendly initiatives, particularly with regard to CityCenter, finishing so far behind LV Sands is tantamount to a smackdown by proxy.

Several years after the publication of Beneath the Neon (now available in e-book format) publications are still shocked -- shocked! -- to learn of Las Vegas' large (and growing) subterranean community. Alas, we no longer have the Hooverville that had sprouted about a half-block north of LVA HQ. Those hobos were a tidy bunch and made our street seem halfway populated.

Marie Osmond pix. I'm just sayin'.

What's a Trump casino worth?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

Signs of the Times

Wed, 07 Oct 2009 14:02:00 -0700

You know the casino industry's in the crapper when, next week, Spectrum Gaming Group is hosting a conference entitled, Distressed Gaming Properties: The State of the Industry. This is so hot-of-the-presses Spectrum hasn't even got the registration page up ... yet.

Quoth Spectrum's e-mail blast: "With the recession battering gaming jurisdictions from Connecticut to Nevada, a new sector of the industry has come to the fore: distressed operations. Investment firms now have funds that specialize in distressed gaming assets, regulators are being asked to deal with situations they never considered, and operators are turning to outsiders to either right their operations or provide interim management services. In this session, experts will discuss the benefits and risks to distressed Gaming M&A, and how regulations and bankruptcy court can impact a successful takeover. They will also discuss how to properly apply multiples, and how EBITDA can be enhanced by skilled operators."

Maybe Penn National Gaming CEO Peter Carlino should attend this before he goes all in on Fontainebleau. His spokesman says Penn "is evaluating other Las Vegas opportunities." They may have "evaluated" Planet Hollywood right out of their grasp and passed on God knows what else. But F'bleau? That's a keeper. Yeah.

$300 mil for F'bleau?

Tue, 06 Oct 2009 13:10:00 -0700

That's the latest; namely, that Penn National Gaming will put down less than $300 million as a "stalking horse" bid on Fontainebleau. Penn would also be on the hook for the costs of the project's bankruptcy proceedings. Potentially getting a Strip resort for less than 10% of its cost sounds like a good deal for Penn ... until you think about the hundreds of millions of dollars (possibly as much as $2 billion) that stand between F'bleau and the finish line.

Sue Lowden evidently didn't get the memo that Mike Ensign is no longer writing fat campaign checks at Mandalay Resort Group. How else to explain the Archon Corp. treasurer's loud and frequent fealty to Ensign fils, the ethically challenged junior senator from Nevada? Lowden's proclamations provided an irresistible temptation for Democratic Senatorial Campaign Committee spokesman Ed Schultz, who sniped, "Sue Lowden's support of John Ensign may have fundraising value to her, but it is a reflection of her own character and fitness for office. She has shown more fidelity to him, than he has shown to his own wife." (Lowden is gunning for Sen. Harry Reid's seat.)

In her capacity at Archon, Lowden could line the younger Ensign up with a dandy post-senatorial job as a casino greeter at her Pioneer Gambling Hall in Laughlin. (As for Lowden, at least she's off Jon Ralston's "Chicken List," after gracing the Face to Face set. Your turn, Sheldon Adelson. Does Sue Lowden have more huevos than you?)

The perils of Packer. Reeling from a $1 billion loss on his overseas casino misadventures, James Packer and his Crown Ltd. are putting some of their Melbourne land on the block.

Not buying it. Although MGM Mirage CEO Jim Murren may have predicted that CityCenter's premiere would increase Vegas visitation by 10%, but gaming analysts aren't having any of it, especially when all the new room capacity is at the high end. Also, it's remembering that the 1998-2000 roll of megaresort openings and the 2005 debut of Wynn Las Vegas coincided with robust U.S. economies. Andrew Zarnett advises casino bosses to look at current numbers as the new baseline -- which sure beats pining for the vertiginous and unsustainable levels of two years ago.

Macanese machinations. Conventional wisdom on the advisability of floating IPOs in Hong Kong continues to seesaw. The Wall Street Journal runs the numbers and finds gaming stocks defying the market's downward trend. Which is good news for Steve Wynn and possibly even Las Vegas Sands' public offering, which is taking forever to reach the launch pad.

Want your ass kicked?

Mon, 05 Oct 2009 17:16:00 -0700

Then go hang out at Stack. If they don't like your looks, the in-house goons will be sicced on you. And Las Vegans wonder at the schadenfreude so many people feel with regard to Sin City's current doldrums.

No magic bullet. Liberalization of casino rules in Colorado will raise considerably less revenue than expected. Whoever made the projections that are now coming up 60% short obviously didn't take the recession into account.

Opposition grows. An effort by Illinois Gov. Pat Quinn to saturate the state with video gambling devices is encountering widening opposition. Chicago suburbs Evanston and Naperville are among the areas that have nixed the prospect of slot routes.

Don't like our roads? Mail your thanks to Gov. Jim Gibbons, who just got his knuckles rapped by the chairman of the House Committee on Transportation & Infrastructure for laggard deployment of federal highway funds. It's pretty slow around Carson City once the Lege decamps, so what's Midnight Jim's excuse this time?

Sanity 1, Drunks 0. A trio of boozing bozos who rampaged through Buffalo Bill's before piling their car into a ditch can't sue MGM Mirage for their own asshattery, Nevada's high court rules. Since they were drunk off their asses and getting into fights, the trio of boozehounds maintained, casino management had an obligation to keep them on-property ... presumably so they could have continued terrorizing other patrons and otherwise letting the good times roll. In an unrelated victory for common sense, it is no longer a crime in South Carolina to play poker in the privacy of your own home.

Keystone stalemate. Casino owners like Las Vegas Sands who have gone ahead with preparations to add table games will soon be rewarded -- but not until endless legislative machinations play out. House Democrats appear to be backing off a 34% tax rate for tables (J.P. Morgan reports that leadership is now floating a 21% figure) and may even come down to the 12% rate favored by their GOP colleagues. The $10 million upfront fee, though, appears to be a done deal.

All that said, solons managed to spend much of a special weekend session dickering over matters that ought to be none of their business. Like: Should casinos be allowed to serve free drinks to their patrons? Or: Can they operate on Christmas? Now, nothing sounds more depressing than spending Christmas Day at Harrah's Chester, but aren't these matters that ought to be the prerogative of the individual casino owner? Also, ostensibly pro-business Republicans wanted to put table games before the voters, which could render the whole legislative exercise moot ... and relief can't come soon enough for racinos like Penn National Gaming's Hollywood Casino, which is starting to slash its payroll.

Scarlett saved?!? & other Case Bets

Thu, 01 Oct 2009 16:28:00 -0700

Splendid news, lads (and lasses). Scarlett, Princess of Magic may return to the Riviera in nine months or a year ... that is to say, whenever the economy eventually rebounds. This comes straight from Riv management.

Of course, there's a good chance the Riv itself won't be around in nine months or so. It's miracle it's stayed out of Chapter 11 as long as it has. Then again, President William Westerman has an enviable track record when it comes to beating the odds. People were writing him off 11 years ago and he's still here.

Ah, the good old days. Remember when the Gold Spike was hands-down the scariest casino in Las Vegas? The Siegel Group has done a splendid job of spiffing the place up but a reminder of the Spike's dodgy not-so-distant past came in the form of a guilty verdict in a Nov. 17, 2008 shooting. According to the Pulitzer Prize-winning Las Vegas Sun, the attempted murder was a "grizzly homicide." Does that mean the assailant was firearm-proficient bear?

Now that autumn is here, get out and enjoy Lake Mead while you still can.

Investors may be tiring of endless debt swaps and postponements. A proposed 64-cents-on-the-dollar (at 10% interest) issuance of MGM Mirage debt laid an egg. When it took out $12 billion-plus, due next June, MGM must have been either high as a kite on CityCenter cash-flow projections when it agreed to that deadline or assumed that, when push came to shove, it'd just rejigger its debt load anyway.

A wise colleague of mine once said in re Donald Trump, "All he ever does is restructure his debt because that's all he can do!" That has now become the modus operandi of the casino industry at large -- except for Mr. Cash-and-Carry, Phil Ruffin. So I guess Trump can legitimately claim to have been ahead of his time.

Penn hearts F'bleau. Well, sorta. Penn National Gaming has acknowledged that it's been sniffing around bankrupt Fontainebleau but cites several disincentives to a deal. Penn's CFO even called F'bleau worthless (and few in town would give him an argument at this point). Penn's publicly stated criteria for a Las Vegas acquisition have included that it be affordable and unencumbered. F'bleau is neither. So if Penn can't make liens and litigants go away, perhaps it can trash-talk F'bleau's price down so far that completion-related headaches become grudgingly acceptable.

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.

Big Trop shakeup

Thu, 24 Sep 2009 17:16:00 -0700

During his absent-minded interregnum as Tropicana Las Vegas CEO Scott Butera nearly denuded the casino of on-property entertainment. Only the hasty re-signing of Xtreme Magic left the Trop with a show in the house. Over time, Butera's people added a slew of second- and third-tier acts.

"Too much," said some. Those "some" would appear to include new CEO Alex Yemenidjian. Virtually unpublicized Beatles tribute act Penny Lane? Gone. Impressionist Rich Natole? Going soon. Bobby Slayton? Going a little later, perhaps. (Anthony Cools' track record as a producer is looking dire.) Although I've heard good things about the new venue created for Soprano's Last Supper and Hypnosis Unleashed, apparently they will be relocated elsewhere within the Trop.

To no one's surprise, Dirk Arthur will yield the prime-time slot (where he was, in all honesty, a placeholder) to incoming Wayne Newton. The Wayner will keep the Tiffany Theater warm until a Trop-owned show replaces Newton's morbidly titled Once Before I Go.

The Harmon Theater's ill-publicized Tickled Pink has also closed and it sounds as though that place is experiencing cash-flow problems. Normally, I'd be sanguine that departing acts would soon find new homes elsewhere in town. However, in these desperate times, entertainment has been one of the first items on the chopping block, so the evicted performers can probably use all the positive vibes they can get.

Casino explosion in Ohio? Not only will Buckeye State voters get to say "aye" or "nay" to Gov. Ted Strickland's creation of racinos, the state could get as many as 11 gambling venues -- not the seven Strickland envisions. Another ballot measure (pushed by Penn National Gaming) would authorize four casinos in four major Ohio cities. Minimum capital investment will be $250 million and the tax rate would be set at -- Ouch! -- 33%. Somehow, I doubt that will scare anybody away.

And they're off! Congratulations to Ocean Downs, the first racino approved in Maryland. By June, reels should be spinning on the first 200 of an eventual 800 slots, to be fully phased in within 11 months.

Gambling scandal ensares eight more

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

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

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

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

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

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

Penn hearts F'bleau ... maybe

Thu, 17 Sep 2009 21:24:00 -0700

So the much-bruited suitor for stalled, bankrupt Fontainebleau has been "outed" and it's ... Penn National Gaming. Ace reporter Alexandra Berzon, late of the Las Vegas Sun, broke the story. However, she notes that Penn and F'bleau have been dickering for three months: "Talks could still fall apart at any moment."

Given the criteria that Penn CEO Peter Carlino has been citing for any major casino purchase, F'bleau is an illogical choice. It's expensive, it's unfinished, it's location-challenged, it's a high-end property in a depressed market, it has a problematic condo component (read: units that will never sell) and, most of all, it's a snakepit of litigation. Plus, the cost of completion seems to escalate by the hour and is currently pegged at $1.5 billion.

Remember, Penn balked at paying $1 billion-plus for The Mirage, a turnkey, trouble-free resort. Meanwhile, Harrah's Entertainment is snatching Planet Hollywood right out from under Penn's nose and the company whiffed on a chance to acquire newly ascendant Greektown Casino in Detroit. Go figure.

A Penn spokesman "could not confirm or deny" the Wall Street Journal story. We'll take that as a "yes."

Aubrey has landed. As in "O'Day." Webmistress Jessica has forwarded the following from Holly Madison's Twitter feed: "@hollymadison123 Damn! I can't take one day off work without everything going to hell in a handbasket! Back to spreading the positive energy!" Like I said, word from the wise is that Madison and new Hitler-lovin' co-star Aubrey O'Day are anything other than BFFs.

Harrah's buying spree

Tue, 15 Sep 2009 17:33:00 -0700

Thanks to reader Todd Bristow, who tipped me to Harrah's Entertainment's $89.5 million purchase of Thistledown Race Track, near Cleveland. Thoroughbred Times reports that over half of that amount ($47 million) is a "contingency" payment. The extra 47 mil would kick in if legislation is upheld that would allow conversion of Thistledown to a racino. The track is one of several assets being disposed of by bankrupt Magna Entertainment. If Harrah's can't step up to the plate, Penn National Gaming and Pinnacle Entertainment are in the on-deck circle.

As you've probably heard, Harrah's is also gobbling up the debt carried by Planet Hollywood. It's a strategic move, considering that Harrah's already owns acreage that extends back from Bally's and Paris-Las Vegas to Koval Lane and then wraps south around Planet Ho. It's also been posited that this could be a "passive investment," a gamble that Planet Ho will come back in a big way in the future. Sounds rather iffy to me but stranger things have happened.

Mind you, this is also the same Harrah's that has been buying back its own debt at distressed rates (most recently at 67 cents on the dollar) and restructuring payment schedules like mad to stay ahead of an avalanche of $19 billion-plus it owes on its LBO. Harrah's creditors, are you feeling like suckers yet?

Or perhaps the money is coming from sugar daddies Apollo Management and Texas Pacific Group. Apollo has already been kicking the tires of Fontainebleau and may well be the "potential buyer" who's poised to take the keys to that Edsel. Even with Harrah's skill set, a high-end condo-hotel like F'bleau would be new business model with which to tangle.

At least the likely scenario is that Harrah's would be merely the mechanic, pocketing a fee for trying to get F'bleau up and running. Gives new meaning to "cash for clunkers," no? (Then again, Penn Nat'l may be smarting so much from that thwarted breakup fee in Ohio that it decides to buy F'bleau as a bank-shot means of getting back at Harrah's. Who knows, when CEO's egos have been bruised.)

As the cherry on top, Harrah's furtive move on Planet Ho inspired the following "No shit, Sherlock" headline, courtesy of the Las Vegas Review-Journal: "Harrah's debt purchase could lead to takeover, analyst says." Gee, ya think? I look forward to, "Beginning of autumn could lead to lower temperatures."

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.

Pinnacle meets karma

Thu, 27 Aug 2009 13:30:00 -0700

Plans by Pinnacle Entertainment to move its President riverboat upriver just hit a big snag. Taking the view that the President's license is portable, Pinnacle hoped to use either the vessel itself or the license to jimmy open a new market niche along the Mississippi River.

Seems the Missouri Gaming Commission doesn't hold with Pinnacle's logic. Move the ship, they say, and it's open season on that 13th (and last) license in the Show-Me State. Right now, Pinnacle's keeping the President operational as a charity case -- thereby preserving the license -- but the Coast Guard is likely to shut her down in 10 months, so decrepit is the vessel.

Not that I wish ill for Pinnacle, one of the classier outfits in the industry, but this here is what's called "karma." Both Pinnacle and Ameristar Casinos pushed hard for legislation last year that uncapped the state's loss limits in return for capping the number of licensees. It was an anti-competitive move that was inveighed against in these pages.

Ameristar and Pinnacle tried to lock up what was an open territory. Now, with the President's license skittering about the field like a wet football, Pinnacle's going to find itself having to grapple with the very competitors it thought it had excluded from the game. Which is as it should be.

There can be only one. Two casino proposals from Cordish Gaming and Penn National have been forwarded to the Kansas Lottery Gaming Facility Review Board (Uff da!) for final arbitration, Remember that the last time we went through this, Penn got a whopping zero votes (probably due to a series of peevish public pronouncements), but then Cordish wanted to resubmit its project in smaller form.

This time around, Penn execs have been playing well with others, rather than trying to dictate the process. They're promising a three-phase, $564 million casino-resort (subject to certain economic conditions). Cordish is choosing to under-promise, committing only to a $390 million casino, at least until bluer skies return. Partnership with the Kansas Speedway still gives Cordish an edge (as does the Hard Rock brand) ... but the Kansas-casino process has been long, tortuous and filled with reversals of fortune. (Mike Ensign, anyone?)

Speaking of Kansas ... shoo-in Foxwoods has announced that it's restructuring its debt and enlisting outside assistance, yet another victim of ill-timed expansion. Small wonder Foxwoods and Lakes Entertainment decided to pool their pennies on Chisholm Creek Casino (above) rather than duke it out for the Wichita market.

Compromise is near. Down in Florida, that is. A formula too complicated to summarize here would bring the Seminole Tribe and the Sunshine State's Lege into agreement. (The Seminoles took one look at the compact fashioned by the Lege last spring and spat it out like bad food.) In return for accepting some restrictions on game offerings at some casinos, the Seminoles get a complete exemption from paying taxes to the state -- if private-sector gambling spreads beyond Broward and Miami-Dade counties. And if existing non-tribal casinos get, say, blackjack the Seminoles' obligation to the state is halved.

So tell me, why does Sheldon Adelson seriously think Florida is a potential growth market?

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.

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 ...

New flavor of Tropicana; M is infectious; Penn is persistent

Fri, 07 Aug 2009 14:05:00 -0700

Alex Yemenidjian has busted out a new logo for his Strip casino:

Hey, it's a start. Still no word on a new evening show for the Tiffany Theater (and somehow I don't think Dirk Arthur is going to cut it as a long-term proposition). Anything being possible, perhaps trademarking a new logo will circumvent that "Tropicana" lease-back clause that Tropicana Entertainment CEO Scott Butera snuck past Yemenidjian ... but the Tropicana Las Vegas had better set aside $2 million just in case.

Success breeds development. With M Resort a smash right of the box, naysayers to the contrary, it's proving to be the catalyst for at least one more casino development. The shrouded-in-mystery Raymond Shapiro project would sit immediately north of M and would -- especially if M's amenities get fully built -- synergize with the additional retail/amusement development that are in M's plans.

Industry wisdom, validated by experience, maintains that casinos do better when clustered -- and the Anthony Marnell III and proposed Shapiro properties might even get Gary Goett's long-stalled Olympia Gaming project out of its holding pattern. (It would be on the opposite site of Las Vegas Boulevard from the Shapiro parcel, closer to I-15.)

The loser in all of this is Station Casinos' stuck-in-limbo Inspirada casino project. By the time both that and the master-planned community upon which it was predicated are ready to go, Shapiro and Goett could be as firmly entrenched as Marnell. But, in this lending climate, the operative phrase for any casino proposal remains, "Show me the money."

Penn to locals: "Screw you." For execs at Penn National Gaming, fortifying themselves against competition from in nearby counties supersedes the good will of their constituency. In Jefferson County, home to Charles Town Races & Slots, voters rejected a request for table games in a 2007 vote that went 56%/44% against Penn.

Undeterred, Penn is going to get back in voters' grille this November, it appears, by dint of either the Nov. 7 ballot or a special election a month later. According to J.P. Morgan analysts, the Jefferson electorate is pondering zoning restrictions "to slow down the influx of people from the greater Washington, D.C. area and the conversion of farms to subdivisions." If that's indeed the temper of the neighborhood, Penn's persistence in trying to drive more traffic into the area seems perverse ... if understandable from a dollars-and-cents standpoint.

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.

'Show Me' no stinkin' IDs

Mon, 27 Jul 2009 18:46:00 -0700

"We don't want them in there," huffs Ameristar Casinos' Troy Stremming (left) with regard to pathological gamblers. Stremming's high dudgeon rings a mite hollow now that the Missouri ballot initiative he crafted and shepherded to victory last fall is providing a free pass for problem gamblers. Once boarding requirements were repealed, away went the mechanism for screening self-banned gamblers. Whoops.

It's not like they still can't be caught on-property, though. Woe betide the player who hits a sufficiently big jackpot for his slot machine to go into "IRS lockdown." His identity has to be verified -- which means he can kiss those winnings goodbye and prepare to be handcuffed. To quote Geena Davis in Thelma & Louise, "The law is some tricky shit."

But Missouri's got nothing on Illinois, where casino employees double as "bounty hunters." If you're a self-banned player who's shooting dice at Alton Belle or Casino Queen, there's literally a price on your head.

Penn finally makes a move

Tue, 14 Jul 2009 12:31:00 -0700

Well, let's not get all excited yet. Penn National has bought a puny stake in Morris Goldstein & Assoc., a slot distributor. It's a bit of kabuki theatre whereby Penn and executives CEO Peter Carlino, President Tim Wilmott, CFO Bill Clifford and veep Robert Ippolito can go through the licensing process now, just in case they feel like acquiring something significant down the road.

Mind you, Donald Trump did the same thing several years ago, by dint of a buying a stake in Rivieria Holdings. Nothing ever came of it.

Clouds over Macao. Hey, dictatorial Chinese Communist overlords in Peking, feel free to loosen up those visa restrictions to Macao anytime now. Visitation was down 42.5% in May. Hotel occupancy was also off 18%. One small bright spot was that Taiwanese visitation continues to ramp up, however modestly (i.e., 3%).

Competition forces sanity

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

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

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

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

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

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

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

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

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

Rough trade

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

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

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

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

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

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

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

House of wax

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

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

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

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

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

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

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

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

Case Bets: California, Packer pickle, Macao pix, Holy Cow!, Singapore, RoboPoker, etc.

Thu, 25 Jun 2009 16:24:00 -0700

Editor's note: An item involving Crown Ltd. contained factual errors, which have been corrected (as you'll see). I apologize for the misinformation. My thanks to the reader who pulled my head out of my @$$.

California gamblers stay and play ... at home. While the recession has made some inroads on tribal-casino revenue in the Golden State, it's losing less ground than Las Vegas. Some of those Vegas losses will eventually be recouped, but this day of reckoning was bound to come.

Unlike Las Vegas, which is arguably suffering from having too many competing profit centers within each resort, California casino bosses interviewed still view entertainment as either a loss leader or a one-off. I never thought I'd say this but Las Vegas could use a little more "old school" thinking right now.

James Packer, the guy who can't catch a break, is finds his casino company in even more hot water, in a case of the sins of the father being visited upon the son. The plot surrounding Crown Ltd.'s courtship of a self-banned high roller (and convicted felon) is thickening considerably. Seems paterfamilias Kerry Packer may have been pressuring crony John Williams to get pathological gambler Harry Kakavas back to the tables.

Williams, for his part, rolled on the late Mr. Packer, ~~who's now got some 'splainin' to do~~. ~~No wonder the young Packer's pursuit of Cannery Casino Resorts collapsed like a pup tent.~~ The money quote, if you will, is: "[Williams] said it was common for patrons to rip up [self-exclusion] cards and that, in his view, Mr Kakavas's loss of $2.3 million in 28 minutes was recreational gambling."

If you lose $82,000 per minute, it's not recreation. It's degenerate gambling.

Globe-trotting Ian Sutton is back from Macao and G2E Asia. The sights! The sounds! The smog!

(Update: Ian says it's not smog but mist, as forthcoming videos will show.)

Holy Cow II: GlobeSt.com, normally a continent source of business news, is shocked -- shocked! -- that Steve Johnson's proposed casino on the former Holy Cow site will include a Walgreens. Smelling salts, stat!

But there are some interesting revelations, For one, the reason that Palazzo's flagship retailer is also a Walgreens is that it was a compromise Sheldon Adelson effected with the landowner ... Steve Johnson. (The mere fact of Adelson compromising is newsworthy enough.)

Turns out, that purchase may set the record for an on-Strip acquisition, at an alleged $50 million per acre -- Phil Ruffin, eat your heart out! Johnson also paid through the nose for the Holy Cow site. The price? $23.5 million/acre for land north of Sahara Avenue. Egad!

Columbia Sussex's casino portfolio continues to crumble. Tropicana Entertainment parent Tropicana Casinos & Resorts is selling its Amelia Belle riverboat (thereby forfeiting the New Orleans market) barely two years after the ship was acquired. Amelia Belle is former Harrah's Entertainment vessel, having been Bally's Belle of Orleans.

It's a canny strategic move for new owner Peninsula Gaming, which now has a Louisiana riverboat as well as a racino and four OTBs, not to mention a small flotilla of Midwest riverboats. TropEnt CEO Scott Butera, meanwhile, has less and less over which to preside. At the moment, his ambit consists of four riverboats, mostly in tertiary markets, two casinos in Laughlin and one on Lake Tahoe. Is this TropEnt's future: A succession of piecemeal asset sales? Sure looks that way.

Bad news for Sheldon Adelson. Over in Singapore, rival Genting's mega-budget Resorts World at Sentosa is letting news outlets like Bloomberg know that 60% of the project will ready for a soft opening in early 2010 (i.e., February-March). Projected attendance figures have been revised 20% downward.

In a rapier thrust at Marina Bay Sands, a Genting exec said the company was having regular meetings to make sure it came in on its $4.5 billion budget. Full completion of Sentosa is projected for 2012. Sands is going to have a sufficiently tough time making its nut without Genting crashing the party so soon ... to say nothing of the fact that Genting enjoys much higher brand equity in that corner of the world.

RoboPoker has risen from the grave. Electronic table games have been OK'd for eight New York State racinos. Though the Lege hasn't signed off, the Empire State's lottery board is confident it has the authority to make this move unilaterally. Poor Atlantic City is dying the death of a thousand cuts.

Congratulations to Penn National. It's scheduled to inaugurate a new pavilion for Empress Joliet today. A March 20 fire resulted in a three-month closure of the boat and substantial fiscal hardship for Penn National. In a noble gesture, CEO Peter Carlino kept employees on the payroll even though his ship was hors de combat. Capt. Carlino, S&G salutes you.

Case Bets: Packer & Ho, Sands Bethlehem, MGM Mirage, Ameristar, Penn, Harrah's, etc.

Wed, 03 Jun 2009 14:40:00 -0700

• Smashing guitars -- but not over each other's noggins -- James Packer and Lawrence Ho christened City of Dreams. The younger Ho downplayed expectations of foot traffic, saying his $2.4 billion megaresort could get by on far fewer visitors than the nearby (and comparably expensive) Venetian Macao, which draws 70K visitors daily.

• After a record-setting opening, Sands Bethlehem fell into fourth place during last week's casino action in Pennsylvania. Not surprisingly, Philadelphia Park and Harrah's Chester led the state.

• Beau Rivage is safe. Although MGM Mirage was peddling several of its regional casinos, J.P. Morgan reports that "we have heard from some bidders that this process is close to dead, so we don’t expect to hear asset sales chatter in the near to medium term."

• While yours truly was critical of staffing cuts at Ameristar Casinos, they appear to be paying off. The company projects flat revenue comparisons in 2009 but better cash-flow margins, pegging the savings as $40 million-$48 million, annualized.

• When in doubt, Penn National Gaming falls back on what it knows: racinos. It's angling for the Laurel Park concession left on the table when Magna Entertainment collapsed. Both Penn and rival David Cordish appear to be trying to chisel a loophole into Maryland's slot-parlor law, which limits companies to one slot house apiece. Penn is already committed to Cecil County but wants Laurel Park ... as does Cordish, who has a pre-standing commitment to the Arundel Mills area. The latter project has run into serious opposition. Expect a nip-and-tuck fight for Laurel Park.

• Penn is evidently getting cold feet in Ohio, however.

• Casino expansion in Iowa will have to wait until 2010, at the earliest. This delay is a disguised blessing. The Hawkeye State market has been holding its own during the recession but the timing for diluting the market with four new casinos could scarcely be worse.

• If wishes were horses, Harrah's Entertainment would be galloping along the shores of the Yangtze River this very minute. Seriously, would you lend Harrah's more money? Would you give an alcoholic the keys to your wine cellar? Well, you might get the empties back so you could redeem the deposit on the bottle.

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?

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.

Diversity initiative at MGM Mirage

Tue, 19 May 2009 16:43:00 -0700

As in revenue diversity. Just when it looked as though CEO Jim Murren was getting locked into a Vegas-(almost)nothing-but-Vegas strategy, he busts out a couple of initiatives that would further expand and diversify his company's global reach and revenue stream.

After getting out two years back, MGM has quietly gotten back into the running for a 4,500-machine racino in Queens, N.Y. The company also has Florida-based developer R. Donahue Peebles in its corner. Others in the field for the Aqueduct contract include discrete bids by Steve Wynn and Penn National Gaming.

The latter is the only one currently involved in racinos and would seem like the logical choice, but observers seem to favor MGM's bid. If it goes through, the Aqueduct racino would pose a serious threat to other casinos in the region -- even MGM's own joint venture at Foxwoods Resort Casino. At least Foxwoods has table games, whereas slots-only Sands Bethlehem could see a huge chunk of its projected customer base gravitate back to the five boroughs.

In a low-risk deal, MGM is also franchising its MGM Grand, Skyloft and Bellagio brands to a trio of boutique hotels in Dubai. Developed by Dubai Pearl FZ, the threesome comprises a grand total of 630 rooms. Back here, that wouldn't add up to one wing of an MGM Mirage resort hotel. Otherwise, the Dubai Pearl project sounds awfully familiar: "an 'integrated city' with 5-star hotels, apartments, condominiums, retail and convention space." Kinda like ... oh, what's that big place down on the Strip? Yeah, CityCenter, that's it!

Exit the king? He's not quite off the stage, but in an event of historic proportions, Kirk Kerkorian's stake in MGM has fallen to 39%. Holy King Lear's abdication, Batman! Does this simply presage another Kerkorian comeback ... or the end of an era?

(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.

Upset in Kansas

Tue, 12 May 2009 17:00:00 -0700

I'm going to go broke trying to make book on who's going to get the three remaining casino licenses in Kansas. "Nobody" is a shoo-in for the Cherokee County vacany from which Penn National walked away last year.

But even the presence of former Mandalay Resort Group executives didn't help South Central Gaming Partners. Jilted by Harrah's Entertainment last year, this investment group just got passed over by the Sumner County Commission. Although Foxwoods Development's parent casino, back in Connecticut, has been struggling lately, it got a nod. So did Lakes Entertainment, which earlier had freely conceded it didn't have financing in place -- no small consideration when your proposal is the most expensive of the three.

Two S&G readers made headlines recently ... or rather, one of their St. Bernards did, thanks to his very vocal protestation of tornado-alarm testing. The sounding of the tornado claxon is one aspect of Midwestern life I find myself not missing in the slightest. So, Chaz, I feel your pain, son.

Atlantic City Death Watch VII

Thu, 07 May 2009 14:29:00 -0700

Speaking at the Southern Gaming Summit, former Harrah's Entertainment COO and current Penn National Gaming President Timothy Wilmott pronounced the last rites for Atlantic City. "That market is in a death spiral. The next two to three years are going to be awful," he said. Wilmott's grave prognosis contains a hidden twist of the knife at his former employer, whom he left abruptly at the start of '07. (Harrah's has four casinos in Atlantic City.)

It's more than rhetorical posturing, too, as Penn has passed on several opportunities to get into that market. Judging from Penn's most recent earnings call, the company's turned the page on its erstwhile desire for a piece of the seaside action.

Isle of Capri Casinos CFO Virginia McDowell, a member of one of several executive teams than have been hustled into and out of Trump Entertainment Resorts in recent years, added that a lack of non-gambling attractions has been Atlantic City's downfall.

We beg to differ ... at least to the extent of noting that Vanessa Williams is playing the Tropicana Atlantic City this weekend. Can't think of a better reason to visit the Boardwalk than that.

Case Bets: Isle exits U.K.; no room at the Trop; Carlino channels Astaire, etc.

Fri, 24 Apr 2009 17:22:00 -0700

Isle of Capri Casinos is coming up for air, literally extricating itself from underneath Ricoh Stadium in Coventry, U.K. As part of CEO James Perry's attempt to refocus a company that spread itself too thin under his predecessor, he's walking away from an ill-starred British venture. Rank Group not only assumes Isle's lease, it gets the casino itself for pocket change, by industry standards: $940,000.

Perry may also be preparing to unload Isle's Pompano Park racino in the disappointing Florida market. At least one analyst is now picking Isle, so recently stuck in the mud, as one of the better bets to emerge intact from the gaming group's crisis.

A house divided cannot flush. Staggering from miscalculation to mishap, the Tropicana Las Vegas has sustained another self-inflicted wound. But don't blame current steward Tropicana Entertainment, predecessor Columbia Sussex or even Aztar Corp. The non-kosher plumbing that got the Paradise Tower shut down dates back to the 1990s, when the Trop was under divided ownership (one of the many obstacles to its redevelopment). The scary part is that it took at least 10 years for the code violations to be discovered.

The real victims, of course, are the hotel guests who are getting bumped from their Paradise Tower rooms. Since it's far and away the nicest part of the Trop, by definition they'll be moving to less-desirable rooms, some of them in truly decrepit parts of the hotel. Given the condition of the Trop's physical plant when I made a "secret shopper" visit, today's news comes as less than a surprise. The resort's advancing years were bound to catch it out sooner rather than later.

Penn's fancy footwork. While not out-and-out denying an attention-getting New York Post story about a possible 'credit bid' play for The Mirage, executives of Penn National Gaming were at some considerable pains to imply that it was all smoke, no fire. CFO William Clifford put it thusly: "... there were quotes and things said that have been pulled all the back to the last year’s Gaming Conference ... I’m not quite sure that the Post article is a very good reflection of anything we’ve ever said at any point in time."

CEO Peter Carlino followed with, "Some of the most interesting quotes were made at a time when none of the stuff that you are all currently thinking about was out there so it’s unfortunate. It’s just a hodgepodge of things pulled together to make a story. We would have preferred not to have seen it that way. Look, common sense says if there’s an opportunity we’re going to follow it but it’s no more exciting than that; enough said." [Emphasis added]

A Bloomberg News report that Penn was pursuing Greektown Casino went unaddressed in yesterday's earnings call. To the extent that Carlino was willing to commit himself on Las Vegas, he said Penn wanted no more than a single property "if we can find one." The consensus of Penn execs was that Vegas would be a "viable" market for the company ... in five years. (The company's strategy is partially predicated on an exodus of Californians relocating to Vegas and jump-starting the local economy.)

Sadly, Atlantic City seems to have slipped off Penn's radar screen altogether. On a happier note, the company promises a new and "exciting" replacement for the Empress Joliet pavilion that was destroyed by fire -- which makes it sound like the previous Ye Olde Egypt theme is now history, so to speak.

Schreckliche Idee! At a time when institutions like Goldman Sachs and Deutsche Bank control ever-larger chunks of the Strip, the Nevada Gaming Commission is seriously considering lowering the threshold of scrutiny even further. (Because if there are any two words that instill confidence nowadays, those words are "Wall Street.")

The man fronting this idea, veteran gaming attorney Frank Schreck, argues that his proposed rule change wouldn't result in casinos ceding managerial or operational control. However, that's already happened at the Las Vegas Hilton, where a Goldman-owned stalking horse holds a sizeable minority interest. What he's proposing would take a bad precedent and codify it.

By linguistic coincidence, schreck is the German word for "fright" and the root of schrecklich or "horrible." Which is what this idea is. But Nevada regulators are already overburdened and about to become more so, once the next budget is enacted. Given that grim future, Schreck's proposed lightening of their workload will be probably be embraced.

Updates: Pinnacle, Boyd, Foxwoods, Donald Trump & Criss Angel

Wed, 22 Apr 2009 16:07:00 -0700

Don't wait by the phone if you've got a date with Pinnacle Entertainment. It has just pushed back the timelines on its Baton Rouge and Lake Charles projects by five months. It cited investor reluctance and warned more delays are likely.

Analysts like few gaming stocks and one of those lucky few is Penn National. But a Morgan Joseph analyst thinks Penn has gone about as high as it should and perhaps too high. The sparked an early sell-off of PENN, thankfully followed by a rally.

One more thing to blame on casinos. The tighty righties (and lefties) are going to have a field day with this. It's a windfall of free publicity for Foxwods Resort Casino, though.

The mouth that snored: How far over the shark has casino mogul-turned-TV performer Donald Trump jumped? Would you believe he was "spotted dozing off during Paul McCartney's concert Sunday at The Joint at the Hard Rock Hotel," according to gossip columnist Norm(!) Clarke. By all accounts, the McCartney show was far and away one of the most electrifying concerts given in Vegas in quite some time, launching Joint 2.0 in style. Sleepy Uncle Trump, though, officially qualifies for fuddy-duddy status.

Mike Weatherford, author of Cult Vegas, has a refreshingly contrarian take on the Criss Angel brouhaha from last weekend. Both MGM Mirage and Cirque du Soleil knew what they were getting (or at least thought they did) when they signed Angel. The real disgrace here, IMO, is that it took Cirque nearly 72 hours to crawl forward with an apology. D'ya mean to say they actually had to think it over? Ridiculous ... though not as ridiculous as the amount of oxygen being consumed by the Carrie Prejean kerfuffle. Would the vaudeville hook please drag that Stepford Wife-to-be and her have-they-nothing-better-to-do detractors off the stage, please?

(Prominently visible in at least one clip from the show was Treasure Island owner Phil Ruffin, separated from Old Man Trump by a stunning beauty whom I took to be Mrs. Ruffin. Whoever she was, the leading pageant contestants weren't a patch on her.)

Carlino's Way: a brilliant Mirage gambit

Wed, 22 Apr 2009 13:14:00 -0700

Considering that Penn National CEO Peter Carlino would have paid far less for Treasure Island than the $775 million (bargain) price that Phil Ruffin ponied up, it's been looking like Hell might be hosting the Ice Capades before Carlino could secure a trophy property on the Strip at a dollar figure he deems affordable. Factor in the reported reluctance of both MGM Mirage and Harrah's Entertainment to part with Strip properties for less than 10X cash flow -- and maybe not even that -- and you figure Carlino and a first- or even second-tier Strip property are going to intersect sometime around the Twelfth of Never.

Carlino's criteria for buying into the Strip, as set forth in a March epistle, are exceptionally conditional: “We’re watching things very closely but will pounce only when the sun, moon and stars align. Penn National can wait as long as need be to make acquisitions that will be opportunistic and, more importantly, return-focused.” Run this month-old e-mail through the Wishful Thinking Machine at the Las Vegas Review-Journal and you get a headline like, "Penn National ready to 'pounce'."

But soft ... what light through yonder tabloid breaks? 'Tis the east and Peter Carlino is the sun. Arise, fair Carlino and buy The Mirage! Although Kirk Kerkorian, MGM Mirage and Penn National are doing their best impersonation of signifying monkeys, Post reporter Josh Kosman is onto a story that, if it pans out, will leave Strip observers gobsmacked. It would appear that Carlino has indeed found a means for bringing sun, moon and stars into alignment that gets a '10' for creativity.

In essence, banks holding some of the $7 billion in unsecured debt that comes due two years hence would make a 'credit bid' on The Mirage, trading debt for property. In turn, they'd hold it as collateral against an eventual repayment by Penn National, which would cross MGM's palm with a downpayment of unspecified size -- but probably small enough that Carlino could crow, "Victory is mine!"

(Interestingly, Penn is also reported by Bloomberg News to be sniffing around for a Detroit casino. It's not MGM Grand Detroit -- which may go wanting for prospective buyers, according to Kosman -- but bankrupt, red ink-ridden Greektown Casino. Given the hard bargains Carlino likes to drive, somebody's going to end up eating Michigan-sized debt if that deal should go through. No way Penn takes on the $777 million Greektown owes.)

It's a variant of an earlier ploy, rejected by MGM CEO James Murren, in which Boyd would have relieved MGM of some of its bonds in exchange for a Strip casino. “[Murren] fixated on the multiple we’d pay. I suspect that attitude may have some flexibility now," gloats Penn CFO William Clifford. Carlino says that Vegas holds "a dozen" casino-hotels that would fit the mid-market niche of Penn's customer base. He's openly ruled out Tropicana Las Vegas, so if a Mirage deal evaporates, what remaining resorts might comprise Carlino's Eleven?

A delicate balance

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

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

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

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

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

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

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

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

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

Kansas heats up again

Thu, 02 Apr 2009 13:57:00 -0700

It's always either feast or famine for the casino industry's prospects in the Sunflower State. A week ago, there was one in-progress project, Butler National's low-cost Dodge City casino and almost nothing else. Now, with the window of opportunity slamming shut (again) for Wyandotte County, a slew of applicants has skittered over the sill.

First in was Cordish Co., making good on its promise to be back with a downsized proposal for the Kansas Speedway. A $390 million Hard Rock-branded casino will be the entirety of Phase One, with the hotel and all other amenities to emerge at an unspecified future point. Yesterday, Penn National Gaming got back into the act, pitching a $500 million iteration of its Hollywood Casino brand. It'd be a full-service product (hence the higher price tag) but Penn's noblesse oblige attitude and its abrogation of a casino development it had been awarded in Cherokee County may still rankle the Kansas Lottery Commission. It blanked Penn in the previous round of bidding.

Hard on Penn's heels comes Las Vegas-based Golden Gaming, which lost to Cordish by one vote last time around. Its proposal is Cordish-like in terms of proposing a $360 million casino (with restaurants and entertainment venues) to be eventually followed by another $300 million in augmentations. These would include an expansion of the casino from 2,000 slots to 2,500 and from 65 table games to 98. Also promised are "a 300-room hotel, spa, restaurants, retail shops, convention and meeting space, an 18-hole championship Tom Watson golf course, 60-lane bowling alley, entertainment venues and more."

(Boy, $660 million sure goes a lot farther in Kansas than it does in Vegas. Here, all it gets you is Aliante Station.)

Golden's would-be project, to be sited along I-70 near Edwardsville, is Cordish-like but arguably Cordish Lite, too. Allying itself with the speedway and sublicensing the Hard Rock brand gives Cordish two sharp arrows in its quiver. It'll take some pretty strong argumentation by Golden to persuade Lottery commissioners to reverse their earlier preference for the Baltimore-based developer, which can now also point to the early success of its Indiana Live! racino as further evidence of its suitability. In Round One, last year, the vote between Cordish, Golden and Penn went 4-3-0 in Cordish's favor. It's the latter's game to lose.

Over in Sumner County, previous applicant Equity Ventures has been pawing the ground for a while now. It's hedging its bet by optioning two sites but one of them is entangled in litigation due to the City of Mulvane's attempt to grab, er, annex it. (Way to improve that tax base, guys!) Jilted partner of Harrah's Entertainment, which retreated from Kansas last year, Equity's profile got higher this week when former Mandalay Resort Group CEO Mike Ensign turned up at the helm.

After a bit of hemming and hawing, Foxwoods Development is returning to the fray, too. It's making the argument that it can get a casino on line quickly and inexpensively, probably in the $225 million neighborhood. Squeaking in just under the wire is Lakes Entertainment, coming off a rebuff by Ohio voters last November. Like the Ensign group, Lakes is opting for a parlay of sites, one of them in Wellington.

The state ought to have fun sorting out what are, in effect, five proposals. Equity has the theoretical advantage of representing the core of the joint venture that won the bidding last year (presuming that Harrah's defection hasn't left a sour aftertaste). Foxwoods, despite recent economic misfortunes in Connecticut, still owns the longest and strongest track record. Promising an operational casino lickety-split is music to tax-starved bureaucrats' ears, too. Lakes has the site (Wellington) that's been bruited as the ~~Lottery's~~ Sumner County Commission's location of preference. This one's impossible to call.

That leaves orphaned Cherokee County, where bidding remains open for another three weeks. Anybody ... anybody at all? Don't everyone jump up at once, now ...

Breaking News: Fire at Empress Joliet

Fri, 20 Mar 2009 16:27:00 -0700

Penn National Gaming's Empress Joliet riverboat complex was spewing smoke this afternoon as a construction-related fire consumed the pavilion area. The blaze was spotted around 10 a.m. Central time and was still belching thick, black smoke three hours later. Empress Joliet was evacuated without neither a hitch nor an injury. Thank god for that and here's hoping the blaze doesn't totally cripple a casino that was facing severe business challenges already.

Big bounce in Pennsylvania

Thu, 05 Mar 2009 14:04:00 -0700

Casino revenues in the Keystone State leapt 14% from February of Leap Year to this year, at least at six of the state's seven casinos. (Hollywood Casino at Penn National Race Course is excluded; it wasn't open a year ago.) That's $126 million against $110 million, even with one less day in the month, which is divided 55/45 between the state and operators. A 1,578-machine increase in slots, mostly at Mohegan Sun at Pocono Downs really helped, too, as you'll see.

The comparisons of gross-revenue (not to be confused with cash flow, which can be considerably less) are as follows ...

Mohegan Sun @ Pocono Downs: $12.4 million/$17.8 million (44%)

Philadelphia Park: $28.5 million/$30.3 million (6%)

Harrah's Chester: $28.5 million/$27.9 million (-2%)

Presque Isle Downs: $12.1 million/$13.9 million (15%)

The Meadows [Cannery Casino Resorts]: $17 million/$20.6 million (20%)

Mount Airy Resort: $11.6 million/$15.3 million (32%)

Plus another $19.7 million realized at Penn National. Once expansions are completed at The Meadows and Philadelphia Park (more bad news for Harrah's Chester), and Sands Bethlehem and Rivers Casino in Pittsburgh open, the state expects the annual take to swell to $2.25 billion, with industry employment growing to 8,500 souls.

Three-fourths of the value of the troubled, $1.7 billion Cannery/Crown Ltd. deal now rests on The Meadows. Crown says it expects an annual cash flow contribution to be $115 million versus only $35 million from the two Canneries in Las Vegas. If New Yorkers really are willing to drive an hour and 50 minutes to pull the slot handles in Bethlehem, then Sheldon Adelson's 17% projected ROI won't be as zany as it appeared at first blush.

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.

Missouri: Dough and "D'oh!"

Wed, 11 Feb 2009 17:34:00 -0700

Silly me. I had the Missouri numbers sitting in my "Inbox" all day yesterday and simply overlooked them amidst a typically frenetic day. A big "thank you" though to reader Bob Bradley, who provided the short and long versions (click on the "January 2009" link for a PDF). The mitigating factors cited in the sixth paragraph of the Post-Dispatch story (such as holidays and number of weekend days) should be taken into account when reading what follows.

The market was up 10% on the nose for January, validating not only Wall Street's renewed faith in regional gaming markets but also eradicating any remaining doubts that the state of Illinois is toxic to casinos. I admire Neil Bluhm's confidence in pursuing that 10th license but can't imagine why anyone would want to be in Illinois right now.

Pinnacle Entertainment's President riverboat has been a floating corpse for sometime now, so -43% comes as no surprise. An ever-so-slight decline at Harrah's Entertainment's Maryland Heights property is an unaccountable disappointment, though, given the liberalized rules that are driving revenue increases across the Show-Me State. Pinnacle's Lumiere Place, a distant third in St. Louis, still has a lot of catching up to do, even with Illinois practically shooing customers into its arms. Penn National, though, leapfrogged Harrah's in Kansas City, moving into the #2 spot. All three Isle of Capri boats posted gains, in a long-overdue piece of good news for that company.

Ameristar Casinos wasn't the biggest percentage gainer in either the St. Louis or Kansas City markets (that would be Lumiere Place -- which saw a 25% higher influx of foot traffic -- and Penn's Argosy Riverside, respectively). But in terms of sheer dollar amount, Ameristar remains the dominant operator in both. The future course of this company may be hazy but you have to admire how well they're maintaining the status quo.

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.

Quote of the Day

Fri, 06 Feb 2009 12:54:00 -0700

"We would love to get a Strip property. But we believe selling multiples now don't reflect reality. Our interest is clearly only in a Strip property, something that will benefit our current customer base around the United States and Canada. I think we are going to have to let this play out longer." -- Penn National CEO Peter Carlino, driving a hard bargain yesterday. The Las Vegas Review-Journal, desperate to keep the Penn-is-coming story alive, headlined his remarks, "Penn reaffirms interest in Strip property."

Mixed message from Penn

Fri, 06 Feb 2009 12:10:00 -0700

Having pulled the plug on his latest Atlantic City venture, Penn National CEO Peter Carlino served the city a heaping plate of gloom with a side dish of pessimism. In fact, he pretty much slammed the door on the besieged metropolis, although his spokesman reopened it a wee bit.

Quoth Carlino: "I think as we've watched New Jersey, sadly, that's a market at the moment that is significantly less appealing to us, and that shouldn't be a surprise. There is much more bad news coming ... [Pennsylvania slot parlors are] nothing but bad, bad, bad news for Atlantic City. It's going to be a while, and maybe a long while, before the picture changes in Atlantic City. It's not a pretty picture."

In other words, he didn't just plunge a dagger into the heart of Atlantic City, he twisted it around a bit for good measure. Also, Penn's legal representative on the Boardwalk is a co-owner of A.C. nemesis Harrah's Chester. Coincidence perhaps, but the symbolism is painful.

Then again ... a Penn representative says the company will "evaluate the opportunity" as Bader Field continues to be shopped around. So Penn isn't really giving up on Atlantic City after all and Carlino's verbal barrage begins to sound like a "softening up" bombardment, preperatory to pushing for a better deal on Bader Field.

Carlino is right to wary of the potential threat from Philadelphia but anybody contemplating an Atlantic City investment is going to find themselves between that rock and the hard place that is the realization that new (or significantly refreshed) product and nothing else will suffice in A.C. Unfortunately opportunity -- the gnarled casino-development process in Philly -- and crisis, in the form of an economic deep-freeze -- have coincided, leaving the status quo drifting along.

There's a variety of low-hanging fruit in Atlantic City: the 14 acres MGM Mirage is peddling; Pinnacle Entertainment's stalled Sands site; the Tropicana; perhaps even Bally's Atlantic City or a management contract at Resorts Atlantic City, if the foreclosure goes through. Not to mention the Trump Marina sale, which seems to have devolved into slow-fizzle mode. But if Penn is sending a signal, it's translating as "Bader or Bust!"

Black Tuesday: Wynn

Wed, 04 Feb 2009 15:42:00 -0700

With the aforementioned exception of Penn National and that of Bally Technologies, Feb. 3 was a wretched day to be in the casino industry, with most attention going to Wynn Resorts.

The company had to good grace to hold a conference call to announce what it was doing, in detail, resisting the obvious temptation to put out a press release and then just clam up. Steve Wynn lavished considerable praise on his employees and came across as sincerely concerned with keeping people employed, albeit in reduced circumstances. Contrast this with certain casino operators (coughColumbia Sussexcough) who have seemed to positively enjoy putting people out on the street, the more the better.

Encore: caught napping?

Wynn (the company or the person, take your pick) is also to be commended for graduating the pay reduction on salaried employees so that the lower-tiered ones face "only" a 10% cutback, as opposed to the -15% that will be suffered in the higher ranks. However, losing as much as $15K in annual income isn't chump change and life will be even rougher for the hourly employees, who are looking at 20% less pay. (Social Darwinians will doubtless adopt the Pollyanna-ish view that the hourly employees now have the "opportunity" to take on additional, part-time jobs ... in a state where unemployment exceeds 9%.) However, unless you're making peanuts to begin with or are independently wealthy, a 10%-20% pay cut isn't "a little less," as Wynn defensively phrased it, it's a lot less. Let's just be clear on that.

During the conference call, Wynn said that the cutbacks had been in the works for five-six weeks, which would place their inception somewhere between Dec. 23-30 ... the first week that Encore was open. That's interesting timing. Perhaps management was too preoccupied with opening the property to see this crisis coming, but whatever the reason, both bosses and employees have been sandbagged.

Given the severity of the economy measures and the fact that, according to Wynn himself, the company is sitting on $900 million in "free cash," as they put it, why were such drastic actions necessary? Especially when the maximum saving is pegged at $100 million? Better too much prudence than too little, of course, but it seems like we're not getting the full picture here. If I had to surmise, I'd say Wynn must be looking at some very dire -- but undisclosed -- 2009 business models and bracing for impact.

Pilar Weiss of the Culinary Union told S&G she wasn't sure where the Review-Journal got its 9,500-affected-employees figure, as roughly half (5,000-plus people) of Wynn Las Vegas/Encore's workforce is Culinary-repped and therefore immune to the unilateral pay and benefit reductions (partly because they don't participate in Wynn's 401[k] plan). "He can do unilateral whatever he wants" to non-Culinary employees, Weiss said, adding that the union hasn't had and doesn't intend to have meetings with Wynn to discuss concessions.

"I don't see any defections," Wynn predicted of his workforce and one can't argue with the implicit logic, even if a Wynn LV/Encore job might not be the highest-paying gig on the Strip now. Most of his competitors are in even worse straits and any Strip job opening draws a hefty surfeit of applicants. Wynn knows his people will stay put because the chances of landing a better job elsewhere are closer to "none" than "slim."

On other topics, Wynn was pretty sanguine, saying that Encore Macau is being financed out of free cash flow and belt-tightening isn't needed over there: "Our business in Macao is at levels that don't dictate that sort of measure." Having almost a fifth of the Macanese market with just one casino is nice, isn't it?

"I don't really feel like sweating the stock price" was another Wynn-delivered bon mot, as he implied he might be in the mood to take advantage of the swooning market and accrue more WYNN shares.

The assembled stock analysts were respectul but not fawning, with the exception of Larry Klatzkin, who coyly wafted softballs for Wynn execs to swat out of the park. Joseph Greff asked the once-unthinkable: Could Strip resorts become irrelevant and go dark? Wynn didn't answer directly but noted that the pressure was greatest on the bargain-tier properties: "Where do you go from 29 [dollars a night]?" Added one of his lieutenants, any darkness "will come from the bottom up."

Penn Natl' > [your company here]

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

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

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

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

Stanley Ho's comeback

Mon, 02 Feb 2009 12:48:00 -0700

Citing the Lusa news agency, J.P. Morgan says that Macao casino revenues for January came in higher than expected, at $1.1 billion. The shocker, though, is the revision of market-share figures, which previously had shown Stanley Ho and Sheldon Adelson each holding a quarter of the market. Lusa's revised numbers show Ho thrusting Adelson firmly into second place -- 28% to 22%. This is a sobering setback for Las Vegas Sands, whose CEO had forecast the demise, at least a dramatic downsizing, of Ho's casino empire.

Let this also be a lesson to those us (present company included) who thought Vegas swankiness would trump customer loyalty to Ho's older -- some would say seedier -- product. The "B" plotline is that Wynn Macau's market share is 17%, only five points behind Sands Macao and Venetian Macao despite far less capacity. Galaxy Entertainment (13%), Melco Crown Entertainment (11%) and MGM Mirage (9%) divvy up the remainder, with the latter paying the price for being last into the market and a reportedly disadvantageous location. This is one race where those who bet on the tortoise over the hare will be chagrined.

Speaking of Stanley Ho, he and an associate have dropped $284,000 into the coffers of the New South Wales branch of Australian Liberal Party. This is significant because Ho made a run at a New South Wales casino years ago but was deemed "unsuitable." Don't be surprised if the Liberals suddenly discover him to be cleaner than a hound's tooth.

Shakeup at Sands. With its Macao and Singapore projects lagging badly, Las Vegas Sands has tasked a new executive team for its Asian portfolio. Senior Vice President Leonard DeAngelo comes by way of Penn National and, before that, a different kind of Sands -- the vanished Sands Hotel & Casino in Atlantic City. Former Langham Hotels & Resorts executive Nigel Roberts has been named president of behind-schedule Marina Bay Sands.

Executive VP Brad Stone has been promoted to the newly created role of president of global operations and construction, which puts him in charge of design and building for all Sands projects worldwide. It's a thankless task but expectations for Sands have fallen so low that if Stone effects even a modest improvement it will seem a triumph.

Atlantic City: Two strikes, no balls

Thu, 29 Jan 2009 18:05:00 -0700

This was originally going to be "Death Watch VI" but three of those in a week is positively ghoulish. So, on to the latest disheartening developments from Atlantic City, the casino market that just can't catch a break.

Cease the revels! Taking a page from the Harrah's Entertainment playbook, Revel is calling a halt to interior work and will concentrate on finishing the exterior of the $2 billion resort. It had weathered the loss of several key executives in a plane crash and an attempted shakedown by Unite-HERE, but now it's basically running out of money. The possibility of a joint venture has now been floated. (Hey, Penn National, here's your chance to get onto the Boardwalk without having to buy the land or even put up most of the construction cost.) Starting a multi-billion-dollar resort project without all of one's financing in place may be standard practice, but it's caused project after project to go begging as Wall Street's purses snap shut.

It seems disingenuous, though, for Pinnacle Entertainment to cite Pennsylvania casinos as a potential reason not to move forward in Atlantic City. True, Columbia Sussex CEO William J. Yung III completely "misunderestimated" the Pennsylvania threat, but he wasn't the sharpest knife in the drawer when it came to running casinos and evidently never familiarized himself with the A.C. market. Pinnacle, they're supposed to be the smart guys, so they had to know full well what they'd be up against when they took a wrecking ball to the Sands back in '07. One would expect no less of them.

The cruel irony to all of this is that, during a time when casino development in Philadelphia has been deadlocked and ineffectual, buying precious time for Atlantic City, the economic crunch has sent project after project either into paralysis or onto the slag heap.

The New Jersey Casino Control Commission in executive session.

Trop the madness! If such a thing were possible, the Tropicana Atlantic City has even fewer slot technicians now than during the slash-and-burn ColSux days. And the techs have voted to strike, which may trip a rolling series of walkouts. Table game dealers would be the next ones out the door.

There's a mixed message coming from Trop HQ. President Mark Giannantonio insists he's been bargaining in good faith. But his hands may be tied by slowpoke trustee Justice Gary Stein, whose public posture has been that it would be unfair to the next owner of the Trop to be saddled with a labor contract negotiated by state-appointed interim management.

I agree, in principle. But in practice that admirable restraint has resulted in Trop employees being strung along while Stein takes his own sweet time getting a sale into place. A picket line would be yet another unfunny act in the farce caused by the New Jersey Casino Control Commission's lack of testicular fortitude when dealing with its dawdling surrogate. It should have told Stein to get the most viable deal and get the hell on with it 10 months ago.

Which is one more argument for taking a chance on Tropicana Entertainment CEO Scott Butera (a dice-throw that seems like less and less of a gamble by the day). When ColSux brinksmanship seemed to have the Tropicana Las Vegas headed for a strike, Butera brought the crisis to a swift and statesmanlike conclusion. He'd probably do the same thing in Atlantic City. It's a situation that calls for decisiveness, a quality not greatly in evidence right now.

Colorado casinos: Four votes, four wins

Wed, 21 Jan 2009 18:47:00 -0700

After a statewide vote approved 'round-the-clock operation at Colorado's non-tribal casinos (along with a 20X increase in betting limits and a wider repertory of games), the measure wasn't home and dry. It had to be voted through in Cripple Creek, Black Hawk and Central City. I heard some skepticism voiced about whether the citizens of Central City were on board with a gambling expansion but they sure were. The proposed liberalization racked up an overwhelming victory yesterday.

Don't gas up for a drive to Colorado just now. The widened operating rules don't kick in until July 1. Although neither Ameristar Casinos nor Riviera Holdings is directly affected by the Central City vote, Wall Street finally got a clue as both stocks traded slightly upward today. Ditto Penn National but not Isle of Capri. Congratulations to all Colorado operators, who definitely could use the relief.

The casino nobody wanted

Thu, 15 Jan 2009 11:11:00 -0700

A tip of the Panama hat to a reader in Kansas who brought my attention to this story ...

The Kansas Lottery Commission will push the deadline for applying for the Cherokee/Crawford county casino monopoly back three months because nobody wants it. Remember that Penn National was the only applicant the last time around and subsequently walked off in a snit. If the KLC were to hold its nose and sanction a quick-and-dirty casino in lieu of the mandated $225 million facility, at least one or two companies would have less trepidation about going where Penn once feared to tread.

Trop afterthought

Wed, 14 Jan 2009 14:59:00 -0700

That poor Tropicana Las Vegas, you could say the whole place is an afterthought these days. The old gal sure deserves better than what she's seen of late. Anyway ...

Seeing how CEO Scott Butera's business plan makes minimal provision for reinvesting in the LV Trop and the first iteration of his reorganization plan spins it off into a separate entity, it sure looks like they're shopping the place, doesn't it? Too bad that Penn National has already turned up its nose at the Trop. MGM Mirage even snubbed it by saying a Trop acquisition hadn't been considered -- not "decided against," not "not discussed," but beneath consideration. Owww! Is that any way to treat a lady of a certain age?

It'd be one of the all-time "fixer upper" acquisitions and with so many more-state-of-the-art, sexier Strip resorts potentially up for grabs (including the eternally available Rio), the market would appear to be saying, "Not now." If Butera could get even $500 million for it this year, I'd be gobsmacked.

"No more Bill Yung, honest." With Butera having earmarked more than half of his proposed $275 million reinvestment money for the Tropicana Atlantic City, he's making what has the distinct sound of a last-ditch plea to the New Jersey Casino Control Commission. As bad as things are in Atlantic City, there's not much Tropicana Entertainment without the A.C. Trop, so he's got to play this hand right down to the end. Once the Trop goes to the bankruptcy auction, Butera's out of the game.

Penn Nat'l: Smoke everywhere, fire less evident

Wed, 14 Jan 2009 13:30:00 -0700

Despite story upon story, Penn National Gaming refuses to oblige the Las Vegas Review-Journal and purchase The Mirage. (This was the paper that pooh-poohed the Phil Ruffin/El Ad deal when it began to break.)

While -- for all we know -- intense negotiations may be going back and forth right now between Penn and MGM over the titular property and a deal could be thisclose, the story has never amounted to much more than feverish speculation that The Mirage simply must be for sale. It would also run a cart and horses through the equally prevalent conventional wisdom that MGM is simply 'renting' Ruffin Treasure Island and will buy it back for $1.2 billion somewhere down the road. After all, if the pirate place doesn't make sense without The Mirage, the reverse equation makes even less.

About the only thing we know for certain is that Ruffin ran the Mirage numbers and found it too rich for his blood, opting for Treasure Island as a Christmas present to himself. And that Steve Wynn didn't make an offer for it. Or so he keeps saying (and I don't for a moment believe that he did or would). Is there a story here or are we all on a fishing expedition?

My best guess -- and it's nothing better than that -- is that MGM is trying to interest Penn in one or more of at least four other properties but Penn wants something mid-Strip, for obvious reasons, and doesn't want to pay the going rate. (Naturally, given God's rich sense of irony, a Mirage sale will be announced today or tomorrow and I will be proven spectacularly wrong. If so, much crow will be eaten.)

What's new and interesting is the revelation in today's paper that, unlike your average sleeping-dog corporate board, Penn's board of directors actually paid more than lip service to its fiduciary duty by restraining CEO Peter Carlino from making a bid on a Las Vegas Strip property until prices fall further. "Penn National's management is committed to acquiring a Strip resort, potentially in 2009," reads the article, in which case Carlino has put himself on the hook and probably shouldn't hope for any discounts. In other words, he's become the equivalent of the pig in the old ham-and-egg-breakfast analogy, with MGM Mirage, Harrah's Entertainment, etc., enjoying the role of the chicken.

Update: Hunter Hillegas has a slightly different take on l'affaire Mirage and his readership appears to be growing skeptical of the rumored sale, for myriad reasons. There's also a valuable link to MGM Mirage property-by-property financials (a nicety the company has discontinued) toward the bottom of the thread.

Update 2: Read this next Mirage dispatch only if you have a strong stomach. I guess bloggers aren't being comped at Encore after all.

Hot flash: Menopause closes April 5.

Is Colony Capital's malaise reaching its sclerotic, baneful arm out for the Las Vegas Hilton? Parts are starting to fall off the LVH vehicle at an increasing rate. First, Star Trek: The Experience was shuttered and still no replacement has been found. Now Norm! ("The Scene and Heard") informs us that the end is drawing nigh for Laugh Out Loud, featuring The Scintas, and the LVH's cabaret mainstay, Menopause: The Musical.

According to man-about-town Clarke, "a sexy show is under consideration" in their place. Whew! I'm so glad to see the LVH doing something original. 'Cause if there's one thing you can't find in Vegas, it's a "sexy show." Nope, nothing like that in these here parts. Way to go, Colony Capital, the company that brought you a celebration-less New Year's Eve at the Atlantic City Hilton. And excuse me but when did Chrissy Scinta cease to be sexy?

From A(ztar) to Z(ilch)

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

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

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

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

Lighthouse Point: Last voyage departs soon.

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

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

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

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

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

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

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

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

Fertitta scores own-goal on stock

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

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

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

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

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

Collapse in Kansas; Herbst is toast

Fri, 05 Dec 2008 11:20:00 -0700

And then there was one.

A Cordish Co./Kansas Speedway joint venture has pulled the chicken switch on a $400 million casino project. This leaves avionics firm Butler National Service Corp., with its Dodge City concession, as the only company with an ongoing casino project in Kansas -- Penn National, Harrah's Entertainment and now Cordish having walked away from the other three concessions. Project head Joseph Weinberg wants to build a casino-first, amenities-later version of what had been proposed. Of course, in order to do that, the bidding process will have to be re-started from scratch. Also, Weinberg's plan assumes that Cordish gets the nod a second time and, were I a member of the Kansas Lottery's board, I'd be getting pretty fed up with the diva-dom displayed by some of the casino applicants.

On the other hand, if a company as well-regarded as Cordish can't get its Speedway casino financed, that makes it easier to excuse Harrah's exit from the Sunflower State. The Lottery says it is willing to"invite applicants to apply with proposals they feel fit the current economic climate." [read: "smaller budgets"]. That, combined with the sudden availability of Sumner County, opens the door wide for Penn National. If the Lottery's board wants to give Penn the Sumner/Cherokee County parlay it requested (and lower the budget for the latter), Penn is the one company that could execute the projects out of cash on hand. Or is it saving its pennies for a Vegas Strip property now?

Across the border, the clever chaps at Pinnacle Entertainment have found a loophole in Missouri law that might enable them to open yet another casino market. Revenues at the old President riverboat, on the St. Louis waterfront, are down somewhere in the bilge water. But Pinnacle has a discrete gaming license for the ship and an option on some land toward the northern end of St. Louis, near the Chain of Rocks Bridge. There, it proposes to essentially dry-dock the President.

Since Missouri law doesn't expressly forbid what Pinnacle is contemplating, the company could open a new market in the state, even though the number of licenses remains frozen at 13. Smooth move. But it's not one that's going to sit well with the backers of Sugar Creek and Cape Girardeau projects that were frozen out when Missourians voted for the license cap last month. And it underscores the perils of shutting the door to new competition, as Pinnacle and Ameristar Casinos are beginning to treat Missouri as their private fiefdom.

Already, Ameristar veep Troy Stremming -- the architect of the freeze -- is huffing that Missourians dare not let Sugar Creek get into the game: “We don’t want to get into a situation where we are over-saturating the market and cannibalizing existing destination facilities.” No, but it's hunky-dory to let Stremming's buddies at Pinnacle have three St. Louis-area locations instead of their current two. No oversaturation or cannibalization there, huh? At least Stremming won't have the casinos-in-Kanas bogeyman to brandish anymore, now that all but one of those projects has collapsed.

Hope for Harrah's. The Chinese government is experimenting with parimutuel wagering on horse races. If the ChiComms can be persuaded to extend the sport of kings to Macao, maybe Harrah's can make serious use of that golf course it purchased and which is now ineligible for casino development. Frank Fahrenkopf couldn't resist mentioning that white elephant during his joint appearance with Harrah's CEO Gary Loveman during G2E. Judging from some of Fahrenkopf's subtle rapier thrusts and Loveman's harrumphing response, there seems little love lost between the twosome.

Herbst Watch, Day Two. The Magic 8 Ball (in the guise of Liz Benston) says bankruptcy likely for Herbst Gaming, which is in default on $1.27 billion of debt. This has been in the cards for Herbst ever since it got taken to the cleaners by MGM Mirage for some Primm, Nev., casinos that had seen better days (like, maybe 10 years ago). Benston's description of the $394 million boondoggle is "ill-advised." Understatement doesn't get any better than that, my friends.

Case Bets: Harrah's, Penn Nat'l, Stanley Ho's truffles

Wed, 03 Dec 2008 18:34:00 -0700

Harrah's Entertainment Vice Chairman Charles Atwood is calling it a day. His stated reason for leaving -- to pursue philanthropic activities -- is the same one given by J. Terrence Lanni when he abruptly left MGM Mirage (after giving Kirk Kerkorian less than 24 hours' notice). But since Atwood isn't departing for another 10 days -- and apparently was beseeched by CEO Gary Loveman to stay on last January, for what proved to be one more year -- there's no reason to believe Atwood's departure is anything but on the up and up.

That said, Atwood is choosing a prudent time to step off the deck of the sinking Harrah's ship. A ways back, I asked if it was too soon to call for Loveman's resignation. Upon reflection I've decided that, no, it's too late. Much too late. Any successor would simply find him/herself rearranging deck chairs on the R.M.S. Titanic.

Remember Baha Mar? The lawsuit against Harrah's, filed after a resort project in the Bahamas turned turtle has been unsealed. It accuses the company and an affiliate of "secretly and improperly plotting to delay or pull out of the project and ... avoid contributing their $212 million share of equity." This promises to be juicy.

Money for nothing. It could be worse. You could be Penn National, which faces the best-case scenario of being out $5.5 million in free slot play, plus $770,000 in free buffets. See, this is what happens when you farm out your direct-mail marketing. An offer intended for 1,000 patrons was mistakenly mailed to 55,000 -- and they want their MTV, metaphorically speaking. If Penn -- which self-reported the goof to authorities -- is held to the full terms of the offer, it could be on the hook for a $29 million promotional allowance. Oy! If you're a recipient of the offer, the number to call is (717) 469-2211 to see if you can make a deal.

Life's good. If you're one Stanley Ho and can afford to spend $530,000 on truffles and tubers. Those better be some mighty good veggies. Then again, Dr. Ho -- who has proven Sheldon Adelson's (and my) reports of his imminent business demise to be greatly exaggerated -- surely knows that revenge is dish best eaten cold. With truffles. Cheers, Stan.

Harrah's waffling on Kansas?

Fri, 14 Nov 2008 17:41:00 -0700

Kansas casino applicants have been dropping like flies and now the buzzards are starting to circle Harrah's Entertainment's $535 million Sumner County project. (Harrah's has already been warned once by the Kansas Lottery that it had better make good on its proposal, in full.) All Harrah's would tell AP is that it doesn't comment on rumors, which is less than a ringing reiteration of its commitment to the Sunflower State.

The folks in Topeka, though, weren't sounding any too confident, uttering things like, "I consider it a possibility, but I haven't heard anything definite." Or "We haven't gotten official notification of anything yet. I know there have been some conversations." Or perhaps the oh-so-reassuring, "When I've checked on the rumors, they have assured us that is not the case, at least not at this time ... but you never know about the future."

There are a couple of observations to be made here. One, which almost goes without saying, is that had Harrah's CEO Gary Loveman not gone a-courtin' to Texas Pacific Group and Apollo Management, we'd probably be talking this moment about a profitable company, not one that lost $130 million over the summer. It has until Jan. 21 to decide which it needs more: The Kansas market or its $25 million soon-to-be-nonrefundable deposit. If it opts to take the money and split, Harrah's will be doubly the loser, having opted out early from a tribal casino-management contract in Kansas in order to take a run at one of the Lottery's concessions instead.

The other thought is that Kansas' four-casino initiative is unraveling in dismaying fashion. Whatever stomach Las Vegas had for managing state-owned casinos in the heartland has been all but lost, especially given the high cost of entry. MGM Mirage, Las Vegas Sands, Pinnacle Entertainment and Olympia Gaming all bailed out late in the audition process.

As for Penn National, not only did it walk away from its Cherokee County concession, no one has stepped forward to replace it. What if they offered a casino license and nobody came? We're about to find out.

(Considering that Penn wanted a parlay of Sumner and Cherokee counties, if Harrah's falters then the Lottery could do worse than swallow its pride and have Penn CEO Peter Carlino on speed-dial.)

That leaves two concessionaires -- Butler National Service Corp. and Cordish Co. -- neither of whom is prominently associated with the casino industry. (In Butler's case, that translates as "completely inexperienced.") It's an inauspcious scenario and, faced with such a mess, Gov. Kathleen Sebelius may find the siren song of Washington, D.C., more appealing with each passing moment.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

On balance, a good day.

Maryland slots: the pros & the cons

Tue, 04 Nov 2008 12:50:00 -0700

They're extensively debated in an excellent new blog, the thoughtful Gaming Atlantic. If a 67% tax rate (that's no typo) sounds like throwing the baby out with the bathwater, you're in good company. At least the slot holds will be low by Vegas standards: 87%.

Missouri amendment to pass: JP Morgan

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

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

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

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

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

Notes from the South

Tue, 28 Oct 2008 15:50:00 -0700

From dealer to GM: New Grand Biloxi Casino General Manager Steve Ditchkus worked his way up from the bottom of the casino pay scale to the corner office. Also, Harrah's Entertainment is still shaking the tree for joint-venture partners on its postponed Margaritaville project.

Speaking of Margaritaville: The businessman who's going to re-brand Trump Marina as the newest "parrothead" hangout is among those involved with the Broadwater Casino project, also in Biloxi.

A scuttled LBO means a good third quarter for Penn National Gaming. Elsewhere, a company spokesman says, "No way, José" (or words to that effect) regarding Steve Wynn's claim that Penn CEO Peter Carlino asked his MGM Mirage counterpart, J. Terrence Lanni, if Bellagio was for sale. That story earned Carlino some S&G ridicule and, if Wynn was talking through his hat, I apologize for buying into it.

Is Peter Carlino crazy?

Fri, 24 Oct 2008 13:43:00 -0700

Now I know that Penn National is all a-flush with cash these days and CEO Peter Carlino is probably feeling bullish. Still, in a recent visit to Vegas to assess possible casino acquisitions, he's alleged to have acted like he just fell off the turnip truck.

According to Steve Wynn -- in the course of scotching a rumor that he might buy up some MGM Mirage property -- Carlino made the company an offer for Bellagio. Carlino must think that J. Terrence Lanni is an awfully desperate man. Why else would MGM part with its most powerful revenue driver on the Strip, a casino that is regularly in Majestic Research's top three when it comes to game usage (over-simply, sheer preponderance of players)?

Carlino made news by publicly dissing the Tropicana as a potential buy, saying "There's better stuff" to be had. Agreed. But, unless Wynn either misheard or is making mischief, Carlino seems to have veered far off the other side of the road. There's definitely some low-hanging fruit out there: The Rio, Riviera (plus debt), Cosmopolitan (ditto), maybe even the Sahara. Why he thinks MGM would part with its most valuable asset beggars the imagination.

(Wynn's hypothesis that MGM might peddle its Atlantic City land and perhaps its half-share of Borgata makes far more sense, especially with the question of Pansy Ho's suitability still hanging fire in New Jersey. And Penn has shown interest in two other A.C. sites already.)

MGM spokesman Alan Feldman is cagey, though, keeping alive the prospect that Bellagio might be had (perhaps by someone with the initials K.K.) for the right price. But I've got to believe it would take an offer as exuberant as the one El-Ad Properties made for the New Frontier before MGM Mirage would pawn its crown jewel to a rival operator.

And don't forget Downtown: Carlino is welcome to buy out slothful Tamares Group any time he likes.

By the numbers

Tue, 30 Sep 2008 16:21:00 -0700

$800,000

That's how much it'll cost Penn National's Hollywood Casino riverboat for failing to check its direct-mail-promo list against Illinois' roster of self-banned gambling addicts (casinoholics?). That meant a 146-name overlap out of a mailing that blasted out to almost 16,000 people. The three managers responsible will be able to meditate upon the virtues of due diligence as they sit out their state-imposed suspensions.

29,000

That's how many fewer prospective customers Las Vegas Sands will have for its Marina Bay megaresort project in Singapore, thanks to that nation's aggressive problem-gambling prohibitions. Unlike U.S. states that have voluntary-exclusion policies, in Singapore it's sufficient if a member of your family drops dime on you as an alleged gambling addict.

Moral: Don't piss off anybody to whom you're related by blood (or marriage). "At this time, we cannot anticipate the volume of applications, but my concern as a social worker is that we should not take it as a punitive measure," says one regulator with masterly understatement.

Sands, meanwhile, having publicly identified Calcutta and Jakarta as target markets for the Cotai Strip™, not Marina Bay, has placed itself in the position of robbing Singapore to pay China.

$75 million

And that is the size of a lawsuit that pits Ultimate Bet and Absolute Poker against their software vendor, after a loophole in that software allowed some players to peek at others' hole cards online.

Value in free propaganda to Internet-casino-bashing Gov. Steve Beshear? Priceless.

Kansas, Round 2: It's Cordish!

Fri, 19 Sep 2008 14:59:00 -0700

OK, I was wrong. Incredibly wrong. As you'll hear on the next Vegas Gang podcast, I stuck by my prediction that Kansas' largest casino contract, the one for the greater Kansas City area, would go to Mohegan Sun. Why? Biggest budget, most amenities, a track record of large-scale casino development. At least I covered my butt by saying that Cordish Cos.' piggybacking of their proposed casino onto the Kansas Speedway gave them "dark horse" status. Also, franchising the casino under the Hard Rock brand was not to be gainsaid.

A racino of a different stripe

So when the winner was announced today, Cordish was it. While Mohegan Sun was willing to put a bigger investment ($740 million vs. Cordish's $680 million) on the table, Cordish's synergy with the Speedway appears to have done the trick. They'll whip up a temporary casino (2K slots, 75 tables) sometime next year, to get the cash flowing while the full-scale project rolls toward a 2011 debut.

Here's the real shocker: Mohegan Sun got zero votes, primarily because state consultants projected its revenues as the lowest of the three proposals remaining on the table. (Pinnacle Entertainment and Las Vegas Sands has already withdrawn from the fray. With a major project underway outside St. Louis, plus others in holding patterns in Atlantic City and Baton Rouge, Pinnacle's chances seemed remote. It's difficult to imagine Kansas being willing to take a place at the back of that queue.)

Which means that three of the seven votes went to -- surprise! -- Golden Gaming, a company whose chances I will freely admit to having severely undersold. It says a lot for CEO Blake Sartini's reputation and for Golden's presentation that it came within an ace of winning, despite having a relatively modest track record -- at least nothing remotely approaching the $662 million casino it proposed to build. With Penn National having sulked its way clear out of Cherokee County and the Kansas lottery board starting to display skepticism toward the Ford County bidders, Golden has at least one, maybe two more opportunities it could pursue in the Sunflower State.

Ten months ago, at the time its casino empire was starting to collapse, Columbia Sussex announced that it had sold the Horizon Vicksburg to casino investor Nevada Gold for $35 million. Seems now that it's yet another William J. Yung III transaction that's (pardon the pun) gone south, following the cancellation of the sale of Casino Aztar to Eldorado Resorts.

Juding from the language that ColSux successor Tropicana Entertainment "have been in discussions regarding a possible alternative transaction" without avail, it appears as though new CEO Scott Butera wants to hang onto the riverboat property (whose on-shore facilities are leased, not owned, by the way -- a common ColSux practice). "(N)o alternatives exist that are suitable to both parties" sounds like a nice way of saying that if any other TropEnt properties were worth having, then they weren't on the table. Then again, given Nevada Gold's current financial situation, it might have been the one getting cold feet, but the formal language doesn't encourage that interpretation.

Either way, Butera's been making some expansionist noises of late and pining for the return of the Atlantic City Tropicana. While Butera has operational experience in that market, from his days at Trump Entertainment Resorts, it's exceedingly difficult to imagine New Jersey regulators letting TropEnt back onto the property so long as Yung has one thin dime of equity in the company.

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.

Isle reports

Thu, 04 Sep 2008 17:50:00 -0700

Not a lot new here, so I'll try to be brief. Losses are down and cash flow is up, particularly impressive in a quarter in which Mississippi River flooding forced the temporary closure of two casinos. An Oregon expansion was written off, and capital is being concentrated on the improvement of core assets in Mississippi.

Florida, England and the Bahamas look like a total bust, while the Iowa riverboats are getting surprisingly modest "bounce" from the Illinois smoking ban. (Note the big improvement at the re-branded Lady Luck Caruthersville, however, formerly a Casino Aztar boat.) Analysts seem happy with the numbers, which never hurts. It's going to take a while to get this boat turned around, but it's definitely moving in the right direction.

Just skimming the overall Iowa numbers for August, I see that Harrah's Entertainment lost market share, while Penn National, Ameristar and Isle of Capri all grew. An extra weekend day helped the state to a 5% gain over August '07. Judging by the stories that disenchanted Diamond and Seven Stars players share with me, it doesn't come as a shock to see Harrah's losing business to its competitors.

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."

Illinois: It's the smoking ban, stupid!

Mon, 25 Aug 2008 17:31:00 -0700

Chalk up another triumph for the blunder-prone administration of Gov. Rod Blagojevich. If, by the time he finally leaves office, Illinois still has a casino industry, he'll have to shake his fist and snarl, "Curses! Foiled again!"

Simply put, Illinois' casinos are choking on the state's smoking ban. There's no other explanation for seven straight months of double-digit revenue decline, of which July's 20% drop was the second-worst. When your best month (February) is "only" -13% in year-over-year comparisons, you've got a problem, to put it mildly.

For reasons not immediately apparent, the privately held Casino Queen in East St. Louis had a banner month, if by "banner" you mean down less than half a percentage point in July and 4% for 2008. (In this context, it was cause for rejoicing.)

But, as the saying goes, you should see the other fellas. Just up the river a piece, Penn National's Alton Belle, formerly one of the stars of the Argosy Gaming firmament, is having a sucktastic year, bringing in the second-lowest revenues in the state and down 29% in July. Most other boats in the Land of Lincoln fared only somewhat better.

Another privately held riverboat, Casino Rock Island, has been able to stem the bleeding to single-digit numbers the last three months. This is doubly impressive because even the smallest revenue fluctuation looks far worse, percentagewise, when measured against such a tiny revenue base (less than $3 million in July), and because it's in the Quad Cities market, highly vulnerable to competition from Iowa.

There hasn't been much good news beyond that. Both the Joliet and Aurora markets have been hammered pretty hard, and Harrah's Entertainment lost the most market share of any company in July. Along recent weakness by Harrah's in Louisiana and Missouri, that's got to be a mite worrisome for the Vegas properties, at the top of the Harrah's food chain.

Atlantic City, take note! Starting Oct. 15, you could be the next Illinois.

Kansas, Round 1: It's Harrah's, Penn

Fri, 22 Aug 2008 17:54:00 -0700

Score one victory each for Harrah's Entertainment and Penn National Gaming in the first round of casino concessions awarded in Kansas today (with Round 2 to follow in a month). But there's really only one winner ...

.... and it's Harrah's, which got the Sumner County contract and, with it, the Wichita market. Penn National must settle for the concession prize of Cherokee County.

Big deal. Penn had no competitors for that market and -- keeping that in mind -- two of the seven state arbiters voted against Penn. Perhaps that's because Penn had previously sulked that it might pull out of Cherokee County if it didn't get the Sumner concession as well. Announcing that it was going to scale back its Cherokee County investment and dribble it onto the market in piecemeal fashion (fearful of a nearby tribal casino) probably didn't endear Penn to the Lottery Gaming Facility Review Board, either.

Even today, Penn's spokesman was still threatening that the company might not go through with the casino Kansas just handed it. That's unbecoming conduct from one of the few cash-rich casino companies at the moment.

Small wonder Penn's Sumner proposal garnered only one vote of support. Which isn't to imply Harrah's gets the Wichita market out of spite or default. (There was, after all, a third contender.) Board members were impressed by the proposed amenities in Harrah's $535 million-560 million proposal and by the site's proximity to Wichita.

Probably the most attractive criterion was that the state's first-year revenue projections for Harrah's, while lower than the company's own, were the highest for any of the three proposals -- 48% more than those for Penn and 44% higher than for Marvel Gaming.

Marvel, which has local ties, particularly to the Binion family, says it's keeping its powder dry. No wonder: If Penn decides to take its ball and go home, Marvel (which got two votes to Harrah's four) appears to have made a good enough impression on the review board that it could make a strong run at Cherokee County, if the opportunity arose -- and the cost of entry would be a great deal lower there.

View the complete set of proposals here.

Recommendation for the weekend: The new suspense drama from Claude Lelouch, Roman de Gare.

Karaoke fans, rejoice! As reported here, earlier (and now official), a singalong version of Mamma Mia! opens on Aug. 29. Presumably smarting from hearing Dark Knight this and Dark Knight that, Universal Studios' press release gets in some passive-aggressive jabs on behalf of its $330 million-grossing musical, noting "is now the highest grossing film of 2008 in the U.K., Austria, Greece, Hungary, Norway and Sweden." And, just to get one more dig in: "The film still has more than 35 territories in which to open." Meow!!!

False alarm: If you got an e-mail alert about a Philadelphia-related S&G posting, but couldn't find it, it's temporarily on hold, pending some new wrinkles in the story. Then there are latest Illinois/Iowa/Missouri/Indiana revenue comparisons and ... and ... and ...

Trop sale stumbles forward ... sorta

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

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

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

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

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

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

Would you buy a used casino from this man?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Speaking of Penn ...

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

Ameristar: What makes sense?

Fri, 01 Aug 2008 14:45:00 -0700

Perhaps this is what happens when you outsource your business coverage to India, but Reuters had a story yesterday positing MGM Mirage and Harrah's Entertainment as two of the likeliest buyers for Ameristar Casinos.

Uhhh, I hate to break this to Reuters, but MGM just came up $3 billion and change short on CityCenter and Harrah's is debt-strapped. So I'd say they've got their hands full. How either one would be able to swing an Ameristar acquisition is an open question. Harrah's also faces redundancy issues, as it already owns riverboats in three of Ameristar's key markets -- Council Bluffs, Iowa, and St. Charles and Kansas City, Mo. Why MGM would feel a sudden hankering for Black Hawk, Colo., plus a brace of casinos in Jackpot, Nev., is even more of a poser.

Reuters' third suggestion, Boyd Gaming, seems a lot closer to the mark. With Echelon temporarily in the deep freeze and Boyd's Blue Chip riverboat leaking market share, a passel of regional casinos in markets where Boyd doesn't currently operate could provide welcome cash flow, shore up the company against its current non-presence on the Strip, and expand the web of properties from which Boyd could funnel players into its downtown Vegas cluster or (eventually) Echelon. Of course, Boyd may still be smarting from a failed Kansas City venture a decade ago, but Ameristar's assets are proven performers.

Besides, it's a company that could use some helmsmanship, having seemed to drift since the demise of CEO Craig H. Neilsen. Although paralyzed from the neck down and often bed-bound (which I've heard resulted in some very unconventional corporate meetings), Neilsen achieved more from the neck up than most able-bodied people do in their entire lifetimes. His successor, ex-Harrah's exec John Boushy, tried to sell the Ameristar people on a change of corporate culture but they didn't want to hear about it. So, given an evident leadership vacuum, a change of ownership makes sense.

Unless Penn National wants to take its $1 billion-plus in "mad money" and go after Ameristar, there aren't too other many potential acquirers abroad in the land. James Packer has already sworn off. Pinnacle Entertainment would rather build than buy. Tribal giant Mohegan Sun has been flexing its financial muscle of late and rates as a longshot candidate (but just came off a wretched second quarter). Beyond that ... who knows?

Quote of the Day

Fri, 25 Jul 2008 13:57:00 -0700

"There is better stuff than that." -- Penn National Gaming CEO Peter Carlino, referring to the Las Vegas Tropicana, in a discussion of possible Las Vegas acquisition targets.

Trump sez, "Don't worry, be happy"

Fri, 25 Jul 2008 12:22:00 -0700

Have you lost a job recently? Do you find yourself suddenly without a paycheck. Well, you can feel better because you're not "unemployed." No, according to Donald J. Trump, you're merely experiencing a "change of schedule." To hear the old blowhard tell it, the 73 pink-slipped employees at Trump International are orbiting the gold-glassed tower in a holding pattern, living on nectar and ambrosia whilst they wait for The Donald to snap his fingers and "bring them back on" when "more sales close." (At present, Trump Int'l is only 31% occupied.)

Trump: Be of good cheer -- or else!

And in the meantime? I guess we're to believe that the unlucky 73 will forego paychecks and food, biding their time until Trump recalls them.

Or not. Someone identifying themselves as a Trump employee writes to the Las Vegas Review-Journal that "We received severance pay and signed an agreement severing our ties to the property ... It was the elimination of about 25% of the staff (including entire departments) at what is currently an extremely troubled property."

But look at the bright side: When Donald Trump eventually shuffles off this mortal coil like the rest of us, he won't be dead -- just having "a change of respiration."

Penn National, having thrown a snit and made its Cherokee County, Kansas casino contingent upon also getting a Sumner County license, is trying to walk its threat back. Penn has been making a hash of this. It effectively ran up the white flag when the Quapaw Tribe opened a casino across the state line, in Oklahoma.

Now Penn wants to dribble its $225 million infrastructure commitment across a 12-year period, in a kind of protracted (very protracted) "soft opening." If they're not going to agressively compete in Cherokee County, why bother at all?

As for Sumner County, Penn finished a distant third in independent revenue projections, which means that the company has some apple-polishing to do in order to remain in the running. Penn's threatening to take its ball and go home could hardly have been more badly timed.

The Ameristar war begins

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

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

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

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

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

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

Indiana: It sure could be worse

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

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

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

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

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

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

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

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

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

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

Correction re: Penn National

Tue, 08 Jul 2008 20:15:00 -0700

In my pell-mell rush to read everything available about the aborted Penn National LBO, I somehow got it into my skull that Penn was getting $1.25 billion in equity from its would-be buyers, Fortress Investment Group and Centerbridge Partners.

How wrong I was! Sitting down with the official announcement, I soon saw the error of my ways: The agreement obligates Fortress et. al. to purchase $1.25 billion in preferred Penn stock. The sweet part is that Penn gets to keep the $700 million downpayment, even if the stock sale goes south. Nor does the stock carry voting privileges, although it can be swapped out for common stock in 2015 (or bought out by Penn).

As we now know, Penn wasted no time in exercising its newfound wealth. Even with a public commitment to a $200 million stock buyback, Penn still has plenty of cash with which to go asset-hunting (or to buy up other companies' discounted debt).

Speaking of mistakes, somebody at Business Wire was getting a little creative when they wrote that Penn's optioned land in Cecil County, Maryland, "borders Pennsylvania and Delaware along the Chesapeake Bay" -- a geographic impossibility.

Other interesting details in the announcement include a projection of 4% revenue growth in 2008 -- hardly unreasonable and maybe even conservative when new racino facilities in Pennsylvania and Maine are factored into the equation.

Also, when one looks at the roster of Penn's new and expanded facilities, it's obvious that this is a company that keeps costs firmly under control. A mere 1% overrun on Hollywood Casino at Penn National is awfully impressive ... Are you taking notes, Don Barden?

Nixed Penn sale a win-win

Thu, 03 Jul 2008 17:52:00 -0700

Update: A correction to this item has been posted, c. 7/8/08.

There was something good for everybody in today's announcement that the increasingly inscrutable Penn National Gaming LBO was well and truly off. Penn makes out like a bandit, collecting a $225 million breakup fee in cash (enough to buy a casino or two, at least), ~~plus roughly $1.25 billion in preferred shares of a quartet of would-be buyers~~.

Forbes characterizes the latter as "a severn [sic]-year, interest-free loan." (If Penn defaults on the loan, however ... ) "They would rather pay that than finance a deal that was forged in far more optimistic times and would involve heavy losses on billions of dollars of debt," said the Financial Times of the bankers who underwrote the exit strategy.

Even in the worst-case scenario, Penn stands to collect $700 million. Time for a little retail therapy! Already it's announced that it has its eye on an expansion into Maryland, in addition to $200 million in stock buybacks. It's even making noises about moving on Las Vegas. (At last! Rescue for the Tropicana -- or even the Riviera -- could be in sight.)

Lead buyers Fortress Investment Group and Centerbridge Partners got off easy, too. They escaped having to pay a 125% premium on stock that, while not exactly tanking, had slipped to a "street value" far less than the $67/share (plus penalties) Fortress and Centerbridge were looking at paying. Going through with this LBO would have been insanity and, to their great credit, all parties recognized as much.

Even as analyst Barbara Cappaert praised the deal for putting Penn in a "cash-flush" position, CEO Peter M. Carlino moped a bit. As much as he wanted to maximize shareholder value, was it realistic for him to expect Fortress and Centerbridge to take a haircut of Yul Brynner severity when his stock was flying low? And is this really the time to be tripling his company's debt load?

One intriguing prospect Penn threw out there was using its newfound liquidity to purchase other companies' debt. This could be a very opportunistic move indeed. With, for instance, Harrah's Entertainment's debt discounted by almost half, Carlino could put himself in somebody else's driver's seat -- and soon.

Denial in the suites

Tue, 01 Jul 2008 18:16:00 -0700

Gary Loveman must be working on his stand-up act. In today's Wall Street Journal, he calls the present economic pickle "the toughest environment we've faced." It might not be quite so difficult had Loveman not steered Harrah's Entertainment (and its apparently sheep-like board) into a leveraged buyout, an act for which Loveman was handsomely compensated by new owners Apollo Management and Texas Pacific Group.

It gets better. Loveman tells the WSJ, apparently with a straight face, that Harrah's is "profitable." Somebody must have hid the most recent 10-Q from him. That little piece of paper shows a March 31, 2007 profit of $185.3 million swinging to a $187.8 million loss one year later.

And if you're "boosting visits to its regional casinos by chartering airplanes to fly in loyal customers," it sounds like something's wrong. I could understand that strategy if we were talking about getting them to Vegas, but why should you have to fly players to Caesars Windsor or Harrah's Tunica? Wasn't the beauty of the regional strategy that it brought the casino to the customer? And if you're having pay the freight for your loyal customers, what does it take to get the more fickle ones through the door?

As a savvy industry observer put it, "The timing of the leveraged buyouts of several companies increasingly appears to have been exquisitely bad." Station Casinos is having to use its Aliante opening, in part, to make a new home for workers forced out by a recent spate of layoffs.

Meanwhile, like Captain Ahab hot on the trail of Moby Dick, Penn National continues to pursue an LBO. Of course, if you were a Penn stockholder, you'd love this deal, as your shares would be bought out at more than double their current value ($67/share for a stock that closed at $29.73 today). If Penn were to abandon this LBO folly and think in terms of growth, it could probably pick up a lot of low-hanging fruit, from Harrah's, Columbia Sussex, Isle of Capri and other overextended companies, thereby penetrating a plethora of new markets.

Isle had the invidious distinction of making the Motley Fool's list of "Deathbed Stocks," with an Altman Z-Score that shows the company to be in very ill health indeed, hitting a nine-year low recently. (Some, though, maintain Isle is undervalued.) More of the old guard are being moved aside, too.

Of even greater significance, the recent reintroduction of the Lady Luck brand was couched as part of a new strategy "focused on increasing free cash flow through organic growth opportunities" In other words, no more growing revenue by simply opening new casinos ... and no more chasing chimerical revenue opportunities overseas. Tomorrow's Isle conference call should tell us if the new leadership team has other tricks up its sleeve for coping with the present adversity.

"Raking" it in at Trump

Fri, 27 Jun 2008 12:25:00 -0700

Once I'd read that Trump Plaza had gone to automated no-dealer poker, my first thought was, "What becomes of the 'rake'?" Not to worry: The machines have taken care of it. Or, as Casino Manager Anthony Spagno was kind enough to explain, "As the case with a dealer, the rake is deducted from the pot at certain intervals during each hand with a maximum of $3.00. Time raked games are deducted from the players table stakes according to the rake schedule."

Automated poker is catching on at Trump Plaza in part, I suspect, because there was no poker there previously and because, according to the article, it provides a user-friendly 'bunny slope' upon which to get acclimated to the game.

These Poker Tek tables have yet to be approved in Nevada, where I'm sure they'll produce an interesting schism. Obviously, no self-respecting poker room on the Strip would install them, but they'd probably do well out on the floor amongst the casual players, even more so than Rapid Roulette, for instance.

And I can definitely see PokerPro muscling into the low-budget Vegas casinos and maybe even some mid-market ones. For instance, you could plunk them down in the poker "room" at Suncoast (really just a random corner of the casino floor) and I doubt anyone would notice the difference.

June's Bad Service Award goes to the bartender at the Sahara's NASCAR Cafe. I killed time there with a soda while some friends and family went roller-coaster-riding. The bartender was surly, took forever (on a very slow Saturday night) and my $2.95 Coke came in a thimble. No tip for that schmuck.

Why is it that casinos are usually willing to pay higher taxes when virtually every other business is only too eager to shirk its civic responsibility? The latest group of gambling halls to pony up are the East Baton Rouge riverboats. Most generous, at least in theory (because it haven't built its riverboat yet) is Pinnacle Entertainment, offering 4.5% of revenues outright, according to JP Morgan.

More complicated formulas apply to the two extant vessels. Columbia Sussex's Belle of Baton Rouge will pay 2% if revenues are less than $73.6 million, but -- if that benchmark is achieved -- it pays a split rate of 3.5% on the first $73.6 million and an extra percent on anything more. Penn National's Hollywood Casino Baton Rouge subscribes to an identical formula, save that the magic number for Penn is $100 million, not $73.6 million (which seems to be a nice way of saying that Penn is trouncing Columbia Sussex. What a surprise.)

The new tax rates supplant $2.50/head boarding fees formerly in place in East Baton Rouge Parish.

'Winging it' at Klondike

Mon, 02 Jun 2008 14:06:00 -0700

This might not seem like the ideal moment to put the concrete pad that once was the Klondike Inn onto the market at a substantial markup, but there you have it. Colliers International Las Vegas is peddling the concept of a fly-up casino-resort, which inspired this measured response from VegasTripping.com.

The Penn National buyout keeps inching forward. Pennsylvania's assent means that six states still have to give the deal their OK. Elsewhere, the company says it's doing turnaway business at Argosy Casino & Resort, so it's raising its bet on the greater Cincinnati market.

Harrah's: Digging to China

Fri, 23 May 2008 17:59:00 -0700

Given the recent freeze-out on new casino operators in Macao, executives at Harrah’s Entertainment might as well be sporting T-shirts that read, “I spent $577.7 million in Macao and all I got was this lousy golf course.” And, in light of Harrah’s considerable debt load, CEO Gary Loveman will have the unenviable task of advising tight-fisted co-owners TPG and Apollo Management what to do next with their expensive piece of Chinese real estate.

They could gamble on hunkering down for a few years, taking a low near-term return while waiting for Macao supremo Edmund Ho’s successor to possibly liberalize the enclave’s gaming regime, admitting new corporate players. Or Loveman could try to peddle it around -- probably at a loss, seeing as the land can’t be rezoned for gambling and he’s dealing from a position of weakness.

(A third option, whereby Harrah’s acts as a passive hotel operator as part of a joint venture in which Wynn Resorts or MGM Mirage owns the casino just seems too transparent and disingenuous to get past the current regime, IMO. It’d be obvious a subversion of the “three-plus-three” arrangement, turning it into 3 + 3.5.)

The fate of the golf course is a pressing question only because Harrah’s latest “Consolidated Summary of Operations” contains some scary-looking numbers. When 1Q08 is compared to 1Q07, interest expense has increased threefold (from $185.8 million to $557.6 million). Pile on $211.3 million in early retirement of debt – to reduce those interest payments – and an 11% decline in income from operations and it’s quite a jolt to the balance sheet. In the 1/28/08-3/31/08 period, combined income of $445.5 million was negated (and them some) by $679.2 million in interest expense and early debt retirement.

Then there’s the matter of the shuffling of properties between Harrah’s Entertainment and Harrah’s Operating Co. According to one analyst, it works like this ...

Harrah's Las Vegas, The Rio, the Flamingo, the A.C. Harrah's and Showboat Atlantic City, Harrah's Lake Tahoe, Harvey's and Bill's Lake Tahoe are going into the Entertainment portfolio, to be followed by Harrah’s Laughlin and Paris-Las Vegas. But then Bill’s, Harvey’s and Harrah’s Lake Tahoe, and Showboat are re-shuffled into the operating company.

(What? No mention of Bally's Las Vegas? Hmmmmmmmm. Why does the word "implosion" keep bouncing through my brain?)

In an excellent analysis, Amy Calistri writes, “Reducing interest expense, through the reduction of debt, has to be at the heart of this accounting tangle.” In other words, Harrah’s is positioning itself for a big sell-off, fleeing the Tahoe market and reducing its high Atlantic City exposure, already worsened by good business at Harrah's Chester. Trouble is, Calistri goes on, casino valuations aren’t what they used to be and potential buyers might still find credit scarce.

(The problem with operator consolidation is that it’s taken a lot of potential buyers off the table – no more Argosys out there -- although Ameristar Casinos needs to rack up some debt to reduce its profile as a takeover candidate. Penn National is in a buying mood but, with its private-equity buyout threatening to unravel, it’s got hassles of its own.)

As for the cheese-paring moves that customers are reporting at Harrah’s Strip properties, Calistri warns that “cost cutting and efficiency will only help [Harrah’s] at the margins ... Indeed, Harrah's biggest hurdle toward profitability over the near term is likely to be undoing the debt associated with their acquisition.”

Galaxy Entertainment's Starworld project, Macao

Which is why when analysts float the idea of Harrah’s buying Galaxy Entertainment as a quick means of entry into Macao, I’m tempted to employ one of my Mom’s favorite retorts: “Using what for money?” Galaxy has its problems (like basically learning the casino business on the job) but with no new gaming concessions on the Macanese horizon, its value just shot up considerably.

And then there’s the little detail of a $2.8 billion (with a ‘B’) tribal court judgment against Harrah’s that, if it continues to stand up (much data here), will lumber the company with even more debt and interest. The verdict isn’t really Harrah’s fault: The case dates back to when Arthur Goldberg was alive and running Park Place Entertainment, which became Caesars Entertainment, which was bought by Harrah’s Entertainment, which is contemplating changing its name to … Caesars Entertainment.

It’s a good thing Apollo and TPG hung onto Loveman, just in case their casino acumen is on par with Apollo’s retail acuity. Earlier this month, Apollo vassal Linens ‘n Things filed for bankruptcy in what Bloomberg called “the biggest leveraged buyout failure since credit-market disruptions began last summer,” and what one analyst characterized as “an utter and complete disaster.” The company will close 20% of its stores, leaving 2,500 people unemployed.

Apollo’s exposure is only (“only”) $260 million, meaning that others, primarily General Electric, are holding most of the bag on this debacle. And maybe the timing wasn’t so good for taking real estate franchisor Realogy Corp. private for $8.5 billion, either. (Bloomberg says $6.6 billion.)

And don't forget about Harrah’s unraveling international strategy, which was ill-timed at best and possibly a total bust. But that’s a topic for another time ...

The Alystra is toast

Wed, 14 May 2008 11:11:00 -0700

OK, so it was a derelict that's been closed for 10 years and unlikely ever to reopen. But the Alystra is now officially "a total loss." Too bad. It was an attractive building that happened to sit in a sort of mini-Bermuda Triangle where no casino could flourish. It also was operated in a manner that brought it afoul of the Nevada Gaming Control Board. There were some flutters of interest 16 months ago, then silence. Since the Alystra had become a homeless hangout, it'll probably be no great mystery how it caught fire.

A bad month for Adelson. First, there was a shaky performance on the witness stand in the Richard Suen/Las Vegas Sands lawsuit. Then a first-quarter loss. Now he's been questioned in a bribery investigation of Israeli Prime Minister Ehud Olmert's government. Sheldon will probably have to do a little 'splainin' to the Control Board when he gets back from Jerusalem.

Luxor 2.0: A review of the ongoing makeover has been posted at VegasTripping.com. The verdict: "Pharoah's Tomb Meets Airport Bar." Hard to believe that Luxor is already 18 years old -- unlike Excalibur, which only looks like it's been around for 30 years or so.

Nathan Burton at the Flamingo. I went. I saw. (And the stunt pictured here does not figure in the act, so caveat emptor.) The magic tricks were sloppily executed -- you had to wonder what the coterie of rival magicians in attendance thought of them -- and almost made one nostalgic for Hans Klok. For this Harrah's Entertainment ditched Society of Seven?

No warp speed here: A story that broke on the Web last week (and was picked up by LVA's "What's News" page six days ago) finally crept into the pages of the Dogpatch Daily. (UNLV's David Schwartz has a good critique of the situation, though.) The same writer who branded Strip casinos as "monuments to gullibility" now turns his scorn upon patrons of the Las Vegas Hilton's Star Trek attraction -- while managing to meet the R-J's two-factual-mistakes-per-story quota and confusing "premiere" with "premier."

But he's not alone. A local publisher mistakes "ringer" for "wringer" in ...

An utterly ridiculous column that suggested the Democratic presidential ticket be suggested by a coin-toss. Seriously. It's difficult to decide if this is a bigger insult to Las Vegas Sun readership or to the democratic process itself, this flippant (pun intended) notion of hinging the fate of our country -- and perhaps, by extension, the world -- on a game of chance. As one Sun reader notes, "I admire your ability to get paid for this."

Since one normally needs to pack a lunch and some No-Doz to finish a Brian Greenspun column (and I couldn't even get through this one w/o skimming), I'll boil down the "logic": "Hillary Clinton has worked harder than any person I know of to become America’s president [and] running for president, and the presidency itself, has to be the hardest job on the planet."

So? Meaning if Greenspun's next-door neighbor worked harder than Hillary Clinton to be on the donkey-party ticket, then he/she would deserve it even more? As Clint Eastwood's William Munny observes in Unforgiven, "Deserve's got nothin' to do with it."

Greenspun cites exit polls as holy writ, whereupon his moving finger moves on to write, "We all know that the polling this year has been wrong at best" (Who's this "we all"? I know no such thing. Do you?) "People, for good or bad reasons, don’t tell the truth to pollsters when it comes to race or gender." Well, if true, that puts paid to those exit polls in which Greenspun places so much stock.

After calling upon the respective campaigns not to "short-circuit the democratic process," out comes the loony coin-toss idea. Why? "We accept the coin toss in every other facet of our lives," quoth the suddenly Solomonic Greenspun. Oh, do we? Maybe that's how they make important decisions at Greenspun Media but I don't think, for instance, that the board of Harrah's Entertainment decided not to accept Penn National's buyout offer because the nickel came up "heads."

Hey, let's have representatives of the Kurds, Shiites and Sunnis over to the Bellagio poker room to decide the fate of Iraq in a game of Texas Hold 'Em, with Halliburton taking a "rake" of the pot. Works for me.

The clue to Greenspun's thoroughly trite and un-democratic "solution" can be found in a passing comment that enfranchisement "for far too long has been a burden to Americans rather than a blessing." I'll leave you to ponder the disturbing -- and elitist -- implications of that telltale remark.

Not smoking stunts your (revenue) growth

Wed, 07 May 2008 16:53:00 -0700

Let's get one thing clear: Smoking is a noxious habit that's likely to kill you and certain to alienate other people, in my opinion. (I had two grandparents who smoked until the air turned blue, then smoked some more, which may explain my antipathy to the, uh, pastime.)

But ... not smoking appears to be bad for the health of casinos, at least in Illinois. April's numbers are out and they're down over 19% -- far more than can be plausibly blamed on the recession. For instance:

The biggest loser: It's Penn National's Alton Belle, off by 27%, with an $8 million gross. The rest of the results, as reported by Bear Stearns are as follows (with gross gaming $, when available) ...

Harrah's Joliet: -18% ($26.4 million)

Grand Victoria [MGM Mirage]: -18%

Hollywood Casino [Penn National]: -20%

Empress Joliet [" "]: -26%

Casino Queen: -5.3%

Harrah's Metropolis: -25.5% ($9.8 million)

Pair-A-Dice [Boyd Gaming]: -16% ($9.7 million)

Illinois' smoking ban went into effect Jan.1 and things clearly haven't been the same since.

This Just In ... Sheldon Adelson is stubborn. Who knew?

Henhouse, meet fox

Tue, 11 Mar 2008 18:36:00 -0700

Budgetary impasse in Trenton? Guvmint forcibly shut down? Nobody to keep an eye on casinos?

No problem!, says state Sen. James Whelan (former mayor of Atlantic City). His proposal would allow casinos to police themselves for the duration -- provided they were fined tenfold the usual amount for any hanky-panky. (Yes, but who is going to report the aforesaid hanky-panky? The casino that stands to pay 10X in fines? Methinks otherwise.) Oh, and the governor could "summarily suspend a casino license," too.

Food for thought, anyway.

Whelan's successor, A.C. Mayor Scott Evans found himself on the business end of a state house grilling yesterday. In light of past shenanigans involving city officials and former airport Bader Field, New Jersey solons aren't predisposed to sign off on what they perceive as a sweetheart deal between Atlantic City and Penn National, which wants Bader partly for a casino and mostly for a 'flip.'

If the "city officials" cited in the story are correct, Evans' proposed deal would leave at least $200 million on the table."You can slice this and you can dice this any way you want, but it looks bad," growled one legislator. It looks like a long spring (and summer, maybe) for Evans and Bader Field.

Finally! Somebody is taking on the question of why slot casinos should be subsidizing race tracks. I dig the romance of the "sport of kings" as much as anybody. But if it can't stand on its own four feet, why is the casino industry obligated to prop it up?

"Cruise to nowhere" indeed. Gambling ship Sun Cruz 9 looks like it has a date with Davy Jones' Locker. I can't say I ever fancied the idea of gambling out in international waters anyway. Props to the skilled Coast Guard crew that rescued the ship's crew in stirring fashion.

(Mind you, there was no gambling underway at the time nor any gamblers aboard; the ship was in transit from port to port.)

Organized crime in Macao's casinos is really a good thing. Yes, an academic actually said that, rationalizing that loan-sharking and God knows what else keeps Macao's criminal element gainfully employed and off the streets. Who knew that Stanley Ho's triad-infiltrated casinos were performing a public service all these years?

Those crooks had better make hay now because it's reliably predicted that the iron fist of Peking will descend upon them once the 2008 Olympics are over (and the world is looking the other way). Given how extremely unsavory Macao's reputation was prior to China's takeover, I doubt our casino barons will be complaining too loudly, either.

I'll be 83 before a bridge between Hong Kong and Macao breaks even. Yeah, but the Las Vegas Monorail will still be running in the red (and still be tax-exempted). So there.

This week in Columbia Sussex

Tue, 11 Mar 2008 17:29:00 -0700

"Things are a little murky." That's how the Cincinnati Enquirer describes the Did-he-or-didn't-he issue of whether Kentucky Gov. Steve Beshear met with million-dollar booster and Columbia Sussex CEO William Yung III, whose desire for a Cincinnati-area casino is the worst-kept secret in the Bluegrass State. (Beshear does, for the record, acknowledge hobnobbing with several players in the horseracing industry, but not with Yung.)

However, a game of keep-away involving records of visitors to the governor's office is clouding the issue. For some, the whole matter is starting to look rather seamy. And, considering the ethical sinkhole that swallowed the administration of Beshear's predecessor, can you blame them?

Having proclaimed for all to hear that the arrival of Pinnacle Entertainment would write finis to one of their riverboats, Penn National and Columbia Sussex have to decide whether to put up their dukes or cut and run. Not that they have to hurry: Pinnacle's Riviere project is still two-plus years away.

But if Hollywood and the Belle of Baton Rouge (soon to be displaced by Amelie Bell [above]) stay put, it's a tacit admission that their parents' anti-Pinnacle campaign tactics were a bunch of B.S. Or so implies the Baton Rouge Business Report. An analyst hired by Penn crunches the numbers and concludes that Belle has the better profit margins, ergo the better chance of eking it out in a post-Pinnacle market. Penn could counter-attack by bringing Argosy Lawrenceburg downriver from Indiana, greatly increasing its Baton Rouge capacity.

But New Orleans-based gaming analyst Nicholas Danna "says [Columbia Sussex] has shown a tendency to overpay for properties, making it harder to reinvest in what they have." He notes, though, that Baton Rouge is a market with considerable room for growth, compared to New Orleans (Belle's former home).

Back in Atlantic City, there are still only two bidders for the Atlantic City Tropicana, although the others may be waiting until next Monday, hoping to slap down a last-second bid that catches the competition unawares. However, since trustee Justice Gary Stein isn't held hostage to "maximizing shareholder value," he doesn't have to take the highest offer. (By contrast, Aztar Corp. had little choice but to sell its assets to Columbia Sussex, even if it knew full well what depredations would follow.)

According to Richard Perniciaro, director of the Center for Regional Business & Research at Atlantic Cape Community College, as paraphrased by NJ Biz, desiderata include "stability, cash to invest and experience in both gaming and working with labor unions. “ In other words, somebody 180 degrees from Columbia Sussex's CEO. Despite the paucity of bids on the table, analysts are starting to doubt that Stein can have the sale wrapped in June (his deadline has already been extended once)

Tropicana execs and overseers, meantime, are forecasting a rosier future, as part of their sales pitch, according to a 36-page memo intercepted by The Press of Atlantic City. Part of the turnaround is to be achieved by restaffing player-development and marketing staffs that Yung decimated. These aren't pie-in-the-sky estimates.

According to the document, it will take more than two years to restore revenue levels to pre-Columbia Sussex levels. And though 300 staffers will be added by year's end, employment levels at the A.C. Trop will still be only 85% of what they were before Yung's minions got in and started slashing away.

Desperation in Florida

Wed, 05 Mar 2008 17:53:00 -0700

... and for once we're not talking about Sen. Clinton's attempts to seat a rogue slate of delegates.

Is Isle of Capri's racino a disappointment (especially for horsemen)? Is Boyd Gaming taking Florida expansion off the table? Is Magna Entertainment threatening to close overextended Gulfstream Park? What's a Florida lawmaker to do?

Why, legalize every form of gambling short of cricket fighting, of course. Statewide slots, a lottery, regulated "adult arcades," high-stakes poker -- it's all on the table as Sunshine State solons head back to Tallahassee, no doubt looking forward to two months of nonstop eye-poking and head-slapping between Gov. Charlie Crist (R) and archenemy House Speaker Marc Rubio (R), as they tussle over a shrinking state budget.

Rubio's still trying to rein in Crist's Class III compact with the Seminole tribes, but that horse may have long since left the stable. The Seminoles are proceeding as though they'd never heard of Marc Rubio. Should he get a court to overturn the compacts, Florida lawmakers who have had a taste of once-forbidden Seminole gambling lucre may already be hooked and repudiate Rubio (who's a lame duck, anyway).

As for the absence of cricket fighting from the list of proposed fiscal remedies, I'd guess that's just an oversight.

The Schmuck Report: On a humorous note, sports reporter Peter Schmuck takes a glance at the gleaming façades of Florida's racinos and declares that "the experiment with increased gambling in Florida appears to be a success." This is either disingenuous boosterism for bringing racinos to Maryland (an on-again, off-again quest) or else Schmuck is happily inhabiting a parallel universe.

Corzine opines. New Jersey's governor goes on the record as favoring smoke-free casinos. He also backs the Casino Reinvestment Development Authority in its quarrel with Atlantic City over whether or not to sell Bader Field to Penn National. (Turns out Penn wants additional land re-zoned for casinos, too.)

Financing is sufficiently concrete, Corzine says, for both Revel and MGM Grand Atlantic City, and he's bullish on Pinnacle Entertainment's postponed megaresort. And playing the stock market isn't gambling, he says: "We made probability judgments about the viability of assets."

Isle: Goldstein out, Perry in; Trump pummeled

Wed, 05 Mar 2008 16:32:00 -0700

Compared to last night's political gloom (at my pad, anyway), today's corporate news seems downright cheery ...

Isle of Capri announced widening Y/Y losses today, along with the retirement of CEO Bernard Goldstein after 16 years at the helm. He gives way to board member James Perry, former CEO of Argosy Gaming and (briefly) Trump Entertainment. Along with COO Virginia McDowell, Perry presided over Argosy's glory years, ones in which it emerged as the Rolls-Royce of riverboat-casino companies, eventually making it a takeover target for Penn National.

Perry faces a daunting task at Isle, whose stock is trading at a seven-year low. According to Isle, Perry has a turnaround plan in place, whose components include reintroducing the Lady Luck brand (to connote second-tier markets), upgrading amenities -- not currently regarded as one of Isle's strengths -- and a downsizing at the corporate level.

However, in a possible allusion to the scorched-earth business methods of competitor Columbia Sussex, McDowell says, "We recognize, however, that companies cannot save their way to success and we continue to reallocate our resources in order to improve the overall guest experience," etc.

Isle's net revenues were up, but largely on the strength of newly opened or acquired properties (like its Waterloo, Iowa casino, above). One of those is the Casino Aztar boat in Caruthersville, Mo., which the state wouldn't let Columbia Sussex acquire in the Aztar buyout.

Back out the new properties and the balance sheet looks a whole lot worse, with revenue down 11% instead of up 17%.

Louisiana and Mississippi revenues are down, as casino competition returns to pre-Katrina/Rita levels. In Iowa, Isle is experiencing the same malaise as nearly everyone else -- a plight that's bound to worsen if the state approves as many five new casinos. Nearly $5 million went down the tubes in a doomed tilt at the Pittsburgh market and a foolish run at Singapore.

Trump Entertainment Resorts was also feeling the pain today, as losses grew a jaw-dropping nineteen-fold (yes, 19X) on a 6.4% slip in revenue, coming in 2% below analyst expectations. The loss was swollen by a $147.4 million in "intangibles," plus a $91.3 million write-off on the declining value of Trump Marina. "There's no question Atlantic City is a difficult environment to operate in, and some properties had a difficult fourth quarter,'' remarked Bear Stearns analyst Carlo Santarelli, displaying a genius for understatement.

Those whom God wishes to punish, he sends them months and months more of America's un-fun couple, the Clintons. Remember what I said about the fabled Conventional Wisdom doing an about-face should HillRod pull an Ohio/Texas victory from the jaws of defeat? Sure enough, today you can read how her campaign "validated a last-ditch strategy," as though it had any alternative. Yup, those 11 straight losses were mere rope-a-dope, luring the Obama camp into a March 4 ambush.

Yeah. Right. Hindsight is not only 20/20 inside the Beltway; it's just had Lasik surgery, too. (Speaking of rope-a-dope, this might be the time for Sen. Obama to start landing a few shots instead of just taking them. I've no appetite for Kerry: The Sequel.)

'Terrible' timing

Mon, 03 Mar 2008 19:40:00 -0700

By golly, it seems like a mere nine days ago that a local newspaper story was reporting disproportionately strong lottery sales at a California-border store owned by Herbst Gaming. "Since taking over the store, the location's total lottery ticket sales have been more than $8.9 million," said the newspaper, although Herbst executives refused to take any of the credit that was being foisted upon them. "It's something to which we haven't given much thought," disclaimed one.

Fast-forward six days and it turns out Herbst is "evaluating financial strategic alternatives," with the help of Goldman Sachs. Why? It would seem that Nevada's partial ban on smoking in public places (aka Question 5) has delivered a dagger thrust to Herbst's slot routes, whose performance is off by one-fifth. Which partly answers the question of how slot routes would fare in Question 5's aftermath.

Last week, it also emerged that one of the moves being contemplated is the sale of some or all of Herbst's casino empire, mostly amassed in the last 14 months through the absorption of three castoff MGM Mirage properties in rural Nevada and the Sands Regent brand. That's a debt load that Herbst can ill-afford to carry if its slots routes continue to tank.

Standard & Poor's cut Herbt's credit rating to CCC today, in part because of "continued weak operating performance at the company's riverboat and land-based casinos." Already WHO-TV, in Des Moines, Iowa, is reporting that one casino is openly for sale. It reminds me of another company that grew too fast too soon ...

Columbia Sussex driving out business? A 104-year-old hardware store and a paint store are shutting down and (in the case of the paint store) moving, all to make room for a casino that might be built if the Kentucky state senate and the voters of the Bluegrass State approve a proposal currently before lawmakers. Oh, and if Covington, Ky., is awarded one of the nine licenses and if that license goes to Columbia Sussex. If not, Columbia Sussex owner William Yung III will have himself a $7 million collection of empty buildings, albeit at the mouth of a freeway exit. So it's not totally a spin of the roulette wheel. Just mostly.

And now for some positive thinking. Naysayers who freak at the thought of a 9.75% casino tax rate might want to consider the influx of investment -- albeit somewhat attenuated at the moment -- into Atlantic City, where the tax rate is 9.5%. MGM Mirage isn't wavering from its high-profile commitment and not only is Penn National willing to go all in, it's wagering that it can lure three other casino companies ... provided it gets all of Bader Field as a precondition.

True, Pinnacle Entertainment is hesitating and the Curtis Bashaw/Wallace Barr project seems to have been indefinitely back-burnered. But, in the former instance, icy credit markets are primarily to blame. As for the latter, the Bashaw/Barr duo is presently in the hunt for the Atlantic City Tropicana, which would make a good strategic fit with Bashaw's Chelsea Hotel redevelopment. So it's far too early to pronounce Barr & Bashaw's south-Boardwalk casino-hotel D.O.A. ... unless they land the Trop, in which case a nice little 'flip' awaits them.

Whoever thought Atlantic City would be the Land of Opportunity?

Getting nasty in Atlantic City

Fri, 22 Feb 2008 11:35:00 -0700

Tempers are flaring out east, where Atlantic City's assemblyman (and former mayor) James Whelan has proposed a bill that would overrule A.C.'s ability to sell Bader Field. Whelan and the state's Casino Reinvestment Development Authority have two valid concerns: That the city would sell Bader to Penn National Gaming below market value and that Penn would profit by flipping three-fourths of the land to other casino developers.

Current Atlantic City Mayor Scott Evans responds with a couple of valid points of his own. One, that Whelan wasn't averse to sweetheart deals when he occupied Evans' chair and, two, the bill would be a usurpation of civic authority by the state.

The Pure Management Group raid has been all over the papers and TV (which is code for "It's Friday and I'm not going to bother with links"). While we focused on lucrative tipping practices in yesterday's Rate Vegas podcast, an informed source tells me that the investigation may be looking at the lavish fees celebrities are paid to "host" events. Imagine not only having pay the Nicky Hiltons of this world through the nose, fly them here, put them up and cater to their entourages ... but having to help them hide taxable income, too. What's a poor nightclub impresario to do?

REI Neon project gets a reprieve, having pulled a rabbit out of its hat in the form of a potential partnership with Cordish Co. That's the same company that is making a play for the Atlantic City Tropicana. It's not clear what Cordish means by "if and when it is consummated"? When the city gives REI free reign? When REI finishes the project? When an REI/Cordish deal is finally reached? There's still a lot of "ifs" in that downtown arena/casinos/condos deal.

NBC cancels Las Vegas? Aw darn! What am I going to do with my Friday nights now? (Actually, the same thing I've been doing for years.) See, they never should have dropped Nikki Cox.

Trop-ping the light fantastic. Clueless movie reviewer critiques hot new Culinary Union surveillance footage. Hey, I've seen worse stuff at CineVegas.

What happens in Atlantic City ...

Fri, 25 Jan 2008 17:14:00 -0700

... sure as heck doesn't stay there. Evidently (allegedly possibly maybe) insulting Jesus is worse than public inebriation. Even so, ESPN's Dana Jacobson remains "an Amazon hottie." And Catholic League President Bill Donahue still needs to get a life.

Shocked and dismayed. That's the reaction of Penn National Gaming. No, not to Dana Jacobson's drunken rant but rather to the volatile comments of Thomas Carver, head of New Jersey's Casino Reinvestment Development Authority, who went off the deep end and called a proposed Penn/A.C. deal for Bader Field "a scam." (Is there something in the Atlantic City drinking water we should know about?)

As off-base as Carver is, he's got a point, albeit one obscured by his hyperbole. Penn is bypassing the CRDA to cut a sweet deal with Atlantic City, whereby it would own the whole Bader Field enchilada, then flip three-fourths of it. Not only does that bypass the CRDA's competitive-bidding process but it would put Atlantic City in the business of sweetening Penn National's bottom line. That's a double affront to the free market. Put Bader Field on the block and may the best company(s) win.