David Mckee's Stiffs & Georges - Laughlin

From the mailbag #9

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

One reader asks, regarding senatorial aspirant Sue Lowden's esteemed Pioneer Hotel & Gambling Hall:

I'm confused (as usual, but...) - Isn't the Pioneer NOT a gambling hall now, its shell hosting an ABC convenience store & various other small shops?
I don't remember if I ever patronized the place when it was a casino, but its stores are in a good location for the Downtown tourist crowd; the ABC Store is especially popular with our Hawaiian friends. That's good for sales taxes, right?

As for the Vegas Club, please don't vaporize it yet: We're going to stay there at the end of the month, mainly because it's free for me - and a separate free room for a friend of mine - allowing him to attend the Speedway races for that much less money.

You're thinking of the Pioneer on Fremont Street, while Ms. Lowden's establishment is down in Laughlin. And it very much has gambling. As for dematerialization, S&G did not nominate the Vegas Club for that dubious honor but suggested that, as long as Sen. Harry Reid's people are threatening to "vaporize" Ms. Lowden that they make themselves useful and turn their phasers on her grind joint, which is regarded as a bottom-feeder even by Laughlin standards.

The Vegas Club is very much on people's minds, as another reader asks:

How is it possible that TV series VEGA$ starring Robert Urich came out on DVD on October 20 and I saw nothing in the Las Vegas media celebrating the occasion. I saw an ad in Newsweek. They couldn't get something with Wayne F. Newton at the Tropicana or Phyllis Davis and Judy Landers in front of the Plaza or the Las Vegas Club? Sad, sad, sad.

Ah, a Phyllis Davis shout-out. You're speaking our language. And, yes, that VEGA$ release really snuck by, didn't it? In a classic case of the blind following the blind, local TV stations take their cues from the newspapers. The various Greenspun-owned organs have been slashing staff at a fearsome rate, so it's understandable that they'd miss it.

As for the Las Vegas Review-Journal, suffice it to say that staffers there, up to and including head cheese Thomas Mitchell, had to be told that the Moulin Rouge was burning down because -- even though it was happening across the street -- they work in a penetentiary-like building with no windows to the outside world (architecture as institutional metaphor).

So it's not the least bit surprising that our insular and rapidly declining local media would totally blow this one. As for Mayor Oscar Goodman, he had a previous commitment in London, but still ... no proclamation? No declaration that Oct. 2009 was hereby "VEGA$ Day"? Another missed opportunity for some free ink.

Goliath, computer nerd; Lowden Trek: The Wrath of Reid

Tue, 20 Oct 2009 15:09:00 -0700

As some may recall, the saga of Goliath, the LVA rescue kitten, had a happy ending. Not only has he found a new, loving home but the hyperactive little fellow (whose new owners renamed him "Murderface") has developed an interest in technology:

"Robin said he’s obsessed with the computer — he’ll shimmy up her leg or the back of the chair, then either perch on her shoulder or sit in front of the monitor and bat at the cursor on screen."

Since my two cats only acknowledge computers to the extent of sitting either A) on the mouse pad or B) in front of the screen, effectively blocking it, Goliath would appear to be part of that younger, techno-savvy generation.

Sue Lowden = Klingons? The senatorial candidacy of Archon Corp. Treasurer Sue Lowden is evidently being taken quite seriously by Sen. Harry Reid. So much so that Reid's office has threatened to "vaporize" Lowden, prompting some musings on the proper response to phaser fire. If Reid wanted to do Nevadans a service, shouldn't he instead vaporize Lowden's Pioneer Gambling Hall, a grind joint that's been likened to the barren, depressing, post-2004 Vegas Club downtown?

Blimps on the radar

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

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

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

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

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

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

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

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

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

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

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

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

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

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 ...

Senator Sue?

Wed, 12 Aug 2009 21:49:00 -0700

Why should Nevada have only one former casino executive in the U.S. Senate when it could have two? Sen. John Ensign (R-Nevada Landing) might soon be keeping company with Sen. Sue Lowden (R-Santa Fe Gaming Corp.), if a poll commissioned by Lowden supporters is in any way indicative. Lowden, an ex-legislator who was drop-kicked by her constituents in '96, was co-owner of the Santa Fe Hotel until it was sold to Station Casinos in 2000. Station then did to the pro-union workforce what the Lowdens could not: sacked every last one of them. Business suffered afterward (customers didn't appreciate the disappearance of familiar faces) but Station has always liked to live dangerously.

Lowden currently sits on the board of Archon Corp., proud owner of the Pioneer Hotel in Laughlin, as well as of the Wet 'n Wild remnants that almost became the site of James Packer's Crown Las Vegas. Archon has a habit of turning up in the newspapers every now and again, sometimes when investors get riled up about dubious, insider-friendly stock moves. Sen. Harry Reid (D-NV) may not even have to unpack his heavy artillery; the Culinary Union will be only too happy to unleash its attack dogs on Lowden ... again.

Carl Icahn, comedian?

Tue, 11 Aug 2009 16:02:00 -0700

"As a result of [Tropicana Entertainment's] continued use of the Tropicana marks in interstate commerce, the Tropicana marks have achieved fame and notoriety and are associated in the minds of consumers nationwide with a consistent level of high-quality casino, entertainment and hotel and restaurant services." -- from court filings by Tropicana Entertainment, proud owner of the Tropicana Express in Laughlin, proprietor of the Horizon in Lake Tahoe (above) and evicted operator of the Tropicana Atlantic City. Uh, yeah, that "notoriety" part is right on the money. TropEnt is suing the Tropicana Las Vegas to enjoin it from using the "Tropicana" name.

It's Wynn + Laughlin

Wed, 08 Jul 2009 08:19:00 -0700

Despite rumors that it would be a no-show at Labor Commissioner Michael Tanchek's three-day hearing on Nevada's tip-pooling law, the company sent outside attorney Gregory Kamer for the first day of testimony. The Las Vegas Review-Journal reports that the witness list includes "Nevada Resort Association Chairman John Hinchliffe, and Steve Willett, assistant games manager at Don Laughlin's Riverside Resort in Laughlin," along with two other pro-Wynn witnesses.

So it's not to be eminence grise Don Laughlin himself but a relatively minor emissary. Due to Laughlin's late and shadowy emergence in thie hearing process, I didn't get a chance to find out why a tip-redistribution system that predates the 1971 law by five years has probative value. Meanwhile, an amicus curae brief written by the law's co-author (ex-state Sen. Donald Mello) has been deemed irrelevant by Tanchek. And, if Tanchek leans heavily on the Laughlin precedent rather than the law per se in his eventual ruling, does he reopen the door to litigation? In that case, the not-so-merry-go-round will just keep a-spinnin'.

Laughlin to rescue Wynn?

Mon, 06 Jul 2009 17:02:00 -0700

I've just returned from the Grant Sawyer Building, one of many seats of guvmint in Nevada. (Judging from some the makeshift signage in the building, money is super-tight these days.) While I was down there, a couple of people told me the strangest thing.

Seems Wynn Resorts isn't going to send any representatives to a series of hearings convened this week by Labor Commissioner Michael Tanchek ... or so the story goes. Since the hearings are for the purpose of interpreting Nevada law on tip-pooling and distribution, you'd think Steve Wynn would have a vested interest. But supposedly he's sending Don Laughlin, owner of the Riverside Resort to speak on Wynn Resorts' behalf.

That'd be strange but not crazy. Laughlin's been doing the same thing as Wynn (cutting management in on tips) for decades. So even with the firepower at his disposal, Wynn Las Vegas President Andrew Pascal, General Counsel Kevin Tourek, etc., Wynn would be effectively ceding the letter-of-the-law argument. By using Laughlin as a stalking horse, his case would boil down to: "It's OK for us to control the tips because, look, here's Don Laughlin and he's been doing it for ages. Tell 'em, Don."

There's no hope of confirming this from the Wynn side of the fence. They all figuratively dove under the table when CityLife came calling last week. I'm waiting to hear from Laughlin himself, who can clarify this bizarre potential turn of events. If true, it'd be a sad day for the Most Powerful Man in Nevada when he has to have a rural casino owner do his heavy lifting for him.

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.

Inside the Harrah's filing:

Fri, 20 Mar 2009 12:28:00 -0700

Hare 1, Tortoise 0: After reading through the March 13 Harrah's Entertainment 4Q08 filing this earlier this week (one of the benefits of using mass transit), I set it aside for a few days, enabling the Las Vegas Review Journal's Arnold Knightly to beat me to the punch. What caught both his eyes (presumably) and mine (definitely) was a line of copy in which Harrah's acknowledged that its poor Las Vegas Strip performance was partly driven by "fewer hotel rooms availabe due to room remodeling and remediation projects at three Harrah's properties [including The Rio]."

You will recall that, whether to save time or money (or both), Harrah's made an end run around the Clark County permitting process when it wanted to make changes to several of its hotels. In some instances, these alterations not only didn't match the blueprints submitted to the county, they also compromised fire safety. (Lax inspection on the county's part allowed the problem to mushroom.)

Harrah's is presently under indictment for these cheeseparing measures, which were uncovered by dint of a forceful R-J investigation. It was a rare instance of the R-J speaking truth to power and the paper has suffered mightily for it, as Harrah's has retaliated in measures both great (an advertising boycott) and petty, like banning the R-J from Harrah's Las Vegas properties.

Whatever punishment the judicial system may or may not levy upon Harrah's will be nothing compared to the dent this misadventure put in Harrah's balance sheet. (By the way, I should acknowledge that Knightly read the Tolstoyian 160-page version of the quarterly report, while I settled for the 34-page "Cliff's Notes" version.) Harrah's may have thought it was saving money by going rogue but that false economy has now come back to bite it in the ass, to the tune of $60.5 million.

Gargantuan writedowns swung income from positive to negative in almost every jurisdiction. The international sector has bled red ink for two years, as London Clubs has proven to be a money-loser. The venture, like the company's hapless flip-flopping in Kansas, is typical of the spasmodic decisionmaking that has characterized CEO Gary Loveman's stewardship. Seemingly random projects (Slovenia, Singapore, the U.K.) were lunged at and toyed with briefly, then ditched. Having settled for one of the smaller fry of the British casino industry -- London Clubs -- and then unable to swap it for a piece of the big boy, Rank PLC, Harrah's must settle for selling off a little bit of LCI here or there.

Harrah's Atlantic City numbers would look much worse if the company didn't cleverly roll its Pennsylvania competitor, Harrah's Chester, into the A.C. portfolio for reporting purposes. If you had to assign Harrah's Chester to a region (as opposed to "Other"), the only one that fits is "Atlantic City Region," though that's a bit like rolling Laughlin numbers into "Las Vegas Region."

Debt service is murder, up 2.7X from 2007. 'Nuff said.

If asset sales are necessary, a non-Total Rewards property like Bill's Lake Tahoe would be already positioned for spinning off. However, Harrah's would have difficulty justifying more than a $160 million average sale price for any of its outlying Nevada properties, where cash flow is comparatively small. If significant relief is to be achieved from unloading casinos, some trophy properties will have to be sacrificed. After all, why should the bondholders be the only ones taking a bath?

Looking for good news in Vegas

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

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

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

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

Echelon: Stopped in the nick of time.

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

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

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

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

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

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

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

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

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

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.

Nevada in October: It was the pits

Wed, 10 Dec 2008 11:47:00 -0700

Taken at face value, October's revenue numbers for Nevada casinos were calamitous. Looked at in context (i.e., coming off a 10% increase from October '06 to '07) they were ... still bad. But I'm going to resist the temptation to jump off my second-floor balcony at LVA HQ, especially since we're measuring the most anemic month of 2008 against the ~~strongest~~ second-strongest of 2007.

However: The next time somebody, anybody says the casino industry is "recession proof," they should be made to walk the plank straight into the new Mirage volcano, where their screams will mingle piquantly with the percussive stylings of Mickey Hart. Every day, I see more boarded-up store fronts and, last weekend, the Better Half and I were able to book a bargain-rate stay at Loews Lake Las Vegas. Talk about a ghost town: Other than the quacking of ducks, there was not a sound to be heard from our patio. (The casino across the lake at MonteLago wasn't quite dead, but they might want to keep those defibrillators handy.)

In an economy that has been brought to near-total ruination under the malign neglect of George W. Bush, it would be just plain unrealistic to expect people to gamble as they did during Vegas' halcyon years. We should have known this day was coming the moment we started reading about credit card and mortgage debt reaching unprecedented levels, as Americans lived off tomorrow to pay for today.

To the numbers ...

Again, remember that these declivities are magnified by being directly compared to a robust year-before performance. The big story appears to be quadruple-whammy leveled on the Strip, where table game drop was down (-20%), as was baccarat drop (-36%), ditto table hold, ditto baccarat hold. Less play + unlucky play goes a long way (as in $100 million-plus) toward explaining the wretched -26% overall comparison. A 17% slippage in slot handle didn't help, but the real damage was done in the table pits, which led the way to a 10th straight month of declines.

The locals market is still slightly (3%) up for the year, but October won't help, with Downtown (-20%), Laughlin (-15%), the Boulder Strip (-28%) and North Las Vegas (-35%) -- where Station Casinos was poised to open Aliante Station -- all taking it on the chin. Compared to those numbers, Reno's "mere" 7% dropoff looks like a moral victory or something.

After posting an anemic ~~$475~~ $905 million for October '08 ($475 million on the Strip), was Nevada able to match the previous November's less-than-stellar ~~$520~~ $981 million ($520 million " ")? The answer will tell us whether we've hit an extremely nasty pothole or been driven clear off the road.

Update: Table game play was extremely lucrative on the Boulder Strip, of all places, which means ... which means ... nah, I got nuthin'.

In fairness to Leon Black (see previous item), his new gambit of gobbling up $20 billion worth of devalued debt beats the heck out of, say, buying an already-debt-encumbered Harrah's Entertainment at a premium price. But, given the choice between investing one's money with Apollo Management and hiding it under the mattress, the mattress is looking awful good at the moment. At least money's not going to lose any value there.

Harrah's swap meet extended

Mon, 01 Dec 2008 18:22:00 -0700

It didn't take long for Harrah's Entertainment to swap out 36% of its outstanding debt, at 53 cents on the dollar. In fact, the longer-term, higher-interest notes Harrah's is offering are already oversubscribed, so much so that the offer is being extended through the week.

Some debtholders haven't the stomach for any further involvement with Harrah's and "approximately $286 million principal amount, or 19% of the outstanding principal amount, of Old Notes maturing in 2010 and 2011 have participated in the Exchange Offers and elected to receive cash in lieu of New 2015 Second Lien Notes that they would otherwise receive in the Exchange Offers", meaning that they'll get $209 million -- a 27% writeoff.

The new notes are securitized through Harrah's Operating Co., which means the company has pledged all properties except cash cow Harrah's Las Vegas, The Rio, Paris-Las Vegas, the Flamingo and Harrah's eponymous Atlantic City and Laughlin casinos ... judging from this inscrutable graphic, prepared by a Deutsche Bank investor presentation. (Seriously, I showed it to two people much smarter than I, and neither could make head nor tail of it.)

Somebody forgot to number the footnotes, but "Other" off to the left appears to correspond to the company's captive-insurance subsidiaries. As for "PropCo Borrowing Structure" and "CMBS Borrowers," I'm still working on those. Whoever they are, six casinos are assigned against their debt load. Eccentrically, Paris-Las Vegas and Bally's, whose physical plants are Siamese twinned, are assigned to different debtors. Go figure.

And whoever came up with the acronym for Harrah's Operating Co. (HOC) must have a grim sense of humor. Because if you had to describe Harrah's present condition in two words, "in HOC" would do as well as any and better than most.

Update: Harrah's offering may be oversubscribed but it's not getting the subscribers it needs. Fewer than a fifth of the takers Harrah's found are ones holding notes that mature in 2010-11, debt that CEO Gary Loveman would doubtless dearly love to extend. Covenant Review founder Adam Cohen called the Harrah's tender "not a good showing," explaining that the company "didn't really get the bonds they most wanted."

Update #2: "CMBS," of course, stands for "mortgage-backed securities." Duh!

Columbia Sussex quickies

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

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

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

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

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

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

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

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

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

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

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

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

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

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

'Sin Fund' falls upon evil days

Wed, 05 Mar 2008 18:34:00 -0700

Not so long ago, journalists like yours truly, were hailing the early success of the Ladenburg Thalmann Gaming & Casino Investment Fund (GACFX). Unfortunately, since its apogee in the fall of last year GACFX has been in a steep decline, losing roughly a third of its peak value.

As one observer commented, upon bringing this to the attention of S&G, "[It] makes money placed in a piggy bank look like a good investment!"

Your Columbia Sussex moment of Zen: An LVA reader writes, "I understand that the River Palms, Tropicana Express in Laughlin are now owned by the Columbia Sussex Corp. I visit these hotels regularly and have noticed that they are slipping in quality. By that I mean the maintenance, i.e. carpets are worn, rooms need remodeling, buildings need paint, and buffets at both Laughlin properties have declined dramatically."

Hmmmm ... sounds an awful lot like my last visit to the Tropicana Las Vegas.

Case Bets: So long, HET ... and plenty more

Mon, 28 Jan 2008 13:18:00 -0700

According to Bear Stearns, the privatization of Harrah's Entertainment closed on schedule. HET stock finished trading just three cents shy of the $90/share buyout price.

Florida showdown: While Mitt Romney and John McCain are battling to the death in the Sunshine State, and Hillary Clinton is pursuing a purely symbolic victory (no delegates are at stake in the Dems' primary), a significant ballot question has flown right beneath the radar.

Voters in Miami-Dade County will be asked whether to allow 6,000 slots, divided between three parimutuel locations. Miami-Dade residents voted this down two years ago but, now that three racinos are running in Broward County and the Seminole Tribe has been approved for Class III gambling, look for Miami-Dade voters to experience a change of heart tomorrow.

Chip skullduggery: Ian Sutton, having survived the ICE expo, is back at work on GamingFloor.com (the best gambling-related Web site ... except maybe for ours ... but maybe not ... but maybe). Nobody but Ian can aggregate stories like this one about casino-chip forgery in Korea. Hey, if they can pull it off in Korea, somebody's bound to try it here.

God help us: Ever try to imagine what the casino industry would be like under a theocracy? Wonder no longer; just go to Guyana.

If at first you don't succeed ... With typical determination, Las Vegas Sands has returned with a new plan for its proposed Kansas casino. Area residents complained about the scale of the previous Sands proposal but the new one, statistically, appears to be just as grand, if not grander. A pity about the rendering: It makes the Sands project look like an airport terminal, and not in a good way. I know Sands can do better -- and has.

Speaking of LV Sands, it looks like Sheldon Adelson has found a way to drive a wedge between local politicians and the Culinary Union. Does this mean will start seeing the Dems holding political events at The Venetian or Palazzo, previously a big no-no?

A lovers' quarrel results in a $780K jackpot at Borgata. No, really.

Vindicated: Las Vegas Sun columnist Jeff Simpson was the canary in the coal mine regarding Columbia Sussex. Now he's turning up potential insolvency at the Las Vegas Tropicana. If you think I'm rough on C.S., just read Simpson. (Be sure and also read the lengthy comment regarding the situation down at the C.S.-run River Palms, in Laughlin.)

Hey, how did that Viva Laughlin! show work out? Not so good, eh?