Exit the Dragon

In a story broken yesterday by VitalVegas, the Lucky Dragon Casino has abruptly shuttered its casino and restaurants. It will attempt to limp along for six months of ‘reorganization,’ sustained by hotel revenues. Were the Consumer Electronics Show not in the offing, S&G has little doubt that the hotel would have gone dark as well. The situation at Lucky Dragon (soon, no doubt, to be known as Unlucky Dragon) is not entirely bleak — unless you’re one of its EB-5 investors. The Las Vegas Sun reports that “The hotel and gift shop will remain open, including room service, morning tea and coffee, officials said. Also, Cha Garden will stay open, featuring a full bar at night and an expanded food menu.” When or if Lucky Dragon reopens (possibly under another name), casino operations and F&B management will be outsourced.

Look on the bright side: You can still redeem your chips. The EB-5 investors, who received permanent green cards in return for their $60 million subvention, are likely sh!t out of luck. We’re not big fans of EB-5, which basically sells jobs out from under Americans, but we feel sorry for the chumps who fell for the sales pitch of William Weidner and Andrew Fonfa. Original general manager Matthew Harkness, scapegoated for a weak opening, has landed at the far-more-promising Hard Rock Atlantic City. It was surely a sign of bad things to come when a second VIP lounge, promised last March, failed to materialize.

The Lucky Dragon’s plan, to paraphrase a line from one of my favorite movies, Das Boot, was perfect in every respect except one: It had to work. It would be the first casino on the Strip to expressly target Chinese players, and it would cater to them with everything from dining amenities and signage that would make them feel at home. (One wonders if a similarly China-centric strategy at Resorts World Las Vegas will be rethought in light of Lucky Dragon’s flameout.) High-value players from overseas evidently proved hard to recruit, while locals casinos SLS Las Vegas and Gold Coast hung onto their market share, pushing back against Lucky Dragon with aggressive promotions. (Wall Street would call this kind of spending ‘irrational’ but we like it.) A casino floor with a preponderance of baccarat also worked against Lucky Dragon, both in terms of players complaining of a lack of variety and due to the sheer volatility of the game itself, which sapped Las Vegas Strip gaming revenues last November. VitalVegas reports, “Whales (however few) would win big, then leave for bigger resorts on The Strip with more amenities.”

Said gaming analyst John DeCree, “a smaller casino will have a harder time absorbing a couple of bad periods with lower win percentages.” He added, “the reality is a lot of the big operators in Las Vegas … they all cater quite well to the local Asian gaming customer, as well as the international Asian gaming customer. And it’s tough for a place like Lucky Dragon with limited space for them to compete with the history players have at other casinos.”

On top of all that, Lucky Dragon had a (shall we say?) difficult location — on Sahara Avenue, as arid a location for business success as its name suggests. (By rights, the Stratosphere shouldn’t be thriving in its north-of-Sahara isolation but it’s the exception that proves the rule.) Also, opening a casino with no player database is a difficult recipe for success, as SLS  already demonstrated. The ability of the casino to reopen quickly will depend on whether the new operator is a known quantity to the Nevada Gaming Control Board or a newbie who requires extensive vetting. Let’s pray it’s not Navegante Group. You don’t bring Navegante in when you want to resurrect a casino, you bring them in when you want to close it down.

The best course of action for Lucky Dragon would be to find a new owner, whether it be Boyd Gaming, Station Casinos or maybe Penn National Gaming, one that could infuse it with loyalty players and possibly tweak the product to broaden its appeal. As Union Gaming’s DeCree says, ”It takes a while to ramp up a new casino. If you don’t have deep pockets, it could be difficult to keep operating.” While the Lucky Dragon says it is ‘temporarily’ closed, VitalVegas‘ Scott Roeben opines, “‘Temporarily’ sounds a little optimistic at this point.” Barring a new owner with a deep pockets and a profound database, we’d have to agree.

In the interim, Fonfa is peddling optimism, saying “this reorganization paves the way for Lucky Dragon to enhance the property’s long-term positioning and provide a better guest experience.” If, as Roeben reports, Lucky Dragon had already been on the market and found no takers, then the tea leaves do not read auspiciously. Ah, well. It was an experiment worth trying.