Mixed message from Penn

Posted on February 6, 2009 by David McKee

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!"

Posted in Atlantic City, Colony Capital, Donald Trump, Economy, Harrah's, MGM Mirage, Penn National, Pennsylvania, Pinnacle Entertainment, Tropicana Entertainment | Comments Off on Mixed message from Penn

Tamares' good deed

Posted on February 4, 2009 by David McKee

Lichtenstein-based Tamares Group bought a gaggle of downtown Las Vegas casinos from Jackie Gaughan five years ago and hasn't seemed to know what to do with them since. However, one unpublicized kindness by Tamares — brought to our notice by an LVA reader — deserves mention and praise:

"I'm writing to bring to your attention a kind deed that the management of the Plaza Hotel (Mr. Freddie Maatook and staff) do for the Veterans living at the VA home in Boulder [City].

"Every Thursday morning they treat the vets to free all-inclusive breakfast. For years, it was at the Las Vegas Club but now it has been moved to the buffet at the Plaza. We happen to be friends with one of the WWII vets (91 years old) and it is the highlight of his week.

"In this time of cutbacks, it is an especially generous contribution that goes unnoticed except to the vets. They go to other casinos BUT this is the only one that 'treats' them."

My thanks — and those of LVA — go out to Tamares for taking care of the "Greatest Generation" and its successors. This European company does itself proud — and makes you wonder if any U.S.-based casino companies are setting a similar example.

Posted in Charity, Downtown, Tamares Group | Comments Off on Tamares' good deed

Black Tuesday: Station Casinos

Posted on February 4, 2009 by David McKee

Yesterday’s Chapter 11 proposal by Station Casinos was paradoxically both inevitable and premature. From the day Station drew on its revolving line of credit to fund operational expenses, the handwriting was on the wall. However, Station chose to precipitate a crisis by opting not to make an interest payment … even with $350 million in the bank.

Already one is hearing grumbles that Station ownership is trying to bust the balls of its bondholders, who balked at the last refinancing plan, to put it kindly. In return for an accelerated redemption date, senior debtors are being asked to take 50 cents on the dollar (mostly in the form of more paper), while junior debtors will have to settle for 10 cents on the buck — a considerable premium to the current value, one must in fairness note. Or they could call Station’s bluff and send the whole kit ‘n kaboodle into bankruptcy court.

The Fertitta clan, Colony Capital (co-owners of Station) and the secured lenders have all signed off on this … of course. They’re the ones with the least to lose, should it go through. Colony and the Fertittae are sweetening their previous offer with a promised $244 million cash infusion. It would be cricket if Frank III and Lorenzo Fertitta ponied up $60 million — if said contribution is proportional to ownership stake — considering that they’ve taken considerably more than that out of the company in recent years. Together with their sister and brother-in-law, the boys toted home nearly $495 million from the buyout alone.

What’s not on the table are asset sales, even though Station has more undeveloped real estate in the Vegas Valley — plus the Reno area — than you can shake a stickman at. (Not to mention that expansion is currently pointless in a market that has lost its elasticity for the time being and is, in fact, constricting). Evidently call-center employees and 401(k) contributions are expendable but pipe dreams like Viva are sacrosanct.

Investment service Moody’s estimates that as many as 17 casino companies are at risk of default right now. (Scary!) Should Harrah’s Entertainment fall, the enormity of ensuing “SPLASH!” will drown out the Station fiasco — but it shouldn’t. In effect, if not in intention, private equity buyouts of casino companies have become a sham whereby management gets its company back for pennies while leaving bondholders holding the bag, too. That’s disgraceful.

Speaking of Moody’s, the Las Vegas Review Journal‘s “Inside Business” blog has an amusing Wall Street-into-English translation of a Moody’s investor note on Landry’s (owner of the Golden Nuggets) that’s a dense thicket of cover-your-ass verbiage. I was going to say Moody’s “waffled all over the place,” but I don’t care to insult waffles.

As for Landry’s CEO Tilman Fertitta, he has more reason than most to delve into today’s coverage of the calamity at Station. After all, the Fertitta brothers helped Tim Poster and Tom Breitling “play” him during his bid for the Nuggets. So, no love lost there. In fact, I’m sure that Tilman is sitting down for an extra-large schadenfreude supper tonight.

Posted in Colony Capital, Economy, Reno, Station Casinos, Tilman Fertitta, Wall Street | Comments Off on Black Tuesday: Station Casinos

Case Bets: Seminoles, Tropicana, Shuffle Master, Stanley Ho

Posted on February 3, 2009 by David McKee

Seminoles offer to lay $288 million and 12,000 new jobs on the table, for starters. Sunshine State Republicans blow them a raspberry. Constitutional or not, Gov. Charlie Crist‘s compact put a good deal in place for both sides. (It wasn’t so good if you were a non-tribal casinos, but they’d been underperforming even before Crist gave the Seminoles table games.) Unfortunately, Florida solons seem bent on pissing it away for a variety of reasons, spite — mainly toward Crist — not least among them.

Good news at Trop(s). It’s a rare and welcome day for Tropicana Entertainment when it can announce not one but two pieces of good news in the same day. At the Tropicana Las Vegas, a marketing firm has been retained to try and reposition the LV Trop as a service-and-value-oriented property. TropEnt promises “to elevate its service and value standards,” in a slap at Columbia Sussex, its nominal parent company.

Out East, you can stick a fork in Continue reading →

Posted in Aristocrat, Atlantic City, Australia, Columbia Sussex, Florida, Politics, Regulation, Shuffle Master, Stanley Ho, The Strip, Tribal, Tropicana Entertainment | Comments Off on Case Bets: Seminoles, Tropicana, Shuffle Master, Stanley Ho

Head-scratcher at Shuffle Master

Posted on February 2, 2009 by David McKee

Come March 15, Shuffle Master CEO Mark Yoseloff finally gets to leave the company — something he’s wanted to do for a while but which has been stymied by the difficulty of replacing him. Just how difficult was it? So much so that Shuffle Master’s board settled on a relative lightweight: Timothy Parott, who was Aristocrat Technologies‘ CEO of American operations for 2006-08. Prior to that, Parrott — a newcomer to the manufacturing side — had been out of day-to-day casino operations for eight years. To make a bad slot-machine pun, it was a move from well outside “the box.”

Industry scuttlebutt had it that subsequently discredited Aristocrat Leisure CEO Paul Oneile wanted to exert more direct control of Aristocrat’s North American operations and that the Parrott appointment furthered that brief. (Parrott’s exit from Aristocrat Technologies roughly coincides with the appointment of Jamie Odell to succeed Oneile.) It looks like the power behind the Shuffle Master throne will be board chairman and former Greenspun Corp. President Phil Peckman, who steered the Greenspuns into the casino business but subsequently fell from favor.

You’ve been served. Can a casino be held responsible for being in receipt of (allegedly) ill-gotten gains? The Venetian gets to be a guinea pig. Lucky them.

“An instructive example of Murphy’s Law.” That’s the verdict from Liz Benston on the botched, bungled and increasingly beleagured Tropicana Atlantic City sale process. If anything has gone right in that snipe hunt, it’s escaped my notice.

Posted in Aristocrat, Atlantic City, Australia, Regulation, Technology, Tropicana Entertainment | Comments Off on Head-scratcher at Shuffle Master

Sign of the times II

Posted on February 2, 2009 by David McKee

This image, taken Saturday at the Plaza Hotel & Casino downtown, pretty much speaks for itself. Auction holders Real Estate Disposition Corp. were scheduled to hold another auction today. The choice of the down-on-her-luck Plaza as venue is apt … although if the REDC had a sense of black humor, it’d hold its foreclosure auction at the in-Chapter 11 Tropicana Las Vegas.

Photo: © Erik Kabik/RETNA

The best thing that could happen to the Plaza would be if this Forest City casino project went through, just behind the Plaza on a portion of Oscar Goodman‘s famous 66 acres. The potential foot-traffic benefits are obvious and brand-new competition downtown might finally force owner Tamares Group to get off its duff and reinvest in the Plaza — assuming it hasn’t flipped its misguided real estate play and fled town by then.

Another Benny Binion descendant dies before his biblical allotment of three score and 10 years has run its course.

It’s a trend! The prime minister of China is the latest shoe-throwing victim. If this continues to catch on, it could really liven up shareholder meetings — especially those of Las Vegas Sands.

Posted in Downtown, Economy, Sheldon Adelson, Tamares Group, Tropicana Entertainment | Comments Off on Sign of the times II

Stanley Ho's comeback

Posted on February 2, 2009 by David McKee

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.

Posted in Australia, James Packer, Macau, Melco Crown Entertainment, MGM Mirage, Penn National, Politics, Sheldon Adelson, Singapore, Stanley Ho, Steve Wynn, The Mob | Comments Off on Stanley Ho's comeback

Who are they kidding?

Posted on February 2, 2009 by David McKee

Mesquite casino oligopolist Randy Black bought himself some TV ad time during the Super Bowl to tout his latest value proposition (starring one Randy Black). His opening gambit: "Everybody's cutting back." Uh no, not if you're Randy Black and just served yourself a nice pay increase while skipping loan payments and sacking the help. But we digress …

What's Randy's big value message? A midweek rate of $99/night, which gets you either a free spa treatment or a round of golf. The prospect of a $99 golf game or spa visit had better be pretty strong, because there's certainly no point in hauling ass out to Mesquite for a $99 hotel room, not when you can stay at Planet Hollywood this week for that little — or for even less at The Rio or the Flamingo, to name two of the nicer propositions. (If your standards are more flexible, you can stay on or very, very near the Strip for $20.)

Columbia Sussex continues to live in a dream world, demanding $249/night midweek for the Westin Casuarina. Heck, you could stay at Trump International for less than half that amount. Donald Trump and Phil Ruffin really let both the condo market and the budget get away from them on the latter, whose budget quadrupled to a final $1.2 billion. But it's not one of those properties (I'm looking at you, Aladdin) where you walk around and wonder, "Where did the money go?"

The recent discounting binge on the Strip may have done its job. J.P. Morgan reports "we are finding that casino operators are reducing the number of promotions that are available by and large" and theorizes, "operators have built up a book of occupancy that enables them to not have to rely on a promotional environment." If that's the case and promotional-rate offers continue to dwindle, it's a classic case of gather ye rosebuds while ye may.

Posted in Columbia Sussex, Current, Donald Trump, Economy, Harrah's, Marketing, Mesquite, Phil Ruffin, The Strip, TV | Comments Off on Who are they kidding?

Atlantic City: Two strikes, no balls

Posted on January 29, 2009 by David McKee

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.

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.

Posted in Atlantic City, Columbia Sussex, Economy, Harrah's, Penn National, Pennsylvania, Pinnacle Entertainment, Regulation, Tropicana Entertainment, Wall Street | Comments Off on Atlantic City: Two strikes, no balls

Bargain$ tonight in Vega$

Posted on January 27, 2009 by David McKee

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

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

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

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

• Conversely, the “Don’t They Know There’s a Recession?” award goes to Continue reading →

Posted in Boulder Strip, Boyd Gaming, Columbia Sussex, Current, Don Barden, Donald Trump, Downtown, Economy, Harrah's, Marketing, MGM Mirage, Sheldon Adelson, Station Casinos, Steve Wynn, The Strip | Comments Off on Bargain$ tonight in Vega$

Atlantic City Death Watch V

Posted on January 26, 2009 by David McKee

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

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

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

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

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

Posted in Atlantic City, Boyd Gaming, Cannery Casino Resorts, Colony Capital, Donald Trump, Economy, Harrah's, Pinnacle Entertainment | Comments Off on Atlantic City Death Watch V

Quote of the Day

Posted on January 26, 2009 by David McKee

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

Posted in Boyd Gaming, Economy | Comments Off on Quote of the Day

Colorado casinos: Four votes, four wins

Posted on January 21, 2009 by David McKee

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.

Posted in Ameristar, Colorado, Election, Isle of Capri, Penn National, Regulation, Riviera | Comments Off on Colorado casinos: Four votes, four wins

The prodigal son

Posted on January 19, 2009 by David McKee

Poor Kerry Packer; the late Australian mogul and famous high roller must be doing all his rolling in the grave now. Reputed for being daring at baccarat and cautious in business, the media baron is at least spared the indignity of seeing son James Packer blow through his patrimony at a record pace.

Going is the $33 million yacht; on hold is the $40 million corporate jet. Even work on the $2.5 million backyard swimming pool has been suspended. (Don’t you hate it when that happens?) At least the pin placements on Packer’s Greg Norman-designed golf course are still “changed every day at massive expense,” reports Rupert Murdoch’s News.com.au.

More seriously, Packer is reported to be suffering from depression, though other media reports dispute this. Given the debilitating, even paralyzing nature of the disease (something for which I can vouch firsthand), it puts a potentially very different cast upon Packer’s December no-show for a Nevada Gaming Control Board hearing.

When Packer did turn up, Chairman Dennis Neilander admitted to being somewhat foxed by Packer’s acquisition of Cannery Casino Resorts (for $1.8 billion). “You and me both,” I thought. As Packer seemingly played Pin the Tail on the Donkey, buying not only Cannery but positions in Fontainebleau, Station Casinos, Harrah’s Entertainment and the flaccid Crown Las Vegas ‘failsino’-tower, I tried to convince myself that an overarching strategy was at work. In retrospect — especially after the writedown of the Station and Harrah’s investments — what we were witnessing was James Packer, Shopaholic. (How did he manage to miss out on the Cosmopolitan?) One begins to see why Steve Wynn steered clear of Packer, back when the talk of a Wynn-Packer joint venture was the buzz du jour on the Strip.

Even the Crown Macau cash spigot has been sputtering, although Melco Crown CEO Lawrence Ho keeps insisting that Chinese access to Macao will improve in time for the City of Dreams opening. (Either he’s whistling past the graveyard or he knows something for which others would pay a very great number of patacas.) Market share is down at Crown Macau and the Macanese government is predicting a serious diminution of gaming revenue for for the overall market in 2009, placing it somewhere near $10.7 billion.

Plus, the ripple effect doesn’t stop there. Aristocrat Leisure, which could really stand to have some good news, had been hoping for a fivefold increase in its installed slot base in Macao over the next two years. Not only is that unlikely, operators are trimming their existing slot inventory.

Underscoring their pessimism regarding reduced visa restrictions, Macanese tourism officials are turning their gaze at least partly away from China. Among the newly coveted markets are Singapore‘s presumed feeder markets — India, Indonesia, Malaysia, the Philippines, Thailand, and even Australia and New Zealand — to say nothing of Singapore itself. It’s long been presumed that Singapore’s got a tough row to hoe when its casino megaresorts come on line and it just keeps getting tougher.

Posted in Aristocrat, Boulder Strip, Cannery Casino Resorts, Cosmopolitan, Economy, Fontainebleau, International, James Packer, Macau, Melco Crown Entertainment, Pennsylvania, Singapore, Station Casinos, Steve Wynn, The Strip | Comments Off on The prodigal son

Sign of the times

Posted on January 19, 2009 by David McKee

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

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

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

Posted in Boyd Gaming, Economy | Comments Off on Sign of the times

Case Bets: CityCenter, Detroit, Boyd in Indiana

Posted on January 19, 2009 by David McKee

CityCenter: Cash cow or calf of gold?

It’s received wisdom that, in its worship of the Golden Calf known as CityCenter, half-owner MGM Mirage is prepared to sacrifice some of its high-value properties, including MGM Grand Detroit, even in the face of numbers like these. Perhaps a history lesson is in order.

After the 9/11 attacks and the crippling blow they dealt to the Vegas economy, one of the ways companies like MGM stayed afloat (and, in MGM’s case, profitable) was that their Vegas operations were backstopped by regional footholds in markets like Detroit and Biloxi. Now one keeps hearing that MGM is bent upon putting all its eggs in the Vegas basket, with even MGM Grand Macau possibly to be had.

(A moment of levity: A Dutch casino executive, speaking at G2E, suggested in all seriousness that MGM buy Station Casinos or Boyd Gaming and transplant their [locals] customer base to CityCenter. Which shows almost as little understanding of the Vegas market as I have of Holland’s casino business.)

If this is an accurate reflection of the corporate thinking at MGM, shareholders should be alarmed, at the very least. A CityCenter-centric strategy concentrates risk, rather than spreading it across multiple markets. The kind of pullback that’s being mooted in the blogosphere and podcast cosmos would be so irresponsible that it would call the judgment of MGM leadership into question. However, so long as said management is answerable only to Kirk Kerkorian, that question may never be called.

Don’t look for rescue from Foxwoods or Mohegan Sun. Their slot revenues have been sucking wind this year. Also, salary cutbacks to 9,800 Mohegan Sun workers bode very poorly for further expansion by the casino, which was bullish on the Kansas market not so long ago.

Boyd fights back. The opening of nearby Four Winds Casino really did a number (as in approx. -40%) on revenues at Boyd’s Blue Chip riverboat in northeastern Indiana. Watching double-digit revenue declines, month after month, might spur those of us with lesser intenstinal fortitude to cut and run.

Not Boyd. It’s reinventing its business model for Blue Chip, in best “adapt or die” fashion. The three-pronged response of a new hotel, spa and concert venue is an aggressive pushback. It probably won’t restore Blue Chip to former levels of glory, at least where gambling revenue is concerned (Four Winds still has the “convenience factor” going for it with Michigan punters). However, it does fling a strong challenge at its adversary. Four Winds, the ball is now your court.

Posted in Boyd Gaming, Economy, G2E, Indiana, Kansas, Macau, Marketing, MGM Mirage, Station Casinos, The Strip, Tribal, Wall Street | Comments Off on Case Bets: CityCenter, Detroit, Boyd in Indiana

Buyers' remorse

Posted on January 16, 2009 by David McKee

Even if hotelier and Westin Casuarina (above) owner Columbia Sussex succeeds in extricating itself from Tropicana Entertainment, it’s not out of the woods by a long chalk. It may have as little as nine months (or as many as 21) to pay off a $700 million loan — or forfeit over a half-billion dollars’ worth of hotel properties.

“Covenants are being triggered by those who have bought at high [long-term value] in 2006 and 2007,” says Cedar Capital Partners veep Phil Golding, and Golding’s time frame would coincide with the $3 billion-plus spending spree that netted ColSux CEO William J. Yung III not only Aztar Corp. but 14 Wyndham-flagged hotels when the seller’s market was at its peak.

Judging by the tenor of the Property Week article, MGM Mirage also found an exquisitely inauspicious time to try and semi-reinvent itself as pure hotel operator (albeit so far only for the China and Dubai markets).

Posted in Columbia Sussex, Economy, International, MGM Mirage, Tropicana Entertainment, Wall Street | Comments Off on Buyers' remorse

Case Bets: Chicago, Wyndham, Harrah's

Posted on January 16, 2009 by David McKee

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

And the winner is … Des Plaines.

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

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

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

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

Posted in Alex Yemenidjian, Economy, Harrah's, Illinois, Indiana, International, Neil Bluhm, Plaza, The Strip, Tropicana Entertainment | Comments Off on Case Bets: Chicago, Wyndham, Harrah's

'Gang' at Encore

Posted on January 15, 2009 by David McKee

Yesterday saw an unusual — but altogether pleasant — change in the Vegas Gang routine, as we taped “on location” from a seventh-floor room in Encore, overlooking Echelon and the increasingly ominous Fontainebleau (so disproportionately massive it looms over its neighbors like Godzilla or Gammera over mere mortals). Both David G. Schwartz and Jeff Simpson joined us by speakerphone, giving the conversation a certain Charlie’s Angels vibe.

It’s Fontainebleau … coming to stomp us all! Run for your lives!

Spoilers ahead …

I’m clearly very much in the minority on the likelihood of a Mirage or Bellagio sale. Cash cows they may well be, but there seems to be a strong consensus that their tires are being kicked and serious talks are underway, as well as that The Mirage has become a stodgy property.

Also that MGM Mirage is a Vegas-Vegas-Vegas-obsessed company and would be willing to sacrifice the Gulf Coast and Detroit markets — the latter of which it utterly dominates — to keep the CityCenter bucks a-flowin’. (And why would MGM bail on Detroit and not on the sickly Illinois market instead? Or Tunica? Or … ? If Alex Yemenidjian would pay $435 million for an Illinois license, what might he put down on actual, operational asset?)

Such a strategy would fly in the face, if not of sense, at least of recent casino industry thinking, whereby you try to maintain strong footholds in the second-tier markets and not put all your chips on Vegas (unless you’re Steve Wynn and even he tried it once). It would be like Harrah’s Entertainment evacuating Atlantic City to raise money for its stalled Octavius Tower.

And you could knock me over with a feather if MGM sells its Macao demi-concession to partner Pansy Ho or back to her father Stanley, especially after all the hoops MGM had to jump through to get into Macao. Bailing on the world’s #1 casino town would be an indicator of extreme desperation bordering on insanity.

Unfortunately, we weren’t able to get into the provenance of the urban legend that Phil Ruffin‘s Treasure Island purchase was just a big-ass/short-term loan to MGM, with “T.I.” serving as collateral — and at 55% interest, no less.

Posted in Architecture, Cloverfield monster, Current, Detroit, Fontainebleau, Harrah's, Illinois, Macau, MGM Mirage, Mississippi, Phil Ruffin, Stanley Ho, Steve Wynn, The Strip | Comments Off on 'Gang' at Encore

Quote of the Day

Posted on January 15, 2009 by David McKee

"For a casino worker, every day breathing second-hand smoke in the workplace is one too many. Everyone has the right to breathe smoke-free air — regardless of the color of their collar." — Americans for Nonsmokers Rights Executive Director Cynthia Hallett, reacting to a resolution passed by the National Council of Legislators from Gaming States. The NCLGS resolution urges constitutent states to make all gambling venues smoke-free workplaces and that smokeless gambling be a mandatory part of future tribal-state compacts. States that require smoke-free casinos are, at present, Illinois, Colorado and Delaware.

Posted in Colorado, Illinois, Labor, Regulation | Comments Off on Quote of the Day