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

Posted on December 11, 2008 by David McKee

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

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

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

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

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

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

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

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

Posted in Boyd Gaming, Cannery Casino Resorts, Colony Capital, Columbia Sussex, Cosmopolitan, Economy, Harrah's, Herbst Gaming, Isle of Capri, James Packer, Macau, MGM Mirage, Morgans Hotel Group, Stanley Ho, Station Casinos, The Strip, Tropicana Entertainment, Wall Street | Comments Off on Case Bets: Stanley Ho in Vegas?, HRH grows but Morgans shrinks

Quote of the Day

Posted on December 11, 2008 by David McKee

“I won’t quote back some of the things that were said about me. This is a family program, I know.” — President-elect Barack Obama, referring to the thuggish and expletive-laden locutions favored by Gov. Rod Blagojevich (D-IL), whose crimes against humanity include shuttering Frank Lloyd Wright‘s Dana-Thomas House, along with many other Illinois landmarks.

Posted in Architecture, Illinois | Comments Off on Quote of the Day

Harrah's honored

Posted on December 11, 2008 by David McKee

Harrah's Entertainment can use any business leverage it can get these days and it just received the endorsement of Stand Out for Equality, an opposition movement spurred by the passage of Proposition 8 in California (where Harrah's Rincon has been hosting same-sex nuptials). Harrah's is the only casino company listed on The Gay-Friendly List, save for the small (but enlightened) Eldorado Casino in Henderson.

The good news for every other casino is that none of them made The Blacklist, which targets businesses and (in an ethically questionable move) individuals — including several judges and lawmakers — for boycott or "buycott," as Stand Out is calling it, laying particular emphasis on the holiday season. If you're in Vegas this weekend and feel strongly about the issue, there'll be a march from the Gay & Lesbian Community Center of Southern Nevada (953 E. Sahara Ave.) at 3 p.m. on Saturday, ending at the Flamingo Road/Maryland Parkway intersection. Meaning you can A) make a political statement, B) get some exercise and C) ferret out Christmas bargains at Target, near the terminus of the march.

If MGM Mirage would like to carve out a bigger share of the gay dollar, it might rethink its plan of fobbing Luxor off on LGBT patrons as the "gay ghetto." (What, Circus Circus wasn't available?) Seriously, it sounds like one more "try anything" non-solution to the Strip's most identity-crisis-plagued property. It's a lovely thought, too: Give 'em the "death-themed" resort, the one that's home to Bodies and the Titantic exhibit, to say nothing of being designed in the shape of a tomb, fer crissakes. Oh, and it's home to the most reviled show in Cirque du Soleil history.

With Bellagio, The Mirage and Mandalay Bay (home to Broadway on the Strip) from which to choose, why Luxor? But it could have been far worse: MGM could have tried to steer the gay crowd to Excalibur instead … though the exterior does resemble a Village People iteration of Camelot.

Posted in California, Harrah's, MGM Mirage, Politics, The Strip | Comments Off on Harrah's honored

Quote of the Day

Posted on December 10, 2008 by David McKee

"They’re taking a real gamble. It’s like playing poker with the capital markets." — KDP Investment Advisors bond analyst Barbara Cappaert, regarding a rejected Station Casinos debt swap that would have covered the butts of Station insiders and Colony Capital at the risk of leaving senior debtors exposed.

Poker? Try "playing chicken." Or maybe Russian roulette.

Posted in Colony Capital, Economy, Station Casinos, Wall Street | Comments Off on Quote of the Day

What'$ in a name?

Posted on December 10, 2008 by David McKee

A reader recently enquired as to what became of the plan to re-name Harrah's Entertainment as Caesars Entertainment. When I asked Harrah's as to whether that was still on, no response was forthcoming.

My questioner wanted to know, "Do you think Harrah's shelved the plan to rename the company to Caesars partly because they might like to sell Caesars if the price were high enough … Does going up market with the company image become a hindrance in these tough times?"

Second question first: This is actually a great time to be a casino patron, provided you've got a modicum of discretionary income. I was working on next year's iteration of the Pocketbook of Values today and the offers for 2009 are much better, IMO. Also, we've been seeing a barrage of bargain-oriented marketing messages from MGM Mirage, "freecations" at Herbst Gaming's Primm Valley trio of casino-hotels, plus a Harrah's Las Vegas promo for its comedy club that — after you factored in the value of Improv tickets and buffet admission — actually paid customers to stay there, to the tune of $1.50/person. (Some will argue that Harrah's should pay people to stay at its titular Las Vegas property.)

So, yeah, unless you're Steve Wynn, a "snob appeal" message doesn't have much traction these days. The people who can afford a high-end Vegas experience are already here; it's the other demographics we have to worry about. Even Las Vegas Sands — hardly the image of a consumer-oriented company — is expanding its loyalty program (Club Grazie) beyond a casino-only proposition. Expenses charged to your Palazzo or Venetian room will now earn points as well.

As to the greater fungibility of the Caesars name if it's only attached to single properties and not the whole company … absolutely. Who'd want to buy a spun-off Caesars Atlantic City, say, if you had to forfeit or sub-license the Caesars brand? Putting any Harrah's-to-Caesars plan on hold avoids all manner of red tape and legal rigamarole, as well as keeping the option open of unloading those lucratively branded Caesars properties.

Of course, given that a strategy at Harrah's these days has the lifespan of a soap bubble, who knows if that just another of CEO Gary Loveman's will o' the wisp ideas, flung out for public consumption, then quickly forgotten. Indeed, to speak of "strategy" in the same sentence as "Harrah's" is oxymoronic, as the company doesn't evince any — unless flailing about in every direction like a spastic octopus constitutes "strategy."

Which brought to mind another Loveman idea, mooted and apparently discarded, that of concentrating Harrah's around three brands (Caesars, Harrah's and Horseshoe), which would be designated as its "core" brands. It currently carries 11 on its masthead and has several others. Re-branding Bally's Las Vegas as a Horsehoe was floated — though mostly razzed — and Harrah's squandered a capital opportunity to bring the Horseshoe name back to Vegas when it redubbed the Barbary Coast with the generic "Bill's" brand.

An effort to maximize the Caesars brand moved but in fits and starts. So far it's consisted of taking it off the Glory of Rome riverboat casino in Indiana and putting it onto the former Casino Windsor, in Ontario. Harrah's Jacqueline Peterson says, "I can't put a price tag on how much it costs because so much more went into these properties than just marquee and business card changes … there were new spaces created and upgrades made throughout."

Asked about the "core brand" concept, she was understandably flummoxed. "We have no intention of becoming three brands and we need look no further than Las Vegas to understand why that wouldn't work[:] we have eight distinctive properties here and renaming those into just three names would be silly and really confusing for customers." Of course, during the five minutes that the Harrah's/Caesars/Horseshoe-centric strategy lasted, it was thought that Imperial Palace wasn't long for this world (this was back in 2005, remember) and the Barbary Coast was still firmly within the Boyd Gaming orbit.

If Loveman has more brands than his company can exploit, he's neither alone nor the first. What used to be Caesars Entertainment (née Park Place Entertainment) went through three CEOs without ever cracking that particular nut.

So, is the Caesars brand up for grabs? I'd be very much surprised if it weren't, although that would be one of the most extreme measures Harrah's could take in order to lighten its colossal debt burden.

Posted in Atlantic City, Boyd Gaming, Detroit, Economy, Harrah's, Herbst Gaming, Indiana, Marketing, MGM Mirage, Sheldon Adelson, The Strip | Comments Off on What'$ in a name?

Nevada in October: It was the pits

Posted on December 10, 2008 by David McKee

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.

Posted in Boulder Strip, Current, Downtown, Economy, Harrah's, Lake Las Vegas, Laughlin, Station Casinos, The Strip | Comments Off on Nevada in October: It was the pits

Expunging the Columbia Sussex brand

Posted on December 8, 2008 by David McKee

If Columbia Sussex ran its Tropicana Entertainment casino hotels the way it maintains its regular hotels, TropEnt CEO Scott Butera is looking at a big refurbishment tab. Southwest Hospitality Management picked up a couple of ColSux discards in Charleston, W.V., in June '07 (which would coincide with a period in which ColSux was trying to sell off assets to pay down Trop-related debt) and, "I feel that if we hadn't done the renovations, we would be hurting more than we are now," according to an SHM exec. (Plus, in a reversal from ColSux policy, wi-fi is now free.) "It is certainly more pleasant and looks more modern … not what they used to be."

Another ringing endorsement of the Columbia Sussex spare-every-expense business model.

Posted in Columbia Sussex | Comments Off on Expunging the Columbia Sussex brand

Fear of flying

Posted on December 5, 2008 by David McKee

There may have been more to James Packer‘s inability to attend his scheduled Nevada Gaming Control Board appearance than not having a plane ticket (which was more or less the official excuse). Today’s Sydney Morning Herald reports that Packer’s Crown Ltd. can’t close on its purchase of Cannery Casino Resorts until early ’09. So, being unable to arrange a flight from Australia to Las Vegas works out rather conveniently, no?

Even so, Crown assures the investment community that, once some i’s are dotted and t’s crossed, it’ll have $900 million for additional casino purchases. And if ever there was a buyer’s market for casinos, we’re entering it. Then again, Packer has a history of rolling snake eyes on casino investments (Station Casinos, Harrah’s Entertainment, Crown Las Vegas, and the all-but-dead Macau Studio City. City of Dreams isn’t looking too hale, either. Oh, and even employees at volatile Crown Macau are being furloughed; but management says they’re really happy about it).

Meanwhile, let’s hope that the next time Mr. Packer has an appointment with Nevada regulators the dog doesn’t eat his homework the night before.

Server-based gambling takes off. See, you skeptics! You said it would never happen, didn’t ya? The joke’s on you!

Oh … hold on … what’s that? The “high-potential gaming market of Cambodia,” you say? To be followed by the cleaner-than-a-hound’s-tooth Philippines?

On second thought, forget I said anything.

Posted in Cannery Casino Resorts, International, James Packer, Macau, Regulation | Comments Off on Fear of flying

Collapse in Kansas; Herbst is toast

Posted on December 5, 2008 by David McKee

And then there was one.

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

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

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

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

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

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

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

Posted in Ameristar, Economy, G2E, Harrah's, Herbst Gaming, Horseracing, International, Kansas, Macau, MGM Mirage, Penn National, Pinnacle Entertainment, Regulation | Comments Off on Collapse in Kansas; Herbst is toast

New blogs on the block

Posted on December 4, 2008 by David McKee

A couple of new bloggers just rode into town, meaning I’m going to have raise my game a bit. Actually, they’ve been in town for quite a long time and know where many of the bodies are buried, but are relatively new to the blogosphere. One is Jeff Burbank, whose contrarian Las Vegas Downtown News doesn’t pull any punches. (Though I wish he’d turn his sights on those do-nothings at Tamares Group.) Burbank is also noteworthy as the author of License to Steal, the standard reference work on gambling regulation in Nevada. I always keep a copy within reach.

Over at the R-J corral, Howard Stutz is doing an online version of Inside Gaming. He’s only been at it for a few days and, for the moment, it’s a sort of parking lot for items that don’t quite merit a full news story but are too worthwhile to be tossed aside. Besides, it’s not like the guy isn’t criminally overworked already. His R-J masters expect multiple bylines per day (and sometimes multiple updates of the same story, too), plus his Sunday column plus contributions to the Las Vegas Business Press. So I wouldn’t blame him if he looks on this “opportunity” more as an additional burden.

Dig these dancing queens while yet you may.

As we’re now one month and counting from the closing night of Mamma Mia! at Mandalay Bay, let’s pause for a bit of good news. Not only has the celluloid version become Britain’s highest-grossing film of all time (unadjusted for inflation), but first-day sales of the DVD outshot previous record-holder Titanic by 34%. It’ll be a shame to lose the best show on the Strip but The Lion King isn’t exactly chopped liver and — best of all — it’s not giving ground to another Cirque du Soleil show. If Cirque ever gets its Silly Putty-covered mitts on ABBA, I’m going to enter a Trappist monastery.

Posted in Current, Downtown, MGM Mirage, Movies, The Strip | Comments Off on New blogs on the block

Quote of the Day

Posted on November 26, 2008 by David McKee

"The massive staff layoffs, the turnover in senior management accompanied by their replacement with personnel with less extensive casino management experience, the cleanliness crisis experienced in the late winter-spring 2007, the regulatory violations directly related to inadequate staffing, and the failure to recognize the immediate need for a conforming independent audit committee, and the intransigence in adopting a conforming committee, all attest to the ultimate conclusion that the Tropicana AC license should not have been renewed," — written opinion of the New Jersey Supreme Court, applying a rhetorical boot to the posterior of Columbia Sussex.

Posted in Atlantic City, Columbia Sussex, Regulation | Comments Off on Quote of the Day

Palace more ‘impotent’ than ever

Posted on November 26, 2008 by David McKee

More nails are being pounded into the coffin of the Imperial Palace. The official word is that eateries The Ming and Cockeyed Clam are closed for good. As for the others, operating hours are being truncated “periodically. Nothing is written in stone.” Not even the future of “Impotent Palace,” it seems.

G2E attendees taking the monorail north to the Las Vegas Convention Center were treated to the daily spectacle of Harrah’s Entertainment demolishing the last of the apartment buildings that sat on the acreage it’s accumlated between Audrie and Koval lanes. Now it’s nothing but magnificent desolation, save for some fugly, Continue reading →

Posted in Columbia Sussex, Harrah's, Tropicana Entertainment | Comments Off on Palace more ‘impotent’ than ever

Sally Rand has left the building

Posted on November 26, 2008 by David McKee

That corpse you may have stumbled across while strolling the riverbanks of Pittsburgh is Pennsylvania’s ‘one and one-third‘ rule. It was a legislative fig leaf whose ostensible purpose was to prevent the prime casino/racino opportunities in the state from being gobbled up by a couple of operators. It’s what helped doom Harrah’s Entertainment‘s bid for a Pittsburgh casino, as few seemed willing to believe Harrah’s was merely the minority investor/advisor it said it was. (Since Harrah’s was already the owner of a racino in Chester, Pa., that scotched its chances for more than a 33% share of anything else.)

So Pittsburghers got Don Barden instead. Didn’t work out too well. (Then again, who could have predicted Harrah’s would be in the parlous financial health from which it currently suffers?)

Anyway, earlier this month, Pennsylvania’s Gaming Control Board bowed to the inevitable and transferred the Pittsburgh license to developer Neil Bluhm, owner of the as-yet-unbuilt SugarHouse Casino in Philadelphia. Which means that the Pittsburgh project will actually get done now. But …

Although Bluhm technically holds only a small stake in the soon-to-be Rivers Casino, the license is in his name. And a Bluhm-controlled entity, Walton Street Capital, is one of the major stakeholders. And the CEO of the project is Greg Carlin, who also just so happens to be CEO of SugarHouse. (Lest it be unclear, in my opinon — not that it matters — Bluhm has an admirable track record as a developer and is the sort of corporate citizen the casino industry needs.)

So let’s call out the 1.33 rule for the fiction it has become. If the PGCB isn’t going to enforce it in other than the most cosmetic fashion, the Pennsylvania Lege should repeal it. This fan dance isn’t fooling anyone.

Speaking of Neil Bluhm, he and Greg Carlin have turned up in Illinois, where they’re amongst the bidders for the state’s 10th and final casino license. The deleterious financial effects of the Illinois smoking ban and the state’s staggering tax rates on casinos have scared off all but a trio of no-name outfits: Bluhm’s Midwest Gaming & Entertainment, Waukegan Gaming and Trilliant Gaming, steered by the Flying Dutchman of the casino industry, Alex Yemenidjian.

The former MGM Mirage and film-studio exec tried to jimmy his way back into Vegas this year, asking a federal bankruptcy court to force Tropicana Entertainment to accept a loan from a Canadian firm with which Yemenidjian had become affiliated. Bluhm, whose base of operations is Chicago, might have a “home field advantage,” but he’s crying foul over Yemenidjian’s opening gambit. The erstwhile casino executive is plunking down a whopping $435 million to, in effect, buy that 10th license. Crass? Yes. Persuasive? Undoubtedly.

Bluhm, by contrast, is offering only $100 million upfront, followed by a series of conditional $10/year payments. Waukegan Gaming effectively splits the difference, bidding $225 million for the license. If Yemenidjian is going to throw $435 million at the license alone, that raises the question of whether he’s robbing Peter to pay Paul: i.e., Will commensurate capital be available to build the casino? (Magic 8 Ball says, “In this economy?!?“)

Help the Neon Museum. All it takes is two clicks of your mouse. Just go to Hampton Inns‘ Nevada Landmarks page and click on the “Vote for this Landmark” link for the Neon Museum (or the Nevada Northern Railway Museum or Carson City’s Children’s Museum of Northern Nevada, if you’re so inclined). The winner of the plebiscite will receive a donation from Hampton Inns at year’s end. Thank you, Hampton. You’re a class act.

Posted in Don Barden, Downtown, Harrah's, Illinois, Pennsylvania, Regulation, Tropicana Entertainment | Comments Off on Sally Rand has left the building

Packer's reverse Midas Touch

Posted on November 25, 2008 by David McKee

Remember what I wrote yesterday about James Packer being bad luck for everything with which he gets involved? Now Station Casinos is the latest victim of his reverse Midas Touch (and he owns a portion of Harrah's Entertainment, too). Maybe we should be hoping his purchase of Cannery Casino Resorts doesn't go through, because Dame Fortune is not smiling upon the heir to Packer billions these days.

Posted in Cannery Casino Resorts, Harrah's, James Packer, Station Casinos | Comments Off on Packer's reverse Midas Touch

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

Posted on November 25, 2008 by David McKee

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

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

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

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

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

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

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

Posted in Atlantic City, Boyd Gaming, Columbia Sussex, Economy, International, Regulation, Tropicana Entertainment | Comments Off on Case Bets: Hooters; Defection at Borgata; Yung vs. Butera

G2E scuttlebutt

Posted on November 24, 2008 by David McKee

Could Herbst Gaming President Ferenc Szony be headed to the Cosmopolitan? That was one of the rumors bruited about at G2E last week. It would make sense. Szony, one of S&G's favorite gaming executives, is no stranger to operating in difficult markets. Right now he's got the unenviable task of pulling the Herbst Gaming jalopy out of the deep ditch into which the Herbst brothers piled it.

Also, the Cosmo still has no gambling expertise on board, a glaring omission for a casino-based property that's already got more than a couple of strikes against it. In Reno, Szony's had to keep the Sands Regent afloat in an out-of-the-corridor location and a declining market … and by all accounts, he's succeeded. He's got the right stuff, casino-wise, and should have been running a Strip property years ago. If the Szony-to-Cosmo rumor isn't true, it should be.

 

Fontaine-blown? While over at the Convention Center, I heard a dire forecast regarding the future of Fontainebleau Las Vegas. Namely, its splendid isolation, surrounded by various 'failsinos' like Crown Las Vegas and Echelon, may result in very attenuated business. One greatly hopes otherwise, but don't discount the James Packer Factor: The Aussie heir has displayed a reverse Midas Touch of late and he's a key Fontainebleau investor.

Not a Harrah's property.

The 11% Solution. More grim news from G2E — Harrah's Entertainment is contemplating cutting its maintenance budget by as much as 89%. Considering the disgustingly filthy condition of the Harrah's Las Vegas parking garage last Thursday night, I believe it. That place looked like it hadn't been swept up in weeks, if not months (though the casino itself was quite spic-n-span). The hobo encampment near LVA HQ is quite tidy and well-policed by comparison.

So Frank P. in Negaunee, if you're reading this … beware!

Posted in Cosmopolitan, G2E, Harrah's, Herbst Gaming, James Packer, Reno | Comments Off on G2E scuttlebutt

Vegas electoral oddity

Posted on November 24, 2008 by David McKee

Today's Las Vegas Sun has a precinct-by-precinct breakdown of how President-elect Barack Obama won the Las Vegas metro area. In colorful map form, it shows Obama winning Downtown (handily) and most of the Strip … save for MGM Mirage's string of properties from New York-New York northward through Bellagio. (Yes, you can tell your friends a Republican won "New York" this year.) I'm happy to report that my neighborhood went pretty gosh-darn "blue," while unassailable fortresses of support for Sen. John McCain included CityCenter, The Cosmopolitan and Monte Carlo, along with Summerlin, Boulder City, Southern Highlands and that hotbed of populism, Lake Las Vegas.

Posted in Downtown, Election, Lake Las Vegas, MGM Mirage, The Strip | Comments Off on Vegas electoral oddity

Quote of the Day

Posted on November 22, 2008 by David McKee

“If they don't [know how], it strikes me that they lack sufficient business judgment to be in the industry in the first place.” — New Jersey Supreme Court Justice Roberto Rivera-Soto on Columbia Sussex's inability to form an independent audit committee — or to grasp the importance of doing so — at the Tropicana Casino & Resort in Atlantic City.

Posted in Atlantic City, Columbia Sussex, Regulation, Tropicana Entertainment | Comments Off on Quote of the Day

Atlantic City Death Watch II; Banquo's Ghost

Posted on November 22, 2008 by David McKee

Wow, I never thought we’d have our second installment so hard upon the first. But no sooner had S&G ticketed Resorts Atlantic City for a visit to Intensive Care comes word that it’s going to miss a $10 million loan for which the casino-hotel itself is collateral. Could we actually see a casino shutdown before year’s end?

Don’t ask Colony Capital spokesman [sic] Owen Blicksilver, possessor of the World’s Cushiest Job. Contacted by a reporter, Blicksilver did what he always does: “declined comment.” Colony could conserve some much-needed capital if it’d replace Blicksilver with a tape loop that just utters, “No comment … No comment … No comment” anytime the phone rings.

The long-suffering Tropicana has had to make layoffs, its first of the year. And while its license denial was being litigated before the New Jersey Supreme Court, who should turn up like Banquo’s Ghost (and every bit as welcome, I suspect) but Columbia Sussex CEO William J. Yung III. Irrevocable proxy or no, Yung still hovers far too close to Tropicana Entertainment for comfort. And TropEnt’s recent spate of public statements have not come from CEO Scott Butera but from a PR agency on Yung’s payroll. So much for the ‘new, independent’ TropEnt.

Butera’s big goof. Meanwhile, the long-postponed Casino Aztar sale has definitively gone down the toilet. Butera had a deal in place but elected to renege, on the assumption he could get a better offer elsewhere. He received, in fact, zero offers. While he vacillated, credit markets went south and Eldorado Resorts‘ purchase loan rocketed from an 8% interest rate to a 19% one. Ouch!

So it’s entirely possible that, even though it just received its Indiana gaming license, Eldorado would have found Casino Aztar too rich for its blood and bailed anyway. But had Butera and TropEnt’s creditors stayed on the sidelines instead of booting the ball around, Eldorado would have had to face the state’s wrath alone. Now it looks very much like TropEnt’s grass-is-greener mentality helped scotch the deal, meaning Butera can queue up for a share of the blame, too. Evansville, Ind.’s mayor, Jonathan Weinzapfel didn’t miss the opportunity to remind people that the casino has been doing better since TropEnt management was evicted last spring.

Our long Vegas nightmare is (temporarily) over. Tonight marks the last performance at The Mirage given by Danny F. Gans, whose giant, grinning visage (and even larger pair of biceps) dominates the Strip. Gans will return, sometime in the new year, in what used to be the Spamalot/Avenue Q theater at Wynn Las Vegas/Encore.

We hope he’s able to use the slacktime to get some much-needed rest and recuperation from his grueling four-show-a-week regimen, which would have been the death of many a lesser performer. But not the redoubtable Gans. Nothing short of a five-day work week can stop him. Maybe he can even employ his sabbatical to conjure up impersonations of celebrities who postdate George Burns and H. Ross Perot.

Posted in Atlantic City, Colony Capital, Columbia Sussex, MGM Mirage, Regulation, Steve Wynn, The Strip, Tropicana Entertainment | Comments Off on Atlantic City Death Watch II; Banquo's Ghost

Atlantic City Death Watch

Posted on November 21, 2008 by David McKee

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted in Atlantic City, Boyd Gaming, Colony Capital, Donald Trump, Economy, Harrah's, Station Casinos, Tropicana Entertainment | Comments Off on Atlantic City Death Watch