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Gaming Guru

Chris Jones
 

As Neighbors Shuffle Ownership, Binion's Suffers

8 November 2005

Maybe all of those horseshoes were lucky after all.

How else to explain the dramatic downturn at Binion's Gambling Hall, which recently completed a dismal third quarter just a few weeks after its new owner began to shed the historic Horseshoe monicker.

In the three months ended Sept. 30, the iconic Fremont Street hotel-casino had an operating loss of $762,000, well below its $80,000 profit in the same period a year ago, owner MTR Gaming Group said Monday.

Binion's also had a quarterly operating cash flow loss of $424,000. That key performance indicator -- which is typically defined as earnings before interest, taxes, depreciation and amortization -- was a $767,000 gain last year, when former owner Harrah's Entertainment paid MTR Gaming approximately $216,000 per month in management fees, regardless of how the property performed.

Binion's troubles in part stem from turnover at several neighboring hotel-casinos, MTR Gaming's top local executive said.

"The turmoil surrounding the change of ownership at both Golden Nugget and the Barrick properties has really hurt the downtown market," said Roger Szepelak, a vice president who oversees Binion's and the Speedway Casino in North Las Vegas for Chester, W.Va.-based MTR. "When they're doing a transition of ownership, there will be some impact to the way they market those properties, and that has a trickle-down effect downtown."

Barrick Gaming in June said it would sell its minority stake in the Plaza, Las Vegas Club, Gold Spike and Western Hotel to majority owner Tamares Group for an undisclosed sum. Separately, Poster Financial Group recently completed a $295 million deal that sold downtown's Golden Nugget to Landry's Restaurants.

Barrick Gaming and Poster Financial Group were each involved in widespread marketing efforts to build business downtown, efforts their successors have yet to match.

The Nevada Gaming Control Board said the gaming win in downtown Las Vegas fell from $107.9 million last July and August to $105.3 million during those same two months this year, a decrease of 2.4 percent. September's data has not been released.

Statewide, the gaming win increased by nearly $230 million in that same two-month period from 2004.

MTR Gaming bought Binion's in February 2004 for a reported $20 million, though Harrah's continued to manage the property until March 10, 2005.

In its first quarter under MTR Gaming control, Binion's posted a $409,000 profit, nearly double that of second quarter 2004.

Binion's recent downturn came despite its hosting July's final table of the popular World Series of Poker, which Harrah's kept along with the local rights to the Horseshoe name.

"We're 99 percent complete in terms of taking down the Horseshoe name," said Szepelak, adding the final hurdle will be cleared when a new Binion's sign is erected above one Fremont Street entrance.

Szepelak said Binion's Gambling Hall is halfway through an $8 million capital improvement that includes new paint, carpeting and updated casino games. The property's food and beverage sales are also improving, thanks to a coffee shop $4.99 steak special and happy-hour deals at its acclaimed steakhouse.

Hotel revenue has lagged, he added, though a new director will begin addressing that department's shortcomings later this month.

News was better at the Speedway. Hotel revenue at the 95-room property was up 20 percent, Szepelak said. It reported a $92,000 profit, reversing last year's quarterly loss of $157,000.

"All of the things that are driving Coast Resorts and Station Casinos are driving (business at Speedway), to an obviously much-smaller degree," Szepelak said. "The (local) economy is very robust, and we're seeing the effects."

MTR Gaming's third-quarter net income was $3.2 million, or 11 cents per share, compared with $5.9 million and 20 cents per share one year ago. Revenue was nearly $95.5 million, up more than 14 percent from last year's $83.7 million. Operating cash flow was down 20 percent at $14.8 million.