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Gaming Guru

Arnold M. Knightly
 

Eastside Cannery: Opening night lures crowds

29 August 2008

LAS VEGAS, Nevada -- There was little sign of the economic slowdown in gaming Thursday night at the opening of the $250 million Eastside Cannery.

Hundreds waited in the stifling heat, some as long as 21/2 hours, for the valley's latest hotel-casino to open to the public at 8 p.m.

Donna Applegate, who arrived at 5:30 p.m., said it was time for a new casino in the area.

She added that as the economy has gotten worse, she believed that locals casinos have been tightening their slots.

"I am hoping the machines are loose," Applegate said. "I want to win, and if I do, I'll be back."

Nearly 30 minutes after the doors opened, a few thousand people had arrived, causing traffic problems in the parking lot and along Boulder Highway.

But not all customers were greeted with open arms.

Families with children and the curious under age 21 were turned away by security unless they were eating in one of the restaurants.

William Wortman, co-owner of Cannery Casino Resorts, said the company built as nice a locals casino as there is in the market for a competitive price.

"We think it brings a new dimension to the east side of town," Wortman said. "We're extremely proud of what we've done here."

Personally, Wortman said, he was most proud that 250 employees from the demolished Nevada Palace made the transition to the new property.

The Eastside Cannery opened its doors on a holiday weekend but in a locals market that has been shaken by high gasoline prices, a mortgage crisis and an uncertain job market.

A question that a lot of the neighboring property owners will be asking today is: How many of the Cannery's customers were ours, and will they come back to us after Thursday night?

A two-hour V.I.P. party before the public opening was attended by many executives from competing gaming companies Boyd Gaming Corp. and Station Casinos, including Stations Chairman and CEO Frank Fertitta III.

Also attending the party were executives and billionaire James Packer from Crown Ltd., the Melbourne, Australia-based gaming company buying Cannery Casino Resorts for $1.8 billion.

Station Casinos spokeswoman Lori Nelson said at the V.I.P. event, "We view the Cannery as competition, and we take competition very seriously."

Station Casinos recently spent $50 million at the nearby Boulder Station renovating various areas, including the buffet, sports book and bingo room. The company will begin a room renovation this fall.

Brian McGill, an analyst for Wachovia Capital Markets who toured the property earlier, said in an investor's note Thursday that he suspects the new property will "take significant share" of customers from Boyd Gaming's Sam's Town, which is next door.

He said he was impressed by "the high quality" of the Eastside Cannery.

"For Boyd (Gaming Corp.), it will be a question of whether the customer base is loyal enough not to give up on the property," McGill wrote. "It remains to be seen whether Boyd will begin to aggressively promote Sam's Town to try to keep its customers."

McGill said the new property should negatively affect Boyd's cash flow, which already is down 8.7 percent at its six locals casinos this year.

Sam's Town accounts for about 23 percent of the company's locals cash flow.

Boyd spokesman Rob Stillwell declined to comment on the Eastside Cannery's opening and its expected impact on his company's properties.

In addition to Sam's Town, the new property joins Arizona Charlie's Boulder and a series of smaller operators along a three-mile stretch of Boulder Highway south of U.S. Highway 95 that was envisioned, at one point, as being a locals Strip.

The Eastside Cannery has 2,187 slot machines and 26 table games on the casino floor.

This is a significant increase from the nearly 485 slots and nine table games that the Nevada Palace, which the Eastside Cannery is replacing, had.

The Eastside Cannery features a 16-story hotel tower with 307 rooms, a 20,000-square-foot ballroom with meeting spaces. The hotel-casino also will have a 450-seat bingo hall, six restaurants, and a pool, spa and sports book.

The new property sits on 27 acres with room for expansion.

The Eastside Cannery is the first major hotel-casino to open on the Boulder Strip, the third largest gaming sector by revenue in Nevada, since Station Casinos opened Boulder Station 14 years ago.

Gaming revenues along the Boulder Strip, which includes Sunset Station in Henderson, decreased 2.44 percent to $903.2 million between July 2007 and June 30.

More recently, revenues dropped 8.24 percent to $214.8 million for the three months ended June 30.

Cannery Casino Resorts was founded by Wortman and casino veteran Bill Paulos. Cannery Casino Resorts also owns the Cannery in North Las Vegas, which opened in 2003, and operates the Rampart Casino at the JW Marriott at Summerlin.