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Best of Benjamin Spillman

Gaming Guru

Benjamin Spillman
 

Las Vegas downtown snaps long slide

3 March 2008

LAS VEGAS, Nevada -- Gamblers lost nearly $632.9 million in downtown Las Vegas casinos in 2007, slightly more than the year before, ending a three-year slide for the historic Glitter Gulch gambling market.

But the operator of the Golden Nugget, the biggest and fanciest casino in the Fremont Street area, is claiming credit for downtown's surpassing of the 2006 results, which amounted to $630.4 million.

That leaves the other players to scramble for what's left in 2008, a year that looks like it will be difficult for the Las Vegas economy thanks to a residential real estate meltdown and waning consumer confidence.

Owners of Binion's and the Gold Spike downtown have promised to upgrade their properties soon, but their neighbors in Glitter Gulch appear destined to remain in a revenue rut for at least another year.

"You're thinking that downtown was up. It's not. The Nugget was up," said Tilman Fertitta, president, chairman and CEO of Landry's Restaurants, the Houston-based owners of the Golden Nugget.

Landry's hasn't reported earnings for 2007, but Fertitta said revenue at the Golden Nugget was up more than 10 percent. He suggested the double-digit uptick saved the overall downtown numbers from another decline in 2007.

"That's what the gaming numbers show," Fertitta said of the Nevada Gaming Control Board's final tally of gambling revenue for 2007.

Since 2005, when Landry's bought the Golden Nugget and a sister property in Laughlin for $295 million, the company has spent about $170 million on upgrades and additions. It rebuilt the pool from a concrete rectangle to an aquatic playground around a water slide and giant shark tank. It remodeled the casino, added restaurants, convention space and a nightclub and refurbished the hotel rooms.

By 2010, when Landry's completes a 500-room hotel tower, the company will have spent more on upgrades than it did to acquire both Nevada properties.

Improvements to neighboring properties downtown have been modest by comparison.

Four Queens owner Terry Caudill spent about $20 million to upgrade the casino, restaurants and hotel rooms in that property. Owners of the El Cortez spent roughly the same on similar changes to their historic hotel.

The El Cortez and Four Queens are privately held and don't report earnings. But Caudill said the Four Queens has posted double-digit earnings increases under his watch. Owners of the El Cortez say that property remains in the black.

Other properties downtown held pat or regressed in 2007.

Boyd Gaming Corp., which owns the California Hotel, Fremont and Main Street Station, reported a 2.7 percent decline in earnings before interest, taxes, depreciation and amortization at its downtown holdings.

The Plaza, Western Hotel and Las Vegas Club casinos continued their slide under the ownership of Tamares Las Vegas Properties. Officials from Tamares have declined interview requests and haven't announced major plans for the three properties once owned by downtown casino operator Jackie Gaughan.

Binion's also suffered a tough year in 2007, posting revenue declines regularly under the ownership of MTR Gaming Group of Chester, W. Va.

Binion's, once admired as one of the best-run casinos in Las Vegas, was sold to Caudill for $32 million. He expects a turnaround once he puts the finishing touches on the deal and enacts plans for improvements on the casino floor and upgrades to the hotel rooms.

But it is the Gold Spike, downtown's dowdiest casino, that appears to have the most to look forward to in 2008.

The property has changed hands twice since mid-2007. Miami-based developer Gregg Covin bought it from Tamares in July for $15.6 million. Covin then sold the property in early February to Stephen Siegel and John Tippins of Las Vegas for $21 million.

Siegel and Tippins immediately embarked on plans to remake the Gold Spike, along with the adjacent Travel Inn, a shuttered hotel they bought last year for $5 million.

Michael Crandall, the Siegel Group's business affairs director, said the Gold Spike owners wouldn't be daunted by Fertitta's bleak assessment of the downtown properties other than the Golden Nugget.

"When people say we can't do something, that is when we like to do it," Crandall said.