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Best of Liz Benston

Gaming Guru

Liz Benston
 

Looking in on: Gaming

8 August 2007

LAS VEGAS, Nevada -- Although Strip casinos are increasingly outsourcing their nightlife operations, Station Casinos has been taking the opposite tack, quietly removing chain restaurants and installing the company's own food and beverage outlets.

In recent days, the company has removed two chain restaurants at Green Valley Ranch, replacing them with home-grown eateries Terra Verde and Quinn's. Terra Verde will be a somewhat different version of the company's Italian-themed Terra Rossa restaurant at the Red Rock Resort, although Quinn's will retain the look of its predecessor, Fado Irish pub.

Although casino bosses can make more money in the long term owning their own restaurants rather than collecting rent , Station's decision is more about creating signature restaurants.

Owners and brothers Frank and Lorenzo Fertitta, known for tasting entire restaurant menus before opening day, are exerting more quality control over the food and beverage operations with the goal of creating more creative, upscale outlets.

"They like creating their own restaurant concepts," spokeswoman Lori Nelson said.

Other examples of Station-owned creations are Hank's, which replaced Bull Shrimp at Green Valley Ranch, Sonoma Cellar at Sunset Station and the Charcoal Room at Sante Fe Station. The company recently took over the Whiskey and Cherry nightclubs from a company that had operated and jointly owned them with Station.

• • •

To slow the massive transfer of wealth from mainland China, where casinos are illegal, to Macau casinos, the Chinese government recently extended visa restrictions that make it more difficult for mainlanders to get to Macau. That's potentially bad news for Las Vegas casino operators opening or operating casinos there.

And yet, the effect of the restrictions hasn't yet been significant as revenue is still growing strong, albeit not as strong as last year. Compared with the Las Vegas Strip, where 5 percent growth in casino revenue is considered healthy, Macau's official gaming revenue has surpassed the Strip's and is approaching a 50 percent growth rate this year.

That's one of the reasons MGM Mirage Chief Executive Terry Lanni isn't sweating the visa problems, focusing instead on the bigger picture - China's hearty economic growth and voracious gambling appetite.

"If you've got 5,000 new millionaires a week and they're restricted to one or two visas a year, that's still a lot of traffic and wealth being created," Lanni said.

• • •

If MGM Mirage is a bellwether for where casinos are making money these days, the company's latest earnings report was instructive. The company's gaming revenue fell 5 percent (excluding Beau Rivage, the Mississippi resort that reopened last August after Hurricane Katrina) - a downturn bosses partly attributed to high rollers who got lucky at baccarat. The decline also reflected MGM Mirage's bigger focus on nongaming amenities, where the company continues to spend hundreds of millions of dollars to woo nongamblers.

In that department, the company's hotel revenue rose 5 percent and food and beverage revenue soared 9 percent. Put another way, gaming has fallen to 37 percent of the company's total revenue.

But MGM Mirage executives are upbeat, predicting a year that's at least as strong, if not stronger, than 2006 - a record year during rosier economic times.

The nongaming trend means that the company, and the Strip, may no longer be as immune to swings in the economy as it was in years past.

Casinos have historically done well even during tough economic times because people will still spend money gambling even though they might spend less at retail stores and in restaurants, bond analyst Dennis Farrell of Wachovia Capital Markets said.

Although the high end of the business remains strong, there's some risk that businesspeople charging expensive meals, entertainment and hotel rooms to their company credit cards could curtail their spending in reaction to economic troubles, he said.

Looking in on: Gaming is republished from Online.CasinoCity.com.