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Riviera sees increase in profits22 March 2007
LAS VEGAS, Nevada -- With the recent implosion of the Stardust, the Riviera is one of the few remaining casinos that trace their history to the postwar building boom of the 1950s.
Coming off a turbulent year that saw two failed buyout attempts and the closing of "Splash," one of the Strip's longest-running shows, the property is refocusing its efforts to take advantage of the shrinking opportunities available to middle-class families and low-end gamblers along Las Vegas Boulevard.
"We answer a lot of demand for the market, which is (for) an economically priced product that's comfortable," Riviera Holdings Corp. Chief Financial Officer Mark Lefever said.
The company's effort seems to be paying early dividends. Taking advantage of not only the loss of the Stardust in November but the Westward Ho in 2005, the Riviera was able to increase its cash flow nearly 5 percent last year. Net income increased 52 percent the last three months of 2006.
"We picked up a lot of customers," Lefever said. "We really did. We picked up some groups and we picked up some casino customers."
The property spent the past year introducing a greater mix of penny and nickel slots to the 990 slot machines while holding on to higher-end table games such as poker and baccarat.
The Riviera succeeded in luring former core customers of the Stardust and Westward Ho. Nevertheless, the removal of the two properties, combined with construction near the property, has caused foot traffic for the property to drop.
While the Riviera waits for surrounding projects to be completed, the property will have to use its large convention space, 160,000 square feet, to keep customer traffic flowing.
The Riviera hosted 290 conventions in 2006, with attendees accounting for 36 percent of the room occupancy. The property has 750,000 convention-related advance room bookings through 2011. This is important because as other resorts on the Strip have closed and gone upscale, the Riviera's room occupancy rates have suffered. Although it enjoyed occupancy rates as high as 98.2 percent during the 1990s, the rate dropped to 91.5 percent in 2001.
The Riviera's occupancy rate in 2006 was 92.2 percent, below the citywide rate of 93.9 percent, the Las Vegas Convention and Visitors Authority reports.
Lefever said that company will start renovating some of its 2,075 hotel rooms later this year, adding the company spends approximately $8 million per year on capital projects for the Las Vegas property.
The Riviera is also considering development options, including a 60,000-square-foot entertainment complex or a possible joint venture to build a condominium project, time-share or an additional hotel tower.
Michael Green, a history professor at the Community College of Southern Nevada, said that when the Riviera opened in April 1955 the property was an "innovator" with its nine-story hotel tower, the Strip's first high-rise. The property also paid Liberace $50,000 a week, an unheard of sum at the time.
But those days are gone, and nostalgia will only carry the Riviera so far in the current Las Vegas tear down-and-rebuild landscape.
"I don't think you can stay competitive," Green said. "It's a problem or a benefit of Las Vegas, depending on your point of view. If you go back to New England or upstate New York, you might stay at a bed and breakfast that advertises the building as two centuries old. That is not what the Las Vegas clientele comes here looking for. It is not what they want."
Today, the Riviera sits on 26 acres on the north end of the Strip, across from the Circus Circus, in the shadows of new condominium towers on its north side and aging apartments and a strip mall to the south.
The property seems to be in investors' sights. The Riviera's publicly traded parent company, Riviera Holdings Corp., faced buyout bids of $17 per share in September and $21 per share in December. Both deals collapsed.
"I think the property is absolutely prime and would be of interest to several strategic buyers," said John Knott, executive vice president of CB Richard Ellis's Global Gaming Group.
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