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Best of Liz Benston

Gaming Guru

Liz Benston
 

Seminoles turn down Las Vegas offer

28 February 2008

LAS VEGAS, Nevada -- The Seminole Tribe, which operates seven casinos in Florida and purchased the Hard Rock restaurant chain in 2006 for nearly $1 billion, has become the envy of Las Vegas casino operators.

While Vegas slots generally turn a daily profit of about $100, Florida slots, which actually are electronic bingo devices, make from $400 to $500 a day. They are among the nation's most profitable — and that's before taking into consideration that the tribe, operating on reservation land, doesn't pay state and federal taxes as commercial casinos do.

No wonder, then, that developers from Las Vegas and around the world have approached the Seminoles, arguably the nation's most economically successful tribe and one of the first to get into the gambling business, to build major resorts.

More recently, developer Triple Five approached the Seminoles about purchasing about 40 acres the company owns across from Mandalay Bay on the Las Vegas Strip.

The tribe said thanks, but no thanks, Seminoles spokesman Gary Bitner said.

"People are coming to the tribe with a variety of opportunities because they're aware of how successful they are. But there's nothing on the table right now in Las Vegas" besides the upcoming opening of a second Hard Rock Cafe restaurant near MGM Grand on the Strip, Bitner said.

The tribe acquired more than 120 Hard Rock Cafes and a few Hard Rock-brand hotels when it purchased the Orlando-based restaurant chain. The Hard Rock Hotel & Casino in Las Vegas, however, is owned by the Morgans Hotel Group of New York.

Not that there's no interest among tribes in investing in Las Vegas.

In recent days, the tribe's name has arisen in connection with a plan. A group of tribes, including the Muckleshoot Tribe in Oregon, is interested in purchasing 70 acres of land at the southeast corner of Interstate 15 and Windmill Lane to build a CityCenter-like development, with about 9,000 rooms, a convention center and an indoor stadium. The project would be managed by Ellis Gaming, a Las Vegas company that manages casinos for tribes.

It's all but legally and politically impossible, though, for a non-Nevada tribe to claim reservation land in Las Vegas, which would allow it to skirt traditional casino taxes and government fees.

Not that the Seminoles need a financial crutch. Although the Seminole Tribe's finances are secret, some analysts estimate the tribe is worth several billion dollars — at least the size and scope of a Station Casinos or a Boyd Gaming Corp., Las Vegas-based operators of locals casinos.

Although tribal casinos are generally cheaper and smaller than nontribal operations, the opposite is true in Florida, where the Seminoles' two Hard Rock casinos are luxurious compared with the much smaller nontribal casinos.

Las Vegas companies have eyed Florida hungrily over the years, but profit opportunities for nontribal operators are limited. Griping about the unfair playing field for nontribal casinos in Florida has become something of a popular sport on the casino lecture circuit.

Florida Gov. Charlie Crist negotiated a compact with the Seminoles that would pave the way for about 15,000 Las Vegas-style slot machines across the state. (The slots would likely be manufactured in Nevada.) Last month the Seminoles fired up about 1,000 of these slots, which are expected to play faster and make the tribe even more money per machine.

Sterne, Agee & Leach stock analyst Nicholas Danna says the introduction of table games, another right granted by the governor, presents an even bigger financial opportunity for the Seminoles.

Only one Las Vegas operator has made a foray into Florida. Boyd Gaming Corp. bought a jai alai operation a year ago near Fort Lauderdale — one of a few pari-mutuel facilities approved to operate slots in Florida — and plans to build a casino there.

Boyd executives say a casino is still worth the effort even in light of the Seminole tax-free gold mine.

"In light of the challenges facing the new casinos in Broward County (Florida), we are taking our time to carefully and thoughtfully study the market and develop a project that will be successful, and will provide an acceptable return on our investment," Boyd Chief Executive Keith Smith said last year during the company's third-quarter earnings report.

It makes sense for Boyd to hold off, Danna said.

"It's quite possible they could do something on a smaller scale," he said. "They're not going to be able to compete (directly) against the gigantic Seminole Hard Rock facility, but there are customers who don't need an expensive steak dinner and a spa but want to eat at the buffet."