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Best of Benjamin Spillman

Gaming Guru

Benjamin Spillman
 

New look for Nugget

9 November 2006

LAS VEGAS, Nevada -- Whales -- gamblers known for big bets -- don't frequent downtown Las Vegas like they used to.

But operators of Fremont Street's renown hotel casino are betting $100 million that a new shark aquarium, pool and restaurants will lure enough small fish to sustain that area's tourist revival.

Workers at the Golden Nugget are putting finishing touches on the most elaborate renovation to the 60-year-old property since 1984, when former owner Steve Wynn spent more than $50 million to add an 18-story hotel tower.

The centerpiece of the upgrade is a 200,000-gallon aquarium that's home to several species of reef-dwelling sharks, game fish and part of a two-story water slide that shoots swimmers into the Nugget's new pool.

Investment analysts and, perhaps more importantly, downtown customers welcomed the changes.

"I don't know if it will draw any new people, but I think they have done a nice job," said Ron Skabor, 53, of Fort Myers, Fla.

Skabor, a paving contractor, has been a regular visitor to Las Vegas for 19 years and says the Nugget is his favorite hotel.

He peered through the glass from a corridor overlooking the pool and aquarium while workers polished poolside railings and bars.

"I just like that it is a little smaller than the big casinos and it has all the class," Skabor said.

The latest changes include:

-The heated pool and aquarium with new decks, poolside bars and cabanas.

-A new bar called the Rush Lounge. It features low-slung seating and a hipper-looking bar.

-A relocated and updated race and sports book along with a new keno room.

The latest upgrades are all expected to open this month. They follow a slew of new restaurants that include a Vic & Anthony's Steakhouse and Grotto, an upscale Italian restaurant, as well as a new buffet and casual Chinese restaurant called Lillie's Noodle House.

On the gaming floor the casino opened a new VIP lounge to ensure swift and private hotel check-in for high rollers. There's also a high limit slot lounge with machines ranging from $25 to $500 minimum bets. The casino also got new carpet, wall coverings, fixtures and layout.

The regular hotel lobby was also renovated, as was the porte cochere and valet area.

The upgrades come little more than a year since Landry's Restaurants of Houston closed a deal to purchase the Golden Nugget and a sister casino in Laughlin for $140 million in cash and assumption of $178 million of debt and liabilities.

Landry's is known for chains such as Joe's Crab Shack, Rainforest Cafe and The Chart House. It is also the nation's second-largest operator of aquariums, said Sylke Finnegan, a representative of the Nugget.

But with the purchase of the two casinos and subsequent renovation, gaming quickly became a big part of the company's bottom line.

The two casino properties represent about 17 percent of Landry's estimated $1.4 billion in sales in 2006, said Michael Gallo, senior analyst for CL King and Associates in New York.

"Clearly it is a property that when they bought needed some renovation," Gallo said.

The renovation costs for the Las Vegas property alone represent more than 70 percent of what Landry's paid in cash to acquire both casinos.

"It is a significant investment, without question," Gallo said.

When Landry's bought the Golden Nugget, the casinos in Laughlin and Las Vegas were earning about $230 million in revenue with a low cash flow, or earnings before interest, taxes, depreciation and amortization, Gallo said. That leaves room to improve the bottom line by making the property more efficient, he said.

"What it means is there is an opportunity to improve it without improving sales," Gallo said.

When Landry's bought the Golden Nugget it was jumping into a gaming market that has been stagnant or in decline for more than a decade.

The downtown market peaked in 1992 with a gaming win of $703.1 million, said Frank Streshley, senior research analyst for the Nevada Gaming Control Board.

In 2005 that figure had fallen to $654.2 million.

"It has been pretty much flat for the last decade," Streshley said. "Unlike the Strip, there hasn't been much capacity added to that market."

Finnegan said the Nugget wants to build on its status as downtown's top hotel by making changes that will broaden its appeal.

"Golden Nugget is like a Strip property that happens to be downtown," Finnegan said. "We are trying to appeal to the masses, not one particular segment of players."

Matt Weatherford, operator of the Web site www.CheapoVegas.com, said he's looking forward to the Golden Nugget's new shine.

"I'm always glad to see anyone put money in downtown," said Weatherford, a regular Las Vegas visitor who has stayed in and rated nearly every downtown casino hotel. "It can't hurt."

But Weatherford also questioned whether the Golden Nugget upgrades will have a positive influence on struggling properties nearby or whether downtown's faded luster will wear on the Golden Nugget.

"No matter how nice that hotel is it is still downtown," he said.