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Best of Howard Stutz

Gaming Guru

Howard Stutz

Sahara casino to shut down in May

14 March 2011

LAS VEGAS, Nevada -- Michael McClendon, a poker room supervisor at the Sahara Hotel and Casino, wasn't surprised when he was called into a meeting at 7:30 a.m. with other employees and was told the nearly 60-year-old Strip resort would cease operations in May.

McClendon, who recently celebrated 25 years at the casino, said the announcement Friday shouldn't have been unexpected.

The Sahara ownership had made several cuts and other changes at the 1,720-room hotel-casino since taking over in 2007 in an effort to survive the recession.

"It's hard because we have a lot of people who have been here for a long time," said McClendon, 66, who plans to retire when the north Strip resort closes on May 16. "We like it here."

Sahara owner SBE Entertainment of Los Angeles announced Friday morning it was "no longer economically viable" to keep the nearly 60-year-old Moroccan-themed hotel-casino operating.

The company will continue to explore plans for the nearly 18-acre site at the corner of the Strip and Sahara Boulevard.

The resort's 1,050 employees were notified in three separate meetings of the property's closing plans under the Worker Adjustment and Retraining Notification Act.

The federal law requires that employees receive a 60-day notice that a business is ceasing operations.

Bartender Doug Colmenar decided to skip the meetings.

"What are they going to tell me that I didn't already know?" said Colmenar, a 32-year employee of the Sahara. "It was a pretty good place in its time. I was hoping (the owners) would be able to spruce it up, but it just didn't happen."

Colmenar, 65, like McClendon, plans to retire when the Sahara closes. He never left the Sahara for jobs at newer Strip resorts because he thought the older casinos had character.

SBE Entertainment Chief Executive Officer Sam Nazarian said his company still plans to redevelop the Sahara and its nearly 18-acre land parcel.

"We are working with our partners to assess a variety of options for the property, including a complete renovation and repositioning," Nazarian said in a statement. "While no final decisions have been made at this point, the continued operation of the aging Sahara was no longer economically viable."

The Sahara includes the NASCAR Entertainment Center, which includes the NASCAR Café and Speed -- The Ride, a roller coaster along the Strip. The Sahara is also home to House of Lords, a historic Las Vegas steakhouse.

A gaming source said SBE had been unable to secure financing for a redevelopment, which could have included the implosion of a hotel tower and other renovation efforts.

SBE operates 24 nightclubs and restaurants in the Los Angeles area. SBE-owned restaurants and nightclubs were to become part of a renovation of the Sahara until the recession shelved the property's plans.

Many analysts thought Nazarian would convert the Sahara into an SLS hotel, which is SBE's luxury hotel brand. The company has SLS hotels in Beverly Hills, Calif., and Miami.

"SBE's intent all along was to spend a bunch of money and turn the Sahara into a hot spot," the source said. "They just decided to close it and wait it out until they get the financing."

The Sahara's hotel and casino will continue to operate until May 16. All hotel room reservations and players club events will be honored until that date. Customers with reservations after May 16 will receive help in finding alternate accommodations.

According to a statement from SBE, the Sahara's human resources department will work with employees through the transition. The Sahara plans to offer sessions with Nevada Job Connect and provide career counseling.

Deutsche Bank gaming analyst Andrew Zarnett, in a note to investors Friday, cautioned the Sahara may not be the last underperforming hotel-casino to close, either on the Strip or in regional markets.

"While this may have come as an unexpected event for many, we are not surprised by this announcement as we have been expecting unprofitable and dated casinos in Las Vegas and other markets to shut down, given the continued downward pressure they face from higher unemployment, rising commodity inflation and reduced discretionary spending," Zarnett said in an research note.

SBE bought the Sahara in March 2007 in partnership with San Francisco-based private equity firm Stockbridge Real Estate Group from the family of late casino pioneer William Bennett. The deal had been valued at between $300 million and $400 million.

SBE is not licensed to run the property's casino. The company operates the hotel and nongaming portions of the Sahara while Las Vegas-based management company Navegante Group oversees the casino.

Bennett's daughter, Diana Bennett, the CEO of casino operator Paragon Gaming, said Friday that she was saddened by the impending closure.

"The worst part is for all those people," Bennett said. "There are a lot of employees who have been there since Del Webb owned the Sahara. I feel sad for the staff. The Sahara will come back, but this will be hard on a lot of people."

The Sahara opened in 1952 and was considered one of the last remaining haunts for the Rat Pack. The Sands, Dunes, Stardust, New Frontier and other historic Strip hotel-casinos have been imploded since the 1990s.

The Sahara was the setting for the original "Ocean's Eleven" movie and the famous Congo Showroom hosted performers such as Johnny Carson, Tina Turner, Connie Francis, Pat Boone, Don Rickles, Dean Martin and the Jerry Lewis Muscular Dystrophy Telethon. The Beatles also performed at the Sahara.

Old photographs from the 1960s and 1970s are displayed throughout the property.

The Sahara was originally owned by businessman Milton Prell, who sold the property to Del Webb in 1961. Paul Lowden purchased the resort from Webb in 1982, added a 26-story hotel tower in 1988, and expanded the casino area.

In 1995, William Bennett, who had retired from Circus Circus Enterprises, bought the Sahara from Lowden for $193 million. Bennett immediately began a $100 million renovation project.

Today, the hotel's 85,000 square foot casino floor advertises itself as the only Strip casino offering $1 blackjack. The Sahara's showroom offers "The Magic and Tigers of Rick Thomas" and "Striptease," a topless revue.

In 2009, the Sahara closed two of its three hotel towers and its buffet, citing slow business.

SBE signed an agreement on March to bring Hyde Lounge, one of the company's best-known nightclub brands, to Bellagio, taking over a 12,000-square foot space at the center of the Strip resort now occupied by the Fontana Bar.

Bellagio owner MGM Resorts International and SBE have a partnership between the companies' customer loyalty programs. Under the arrangement, members of SBE's SB Preferred program can use rewards in conjunction with MGM Resorts' M Life at the company's hotel-casinos.

Nazarian said the Sahara is working with MGM Resorts on possible solutions for customers and employees.

"We will work together to try to find jobs for Sahara employees in cases where there are open positions in MGM Resorts' properties," Nazarian said. "We will also work with MGM Resorts to accommodate Sahara hotel and group customers with reservations following our closure."

MGM Resorts Chairman and CEO Jim Murren said the closing was a sad but expected chapter in the city's history.

"While today we pause to reflect on many great memories and stories of its legendary past, like so many before it, there is a brighter future for this property," Murren said. "The Sahara Hotel is in great hands with the creative minds at SBE and will emerge some day soon as a healthy and vibrant part of our city's future."

Nazarian said he still hopeful the north end of the Strip can be redeveloped. The area has been hit hard by the recession. Boyd Gaming Corp. stopped construction of the Echelon project in August 2008 while work halted on the Fontainebleau development in April 2009 after the property went bankrupt.

The lone bright spot occurred Wednesday when gaming regulators approved the takeover of the bankrupt Riviera by financier Barry Sternlicht.

"We see the northern end of the Strip as the future of Las Vegas," Nazarian said. "With Las Vegas showing early signs of recovery, we are confident that we ultimately will find a creative and comprehensive new solution for this historic property."