SEARCH NEWS:

 

Executives Scramble to Reverse Fiesta Casino's Woes

LAS VEGAS —- Station Casinos executives are working to reverse the fortunes of the Fiesta, which has sustained a drop in business since it was purchased in January by the locals casino giant.

Company bosses do not disclose financial results of their individual hotel-casinos, but there have been operational troubles at the Rancho Drive property, which cut into the company's second-quarter earnings.

Among the challenges: reaction to the layoff of 1,100 Fiesta workers at the time of the $185 million sale, the perceived tightening of slot machines, and competition from Coast Resort's 11-month-old Suncoast and Carl Icahn's Arizona Charlie's.

"The North Las Vegas market has been impacted by the opening of the Suncoast, and the fact is we have some issues at the Fiesta we need to get resolved with the acquisition," said Station Casinos Chairman Frank Fertitta III.

The layoffs, which were done to "Stationize" the Fiesta with employees familiar with the new owner's operational style, are considered by several sources to have been the greatest mistake, leading to a revolt by some longtime customers.

An estimated 2,000 to 3,000 regulars went to the Fiesta as much as five times a week, a source said, with the customers building strong personal ties to many of the employees. The job losses saw many of those customers head elsewhere.

With its roots in the 25-year-old Bingo Palace turned Palace Station of family patriarch Frank Fertitta Jr., Station Casinos has grown to have seven major casinos in the Las Vegas-Henderson area, giving the company control of nearly half of the locals gambling market and altering its image for some customers.

"Station got so big that they went from underdog status to being the bullies," said Anthony Curtis, whose monthly Las Vegas Advisor newsletter critiques local casino operations.

Meantime, the September opening of the Suncoast cut into an estimated 20 percent of the Fiesta's customer base, leading to monthly declines in cash flow from about $2 million to about $1.3 million in the months leading to the sale, sources said.

"They would've had to (have) made significant changes anyway," a source said of the challenges facing the Fiesta's former owner George Maloof and his management team.

In a sense, the casino's foundering results are reminiscent of those of another standalone party spot gobbled up by a bigger company.

In 1999, Harrah's Entertainment purchased the publicly traded Rio, which was largely owned by resort developer Tony Marnell and partner Jay Barrett.

The Rio was considered an edgy, trendy nightspot that drew locals and tourists, but the mid-market-oriented Harrah's has had trouble retaining that sense of place and energy.

Young partiers and middle-aged gamblers left for the city's new new things: Bellagio, Mandalay Bay, the Venetian and a somewhat older favorite, the Hard Rock.

Harrah's executives have tinkered with the formula and are attempting to re-energize what has become a mid-market slot joint.

"It's the best example of learning what not to do," Fiesta general manager John James said of Harrah's Flamingo Road megaresort. "Personality plays in the property. Tony Marnell walked away from the Rio, and there went the Rio."

Las Vegas Advisor's Curtis believes something similar has happened with the Fiesta and the departure of casino developer Maloof.

"The term 'Stationization' took hold," he said. "They're taking away what we loved about ... the Fiesta."

The thirtysomething Maloof has a reputation for being a creative entrepreneur who understands what it takes to build casinos that appeal to hard-core video poker players and twentysomethings seeking a fun night on the town.

He's in the midst of building the $265 million Palms, which is scheduled to open by December along Flamingo Road, across from the Rio and Gold Coast.

Maloof is somewhat guarded when discussing the Fiesta's recent fortunes. He's friends with Station's Fertitta, whose company has a 6 percent interest in the Palms.

Maloof said he's confident the Fiesta brand will become a powerful draw for its new owner, especially as the name is extended to other Las Vegas-area casinos, with the next being the soon-to-be-renamed Reserve in Henderson.

"When you have a transaction that large you have to look at the long-term effect," Maloof said. "I think over the long term it will work with that brand. I have a tremendous amount of confidence in John James and Station to make it right."

James left the Fiesta after 30 years in a top management job to run the bankrupt Regent in Summerlin. Since his recent return he has overseen the loosening of slot machines, the lowering of prices for alcoholic drinks and beer, and the reintroduction of discounted prices for steaks — tactics that are designed to appeal to locals.

A free $250,000 weekly football contest at the Fiesta and the Reserve is designed to generate foot traffic through the casinos.

"The Fiesta was missing a little bit of personality," James said. "I know our main mission and focus is to rekindle the focus of the Fiesta.

"Frank did not buy the building, the Fiesta, not to grow it. He bought it to expand the brand."

< Gaming News