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Experts: Downtown Casinos Must Raise Revenue

LAS VEGAS -- There's two clear ways stop the bleeding at a money-losing business, experts say.

Make more money, and spend less.

With several downtown casino properties already near failure, many casino operators, who now face added costs because of new five-year union contracts for maids, food-service workers and bartenders, are having to look at ways to increase revenues and cut costs.

One of the hardest-hit downtown casinos could be Binion's Horseshoe, whose owner Becky Binion Behnen this week said she will cut an undetermined number of jobs. Informed sources said the struggling downtown property's cuts could number in the hundreds.

Behnen declined to say how many of the Horseshoe's 1,700 workers would be let go.

"There will be some cuts," Behnen acknowledged.

Alan Abrams, vice president and director of operations for Exber Inc., the Jackie Gaughan-owned company that operates the El Cortez, Western and Las Vegas Club, however, was the first to make staff cuts after the new labor deals were negotiated.

The Western eliminated 14 jobs when it closed its keno operation last weekend, just days after reaching agreement with the Culinary and Bartender's unions on a new contract.

"You have to look at what everything costs," Abrams explained. "We can't cut the quality of our food, and something has to give."

Abrams estimated the new Culinary contract will cost the El Cortez an extra $6.3 million over the five-year term. The Las Vegas Club deal will cost an extra $3.7 million, and the Western's will cost $1.3 million.

Abrams declined to say if and when he'd have to eliminate more jobs.

"There's still some fat out there," he said. "I'm going to do whatever's necessary to keep these properties viable."

Culinary Political Director Glen Arnodo said the possibility of job cuts wasn't addressed during the recently concluded contract talks. "Staffing levels are not something they consult with us on," Arnodo said.

However, lawyer Gregg Kamer, who represented Behnen and the Horseshoe in the contract talks, said, "It became apparent that people could do more with less staff."

John Wilhelm, president of the Culinary's international parent union, acknowledged recently that properties like Binion's Horseshoe can't afford the new union contracts, but he called on the downtown operators to come up with innovative marketing strategies to increase their revenues.

Downtown casinos' share of statewide casino revenue has dropped to 7.2 percent in 2001 from 13.9 percent in 1988 as they lost market share to new megaresorts on the Strip and nonunion locals casinos sprouting throughout the valley.

Wilhelm cited Boyd Gaming Corp.'s Main Street Station and Fremont as two downtown union properties that have been successful by going after a distinct market niche, Hawaiian travelers.

Those properties, along with Boyd's nonunion California and MGM Mirage's Golden Nugget - with its Strip quality rooms - are downtown's most successful casinos, experts said.

But the remaining properties that want to add new revenue have their work cut out for them, experts agreed.

Coast Casinos Chairman Michael Gaughan, who represented his father Jackie Gaughan's properties during the Culinary negotiations, said the problem with downtown "is that it's a locals market with difficult demographics.

"And there's a number of operators competing for that challenging demographic. It's a tough market," Gaughan said, referring to the people who live in a five-mile ring around downtown, a locals casino's traditional customer base.

Two things on the horizon could help revitalize downtown: the new high-end outlet mall planned just west of the Plaza, Las Vegas Premium Outlets, and a planned downtown extension of the Strip monorail, Gaughan said.

Even better would be new downtown residential development to improve the demographics, Gaughan said.

Casino gambling expert Anthony Curtis, publisher of the Las Vegas Advisor consumer newsletter, said smaller downtown properties like the Golden Gate don't have many options when it comes to new marketing approaches.

"Making money in the gambling business is a factor of size," Curtis said, noting that casinos like the Golden Gate don't have the assets or land to expand.

"They already market aggressively," Curtis said of the Golden Gate, which was the only casino to not sign a new contract by the union's July 1 deadline and experience a work stoppage that lasted eight days. "They've been very courageous, they've kept the great shrimp cocktail for 99 cents, holding the line on quality. But they're a small operator in a market that's going down."

Casino public relations expert Ray Brown, president of Shonkwiler Marcoux, said downtown properties, with the exception of the Boyd properties' Hawaiian connection, are parasites, relying on the Las Vegas Visitors and Convention Authority or the Fremont Street Experience for marketing.

Key to the struggling properties' success, Brown said, is capital investment and a coherent marketing strategy.

"That little Fremont Street mall has far more slot machines than a megaresort, and it could be so much like Bourbon Street in New Orleans," Brown said. "But they've forgotten quality and just focused on price. When every place has a $5.99 prime rib, downtown gets customers who only care about price."

Downtown casinos also need to educate tourists, marketing their slots as better-paying than Strip machines, he said.

Michael Gaughan said the atmosphere around the casino district needs improvement.

"You've got to clean up downtown," Gaughan said. "You've got to get the bums out of downtown, stop them from sleeping in the alley. They're not out there on the Strip; they're all downtown."

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