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Polynesian-Themed Hotel-Casino Planned for Henderson

LAS VEGAS, Nevada – August 31, 2001 -- The owners of the Castaways, formerly known as the Showboat, plan to break ground in December for an estimated $150 million neighborhood casino near Sunset Station in Henderson.

The yet-to-be named Polynesian-themed hotel-casino would sit on a 32-acre site at Warm Springs and Gibson roads, not far from the Henderson Auto Mall.

Castaways owner VSS Enterprises LLC is close to finalizing financing for the development, VSS President and Chief Executive Officer Mike Villamor said. He declined to identify the project's lead banker.

The company plans to position the gaming property with its 200 suites and mini-suites as an up-market getaway that will appeal to business travelers, as well as local residents. It is designed to be no taller than four stories, or 45 feet at it highest point.

"Most (locals) properties you drive up and see nothing but blacktop and a high rise," Villamor said Friday. "This is going to be a true resort."

The estimated $1.5 billion locals gambling market has become increasingly competitive in recent months, as the sector giants — Station Casinos, Coast Resorts and Boyd Gaming — vie for customers by offering discounted meals and cash incentives amid the current economic uncertainty.

"It is a very tough environment," said Dennis Forst, a McDonald Investments casino industry analyst. "I wish them luck."

That competitive scenario has played out at the Castaways, which VSS acquired from Harrah's Entertainment in March 2000 for $23 million.

Harrah's purchased the Showboat in 1998 as part of a larger deal to buy Showboat casinos in Atlantic City and Australia, but Harrah's executives had no use for the 47-year-old bowling-driven Fremont Street property, leading to the VSS purchase.

Villamor echoed recent comments by many of his competitors, saying it has been a difficult summer for the Las Vegas casino industry, as fewer customer travel to the desert city from California, with rising utility costs, jobs layoffs and the spread of tribal casinos apparently cutting into the visitor flow.

The Castaways, with its Hawaiian beach theme, has targeted groups of 50 to 300 people seeking golf and bowling getaways, tapping into the Castaways 106-lane bowling alley and nearby golf courses.

The result: the 450-room hotel is selling out on weekends, but running a relatively low occupancy rate of 60 percent to 70 percent, Sundays through Thursdays.

"We've fought for every piece of business we can," said Villamor, who declined to discuss cash flow numbers for the property. "It's been a lot of work. I think people are uncertain where the economy is headed.

"This is a crunch time for the industry. A lot of guys are really fighting for market share."

Villamor and VSS partners Dan Shaw and Greg Schatzman believe the Henderson market is prime for further development, even as Station Casinos prepared to open its Green Valley Ranch casino in December. That market is currently dominated by Station Casinos' Sunset Station and The Reserve.

"We're going after the business market," Villamor said. "We're going to be an extra bedroom for Henderson."

Plans call for the VSS resort to be part of a larger 70-acre Tahitian-themed office and retail development to be built by Les Dunn & Associates.

The hotel-casino would include a 32,000-square foot casino with as many as 1,500 slot machines and 24 table games, a race and sports book and 500-seat bingo hall. It would have two gourmet rooms, a 250-seat buffet, indoor and outdoor wedding chapels and 20,000 square feet of convention space, as well as two swimming pools and lush South Pacific-style garden.

Villamor, who possesses a general contractor's license and previously helped develop the three hotel-casinos at Primm, as well as the Gotham-themed New York-New York, will oversee construction of the project, which he expects to be completed by December 2002.

Dave Ehlers, a Las Vegas investment adviser who closely studies the casino industry, said that despite the competitive nature of the locals market, there is room for growth, especially as an estimated 3,000 to 5,000 new residents continue to move to the Las Vegas area monthly.

Many of those newcomers, Ehlers said, are high-income individuals who are leaving California and elsewhere to escape high taxation. "We're seeing more affluence in Southern Nevada all the time," he said.

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