Aladdin tries to reassure its bond investors

David Strow

Tuesday, Nov. 21, 2000 | 11:08 a.m.

Despite a rocky start, Aladdin officials tried to reassure analysts Monday that results are improving at the two-month-old resort.

In a conference call for analysts covering the Las Vegas Strip resort's publicly held debt, Aladdin officials said they are undertaking a number of changes to improve the property's business. One of the most significant -- the elimination of "Sinbad's Lounge," a high-end slot area separate from the Aladdin's high-end European gaming salon.

The conversion of Sinbad's Lounge to a mid-level slot area was done several weeks ago, said Chief Operating Officer Bill Timmins. All of the resort's high-end slots are now concentrated in the London Club at the Aladdin.

"London Club was cannibalizing that to a certain extent," Timmins said. "We decided very quickly we needed to convert that purely to $1-$5 denomination (slots)."

The reconfiguration was part of an overhaul of the Aladdin's slot floor. The number of slots was reduced from 2,800 to 2,545, as the floor was redesigned to allow better visibility, particularly for visitors looking into the casino from the connected Desert Passage mall.

"We thought we'd have substantial business from Desert Passage, but unfortunately the visibility was wrong," Timmins said. "We're already seeing the benefits (from the reconfiguration)."

The property has recorded average win of $95 per slot per day, below the Strip's average. But Chief Executive Richard Goeglein said the property experienced "very good slot volume" for the last three weekends.

"We're up to the levels we expected when we opened," Goeglein said.

A stable financial situation is crucial for the Aladdin, which faces a $5 million interest payment next month, and an $11.5 million debt payment in February. The Aladdin had $10.3 million in cash on hand as of Sept. 30.

"We need to have a strong New Year's and January in front of that (February) interest payment," said Chief Financial Officer Tom Lettero. "But we're definitely looking better than I would have expected for December, and January looks real strong."

Low convention business and hotel bookings also were a problem in August and September, primarily because "no one believed we would open on Aug. 18," Timmins said. Certain "construction glitches" -- including a lack of hot water in some of the Aladdin's rooms -- were also a problem in early months.

Glitches also emerged at the London Club, which operated on a 12-hour-a-day schedule for its first few weeks of operation until fire and life safety tests could be completed.

However, most of these glitches have been resolved, and convention and hotel business is picking up, officials said. As evidence, Goeglein cited a 1,600-room convention booked by Nortel Networks in January.

"We look at the first quarter of next year with a lot of positive feelings and believe that the first quarter and beyond ... the year will unfold in a way that's quite satisfactory."

In October, the Aladdin's 2,565 rooms averaged a 94 percent occupancy rate, with an average daily room rate of $135. So far in November, the hotel is running at an occupancy rate of slightly more than 90 percent, at an average daily rate of $128, Timmins said.

The resort also hopes to draw more traffic from a 32,000-square-foot spa, scheduled to be developed and built by Steiner Leisure Ltd., a Miami-based operator of spas aboard cruise ships. The Steiner-operated spa should open by July 2001.