Station maps expansion, theme plans for the Reserve

David Strow

Thursday, Jan. 11, 2001 | 11:14 a.m.

For the third time in five months, Station Casinos Inc. received approval from the state Gaming Control Board to acquire a competitor in the Las Vegas market.

This time, the target was the Reserve hotel-casino in Henderson, which Station hopes to buy from Ameristar Casinos Inc. for $70 million. If ultimately approved, Station officials say they will probably retheme the African safari-themed property, and spend roughly $40 million on its expansion and renovation.

However, those plans are still preliminary, cautioned Scott Nielson, Station executive vice president and general counsel.

"We really want to get in and operate that property for a little while before making those decisions," Nielson said. "We just want to get a better feel for that property and how it's been operated before we finalize our decisions."

With the board's unanimous approval, Station needs only the approval of the Nevada Gaming Commission to acquire what will be its seventh big Las Vegas-area property.

The commission will vote on the matter Jan. 25. If approved, Nielson said Station expects to close on the Reserve purchase by the end of January. The sale is linked to Station's $475 million sale of its casinos in Kansas City and St. Charles, Mo., to Ameristar, a deal that closed in December.

At this point, Station is looking at adding a 1,800-space parking structure to the Reserve, adding about 10,000 square feet of space for a restaurant tenant and adding food court space for five to six smaller restaurants. Nielson also said there will probably be a "small expansion" of the Reserve's casino area.

A new theme for the property hasn't been identified yet, Nielson said, but it probably will not be placed under the Station brand.

"It's so close to Sunset (Station) that we want to have differentiation in terms of our product," Nielson said.

And, unlike previous purchases of the Santa Fe and the Fiesta, Station has agreed to retain the 925 employees of the Reserve at their current pay levels, seniority and benefits when it acquires the property.

For the control board, the issue of market concentration re-emerged with the Reserve purchase -- and once again, board members decided not to block a Station takeover because of those concerns, though the board conducted a more in-depth examination of the matter this time.

With seven big casinos and a few smaller ones, Station will easily surpass its nearest competitors in the "locals" casino market -- and will actually have more hotel-casinos in the city than any other company, surpassing the six properties owned or partially owned by MGM MIRAGE in the Las Vegas metro area. (MGM MIRAGE operates more properties in Clark County, however, because of its properties in Primm and Laughlin.)

Of course, the $1.6 billion Bellagio alone represents vastly more capital investment than almost all of Station's properties. And board Chairman Dennis Neilander said the Reserve's overall market share in Clark County and the state -- not its share in the "locals market" -- was the determining factor in whether or not to approve the buyout.

"Statewide, (the Reserve) puts them up only one-half a percent in gaming win," Neilander said. "In Clark County, they're still below 10 percent (in share of gaming win). After our analysis, we didn't have any regulatory concerns."

Neilander said his criteria for market concentration focuses on whether acquisitions hurt the casino patron from a competitive standpoint; member Scott Scherer said he looked at the impact on casino employees.

Scherer said he would be concerned for employees "if there was so little competition for places to go (work other than Station properties) that they have diminished bargaining power. But I don't know if they (Station) will cross that line."

Nevada gaming regulations contain provisions that allow regulators to block acquisitions if they feel one company is building too much market share. But while the regulation contains a variety of ways to determine market share, including gaming win, hotel rooms and employees, it makes no distinction between the local casino market and the tourist casino market.

"When you look at the local market, some go to the Strip, some go to taverns, some go to Stations," Neilander said. "There's such a wide variety of choices for the consumer."

Board member Bobby Siller noted that since many Stations are located on major freeways, patrons going to a Station property also have easy access to properties downtown or along the Strip.

"I don't even think of Palace Station as a local casino," Siller said.

Though Station does not have any more acquisitions planned in the immediate future, it is busily working on two additional hotel-casinos in Green Valley and North Las Vegas.

The Greenspun family, owner of the Las Vegas Sun, is a partner with Station in the Green Valley property.

Though the Reserve purchase was approved, board members say they will continue to closely examine the issue of market concentration -- and might ultimately decide to refine state regulations on market concentration as a result.

"We'll keep an eye on it," Neilander said.