Coast to build a third room tower at Orleans

By Liz Benston (contact)

Friday, Dec. 5, 2003 | 11:03 a.m.

Just over a year after completing a second room expansion at The Orleans hotel-casino in Las Vegas, owner Coast Casinos Inc. has unveiled plans to build a third hotel tower at the company's largest property.

The 21-story tower is anticipated to break ground early next year, adding 460 rooms to the Mardi Gras-themed resort by winter 2004. The Orleans will have 1,886 rooms with the expansion.

The tower is estimated to cost $36 million.

A third tower was envisioned as part of the property's master plan and was initiated after witnessing the success of the latest room addition, General Manager Horst Dziura said.

"We prepared a feasibility study when we added the second tower and the figures were exceptionally good," he said. "It will pencil out quite nicely for us."

Last month, Coast Casinos reported a surge in third-quarter profit and revenue mainly due to the additional rooms and other recent expansion projects at The Orleans.

The company, which is privately held but has publicly traded debt, reported a 167 percent jump in profit to $8.2 million and a 13 percent increase in revenue to $148 million.

Revenue increased 25.6 percent at The Orleans during the quarter. Casino revenue rose 16.6 percent.

Jefferies & Co. bond analyst Ray Cheesman said the third tower "is not a total surprise" given how much the second room tower helped the company's recent financial performance.

"I was blown away by the third-quarter numbers," he said.

Over the years savvy tourists have sought out The Orleans as a place where they can find spacious, Strip-quality rooms for "a fraction of the price," said Anthony Curtis, publisher of the Las Vegas Advisor newsletter. "They've built up a clientele offering room value ... close to the Strip."

Coast has tightened up on marketing and promotions for gamblers in recent months but its ability to draw travelers and fill rooms hasn't faltered, Curtis said. The Orleans remains a good value relative to the market, he said.

"It looks like Coast has come up with a strategy that involves rooms," he said.

According to rate surveys compiled by the Las Vegas Advisor, rooms at The Orleans average about $50 a night during the week, fluctuating from lows of around $35 to highs of about $70 but well under Strip rates, Curtis said. Weekend rates are usually under $100, from about $70 on up to about $120.

The property's occupancy rate hovers in the high 90s, Dziura said. Customers "feel that they receive an exceptional value for their dollar," he said.

The tower will face Tropicana Avenue and extend from the corner of the current towers alongside the porte cochere, creating a "T" shape. The rooms will be similar to existing accommodations.

Located less than two miles west of the Strip on Tropicana Avenue, The Orleans already is of the largest casinos in town.

The Orleans opened in 1996 with 840 rooms and opened another tower with 586 rooms in August 2002. The 9,000-seat Orleans Arena opened in May and is home to the minor league Las Vegas Wranglers hockey team.

The company also expects to break ground on its fifth Las Vegas casino, Southcoast, by at least second quarter of next year. The site is located between the Silverton casino at Interstate 15 and Las Vegas Boulevard and St. Rose Parkway to the south.