Small properties may gain from proposed mergers

Wednesday, Aug. 25, 2004 | 10:31 a.m.

The two pending casino company megamergers destined to change the landscape of the gaming industry have raised the profile -- and the value -- of some of the small, non-corporate properties, some casino executives say.

Executives of some of the independent companies say while they may have a harder time competing against the corporate giants that would emerge from the joining of MGM MIRAGE with Mandalay Resort Group and Harrah's Entertainment Inc. with Caesars Entertainment Inc., some say their own properties have become more valuable commodities.

Some already have capitalized on that value by lining up their own deals: Real estate mogul Donald Trump has signed on to develop the Trump International Hotel and Tower on property near the New Frontier hotel-casino and the Hooters restaurant chain will put its brand on the Hotel San Remo.

The board of directors of the Riviera Holdings Corp., operators of the Riviera hotel-casino on the Strip, on Monday rejected what was announced as a friendly offer of $12 a share from current investor D.E. Shaw Laminar Portfolios, New York, for the company's assets, which also include the Riviera Black Hawk in Black Hawk, Colo.

A spokesman for Laminar said Tuesday he had no comment on whether the company would present a new bid.

While a statement from the Riviera board cited concerns about the Laminar bid's not addressing regulatory issues involved with Riviera's plans to develop a hotel-casino in Jefferson County, Mo., it's been clear that the Riviera is in no hurry to sell.

William Westerman, president and chief executive of the company, said about a dozen inquiries about acquiring the Riviera have reached him in the past year, even before the Laminar bid arrived through a Securities and Exchange Commission filing on Friday.

Westerman said in a recent interview that the company "would stand pat until we receive an offer we can't refuse."

Other hotel-casino managers say the two merger deals, which aren't expected to be completed until next year, have raised the profile of their own properties, but managers are split over whether it would be harder to compete against the new giants and whether they consider their properties to be any more valuable.

"It's a positive thing for us," said Phil Ruffin, owner of the New Frontier hotel-casino. "There's a limited amount of ownership on the Strip."

Ruffin said he doesn't see the competitive environment changing much.

"They're all strong competitors," Ruffin said. "Harrah's has done a good job with their marketing and the acquisition of Caesars will increase their presence on the Strip. MGM MIRAGE and Mandalay are strong. Then, we still have (Sheldon) Adelson (owner of The Venetian) and Steve (Wynn, chief executive of Wynn Las Vegas) building new properties."

The increased focus on the north end of the Strip hasn't led Ruffin to jump into announcing any new plans for New Frontier property, except for the condo deal with Trump.

"We're in no rush," he said. "Our business has doubled since last year and we're highly occupied, in the high 90s (percent occupancy)."

An executive with the Tropicana hotel-casino said the corporate expansion that is happening all around his property could turn into an advantage because the smaller operations would be able to respond faster to changing market conditions.

"I've seen some of these large companies, and I know our decision-making will be made a lot faster," said Dennis Gomes, president of the resorts division at Tropicana Resorts. "I don't think the mergers make us any more or less valuable because our value is determined by our productivity in terms of profits. But we'll have more flexibility than these gigantic bureaucracies."

Gomes acknowledged that there will be some disadvantages to competing against larger competitors.

"It puts us at a disadvantage when it comes to making deals with suppliers, like slot (machine) manufacturers," Gomes said. "They're (big competitors) going to have more clout, particularly in Atlantic City. But I think customers prefer the treatment they get with a smaller company. In the big places, it's harder to maintain that personal touch."

Gomes said the Tropicana's parent company, Phoenix-based Aztar Corp., has kept its Las Vegas plans a tightly guarded secret.

"Paul Rubeli (Aztar's chairman and chief executive) has always maintained that the Tropicana is not for sale. It's too valuable," Gomes said. "There have been a lot of development plans being studied and it's very exciting, but a final decision on what we're doing isn't there yet."

Al Hummel, president and general manager of the Sahara hotel-casino, said the opening of the Las Vegas Monorail has opened up new opportunities for the north Strip property.

In a recent interview with In Business Las Vegas, a sister publication of the Sun, Hummel said Sahara owner Gordon Gaming's outlook is very clear: "The place is not for sale."

Hummel's sister, Lynn Bennett, widow of Gordon Gaming founder Bill Bennett, is more determined to keep the Sahara with every new offer made on the property.

"Every time we get a new offer, it makes her not want to sell it even more," Hummell said.

Ed Crispell, general manager of the Imperial Palace hotel-casino, said he sees more negatives than positives as a result of the proposed megamergers, but he said his company would continue to be successful because of its consistent marketing strategy.

"We have appealed to the mass market that is middle America," Crispell said. "Over the years, we have not varied from that direction and our customers have been very loyal to us."

He said in the downturn that followed the 9/11 terrorist attacks, some of his company's competitors went to tour operators and said they would match the Imperial Palace's package prices.

"We said, 'We've been doing business with you for 25 years. If you think that is going to be advantageous to you, go ahead.' But most of them stayed with us because of that relationship," he said.