Tropicana owner reports higher profit

By Liz Benston (contact)

Thursday, July 21, 2005 | 10:54 a.m.

The owner of the Tropicana hotel and casino in Las Vegas said profit soared 65 percent, largely from the addition of a new retail mall at its flagship casino in Atlantic City.

Aztar Corp. of Phoenix reported profit of $15.5 million or 41 cents per share compared with $9.3 million or 25 cents per share in the second quarter of 2004.

Analysts expected the company to earn 39 cents per share in the current quarter.

Executives said Tuesday the company isn't any closer to determining whether to redevelop its aging Las Vegas casino -- a massive undertaking investors have been awaiting for years.

If the company moves forward it plans to first redevelop 17 acres north of the Tropicana property on land it owns. The Tropicana property would then be rebuilt either while the north parcel is under development or afterward, Chief Executive Robert Haddock said. Haddock declined to give a timeline for when redevelopment could begin but said construction could take about two years to complete.

Analysts say profit improvement at the Tropicana will be limited in the future given the property's advanced age.

"We continue to wonder why management has not accelerated the redevelopment process given the resurgence and phenomenal strength of the Las Vegas market over the past several years," CIBC World Markets stock analyst William Schmitt said in a research note today.

The property has stopped accepting bookings for its convention business past Nov. 30, leading some analysts to suspect that the company could redevelop the site as soon as next year.

But Haddock said investors shouldn't read too much into the move. The company has periodically halted advance bookings over the past couple of years amid discussions about redeveloping the Tropicana, he said.

Earnings before interest, taxes, depreciation and consolidation -- a key measure of casino profit -- rose 16 percent to $54.2 million. Revenue rose 15 percent to $228.3 million.

Revenue at the Tropicana Las Vegas was relatively flat at $41.8 million but profit rose over the past year.

Executives said the Tropicana's casino revenue suffered somewhat in part because the property is giving away fewer rooms to attract gamblers, instead filling rooms with cash-paying customers. The property also has older slots that don't accept and dispense paper tickets in lieu of coins, as competitors do, they said.

Hotel occupancy was 100 percent, even with last year, and the average daily rate was $92.17 compared with $83.84 a year earlier.

Improvement was most dramatic at the company's Tropicana resort in Atlantic City, where spring and summer crowds flocked to a high-end retail and entertainment area called The Quarter. The 200,000 square-foot mall, built with an Old Havana theme in the style of megaresort malls in Las Vegas, is drawing new customers to Atlantic City and especially urbanites from places like New York, executives said.

Tropicana Atlantic City table game volume grew by 46 percent and table game revenue rose 40 percent over last year. Slot revenue rose by 18 percent. Overall revenue rose 27 percent to $122.7 million.

The company's Ramada Express casino in Laughlin rose 3 percent to $23.4 million but profit was fairly even. Hotel occupancy was relatively flat at 70 percent and average rates rose 7 percent to $38.12.