LOOKING IN ON: GAMING

By Liz Benston (contact)

Friday, Dec. 15, 2006 | 7:16 a.m.

Morgans Hotel Group signed an agreement in May to buy the Hard Rock Hotel from Peter Morton and will forfeit $50 million if the $770 million deal doesn't close by Feb. 11 - a fast-approaching deadline given that Morgans and one-third equity partner DLJ Merchant Banking Partners haven't yet applied for Nevada gaming licenses.

Some say the delay may be because of plans by the Seminole tribe, which owns two Hard Rock-brand casinos in Florida, to buy the Hard Rock Cafe chain from British company Rank Group.

The Hard Rock in Las Vegas is not part of the chain because when Morton sold it to Rank in 1996, he held on to the Las Vegas casino and rights to build other Hard Rock casinos.

It could make sense for the Seminoles to buy the Las Vegas Hard Rock and combine it with the larger chain - although it could be difficult for the tribe, with hundreds of members to investigate, to acquire a Nevada gaming license.

But gaming attorney Frank Schreck says Morgans doesn't plan to flip the Hard Rock and will file a gaming license application this month. Tavern and slot route operator Golden Gaming has a two-year contract to operate the casino and is expected to receive a license by the February deadline, Schreck said.

In the meantime, Morgans and DLJ will only receive rental income from Golden Gaming, which will run the casino and make the big bucks.

Las Vegas casinos say they are generally prepared to implement the state's new smoking restrictions if and when a legal challenge to them is resolved.

But questions remain for casino operators and their lawyers. While the smoking ban in restaurants seems straight-forward, how should casinos handle hybrid venues such as restaurants that become after-hours nightclubs and taverns with big restaurants that enjoy a big lunch and dinner trade but primarily serve alcohol at night?

Attorneys also question whether restaurants that refuse minors would trigger an exemption from the ban, aimed at banning smoking in areas where children linger.

It could become a moot issue as soon as Tuesday , when District Judge Douglas Herndon considers a preliminary injunction on the smoking ban. He could rule that the ban - Question 5 on the November ballot - qualifies as law, or find it unconstitutional, or allow parts of it to take effect while striking other parts of it. Any decision will surely trigger an appeal.

Wynn Las Vegas card dealers, who unsuccessfully sued Wynn for forcing them to distribute some of their tips to their immediate supervisors, expect other casinos to begin adopting the tip-sharing policy.

Although casinos expected the courts to uphold Wynn's new policy, other big casinos have been loath to upset dealers by dipping into their tips and have not yet followed suit.

Meanwhile, tip sharing with supervisors is alive and well in another little-watched part of the casino.

Culinary Union contracts with some Strip casinos require banquet workers such as food servers, table busers and cocktail servers to share tips with captains, hosts and catering managers. One contract at Harrah's Las Vegas, for example, requires that of the standard 17 percent service charge for banquets, supervisors get 14 percent of it with the remaining 86 percent divided equally among servers and bartenders.

Restaurant servers commonly split tips voluntarily with bartenders, busers and cooks on their shift because those people contribute directly to customer service. Tip pooling among dealers is mandatory. But dealers disagree with rulings in both state and federal courts concluding that supervisors - floormen who oversee games for the house - are part of the service chain and therefore entitled to participate in the same tip pool as dealers.

Wynn dealers are appealing the tip-sharing policy to the Nevada Supreme Court, but also hope state law will be rewritten to clarify who can participate in tip pools, as other states have done.