gaming:

A month after T.I. buy, Ruffin discusses downturn

Billionaire businessman critical of lower room rates, excessive debt

Thursday, April 16, 2009 | 10:10 a.m.

Back in the Game

From MGM to Ruffin: Treasure Island changes hands (3-19-2009)
Board recommends approval of Treasure Island sale (3-4-2009)
Treasure Island’s buyer talks about the art of the deal (12-28-2008)
Treasure Island likely a domino standing alone (12-22-2008)
For strapped casino giant, sale provides sure cash (12-16-2008)
MGM Mirage to sell Treasure Island (12-15-2008)

Treasure Island

Phil Ruffin, the Strip’s newest casino owner, weighed in on cash-strapped MGM Mirage, the local economy and his latest casino purchase during a television interview Wednesday night.

Ruffin purchased Treasure Island from MGM Mirage for $775 million in a deal finalized last month. During his interview on “Face to Face with Jon Ralston,” he called the 20 acres the casino sits on an “irreplaceable asset.”

“You always buy location,” Ruffin told Ralston, a Las Vegas Sun columnist. “When I was at the Frontier, I always coveted the Treasure Island location.”

The Kansas billionaire purchased the casino in one of the worst economic times the Strip has seen, but it came at a price tag lowered by the economic downturn.

Ruffin said he remembers calling MGM Mirage CEO Jim Murren last December, offering to buy Treasure Island for $700 million in cash. Murren called major stockholder Kirk Kerkorian and said they would do it for $850 million, Ruffin said. But during a walk-through of the property a day later, Kerkorian and Ruffin agreed to meet in the middle at $775 million.

Ruffin paid $600 million in cash for Treasure Island on March 19 and will finance the final $175 million over three years.

Unlike the position many casino owners and companies find themselves in, Ruffin said he doesn’t want to carry loads of debt.

“We had the cash and that was the reason we did the deal,” Ruffin said during the “Face to Face” interview.

MGM Mirage spent $84 million on a room renovation project at Treasure Island shortly before Ruffin bought the property. He estimated a property like Treasure Island would cost $2.7 billion to build today, with the cost of land and building of the property.

His choice to buy a newly renovated casino like Treasure Island rather than build a new one was a cost-effective one, Ruffin said.

The economic downturn has prompted casino operators on the Strip, including Ruffin neighbor Steve Wynn, to slash room rates, in some cases by hundreds of dollars. Ruffin said he refuses to do so, adding that other casino operators also should resist such large price drops.

“If they can’t afford $125, $130, that’s someone else’s customer then. You don’t need to be at 100 percent [occupancy] all the time. We’re not going to give our rooms away and I wish they would stop giving their rooms away,” Ruffin said.

Still, the Treasure Island room rate calendar shows prices as low as $79 on some weekdays through May.

As for taking another MGM Mirage asset off their hand -- such as The Mirage next door -- Ruffin said he would be interested but likely couldn’t nail down the financing in such a difficult economy.

Ruffin defended MGM Mirage’s CityCenter project, calling it a “great project” but ill-timed because of the economy.

“If the condo market would have continued it would have been sold out, but the condo market died,” Ruffin said. “[Donald] Trump and I are in a condo deal but there are no sales there and that’s going to take a while. Even the people who put up 20 percent can’t find the balance.”

Ruffin is Trump’s business partner in Trump International, including the $1.2 billion Trump International Hotel & Tower, which opened in April 2008.

Ruffin said the problem with casino operators today isn’t that they aren’t bringing in the money. It’s that their large amount of debt has exceeded their revenues.

“Banks were lending money like crazy. They were stumbling over themselves to do deals. It’s not that the hotels don’t make money, it’s that they just can’t make their debt service,” Ruffin said. “If you have a lot of debt, you have a lot of problems.”

Unlike other casino operators, Ruffin said he isn’t going to speak his mind on national and state politics. Executives like Wynn, and some city and state officials have commented in recent weeks on President Barack Obama’s remarks about Las Vegas. Ruffin said he’ll stay out of it.

“I don’t like to talk about that and I don’t think we should talk that here in Las Vegas. Just let that slide,” Ruffin said. “It was a stupid comment and let it go. I like Mayor Goodman but he shouldn’t amplify it.”

Wynn was vocal as a guest on last week’s “Face to Face” about the tax burden the gaming industry carries, saying other businesses, likes banks and construction companies, have not paid their share.

Ruffin said casinos are doing their part to fill local and state coffers.

“We pay $20,000 in utilities and $20,000 in property taxes a day so we pay a lot of taxes,” Ruffin said. “Whether the others have paid their fair share or not, I don’t know about that.”

But Ruffin did have this to say about Nevada politics: It would be a terrible time to raise taxes on struggling casinos.

“I think the gaming industry supplies a lot of customers and a lot of employees,” Ruffin said, “so right now leave it flat until the economy gets a little better.”

Discussion: 14 comments so far…

By Gregory

4/16/09 at 12:22 p.m.

Suggest removal

Corner property locations always inevitably control the block, or find a good deal of leverage in future dealing.
By lucky7

4/16/09 at 3:50 p.m.

Suggest removal

I understand his point about room rates, but get me into your hotel and I will play your gaming stations. You will usually make up the difference on the room with my casino play, food (alcohol) purchases and show options. With the economy the way it is for now, 90% room occupancies would make the difference. The rooms are there and you have the staff to man them anyway. But then I don't make millions a day either what do I know!
By LasVegasWilly

4/17/09 at 12:55 a.m.

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"By lucky7
But then I don't make millions a day either what do I know!"

EXACTLY! Come back when you DO know something.
By acesbet

4/17/09 at 6:45 a.m.

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"If they can't afford $125, $130, that's someone else's customer then. You don't need to be at 100 percent [occupancy] all the time. We're not going to give our rooms away and I wish they would stop giving their rooms away," Ruffin said.

My Wife and I will be staying at the "Venetian" - "Mandalay Bay" in the future. I think the T.I. has seen the last of our contributions. It seems "Ruffin" would rather have it that way. We just returned from a wonderful stay at the "Pallazo" in January. In a couple of weeks we will be staying at the "Venetian" for a week. We will be celebrating our (51st). Of course many of our friends will be coming with us because of the Room Prices. "Ruffin" Don't you get it? We are not coming with empty pockets and purses. Duh!
By azsk8fan

4/17/09 at 7:16 a.m.

Suggest removal

Ruffin sounds like a real jerk.
By pmmart

4/17/09 at 8:40 a.m.

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If the Las Vegas strip had a dozen Phil Ruffins as casino operators Las Vegas wouldn't have nearly as many issues as we have today.

Corporations run their business's by an inflated bottom line and when that figure drops below that line the cut backs start .. at the bottom and slowly work their way up.

The corp. that I retired from demanded 32% gross profit and 22% net from our division .. when the net dropped to 18% they laid off 20% of the workforce.

Who wouldn't love 22% net from their investments?
By rumrunner

4/17/09 at 10:45 a.m.

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The strip casinos brought this on themselves! They bit off more than they could chew,and now are crying boo hoo! His comments about room rates, there some others customer! Its that attitude that is running people away from vegas. GREED GREED GREED!!!!! Maybe these corporations that are chooseing other cites for there conventions is because they are sick and tired of getting fleeced! 14 bucks for a six pack. 8 bucks for cigs,4.50 for a soda? These ceo s must be complete retards!
By woken

4/17/09 at 10:45 a.m.

Suggest removal

Im staying at the Mandalay Bay in two weeks because we recieved comped rooms. My wife and I stayed at the Luxor in Jan. If I keep getting comps I will probably come more often. That translates into spending more money. We would normaly go to Vegas once a year, but now who knows how many more times we will come. Another thing about the rooms. When I was here in Jan. the Luxor was empty on a weekend. The hotel closed the top 20 floors of the pyramid, because of so many vacancies. Seems to me having people in your casinos will only help.
By homer

4/17/09 at 11:50 a.m.

Comment removed by staff.
By azsk8fan

4/17/09 at 12:32 p.m.

Comment removed by staff.
By Mandy

4/17/09 at 3:27 p.m.

Suggest removal

"If they can't afford $125, $130, that's someone else's customer then. You don't need to be at 100 percent [occupancy] all the time. We're not going to give our rooms away and I wish they would stop giving their rooms away," Ruffin said."

Something tells me he may regret this statement some day. Maybe soon than later. The high room rates have contributed to the decline in tourism in this City. What year is this old man living in? It's obvious he wants only one type of visitor to his hotel and I hope there are enough of them left to at least fill his hotel 50%.
By Gregory

4/18/09 at 12:06 a.m.

Suggest removal

Phil Ruffin is not stating anything that Steve Wynn has not previously stated about targeting a specific customer. Mr. Ruffin also understands marginal cost equals marginal revenue, and an owner-operator is not obliged to SPEND every dollar made at the margin, until the market downturns. Mr. Ruffin is rock solid, and will be a great owner-operator in the Strip Corridor.
By homer

4/18/09 at 9:11 a.m.

Suggest removal

Phil Ruffin At one time TI employees had a great empolyer and now comes Ruffin and his child bride who has everyone at TI living in fear. Mrs. Ruffin a native of the Ukraine is said to dismiss people with a wave of the hand when she can not understand the english language or simply does not like the person. It is a shame what has been done to TI a great sister property of the Mirage by want to be Steve Wynn.
By Casino_Knight

4/18/09 at 10:33 a.m.

Suggest removal

After years of being a TI fan and just returning from a two night stay, its time for us to move on. It's the "OLD/NEW FRONTIER" all over again.

No longer will your host hook you up with show tickets for the asking, let alone an off property show. Before that happens, I was told your loss had to be $40k. Not coin-in, but loss. Period. No exceptions.

Although they are still using the MGM/Mirage card system, promotions, etc., the end is fast approaching.

Every employee we spoke with, from the casino floor, bartenders, servers, etal; wanted to leave but nothing was available elsewhere. They all felt as "doomed as doomed can be". Sad.

This trip, instead of dancing with the one that brought us, we hit a few of the other MGM properties to grip and grin with our "new" hosts who were more than happy with our play. In fact, had we been able to stay longer, they would have provided a "limo" to move us right then.