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Planet Hollywood reports worsening finances in quarter
Friday, Aug. 14, 2009 | 2:19 p.m.
Planet Hollywood's Westgate Tower.
Sun Coverage
The owner of the 2,519-room Planet Hollywood resort on the Las Vegas Strip today said its financial position is deteriorating and that it may have trouble meeting its loan commitments.
Planet Hollywood also said that for the quarter ended June 30 it lost $12.07 million vs. a loss in the 2008 quarter of $12.2 million.
Revenue fell from $72.2 million to $60.6 million, as casino revenue for the quarter fell 8.5 percent to $28.3 million and hotel revenue was off 25 percent to $22.8 million.
Hotel occupancy fell 5.4 percentage points to 91.6 percent while the average daily room rate declined from $136 to $96.
On July 30, Moody's Investors Service placed a pool of structured debt securities under review for possible downgrade in part because of their exposure to Planet Hollywood.
Moody's said that despite a $178.4 million renovation and transformation project to re-brand the old Aladdin into the Planet Hollywood Hotel & Casino in 2006, the property has not met financial expectations.
"The slowing U.S. economy has led to reduced convention bookings and leisure/gaming demand. As a result, initial cash flow projections have not been reached," Moody's said, adding that for the trailing 12 months ending in March, the net cash flow was $28.9 million.
In a filing with the Securities and Exchange Commission today, Planet Hollywood's owner said it may have trouble servicing its $860 million commercial mortgage.
"Absent a capital contribution ... an equity investment by third parties or a restructuring of the loan agreement, we do not believe that cash generated from operations, cash held in reserve by the lenders under the loan agreement and cash made available under the modification to the loan agreement will be adequate to meet the anticipated working capital and debt service obligations of OpBiz (Planet Hollywood) through Dec. 31, including interest payments due on the loan for upcoming monthly payments," the company said.
"The company is currently seeking a modification of the loan agreement and access to funds in the interest reserve account, as well as additional capital investments to satisfy the requirements necessary to exercise (a loan) extension option or otherwise defer maturity of the loan and to provide funds to pay upcoming monthly interest payments," the company said.
As for the current slow business conditions in Las Vegas, Planet Hollywood said it doesn't expect much improvement during the rest of the year.
"Reduced casino volumes, a reduced demand for hotel rooms and a highly competitive market driving hotel rates down have all contributed to declines in the overall Las Vegas market. This slow down was particularly significant in the fourth quarter of 2008 and has continued into the second quarter of 2009. 2008 was the PH Resort’s first full year of operation as a rebranded property. We believe that second quarter 2009 operating results were negatively impacted by the current market conditions and that we will continue to experience lower than historical hotel occupancy, room rates and casino volumes in 2009. As a result, we have increasingly focused on efficiency initiatives to control expenses and improve performance," the company said.
Discussion: 29 comments so far…
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Why does it seem surprising everytime the paper reports another casino is having trouble? It shouldn't !! The economy sucks and will suck for years to come..this is not news...There is a reason we are in the highest unemployement state in the union.
Casino Resorts like Planet Hollywood need to attract the middle class in high volume. Lower the table minimums to $2 and the drinks to $3. Create a more appealing loyalty program and develop a unique angle on the market such as affordable child care so families can take advantage of Las Vegas as a cheaper alternative to Crusie and All Inclusive vacations. The economy is going to be bad for a long time. Wynn has already captured the upper class market so don't waste your time trying to compete. Take the business from downtown.
prive' being closed doesn't help them either.
look, this town is on a long, slow, downward spiral.
yesterday it was hilton. today it's planet hollywood.
at some point...and everyone thinks i'm crazy...but at some point you'll see chains around the doors of a resort on the strip before this is all over with.
HEY, CASINO EXEC'S & BOARD MEMBERS, LISTEN TO WHAT (LENOKD)HAS TO SAY. NOT EVERYONE WEARS A SUIT TO WORK. THE INDIAN CASINOS IN PALM SPRINGS AREA ARE DOING JUST FINE WITH THE "HIGH ROLLING MEXICAN LANDSCAPERS". THEY MAKE MORE MONEY THAN ANYONE DOWN HERE. WAKE THE H--L UP.
Another surprise on the economic front. Will they call inflation a surprise when it raises it's ugly head. With our current printing press turning out TRILLIONS it will be so Bad. but surprising. Thanks Sen. Reid, great job your doing for Nevada.
PH looks to be an eventual candidate for BK reorganization...JMO
They are still cash flow positive of almost 30 million. It's the depriciation that is causing a negative income. There isn't a company out there that will close it's doors on positive cash flow. It's not the operations hurting companies it's the debt. Richard brown knows what he is doing.
Stop that freaking noise inside of the casino. When I was there last time I heard different loud music noise coming from all corners of the casino, disturbing the most possible and pushing me away from the machines back to Las Vegas Boulevard. I was happy when I was out, finally. Will not return to PH so soon again....
Dump the tickets,get some coins clangin,everything will be OK.
We are in a deep recession pointing fingers will not solve this problem. Are economy is in the worst shape are government doesn't know how bad. What scares me is how the proping up the stock values when their loosing money ( does that make since) Gaming was the last to fall and will be the last to come back.
Casino CEO have 500 Indian casino's in the USA to compete with they didn't have 10 years ago. These Indian casino's aren't tents anymore they are running in the black even in this economic down turn. DON'T YOU THINK THEY SHOULD PAY TAXES!
1. Lower table minimums to 1-3 USD.
2. Raise slot hold percentage to 3%/97% payout
3. Free rooms for all
4. Free show tix
5. Lower house edge on all games
Scottsdale, The days of free rooms are over, unless you leave enough on the floor that a free room is a minimal cost to keep you there. Affordable rooms for all might be the ticket, but then again, 90% or more occupancy might say that they are not really over priced at today's rates. Until the resorts get their debt service under control, there will be more loss reports to come. Kind of like an individual who maxes out a dozen credit cards, starts missing payments, gets hit with fees and rate increases, and then cries about being "ripped off"....only multiplied by several million. I do agree that lower table limits is a good start. Some will not play a $10 table, but might play a 3 or a 5.
Hey geniuses, I am a Casino boss and I can tell you that lowering table limits to 2 or 3 dollars will only bring in the less desirables that will drink all day on $20 which will then cost you 10 times that amount they they are spending, then they will want a comp for dinner costing another 3 times the amount they just gambled and stiffing every employee they get free stuff from along the way!!! The only solution is for the finance companies to modify the loan debt and wait this thing out with the rest of us!!!!
If we cheapen Las Vegas it will be worse than NBA All-Star Weekend and anyone in the Casino business knows what a nightmare that was!!!!
I can't believe the only solutions you people come up with is give away's!! Cash flow is not the problem here, paying off these huge debts are!! These corporations were acting like drunken sailors with there lavish spending and its partly the banks fault for letting it happen so they should share in the misery as well and keep these places open and keep the people working!! People will eventually loosen the wallets and spend money its only human nature!! These banks are stock piled with peoples money and eventually this economy will explode with prosperity, buy the casino stocks now before it gets to expensive. Look at what Las Vegas Sands is doing and maybe you will believe TOO!!
Of course debt is a major part of the problem. The problem with debt is that it has to be paid back. During periods of economic expansion, this isn't a problem, however during recessions and depressions, like now, this is the problem. If a company is cash-flow positive then a debt-equity swap will relieve the pressure. However, the take in Nevada is going down every month. It is just a matter of time until these places are cash flow negative. Then the liquidations will begin.
Part of Vegas's problem is competition from other markets. This has lessened the allure of Vegas as a gaming destination. However, there is a further problem. The quality of the Vegas experience has been diminishing over the years. The reasons Vegas has become less fun is: 1)Casino beancounters cutting back on comps and increasing the house advantage of games 2)The impersonal nature of most casinos, 3)Increasing costs of a Vegas trip as casinos attempted to increase non-gaming revenues and 4)Corporatization of casino ownership.
I live in the East Coast. I can have a mediocre experience in CT or AC. Vitually all those casinos are either in bankruptcy or heading there, also as a result of debt.
For Vegas to prosper in the current down times, it must get back to basics. Use technology to restore the customer relationship, get more generous with comps, go back to the Frank Rosenthal way of doing business, less the broken bones. Innovate more. I haven't seen a new gaming concept the equal of Rosenthal's Sports Book, the buffet, the blockbuster show, etc., in 20 years. Beancounters only know how to cut costs at the expensive of the business. They are clueless as to how to create excitement and buzz.
Even Wynn is run by beancounters. Steve is not running that show anymore.
De-emphasize slots as a business model. I know they are less labor intensive than table games, but they are completely homogeneous. You can play them anywhere. I know they are profitable, but they increase the depersonalization of the business and over reliance upon them has damaged the Vegas experience.
Next, Vegas is sin city. Nevada should immediately legalize marijuana. This is a multi-billion dollar industry. People travel to Amsterdam and other places for the hashish bars. Vegas should have them. Depressions are the best time to end prohibitions.
There are many more things to be done, but this would be a start.
I have a novel idea to this problem. I got the idea from running complex issues thru a super computer. It took it 3 days to get the answer. I'm sure this solution has NEVER, NEVER been said before now. Here goes.
1) Cut the room rate from $499 a night to $49 night. Duh.
2) Get the machines to pay out @ 98% instead of 45% Duh.
3) Those "penny slots" Really 1-20 dollar slots-get rid of them!!!! Duh
4) Free drinks, shows and compd meals.
5) Then I will come by and loose my $$$ in the machines, you get rich! duh
I am sick and tired of hearing about "The Indian Sovereign Nation") Ya! Ya!you can't touch me crap.
They are just a group of Indian's who have been "blood sucking" off the United States of American taxpayer for much too long. Get rid of the American politicians that condone this and rewrite the laws to protect the American taxpayers.
You want to live here! than pay your fair share.
This is the best country in the world to live in but it is not perfect.
Ace's
Appeal2, someone somewhere should be paying you a consultation fee. Great post!
I agree appeal2 made a really great, well informed post, except for the marijuana part.
Kudos to appeal2. In reference to the indian casinos, my son and I were in Oklahoma this weekend and there is no apparent visitor problem there. Last night in Norman the machines were packed. We both played several hours and left winners. Today, at the Winstar near the Texas border there were still cars parked in the grass beyond the concrete parking areas. That sais that it was very busy last night. My wife and I have been to Las Vegas and Atlantic city this year. We have just come to the conclusion that with the gaming environment that we found in both it is just not worth the trip anymore. We love Vegas and we are very sorry to have seen this happen. People really do have a lot of options today. That does not help the situation in Vegas.
I cannot emphasize it enough...we built properties way above what the visitor ever expected, envisioned, and wanted. We fell prey to the egos of the operators and owners...trying to outbuild each other. Why...none of these huge price tags made any sense economically...and, now look at everyone failing to meet their mortgage and bond obligations. It is a sad commentary caused by overpaid ego-centric managers, operators, and owners! Bring back the Primms, the Satres, the Benedicts, the Cohens,the Giovencos, the Fitzgeralds, etc. Out with the new...
YEAH WOODMAN. STAY HOME/WE DONT NEED YOUR NEGATIVE ATTITUDE!
ASS
Last time we were at Planet Hollywood we had to fight off an army of time share touts every time we went thru the front door, pretending to want to give us discount vouchers and offers. No way this should be going on at a major strip casino, and the same goes for NYNY. The old Aladdin at least was themed and a bit interesting, the new Planet Hollywood has a modern exterior and a bland interior which looks like our hometown casino here in Australia with some fake movie posters for things food related near the buffet. Great buffet by the way if getting up in price a bit. And if you think about it, its the best part of the Planet Hollywood and its all that is left of the Aladdin. Anyone stupid enough to put off their customers at the door deserves to lose money. We are due back in a month and will not be going to Planet Hollywood. Coming from literally half way across the world I want to see something I can't see and do at home, bring on the volcanoes, fountains, moving statues, lions and krispy kreme.
Yeah I agree with dswils. I remember those harem-clad servers in the old Aladdin during the 1980's. I also remember $12.99 buffet dinners, $20 rooms, and the Ripley's Believe It or Not Museum at the 4 Queens. I saw every magic show on the strip. (What is Melinda First Lady of Magic doing now?) So what happened? A lot of overbuilding and a lot of corporate debt, apparently. Oh well, maybe some of the old Vegas had to go, like the Dunes, Landmark, Desert Inn, Silver Slipper, Westwood Ho, etc. It was getting pretty shabby.
Ph is now being run by old veterans from the industry who have never been stellar in their previous positions. Not what is needed to survive in the 21st century with nationwide gambling.
There are reasons why its losing at a faster rate then the competition and will probably continue to do so.
Just one word to sum this all up...Greed... That's why the country is in the mess it's in and that's why LV is in the same mess. Fountainbleu, City Center, Echelon. The folks that decided to build these gargantuan, bankruptcy laiden properties are just plain greedy. Everyone wants more, more, more. Honestly, how much money does Mr MGM Mirage, and Ms. Harrah need to function? And the banks,,,,don't get me started. They are the worst. Greed, Greed, Greed. That's all I have to say.
Mr. President why are the banking,and loan company not making loans as you promised they would do for the american people we are all hurting and not getting any help. Time for them to answer to you for not helping us the little people that keep them in business, maybe we should boycott their business. Check http://www.obamamortgagerelief.org/.