Thursday, July 2, 2009 | 2 a.m.
- Herbst Gaming files for bankruptcy protection (3-22-2009)
- Betting it all on bankruptcy? (3-17-2009)
- Reports: Gaming revenue down, casino debt climbing (1-30-2009)
- Herbst misses debt payment, again (12-4-2008)
Beyond the Sun
On a recent Monday afternoon, Buffalo Bill’s — a Western-themed casino about 45 miles from the Strip at the California border — offers a glimpse of Las Vegas’ past.
The place is hopping.
A line to sign up for the players club snakes through the casino and toward the lobby. Nearby, people in shorts and flip-flops play slowly, pausing to gulp sodas and take in the crowd. In the food court, families and young couples take up most of the available seats, eating on the cheap amid kiddie rides and arcade games.
Next door, the more understated Primm Valley casino is busy with customers, many favoring polo shirts over well-worn T-shirts. Across the freeway, long-haul trucks are gathering at Whiskey Pete’s, which welcomes the Wrangler crowd with its giant parking lot, $9 rooms and free breakfasts for truckers.
With hotel rooms on the Strip at more than half their pre-recession rates, the three Primm casinos — marketed as a cheaper, no-frills alternative — have been forced to slash prices even deeper.
And still, the properties are making money from people clamoring for $2 beers, $7 prime rib dinners and $25 shows.
“It’s hard to pass up these kinds of deals in tough times,” said Michael Starr, who oversees the properties as executive vice president and general manager of Terrible’s Primm Valley Resorts. “People are appreciative.”
And it’s helping make money for Herbst Gaming, which owns the casinos and is struggling under more than $1 billion in debt.
Herbst filed for Chapter 11 bankruptcy protection in March, in part because of debts the company accumulated to purchase the Primm casinos in 2007 from MGM Mirage at about the worst possible time.
While other Herbst business segments founder, the Primm casinos in May — the most recent month for which figures are available — generated a $127,372 profit, helping to offset recent losses. The question is whether the sister casinos can continue to make money for their new owners when the bankruptcy dust settles.
The Herbst family will lose the casinos to lenders in bankruptcy. After wiping out $330 million in bond debt and a big chunk of $847 million in bank debt in bankruptcy, the lender-owners are hoping to make a profit on the three casinos after they get regulators’ approval to take ownership of them.
Starr, a gaming veteran who was brought in by Herbst last year, doesn’t know what his role might be when the lenders take over. In the meantime, he has more work to do.
“It would be too easy to give up,” Starr said in his upstairs office at Buffalo Bill’s, distinguished for its desk of tooled leather and a cowboy mannequin that comically yet inconspicuously wears a yarmulke atop his wide-brimmed hat. “We’re not going to surrender. You’ve got to hustle every day and not be afraid to try some things that don’t work.”
His strategy includes:
• Operating the three hotels as separate wings of one hotel — and on slow nights, diverting guests to Buffalo Bill’s, the largest of the three. It not only saves money but, by consolidating customers in one casino, triggers more spending.
• Marketing more to locals with aggressive discounting. This summer, the properties offer “freecations” for locals, including two free nights, $50 in slot play, two-for-one buffets and golf rounds, free passes to attractions and two free alcoholic drinks. Locals now make up at least 30 percent of the casinos’ business, compared with only 10 percent a year ago, Starr says.
• More frequent headliners and bigger names such as Reba McEntire, Aretha Franklin and Snoop Dogg, as well as niche entertainment such as boxing, mixed martial arts and lucha libre, or Mexican wrestling. Buffalo Bill’s can book big acts for midweek appearances before or after Strip shows, at a significant discount. The goal is to attract a more diverse crowd than the typical Strip hotel.
Whiskey Pete’s, the first of the three state-line casinos, opened in 1977 as businessman Ernest Primm’s way of capturing money headed for Las Vegas. He passed on the business to his son Gary, who opened Primm Valley in 1990 and Buffalo Bill’s in 1994 — at the time of a major resort expansion on the Strip. Isolated in the desert, the properties were always known to undercut Strip prices with big deals.
Freebies and discounts are as old as the casino business. But they aren’t for the faint of heart, nor are they entirely embraced by the industry.
“It’s a risk, sure,” Starr says. But the strategy pays off, he says, because people spend money elsewhere in the casino — and make return visits. The lower the prices, it seems, the more frequent those visits tend to be.
“People like free,” he said. “We’re introducing new people to the property. Getting them to come back is easy.”
Because of the large fixed costs involved in running a gaming hotel — and a desire to keep as many of the casinos’ 1,000 workers employed as possible – it’s better, Starr said, to fill a room for a few bucks than not at all. Unlike Strip resorts, the Primm properties have no hang-ups about pricing — and no upscale image to protect.
“I have yet to make money on a vacant room in this business,” Starr said.
The various marketing gimmicks and an ambitious radio and print advertising blitz may explain Buffalo Bill’s 98 percent occupancy rate Sunday, as well as the property’s hundreds of same-day Sunday reservations — many from tourists who canceled reservations on the Strip when they heard the deals.
Even in bankruptcy, Herbst is spending a few million dollars on strategic upgrades, including a new reception area, remodeled rooms and a spa with 13 treatment rooms at Primm Valley.
A spa may seem counter to the no-frills image of the Primm casinos, but Starr says it’s the amenity most requested by customers and will be another revenue source.
“This is a pretty easy business to figure out,” Starr said. “Customers will tell you what they want.”