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September 30, 2014

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Tropicana posts loss amid upgrade to Las Vegas property

Tropicana Renovation

A view of the bathtub in the 3,000-square-foot Chairman's Suite at the Tropicana. The property is going through its first major renovation in nearly 25 years. Launch slideshow »

Even as it invests $147 million in upgrading its property, the Las Vegas Tropicana hotel-casino posted a $10.8 million loss on declining revenue in the second quarter.

Tropicana Las Vegas on Tuesday said net revenue decreased 33 percent to $13.8 million for the three months ended June 30 vs. the second quarter of 2009.

The decline was "primarily related to decreased visitor volume due to disruption from our current property revitalization as well as reduced consumer discretionary spending," the Tropicana said in a regulatory filing.

"Our net revenues are expected to continue to be negatively affected throughout 2010 due to disruption from our capital improvement project, which has resulted in the closure of a significant number of rooms and a portion of the casino floor for renovation, which is expected to be completed in phases through the second quarter of 2011," the company said.

Excluding impairment charges and other write-downs in the 2009 quarter, the second quarter 2010 operating loss increased $7 million to $10.8 million, primarily because of the decrease in net revenue, the company said.

The $10.8 million loss also represented a deterioration from the first quarter loss of $7.7 million.

Room revenue fell $700,000 on a year-to-year basis as the average daily rate of $54 was off from $56, though occupancy improved from 78 percent to 80 percent.

"The current unprecedented and challenging global economic conditions have negatively impacted our results of operations by affecting visitor volume and overall consumer discretionary spending. Although there has been a slight increase in visitor volume to the Las Vegas market in recent months, consumer spending continues to remain low. Corporate spending on conventions and business development has also decreased substantially as companies are cutting costs in response to the current global economic conditions," the Tropicana said in Tuesday's report.

"In addition, in recent months the Las Vegas market has also seen an influx of room inventory as a result of the opening of City Center by MGM Resorts International in December 2009, which increased room inventory by approximately 4,400 rooms. The increase in room inventory has resulted in increased competition leading to a lower average daily room rate and hotel occupancy, which translates into lower room revenues,” the company said.

The 1,772-room property on the Las Vegas Strip is controlled by investors including Canadian investment company Onex Corp. and property manager Alex Yemenidjian. They purchased the company out of the Tropicana Entertainment bankruptcy last year for $205 million.

As for the $147 million capital improvements plan, the Tropicana said $65.3 million had been spent as of June 30.

The capital project includes renovating hotel rooms and suites, remodeling the casino, race and sports book; adding new slot machines; redevelopment of the convention center, pool area and showroom; food and beverage upgrades; a newly-designed facade and outdoor signage, the reconfiguration of the pedestrian bridge between Tropicana Las Vegas and MGM Grand Hotel & Casino and the addition of the Nikki Beach nightclub and Beach Club.

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