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April 16, 2014

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Q&A: David Ross-Ferrenc Szony

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Justin M. Bowen

Ferenc Szony, president and chief operating officer of Herbst Gaming Inc., left, and David Ross, CEO of Herbst Gaming, are newly installed to turn things around financially.

When the Herbst Gaming empire fell into bankruptcy, it fell hard.

Hundreds of employees were laid off. The Herbst family, longtime Southern Nevadans who successfully built an impressive oil company and parlayed it into a multitiered gaming enterprise, lost millions of dollars and relinquished its role in the company’s management.

Rising from the ashes was a new Herbst Gaming, headed by two men with a combined 50 years of experience in Nevada gaming.

David Ross, new CEO, was the chief operating officer of Coast Casinos and was vice president and general manager of the Suncoast and Barbary Coast from 1997 through 2004.

Ferenc Szony, president and chief operating officer, has specialized in turning around distress properties. He turned publicly traded Sands Regent whose stock had been trading for under $1 into Fortune magazine’s No. 9 company among the 100 fastest-growing in the country in 2005.

Both have degrees from UNLV in hotel administration and both were licensed to operate Herbst by the Nevada Gaming Commission this month.

Ross and Szony talked about the downfall and rebuilding of Herbst and what lies ahead.

IBLV: It’s been quite a struggle for many companies, including Herbst Gaming, during the Great Recession. Where do things stand today?

ROSS: The industry has faced the most challenging economic times of the past 80 years or so. As an industry, I think we have adapted well to the macroeconomic issues. This company, through the restructuring, and I think the work that the management team did over the past 12 to 18 months, is to prepare to exit bankruptcy. But for the industry, this was the worst, and Nevada, Arizona and California has been at the epicenter of unemployment and foreclosures. There’s been a huge housing reset, and there have been personal balance sheet resets. I think we as an industry had to bring our cost structure in line with our revenue. As we work our way through the bankruptcy, both Ferenc and I, working with the management team, addressed our cost structure and positioned our company to successfully emerge from bankruptcy. I think the Herbst board and the integrity of the Herbst family allowed us to effect change for the benefit of the company. We all operated under the mantra of “We’re going to do the right thing for the company.” For a licensee and the Herbst family to allow that to take place not withstanding what was taking place at the equity level was a testament to their integrity. For us, as we emerge, we’ve gone through a very painful process, and we’re seeing signs that we are coming off the bottom. A lot of key data points reflect that, whether its visitor volume, gaming revenue, hotel occupancy or traffic on Interstate 15 coming into Las Vegas, we’re coming off the bottom. I don’t think anybody’s calling an all-clear, but Ferenc and I do believe we have positioned the company to successfully emerge from bankruptcy.

SZONY: The challenges we faced were unique compared with other casino companies. First, we’re not a casino company. We’re really a gaming company because we operate in both the free-standing casino environment in the tourist and locals segment as well as the slot route. That’s an element that when you think of a traditional casino company, they don’t have that side of it. And, there are a handful of route companies that don’t really have the casino side of it. So you had this company faced with, first, the smoking ban, and then we got everything that everybody else got with the economy. We kind of got a double hit when everybody else got the single hit.

Most analysts say you got hit particularly hard because you had just made these big acquisitions of the Primm properties and Sand Regent in Reno.

SZONY: We had a lot of debt come right at the peak of the market, but we weren’t the only company affected by that. Boyd shut down construction on Echelon, obviously everything that happened with (Anthony) Marnell and M. Aliante is a great example — even Station (Casinos) in general. There was a period where there was a feverish run of opportunity. Housing was going as fast it possibly could, development was going, and lenders were trying to better than they did the last quarter. There was money out there and there were lenders pushing for you. “We’ve got funds for you. Find a deal. Do something.” How good was the run going to be? So you had that mentality of the world going on at that time. If you didn’t grow, you were getting left behind. That was one of the things that pushed that along.

ROSS: I think there were three things that pushed the company into restructuring. The smoking ban went into effect. This company was founded on the (slot) route and its primary cash flow was from the route. When the smoking ban hit, it changed the business model. As we did that and levered up at the same time, trying to diversify the portfolio, looking back, it seemed strategic. We said, “OK, let’s change that business model and diversify,” get a little more geographically diverse in the Midwest — that turned out to be a great acquisition. And we acquired some northern assets to geographically diversify within the state. And then they bought Primm. We levered up, and then the music stopped in the economy. Now, you have too much debt, your core business changed with the smoking ban and the economy went completely off the track. Those three elements really hurt. I think (Nevada Gaming) Commissioner (Tony) Alamo said on the record that this was the perfect storm. You could probably face two of those three, but those three together were just too much to overcome with the debt structure that they had.

During bankruptcy proceedings, an estimated 1,000 people were laid off. With the company in a new growth mode, what’s the outlook for some of those to be recalled?

ROSS: I think Ferrenc said this really well to the Gaming Commission. I’ll try to articulate the exact quotes. About 750 in the last 12 months … a lot of those were as we outsourced restaurants. Although they were no longer our employees on the books, the restaurant operator interviewed all of them and actually hired a lot of our employees. Every gaming company has gone through this and it’s the worst part of the business. It’s a painful part of what we had to do. A lot of those folks were hired back on. You still need individuals to run those outlets. So that was the majority of the transactions. From an outlook perspective, we’re confident that as we come off the bottom our occupancies are going to grow. We’re hopeful that we can come back in and start to bring staff back on. We certainly have the supply. Now we need the demand to catch up.

SZONY: As volume goes up — on the hotel side, as occupancy grows, you need the staff to do it. You can’t carry a group and our management team and our employees know that when business is down and there isn’t the volume, there isn’t going to be the work to do. The key thing is getting the volume up and that’s why we focus so much of our efforts on how do we get more people to visit. That’s a crucial thing. Then you’ve got something to work with.

The company is known for its resort properties in Primm, its Terrible’s Casino brand and its convenience store network that is part of a vast slot route. What’s the status of the Primm properties?

SZONY: Primm is a challenging set of assets, primarily because it’s a value play. Right now, the value segment is the one that’s probably been hit the most because the premium properties have one luxury — the ability to drop prices if necessary. When you’re already in the value segment, it’s very hard to drop down. That’s one of the challenges that Primm faces. As the Las Vegas Strip has become much more of a value destination, being able to stay at properties where Luxor and Excalibur were commanding triple-digit midweek rates and maybe $199. It was still a good value compared with other properties on the Strip. Primm was very successful being able to be at under $100. As those properties dropped down into those lower rate categories and right into our wheelhouse, that’s when it gets tough. So Primm is still, we believe, an asset that has great opportunity in front of it. It has a real diversity of products out there, everything from the mall, a large room component, the rides, plenty of meeting space, an amphitheater. You’ve got a lot of things going on. It’s how you program it, that really makes it work. Car volume on the freeway is up so that’s a positive. What our job is, is how do you pull those people off and get them in our buildings? That’s crucial. But Las Vegas has become much more of a value segment so they’re using the tactics that we traditionally did to attract patrons. Properties like ourselves, Primm, the Sahara, the Riviera — some of those that are not the newest and glitziest products — are the ones that get challenged in this kind of environment. They’re cash-flowing positive and we’re seeing improvement year over year. That’s good. We’re reinvesting in them. At Buffalo Bill’s we’re redoing guest rooms, we’re putting in a brand-new Denny’s coffee shop out there. There are great improvements to the slot floor at all three of them, a renewed focus on how we do entertainment out there. When you’re really on the tourist side of it, these boxes were built to run at a certain level. They aren’t as much fun when they’re not at that level. What we can see is that if we have a little bit of increase on both the patron side and on the revenue side, they can move very well.

Give us an update on the status of properties in Southern and Northern Nevada and in the Midwest.

ROSS: I think that we are very competitive in Reno. Rail City in Sparks and the Sands have held up remarkably well, given the economic backdrop. If you look at the gaming numbers over the past 18 months, the market has declined and impacted things much greater than the balance of the county or the Strip. It depends what numbers you look at. When you bifurcate the state, it’s been a very challenging market up there. We’ve actually outperformed, so we’re very happy with the management team and that we’re executing on that. The same thing is true in Southern Nevada. Our properties in Pahrump as well as our Flamingo-Paradise property probably perform better than the market in many aspects. So, we’re happy with that. Our properties in the Midwest have held up rather well through the recession. It’s a little more insulated and it probably speaks a little bit to customers staying closer to home to participate in gaming and you’ve heard that for a lot of our competitors in this, who are saying the same thing. We’ve certainly seen support of what they have been communicating during their conference calls. To sum it up, our properties as a whole, collectively as a group on the casino side, have been performing relatively well or better than the market in the different pockets where we operate. As Ferrenc alluded, Primm is more of a tertiary market, so it’s seeing pressure similar to Laughlin and Mesquite. As the value resets in Las Vegas, that is where we have a tremendous amount of supply. Traffic on the weekend is fine. It’s the midweek traffic that is the challenging part of our environment. And that’s really where our cost restructuring is being addressed.

And the Midwest?

ROSS: They’ve held up extremely well. We’ve got great leadership back there with Craig Travers (regional vice president of the Midwest and general manager of the company’s St. Joseph, Mo., property) I’ve known Craig since we were at Coast (Casinos) together. He’s a terrific leader, a terrific manager. We have Bob Thursby (general manager of Herbst’s Lakeside Casino) up in Iowa and Jerry Smriga (general manager of the Mark Twain property). These are key leaders in the company. The assets are great assets. It was a great acquisition by the Herbst company. So we’re extremely pleased that it’s strategic I the sense that we’re geographically diverse. From our side, Missouri has continued to see improved operating results for the last couple of quarters that we’ve reported. In Iowa, we started the year with some inclement weather there that affected us, but we have some great opportunities there. We have about 88 acres that are undeveloped, so we’re looking at opportunities for how we improve that property. So we’re very bullish, very excited about our opportunities in Iowa.

How about the slot route?

ROSS: On the slot route, the numbers fluctuate. As of right now, we’re Nevada’s largest slot route. The company was founded from the slot route. Ed, Tim and Troy (Herbst) built the company off that. Convenience stores are part of it, but it’s really taverns, grocery stores and C-stores. It’s really a collection, but we have more than 6,000 games in Nevada. A lot of them are here in Southern Nevada, but they’re all over the countryside. But the slot route really has been impacted by the smoking ban. It’s been well-publicized. Another thing that we’ve found is that segment really is tethered to the local economy so as the economy has worsened and the unemployment numbers have gone up, we’ve had fewer customers. From that side, we operate like a casino so it’s just like Station (Casinos), just like Boyd (Gaming) where there are fewer customers and only so many discretionary dollars so the customer’s choice right now is where do I participate in gaming? (They say) I still want to participate in gaming, but unfortunately the world has changed for a lot of folks. So we’re faced with a lot more competitive pressure. A lot of those customers were from the construction industry and construction jobs, as you know, have gone. The amount of people tied to the hospitality industry is substantial, so when you see people who are underemployed, the ones working maybe only three or four days a week or their tip income is down, that has had a profound impact on the route.

Tell us about the new management structure. Are any members of the Herbst family still in the picture?

ROSS: No. This happened before I became a part of the company. But the way the plan was filed, they would be stepping away from the business at substantial consummation so that is what is intended now. I can’t say enough about the integrity of the family. They could easily have mentally and physically checked out, but they just didn’t do that because they have so much integrity. Jerry Herbst, who’s not part of the Herbst Gaming side but is with Herbst Oil, was the second-largest shareholder of Coast (Casinos) when I was at Coast and the integrity of not only him, but the brothers was, “We have to do the right thing, David and Ferrenc. We have to do the right thing to manage the business through this restructuring.” Fundamental change is very painful to go through, so I can’t say enough about Ed, Tim and Troy. As you look for the company to emerge, it’s in a much better place because of their efforts and John O’Reilly, from the board’s perspective, which is who Ferrenc and I answer to.

Will the Herbst name stay in effect?

ROSS: We have a trademark agreement with them in place through the better part of next year. It’s a brand that has had a lot of integrity and consistency in Southern Nevada. I thought the comments from the chairman of the Nevada Gaming Commission (Peter Bernhard) were appropriate at the meeting. He said, “This is a sad day, kind of a bittersweet day, because this was one of the prominent families in Nevada and this was one of the end results of the economic situation,” and Commissioner Alamo echoed it as a perfect storm. But I think the comments of the chairman were very respectful of the family and support what I’ve told you about the integrity. We’re very fortunate that we have this family through this process.

Let’s get into some of the details of those properties. In Primm, in addition to the three hotel properties, you have a nice arena, a couple of great golf courses, a mall with some top-brand stores and a world-class roller coaster. How are those being leveraged to make Primm a go-to destination?

ROSS: I think Ferrenc sort of hit this in that Primm has these amenities that you described. Those two golf courses, by the way, are Tom Fazio courses, so they’re championship courses that are in great shape and are well-run. As we get the word out and begin using some marketing intelligence that we’ve brought in, that will move forward. Ferrenc mentioned that we’ve invested in these properties and we’ll finish the remodeling at Primm Valley, we did the casino remodel last year, we’ve done a spa addition over the last 24 months. I think that as you look and sit back, it will change people’s perception. They’ll say, “Wow, that’s a great product.” We’ve shifted focus on food and service. So it’s part of a broader strategy. It’s not just one thing. It’s not just Buffalo Bill’s and the amusement rides, or a golf course or spa, it’s a collective and how do we market it as a resort that’s still a value play. I think if we execute in regards to customer service, those things are going to attract other segments of the market. That mall has 3 million people visit it a year, according to the mall operator. That’s a lot of traffic out there. We have approximately 40,000 cars a day go by our front door, according to the Nevada Department of Transportation, so we’ve got to do a better job of getting them off the highway. We’re putting in a branded leased restaurant, a Denny’s, and I think that is going to help target another segment of our customer. We’re one of the leaders in gasoline in terms of those stations so we intend to do an improvement on that side of the highway. So we have some opportunities to improve the facilities, but we’re doing it strategically by doing it one property at a time and now we’re at Buffalo Bill’s.

In 2009, the resorts had a concert lineup to attract people to the resort. Will that continue? What big-name acts are on the horizon?

ROSS: We’re still going to have concerts, but in addition to concerts, there will be a considerable amount of casino events like golf tournaments and slot tournaments. There are a certain amount of special events that speak to a specific segment of customer. So I think the concerts are a broader part of the whole strategy, whether it’s mixed martial arts, motocross events or races. There’s a collection of opportunities for entertainment.

SZONY: The strategy is that Primm has always had a good country western backbone to its entertainment and you’ll see us continue to do that in upcoming acts. I think what you’ll see us try to do, as some other casino venues, including those in Southern California, have done is diversify into classic rock as well as the country side and really doing a blend of different things. (Country) will always be a part of what Primm is. It’s no longer simply a stopover for a couple of hours to grab a quick meal at Whiskey Pete’s, maybe get your last chance to play and then move on — which is what it once was. It’s a full-service destination resort at a huge value. So entertainment is one of the things that we do out there and we’ve got the 6,000-seat Star of the Desert arena out there. We like to say that it’s just right — not too big, but not too small so you can really get up close and personal with some great acts that you just can’t at some of the bigger venues that you see around. But as David said, entertainment is just one piece of the puzzle.

Tell us about the room renovations. Some skeptics believe rooms are being closed off because of hard times, not because you’re working on rooms.

SZONY: On the Primm Valley Resort property, we’re 50 percent through on the guest rooms out there and the other half are being worked on now. The unfortunate situation that befell Fontainebleau played right into our position. Your paper reported recently that one of the downtown properties — my good friend, Tony Santo (owner of the Plaza, Las Vegas Club and Western hotel) — had pulled off a coup and that sometime in the first quarter you’d be able to see refurbished rooms with Fontainebleau’s case goods and other amenities. Well, frankly, you can see those today at some of our properties because we got in there and used them. We were slated to redo the rooms anyway, but the opportunity that Fontainebleau presented to us was great. And it’s beautiful stuff. You’ve got to give credit to the guys working on that project. But it’s allowing us to finish that off and move quicker into Buffalo Bill’s. Originally, our plan was to finish Primm Valley Resort, get it entirely up to speed with the new spa. What this allowed us to do was get into Buffalo Bill’s quicker. So half of Buffalo Bill’s is being worked on as we speak and going into the first quarter. We’ll get half of that facility done probably six to eight months faster than on the plan we had to do that. But you have to keep these properties fresh, you’ve got to keep them new. And it’s not just in all the things that you see and touch. We’ve invested right now out at Buffalo Bill’s more than $1 million in energy-saving elements, from an entirely revised lighting package to going into the guest rooms and changing the thermostat systems. You’ve seen these systems in Europe and other places that change settings when the guest is not in the room. These are upgrades to the property that are going to pay back over the long term. It’s good for us, but it’s also good for overall energy consumption. We’ve regutted the coffee shop area and Denny’s is going in and doing that. Frankly, you couldn’t do some of these renovations out there without shutting the building down for a couple of weeks to be able to get in there and get that done. It’s a pretty major undertaking. With everything we’ve done — the energy savings, the restaurant, the carpeting, the spa, the rooms — it’s probably between $4 million and $5 million. One of the things that is interesting is that we’re doing this through a bankruptcy. Everyone understood that even though you’re going through this dynamic business change that primarily occurs in our offices, you can’t stop maintaining the property and reinvesting in them. And it’s not just at Primm. We’re investing in Northern Nevada. We’re going to renovate a restaurant at the Sands in the spring. What was very positive was that the Herbst family understood through this process that for the benefit of the company and its 5,000 employees you can’t stop doing what you have to do running the business despite all this other stuff that had to be done. The incoming equity — the bank group coming in — understood and didn’t restrain us or hold us back from doing the right things to keep the business moving so that as we come out of this tough situation we’re not going to have to catch up on the things that should have been done in the last 18 months. We’ve been doing it and we’re going to be hitting the ground running and be much stronger going forward and that’s because of the work we’ve done in the past 18 month.

Looking long-term, how will high-speed rail projects, a new airport in Ivanpah Valley and a solar generation station nearby affect business at Primm?

SZONY: It’s all good.

ROSS: We’re hopeful. As a lifelong Las Vegas resident, I’ve been hearing about high-speed trains for a long time and I can’t wait to see it happen. It would be great for Las Vegas and clearly we’d benefit from the construction of that and the solar generation station. The construction alone would be boost for the state, for the area, for us so we’ve been very excited and supportive of the process. Obviously, a lot of lift has come out of Las Vegas as airlines have cut back and reduced the number of flights into Las Vegas. That has put pressure on Las Vegas as a whole. But we all know we’re in a cycle and as we come out of that cycle and demand comes back to McCarran, we’ll need something. With the new gates out there (at McCarran), we’ve probably got some time before we need Ivanpah, but eventually I can’t wait to see that happen. Certainly all those things will benefit our property out there.

Who is your market for the Terrible’s Casinos? Locals? Discount or value-seeking tourists?

ROSS: The majority of customers who we serve in Las Vegas are locals. We do have a little over 300 rooms here and we are going to get our share of tourists just because of where we sit in proximity to the airport and Thomas & Mack Center. We are going to get a collection of tourists because there are a lot of time-shares around there that don’t have food services. So we are the beneficiary of tourists, but I would say the majority, if not the supermajority, is the Las Vegas locals market.

SZONY: If you look at as a company and the assets that we have, whether they play on the tourist side, which our property at the Sands in Northern Nevada and Primm do and to some degree Terrible’s on Paradise, then you look at the next segment, which would be the locals side, whether it be Pahrump, Las Vegas, Rail City (in Sparks) or our three Midwest properties which are primarily locally driven, the one thing they have in common is that they have a midlevel customer who is looking for great value, an extended play time — a great value in their gaming opportunity — and it’s a very comfortable, fun environment. They’re smaller-feeling properties so there’s a casual comfort to them. That you have whether you’re in Osceola, Iowa, Sparks, Pahrump or Las Vegas. That’s really how the company was set up. Some people say it’s kind of a hodgepodge of assets. Maybe geographically, we’re very diverse which has actually been a great thing for us. But the idea that the segment of the business that we go after is pretty much the same.

Who do you consider to be your biggest competitors, Station and Boyd?

ROSS: Anybody who competes in the Las Vegas locals market, whether it’s the Arizona Charlie’s group, Michael Gaughan, Silverton, the ones you mentioned. Although what you find in the locals market is that often these compete in three to five miles around a property for the most part, the theory being that no one’s going to drive past Green Valley Ranch or Palace Station to get to M Resort. The theory is that it’s more of a localized environment.

How is Herbst Gaming reaching out to its customers?

SZONY: He wants to know about the secret sauce!

ROSS: Having a background at Coast, Michael Gaughan was probably the first to put loyalty clubs in the Las Vegas locals market back in 1986 at the Gold Coast. It’s no different today. We’ve certainly seen an evolution in marketing. There’s a lot of direct-mail marketing. Most of the players in this space have the same approach to reaching out, making sure the loyalty cards and the matrix are speaking directly to that segment of the market. So it’s probably no different from everybody else. We have one card for the entire state of Nevada, so that may be a little different.

SZONY: It’s kind of unique. I think we are different from the other guys. We give back a little bit more than I’m not going to say every one of our competitors. I’d say they’d be hard pressed for anybody to say they do more than what we do and what we give back because we see our patrons multitimes a week. And even on the tourist side, we operate properties that people return to multiple times a year. It’s not their one-time-to-Vegas type of trip or one-time-to-Reno. Even our tourists return to us almost monthly. So we have to operate a little differently, have to give back a little bit more, we have to get to know them a little bit more. I think we use the same toolbox that everybody else does, but fortunately the size of our organization and the way that we get in and get close to our guests throughout the state has been a real plus. And I think that kind of grows out from starting out in the routes business which is very hands-on. Every bar has got the same slot machine, but it’s the bartender, it’s the staff that’s there or that change attendant when you walk into a Vons that makes you want to play there. The Herbst family kind of started this thing going, and, frankly, I think they brought the right assets along and assembled a team over the years that made sure they were using the same toolbox as the other guys, but let’s do it just a little differently.

Are there any plans for change at your flagship Terrible’s property in Las Vegas?

ROSS: Probably not to the extent that Primm is going through. We have new carpet and we’ve put more than 100 new slot machines in last year. So there’s always renovation going on. We want to make sure that we reinvest in our properties and keep them very competitive. Even in our financial covenants on a go-forward basis, a sufficient (capital expense) is built in to allow enough leeway to make sure that these properties are kept up.

Is it a benefit or a problem to be across the street from the long-shuttered Key Largo property?

ROSS: There are some different rules of thumb. Obviously, if it were open, there would be a lot of potential customers that have a tendency to migrate. No one necessarily stays exclusively at one property. You see that up and down the Strip as people will stay on the Strip and migrate to the neighbors to see something different. Clearly, that is an element that’s not there that used to be there. I don’t know what’s going to happen on the development side. When I drove by it the other day, I said, “Wouldn’t it be nice if it were back.” We’re certainly not afraid of competition.

What niche do you serve in the Pahrump, Reno, Dayton and Verdi markets?

ROSS: The Midwest, Pahrump, Sparks, Dayton all really serve the locals market. Rail City in Sparks is terrific as are the three Midwest properties. These are really customers who live in the local area that participate in gaming as opposed to tourists. The Sands is not, but all the others serve locals.

So is the Sands considered a downtown Reno resort property?

SZONY: The Sands is really a blend. It’s kind of interesting up there because a little over 40 percent of its gaming revenue comes out of the locals segment and a little under 60 percent is tourists.

And you were there for a long time before Herbst acquired it.

SZONY: I’m still there one day a week. We have four properties in Northern Nevada, so I’m there and still intimately involved in how we work that segment. So it’s a blend property. It’s somewhat like what we have with the Paradise property, although that’s far more local-based than tourists, but it still has a room component. Tourists frequent it that are tourists staying with us and other tourists that are staying right around us in time-shares and other noncasino rooms. Paradise Road has a lot of rooms on it without many casinos and they’re looking for a place to go. They’re often high-frequency visitors, they come regularly and they’re looking for great value. We get people who stay at the MGM (Grand) and at the Flamingo and come down and play at the Paradise property because it’s such a great value and they know it. It’s a great food value and a great gaming value. We often think of value as an inexpensive room or an inexpensive meal for the quality of what you get, but there’s also the side of. “Gee, how come I was able to go in with $100 and I played all night in a casino, but the last couple of places I stayed an hour into it or my California Native American casino … my God, I went in on a Saturday night and with a $25 minimum on a table, my $100 lasted me 20 minutes. I was done.” Value can play on the gaming side as much as anywhere. That’s our sweet spot.

You talked about how the slot route got slammed by the smoking ban. How important is the slot route to the company today?

ROSS: It’s about 10 percent of our gaming revenue.

Have the bars and taverns on the slot route that were affected by the enactment of the Nevada Clean Air Act recovered from the smoking ban that was put in place?

SZONY: It hasn’t. We operate two segments in the route which is a little unique even on that side of the business. We’re in a large number of taverns that serve food. Some do not, which means some of them have smoking and some of them do not. We also are the predominant operator of slots in some of the grocery stores, C-stores and drugstores that have slots. Those definitely don’t allow smoking and they are the type of companies that immediately upon hearing what was going on with it said, “Listen, we’re going to conform with that, that goes right through.” Those patrons who wanted to smoke looked for other outlets to do it. The traditional bar environment kind of popped up because there are some of them that do that but also the local casino floor kind of popped up as have a new element that is actually being debated on the county commission level. It’s more of a slot parlor environment that has proliferated in the valley down here. The movement of the patrons has been there and I don’t think smoking is coming back so it has been a change in the business dynamic for the route.

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