Monday, June 20, 2011 | 3 a.m.
- Phil Ruffin shuns high end as he modifies Treasure Island (5-31-2011)
- Phil Ruffin: Captain of the ship on the Strip (4-3-2010)
- A month after T.I. buy, Ruffin discusses downturn (4-16-2009)
- Phil Ruffin: Strip will remain king, but downtown will suffer (12-27-2009)
- Ruffin rejoins ranks of Strip casino owners (3-21-2009)
- 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)
If there is anyone who knows a deal, it’s Phil Ruffin.
The now-Treasure Island owner sold his 36-acre New Frontier land for $1.2 billion, the largest price-per-acre land sale in the Strip’s history, to the El-Ad Group, which had plans to build an $8 billion luxury hotel similar its Plaza Hotel in New York. A year and a half later, he turned that profit into a new acquisition on the Strip, purchasing Treasure Island from MGM Resorts International at the bargain-basement price of $775 million in the midst of the company’s struggle to finance the completion of CityCenter. Now, he’s working on deals for his customers. Since Ruffin purchased Treasure Island in March 2009, he has been busy with renovations to fit his property to what he believes the new Strip customer wants: A mid-level resort.
In all, Ruffin has spent about $20 million on renovations to make it a resort for the everyman, the antithesis of the customers his across-the-street neighbors Wynn Resorts and Las Vegas Sands are going after. It’s a niche that he thinks has gone missing on the Strip as pricey restaurants and extravagant rooms have become the norm in recent years.
Ruffin sat down with VEGAS INC to talk about his strategy at Treasure Island, the future of the north end of the Strip and what’s on the horizon for the casino mogul.
How’s business going?
Business is better than last year. We’ve made some improvements. Gilley’s (which opened April 2010) is running full swing. We hired 80 people there, and we’re in the process of adding in August or September a Starbucks on the Strip and margarita bar there, too. We’ll be adding 20 to 25 people there. And construction is beginning on Señor Frog’s in August and they hope to have it completed by the end of December. That will add another 80 to 100 people. We’ve put on a substantial amount of people.
How did the Señor Frog’s relationship come about? It only has one other location [Coconut Grove, Miami] in the country.
We have the pirate show outside. As you know, it’s a free show. The cost of putting on that show is $5 million a year. About 9,000 to 10,000 people per night view the show, and about 20 percent of the people come inside the hotel. We needed to justify that cost by adding more venues inside the hotel so people will come in. So what we were looking for was a high-energy, entertainment venue. Señor Frog’s is of course Mexican. It’s high energy and should be able to hold those 9,000 people per night. We just hope it will bring more people into the hotel. They chose this hotel because of the water venue and we have an outside patio there. So it fits with their operation. We had a good meeting of the minds there, and I think it’s going to be good for the hotel.
There was a nightclub when you purchased the property in March 2009 but it’s no longer here. It seems like you’re bringing in some other options that aren’t necessarily nightclubs, such as Gilley’s and Señor Frog’s. But, are still party venues.
That’s correct. We have Kahunaville, which is very good, but nightclubs, we just didn’t fare with it. We had one called Christian Audigier but there are so many nightclubs. Everybody’s got one or two, and ours was just marginal. They’re going to take the space that’s currently Khotan and Christin Audigier and combine them to make Señor Frog’s. We’ll be moving the Asian restaurant to where Isla is because you don’t want to have two Mexican restaurants and we think it’s important to have an Asian restaurant.
Give us a snapshot of the Treasure Island customer.
Our customer is very high-energy, and believe it or not, around 40 years old. About 30 to 40 percent come from Southern California. We’re consistent with the rest of the town with most patrons coming from California and the drive-in markets. We also have a huge number of guests coming from Chicago, New York and Texas.
Since you purchased the property, you’ve swapped out a lot of venues for more midlevel options, like the diamond shop for the cubic zirconium store, and you added a by-the-slice-pizza shop. Is it working?
We had Francesco’s, which was a very high-end Italian place. People are shying away from high-end today. So that’s why we took it out and put Gilley’s in its place. High-end is tough today. To sit down with four or five people for a $400 to $500 tab is probably not the venue we’re going after. We’re not really high-end. Steve Wynn and Bellagio have that pretty well captured so we don’t go for that high-end.
Mid-level is working here. We’re doing well.
What about room rates? Have you lowered or increased them?
We’ve increased our room rates. We’re probably up $10 to $15 from last year because of the overall improvement on the Strip. We’re getting more traffic and business has been better, and I think as the economy improves, it will keep getting better.
Can we expect to see any renovations to the hotel’s rooms soon?
Part of why we paid so much for the business is because MGM had just spent $92 million on redoing the rooms, so I don’t have to do that for a couple of years. We’re happy about that.
Where’s the bulk of Treasure Island’s revenue coming from now?
It’s the hotel. We’re 70/30—70 percent from the hotel and 30 percent from the casino. If we had some real high-end play like Aria or Bellagio, then there would be a bigger percentage. We don’t have anything super high end. We have guys with half-a-million dollar lines but no $2, $3 million lines.
Not far from Treasure Island sit several shelved projects including the Echelon, Fontainebleau and the empty Frontier lot. And farther north, the Sahara has shut its doors. Has what’s happened on the north end of the Strip affected your business in any significant way?
It’s decreased traffic. That fact is that walk-in traffic on this side has gone down. We’d like to see something open up down there. We’d like to see them finish where the Frontier property was and we’d like to see Echelon finished. They may not do that for a while. There are so many rooms now that it may be a while until those are completed. It really doesn’t help us. I think of it as the Strip starts from Wynn’s, south. Going the other way, there’s not much left. You’ve got Circus Circus, which will always do well because of the MGM reservation base. You’ve got Riviera, which takes up much of the niche the Sahara had, so that should help them. We probably weren’t getting much of their business, anyway. Too far down and those were very low room rates. We wouldn’t take those customers.
Anything in particular you’d like to see happen on the north end of the Strip?
We all want to see what Carl Icahn is going to do with Fontainebleau. It’s just sitting there but no one has any idea what will happen. He has the money but he’s a very smart guy and I don’t know what he’ll do. It does look like a disaster at the north end. It doesn’t look good, but at some point it will straighten itself out. It will take a few years before we see that, though.
Have you heard about any updated plans for your former Frontier site?
Well, they’re looking at it again. They’re a very rich company. Isaac Tshuva, the owner of Elad, he discovered the largest natural gas deposit in Israel, enough to supply them for 200 years. He could do it if he wants to. I know they have a study underway but if they do anything over there, it would three years or so before they get it going. They wouldn’t do anything except high-end but it would increase traffic so we’d like to see something go there. Forty acres is a lot of acres.
Will we see you scooping up other properties on the Strip any time soon?
If something becomes available, we’re sure looking, but right now, no one has anything for sale. MGM—I think they’re happy with their cash flow and have solved most of their problems, and I don’t think they’re looking to divest. We’re always looking at properties next door to us, but you can’t force someone to sell.