What is the mood of the casino industry in Las Vegas? Well, during last week’s seminar at G2E, one major operator talked aggressive, one downsizing and a third hopeful.
“If we had to do it over again, we might not have feared CityCenter as much as we did,” said Bill Clifford, chief financial officer at Penn National Gaming (PENN). “CityCenter is a great convention center, but it struggles with tourism and travel. Plus we didn’t have Ohio back then.”
“We cut back our operating costs from one-third to one half,” said Steve Manzanares, the CFO and vice president of Treasure Island. “We evaluate our payroll on a daily basis.”
“We’re opening up in 28 days,” said Jeff Burge, chief financial officer at Cosmopolitan. “That’s the last one for awhile.”
Clifford called Penn National, “one of the most inquisitive companies in the U.S.,” in describing their successful bid at the M resort and their failure to bailout the troubled Fontainebleau.
“We don’t own the [M] property, but we paid $230 million of which $20 million was cash,” Clifford said. “It’s like by boss Peter Carlino says, ‘if you want to get a deal done, it’s about saying yes.’ “
And, M Resort did say yes to Penn National.
“The balance sheet was in our favor,” Clifford said. “We were able to buy debt. When it comes to acquiring properties these days, you need cash at the door.”
Clifford admitted that Penn National is rarely successful in buying companies because company policy is to take a position and stand firm.
“We drew a line in the sand for our price on the Fontainebleau and stopped,” Clifford said. “Others in our position may not have backed off, but we did. You don’t gain by upping a cash offer. It comes by customer satisfaction. We focus on margins, economic opportunities and marketing expense. While others are upgrading, we are reducing payroll and adjusting our staff.”
Manzanares said that Treasure Island also needed to scale back in order to make the improvements needed to be successful.
“We were physically connected to the Mirage,” he said. “We co-existed for about a year and then broke off. It was a bit of a culture shock going from MGM ownership to Phil Ruffin, but our new boss is very fair.”
Manzanares said Ruffin’s $750 million purchase price for Treasure Island would never have happened today.
“We would do it for less today,” he said. “Value now is about getting the most you can from capital and players on property. At MGM, we evaluated payroll monthly. Now under Ruffin, we do it daily.”
Burge, the former vice president of finance at Las Vegas Sands Corp’s (LVS) Palazzo and Venetian, credited Deutsche Bank for taking over the foreclosure and allowing the $3,9 billion Cosmopolitan to proceed with plans to open in early December.
“Cosmo is similar to Palazzo in that it’s only on eight acres with 3,000 rooms and a 9,000-sq. ft casino,” Burge said. “It’s a vertical hotel dead center of the Strip with 3,800 people on staff.”
Deutsche Bank paid $1 billion to acquire the project at a foreclosure sale in August 2008. The Cosmopolitan was scheduled to open in September 2010. It is located between MGM Resort’s CityCenter and Bellagio properties on Las Vegas Boulevard.
Andrew Zarnett, Deutsche Bank securities managing director, served as the moderator for the panel.
“I’ll let Mr. Burge speak about Cosmopolitan,” Zarnett said. “I think the panel [participants] are leaders in the CFO field in what has been two straight years of volatility.”