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Pinnacle puts Bahamas hall on the block

Sep 9, 2008 6:59 PM

Gaming Insider by Phil Hevener | The gambling business is not for every place or, for that matter, every company, as Pinnacle Entertainment CEO Dan Lee explained.

Wanna buy a casino? A nice small little place and what a location – right there in the sunny Bahamas.

Casino companies are usually loath to declare that they plan to sell anything, figuring it is bad, bad, bad policy, but in this case Las Vegas-based Pinnacle is running with an upfront explanation of its plans.

Pinnacle shut down the table games at its small casino on the island of Exuma at of the end of August as it looks for a buyer and even considers a possible closure. The slots will continue in operation, at least through the end of the year.

What brought this on?

Lee says the casino is "practically surrounded" by a Four Seasons and the hotel company had asked Pinnacle to take a shot at operating the casino. At first glance the deal looked like a slam dunk, Lee figuring, how could it miss?

"We thought, if the people staying in the Four Seasons hotel gamble even a little bit per night, we can make money … The owner of that hotel owns quite a bit of land and had plans for the development of additional hotels on the island. They had sold a lot of home lots along their beautiful golf course and they built a marina. And so we thought, well, when the marina opens, we’ll have boats; when the houses get built along the golf course, we’ll have people vacationing in those houses, there will be other hotels and so on."

But then reality hit.

"We found out," Lee says, "that the average person that stays at that Four Seasons actually gambles very little. I think they spend all day golfing or at the beach and they’re sunburned at night and then they go to bed. And when we bring gamblers down there, we find out that the Four Seasons wants to charge us retail, and sometimes we can negotiate a little better price, but …"

The numbers have not improved. The actual owner of the hotel (Four Seasons operates but does not own it) is in receivership.

"And the other hotels and the other developments don’t seem to be happening. And then I think with the economy being what it is … and frankly, just kind of looking around the pool at the Four Seasons, it seems like a large part of the customer base had one foot on Wall Street, if not two feet. They looked like a lot of people who worked long hours and weren’t afraid to spend $10,000 on a weekend with the family."

They had done their gambling at the office.

Lee says the occupancy of the Four Seasons has "slipped quite a bit in the last couple of months."

Which had Pinnacle strategists considering their options, eventually deciding there was little chance for the casino making a profit in the foreseeable future.

Lee concluded, "It’s a difficult thing to manage because it’s not easy to get to. Maybe this more properly belongs to somebody who’s based in the Bahamas. And so we’re going to look to possibly sell it for whatever we can get for it. If we can’t get it sold, we’ll probably simply liquidate it."

And that will be that as Pinnacle moves on.

Private salons

Changes intended to make private gaming salons much more user friendly will be reviewed Sept. 17 at 10 a.m. during a meeting in Las Vegas before the Gaming Control Board.

It’s hard to say what the final rules will look like but the proposed changes are intended to snip through a lot of the red tape involving Control Board supervision, minimum bets and the process for seeking Board permission a private salon.

Private gambling is necessary for casinos reaching out to the wealthy gamblers who are accustomed to gambling behind closed doors in jurisdictions such as Macau and even some of the Indian casinos in California.

One proposal for change has the Control Board chairman deciding on a case-by-case basis what the minimum bets in the salons would be. But the counter argument to such thinking is that the chairman should not be in a position to affect the levels of competition between casinos.

The private salons were originally seen as tools to attract foreign high-rollers but the proposed changes to be reviewed next week appear to strip the current regs of any reference to their use as an "international marketing tool."