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Loveman takes over Harrah’s as problems develop

Jan 7, 2003 6:05 AM

Dr. Gary Loveman, (the PhD. came from Harvard Business School where he taught before joining Harrah’s Entertainment Inc. (HET), nearly three years ago) took over the chief executive officer’s office last week only to find that he will have to address problems in Atlantic City almost immediately.

It appeared to be good news when the N.J. Casino Control Commission announced that only Harrah’s Casino in Atlantic City avoided negative results during the month of December. Over all, the city’s casinos showed a revenue decline of 9.7%. But, Harrah’s experienced an increase of 11.8% during the reporting period.

However, it was noted that Harrah’s was benefiting from a $113 million hotel and casino expansion in May and the addition of 500 slot machines on Dec. 23.

Analyzing the December numbers, Robin Farley, chief gaming analyst for UBS Warburg, noted that the Atlantic City property only grew its gaming revenues by $3.7 million. She estimated that the property would have to grow its gaming revenues about $4.5 million to $5.0 million monthly to get a 15% return on its expansion project.

But initially, the company will have to operate with 109 fewer slot machines because they did not replace or upgrade them before their 12-year regulatory life expired.

A year ago, the regulators warned the company that the aged slots needed to be addressed since a two-year-old regulation required that slot machines had to be replaced, or removed, following the 12th anniversary of their last approval.

Harrah’s officials said they had spent $38,000 to buy replacement kits from International Game Technology (IGT) but that the shipment of the kits had been delayed.

Loveman, who succeeded recently-retired Phil Satre in Harrah’s CEO position, has been recognized for his skills in labor economics and human resources. He was responsible for expanding the company’s "Total Rewards" program that has grown to 25 million users nationwide.

Trump on the march

Like Sherman marching on Atlanta, hotel and casino mogul Donald Trump is pushing his way through the political process to insure getting a riverboat gaming license from the State of Illinois.

Trump has lined up 11 communities in Southern Illinois to support his efforts for a license in the town of Crestwood. Whether that license would be the 10th non-functioning license originally designated for Rosemont or whether the legislature would change the law to permit an 11th license was not certain.

Actually, the consortium of towns plans to serve as the casino’s "host" community, sharing in the responsibility and the revenue regardless of which suburb actually becomes home to the casino. And, it won’t matter whether Trump is awarded the license or not. But, it was expected the "The Donald," whose casino interests include properties in Atlantic City, Gary, Indiana, and Southern California, would have a deal with the consortium locked up by the end of this week.

Working to thwart his efforts is the South Suburban Coalition Against Gambling Expansion, consisting primarily of private citizens who will point out the alleged problems associated with gaming.

Licensing delays

Business has been booming at the newly opened Seneca Niagara Casino in upstate New York despite complaints from patrons about the lack of workers on the casino floor.

The casino operators have been taking the complaints but the real hang-up has been with the state regulators who have developed a backlog of applications for licenses from prospective workers. Only about 75% of the applications have been processed, creating a serious help problem for the casino.

Coming to the rescue, however, have been those licensed workers who have been on the job since the property opened. Many of them have agreed to work 14-hour days and six or seven days a week to see the help problem through.

There has been a serious shortage of cocktail waitresses and slot machine mechanics to keep the gaming devices operating but the most common complaint was from anyone looking to be paid for a small jackpot. Some winners have had to wait as long as one hour to be paid.

Still the initial success of the new casino has been "awesome," in the words of Niagara Falls Mayor Irene Elia.

Best of Breed

Gaming industry leaders International Game Technology (IGT), Bally Systems, a subsidiary of Alliance Gaming Inc. (AGI) and Konami will co-chair the newly-formed "Best-of-Breed" technical committee of the Gaming Standards Association.

The association formed the technical committee to steer the definition and deployment of the protocol standard that will be the leader in the casino industry.

Representing the companies will be John Chamberlain of IGT and Jim Morrow of Bally Systems, who will co-chair the committee while Tim Britt of Konami will serve as technical chair.

In making the announcement, Peter DeRaedt, president of GSA, said, "The development of this standard is critical to the gaming industry. Having individuals of this caliber guiding this effort ensures the work will be first rate."

Quick profit maker?

Members of the New Mexico State Racing Commission who rejected a bid by Las Vegas gaming entrepreneur, have finally filed a report listing their objections to the application.

It all came down to their expressed belief that Shawn Scott, who reportedly sold a $10 million Louisiana racetrack for $131 million, was only interested in making a quick profit if he were granted the license to build a racetrack/casino in Hobbs, N.M.

Scott was one of three applicants. The other two were R.D. Hubbard, the owner of Ruidoso Downs whose gaming reputation was scarred by a major fine in Indiana, and Ken Newton, former operator of the defunct Downs at Santa Fe.

"Based on Mr. Scott’s pattern and practice," the report read, "the Racing Commission believes that it is more likely than not, that if given the license to operate the casino and racetrack in Lea County, that Mr. Scott will sell the license in the near future for a large profit without the state of New Mexico, Lea County and Hobbs deriving any benefit."

Scott currently has racing interests in upstate New York and Maine and purchased the closed Vacation Village Hotel/Casino in Las Vegas at auction.

Executive returns

Alan Goodenough, the former chairman of London Clubs International (LCI) and the person most responsible for the company’s ill-fated investment in the Aladdin Hotel Casino on the Las Vegas Strip, has resurfaced as a participant in the U.K.’s gaming industry.

The Aladdin’s bankruptcy severely crippled the LCI’s financial position and sent Goodenough into retirement because of ill-health.

To expedite its restructuring, LCI offered a deal to Stanley Leisure, the gaming group, whereby Stanley would take over LCI’s operations. The initial offer was rejected as insufficient and a deadline of Jan. 22 was given by LCI’s chairman, Michael Beckett, to come up with a decent offer or bow out of the negotiations.

Stanley Leisure said if it makes the deal it will sell off five of LCI’s casinos, including the ultra plush Les Ambassadeurs to Hg Capital, a private equity group that includes among its members, Goodenough.

Still to be heard from is South African gaming magnate, Sol Kerzner, whose company owns $15 million of LCI’s debt.

Track unity urged

Maryland Gov.-elect Robert Ehrlich, a stated proponent of issuing slot machine licenses to four state racetracks, is becoming frustrated by the lack of unity among track operators.

He already has put them on notice to get their act together if they expect legislation to fly.

So far, his words of warning seem to be falling on deaf ears. Meetings to resolve some of the existing problems affecting the tracks only seem to have exacerbated the feuds that have split the tracks over recent years.

Not only are the track participants — people like horse breeders, owners trainers and track operators — arguing, but even the tracks can’t decide which ones will get the slots. Ehrlich supports just four tracks — Laurel, Pimlico, Rosecroft and Cumberland. But others involved in Ocean Downs on the Eastern Shore and Timonium State Fairgrounds want in on the project.

Ehrlich, who plans to use the slot revenues as a means of cleaning up some red ink, will issue his legislative recommendation later this month.

The Insider

International Game Technology (IGT) will report the results of its first quarter of fiscal year 2003 on Wednesday, Jan. 22 at 11 a.m. PDT.

WMS Industries Inc. (WMS) has scheduled a conference call for Tuesday, Jan. 28, at 1 p.m. PDT at which time it will release its fiscal results for the second quarter of the current fiscal year.

Mandalay Resort Group (MBG) opened its Mandalay Bay Convention Center on Monday. The new convention site, built at a cost of $235 million, is being marketed as the fifth largest convention facility in the U.S.

Rhode Island Gov.-elect Don Carcieri is expected to favor an increase in gaming devices for Lincoln Greyhounds and Newport Jai Alai provided the state gets a bigger cut of the gaming pie.

A state-sponsored task form has determined that a casino in Maine would hurt the state’s harness racing industry and would shrink the state’s current lottery revenues. Also, the task force said the state lacks an adequate network of social services to assist problem gamblers that would result.

Carl Icahn’s Sands Hotel/Casino in Atlantic City has announced a cutback in employees of as many as 150 people because of a stiff decline in gambling revenues during the month of December. This will be the second major layoff in the past eight months.

It’s almost as if the general public didn’t care. Reviews of two environmental studies involving proposed casino in the New York Catskills has drawn no interest even though the casinos could attract more than 35,000 vehicles on a peak Saturday.

Citing changes in demographics, Ladbrokes, the English bookmaking firm, said it would close about 50 betting facilities throughout the country. The shops have failed to increase their turnover, according to company officials.

Facing a $1.2 billion budget shortfall, Illinois is expected to expand its existing gambling activities by possibly licensing a land-based casino in Chicago; increasing the number of riverboat casino licenses from the existing 10; adding gaming positions at the operating riverboats, or permitting the state’s track to install slot machines.