Outlook for Tropicana less certain

Dec 14, 2004 6:27 AM

Paul Rubeli’s unexpected departure as chief executive officer and chairman of Aztar Corp. puts a big, bright light on the company’s long-standing reluctance to redevelop its Las Vegas property.

Plans for the Las Vegas Tropicana will probably remain on the shelf. That’s unless the company is sold or there’s a dramatic rethinking of Aztar strategy.

MGM, Mandalay and Steve Wynn have collectively built more than 30,000 hotel rooms and added countless attractions and examples of entertainment architecture since Aztar and its predecessor last did anything significant in Las Vegas.

Rubeli’s pending departure and the naming of his hand-picked successor, Chief Financial Officer Bob Haddock, a man with ZERO operations experience, does not bode well for the likelihood of action in Las Vegas.

Haddock seems unlikely to veer from a company tendency in Las Vegas that has been characterized by caution rather than enthusiasm.

Where MGM and Harrah’s have embraced all the good reasons for moving forward, Rubeli has seen discouraging challenges.

Rubeli’s made no secret of his distaste for the pending merger of MGM and the Mandalay Resort Group. He thinks it has the potential to create a decidedly hostile operating environment for smallish stand-alone facilities such as his own.

Another issue working against Aztar expansion in Las Vegas right now is the higher price of construction. A year or two ago the company anticipated spending roughly $750 million on a property that was expected to produce roughly a $100-$125 million in annual cash flow.

Revenue models were based on casinos such as Paris, Treasure Island and New York-New York. But the soaring cost of construction means $750 million will no longer buy the same "statement" it once did.

Also, if you tear down the existing Tropicana to create a new property, the company would be left with nothing at all on the Strip for several years — a time when global interest in Las Vegas has never been hotter.

Aztar’s lack of a presence on the Strip would dilute the marketing power of the recently expanded and bigger than ever Tropicana in Atlantic City.

All this must look like discouraging news to a company that doesn’t take much to get discouraged, where its assessments of Las Vegas are concerned.

Aztar execs were not available for comment in the wake of Rubeli’s unexpected announcement.

Here ”˜n’ there

”¡ It’s hard not to like the idea of Las Vegas being home to major league baseball, possibly the Florida Marlins, but a veteran gaming exec confides, "It isn’t gonna work. Some of the casinos will make sure it doesn’t work. What do they want with a pennant contending team pulling thousands of people a night out of the casinos?"

”¡ The late Mirage Resorts super host Charlie Meyerson was one of the best of the good guys, a personality and talent who understood that after all was said and done, success depended on getting people together. Steve and Elaine Wynn and Meyerson’s long-time friend Marc Schorr, who heads Wynn Las Vegas, attended funeral services back East.

”¡ Look for Jack Binion to be something of a catalyst in jump-starting high stakes poker at Caesars Palace, once the Harrah’s ownership has been approved.

”¡ Colony Capital is way behind schedule in launching improvements it promised months ago at the Las Vegas Hilton. Current priorities there include work on the mammoth Hilton Center, where some convention customers have complained about the lack of upkeep. In fairness, Colony faces the difficult task of "rehabbing" a property that did not get much attention during the last several years in the hands of its former owner.

From the sign of the times department: Everyone’s looking for an attractive niche, including casinos such as the Rio, which has scheduled a Dec. 27 opening of The Ultimate Girls Night Out, a 400-seat theatre that will be home to the Chippendales male revue.