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May. 15, 2008
Copyright © Las Vegas Review-Journal

Off-Strip hotels push harder

Hooters, Hard Rock, LV Hilton spend more on promotion to draw patrons

By ARNOLD M. KNIGHTLY
REVIEW-JOURNAL
HOOTERS HOTEL

• Net loss $2.2 million, a 22.4 percent decrease from $2.8 million in 2007.

• Revenues $16.1 million, a 6 percent decrease from $17.1 million in 2007.

• Cash flow $3 million, a 20.8 percent increase from $2.4 million in 2007.

• Casino revenues $6.4 million, a 4.6 percent increase from $6.1 million in 2007.

HARD ROCK HOTEL

• Net loss $22.6 million, a 62.5 percent increase from $13.9 million in 2007.

• Revenues $40.6 million, a 3.3 percent decrease from $42.1 million in 2007.

• Casino revenues $13.7 million, up slightly from 2007.

LAS VEGAS HILTON

 • Net income $6.6 million, a 5.7 percent decrease from $7 million in 2007.

• Revenues $80.6 million, a 1.7 percent increase from $79.3 million in 2007.

• Casino revenues $26.4 million, a 2.4 decrease from $27.1 million in 2007.

*All numbers are for the first quarter ended March 31


Construction continues Wednesday on the Hard Rock Hotel's pool area and new tower; the work is part of a $750 million renovation, scheduled for completion in mid-2009. In a regulatory filing, the Hard Rock Hotel said its quarterly net loss widened from a year earlier.
Photo by Craig L. Moran.

Three off-Strip properties are addressing the economic pinch by increasing promotional spending, although they are taking separate approaches to cost-cutting efforts.

Hooters Hotel, Hard Rock Hotel and the Las Vegas Hilton increased promotional efforts to help drive customers to their properties during the first three months of the year, filings with the Securities and Exchange Commission during the past week show.

Hooters Hotel increased promotional expenses 24.5 percent, cut operational expenses 10.2 percent and slashed room rates 11 percent from the first quarter last year.

The property, which is a block east of the Strip on Tropicana Avenue, plans to save as much as $500,000 per month on operational expenses this year. The company said it began cutting payroll last year, but didn't say exactly how.

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    • "The reduction that began in the fourth quarter 2007 played out in the first quarter of 2008," Chief Operating Officer Gary Gregg said during a conference call Wednesday with investors.

    The property posted a net loss of $2.2 million while revenues fell 6 percent to $16.1 million from $17.1 million in 2007. However, cost reductions helped trim the loss by 22.4 percent from $2.8 million in 2007.

    Gregg said the combination of decreased expenses and increased gaming revenue, which bucked market trends by climbing 4.6 percent to $6.4 million, has positioned the property well "when the pressure comes off the discretionary or entertainment dollar of the consumer."

    Hooters Hotel also cut average daily room rates by 11 percent, $80 per night compared with $90 per night last year, hoping hotel visitors would spend the savings in the casino. Hooters Chief Financial Officer Deborah Pierce said during a conference call that the hotel is following the Las Vegas trend of cutting rates to attract visitors amid the soft economy.

    Room occupancy was 87.9 percent for the quarter, down from 91.3 percent a year earlier. However, Pierce said the poor occupancy was driven by a poor January with the hotel at 96 percent occupancy in February and March.

    Separately, the Hard Rock Hotel is contending with challenges beyond the economy.

    A $750 million renovation, scheduled for completion in mid-2009, is under way and is causing disruptions at the property.

    "We started to move some dirt and the parking lot is pretty full with construction vehicles," said Richard Szymanski, chief financial officer of Morgans Hotel Group, the property's co-owner. "Having said all that, we actually did better in the market than a lot of our competitors."

    Although the property increased promotional expenses 33.4 percent, its quarterly loss was driven by a 15.4 percent increase in interest expenses and deferred financing from the property's acquisition in February 2007.

    The hotel-casino reported a net loss of $22.6 million, a 62.5 percent increase from a net loss of $13.9 million in 2007.

    Revenues fell 3.3 percent to $40.6 million from $42.1 million.

    The revenue decrease against a 1.8 percent increase in operating expenses contributed to the overall loss.

    Casino revenues for the quarter rose 0.7 percent to $13.7 million from $13.6 million.

    The property has also begun a new advertising campaign in local magazines and on billboards aimed at local players.

    The hotel-casino, which is owned by a joint venture between New York-based boutique hotel operator Morgans Hotel Group and investment bank DLJ Merchant Banking Partner, cut average daily room rates by 4.1 percent to $184.40 per day from $192.30 per day.

    Revenue per available room slid 4.2 percent to $173.41 per day from $180.99 daily. Occupancy was flat at 94 percent.

    "Most of the reports for the market are 6 (percent) to 8 percent (declines)," said Szymanski during Morgans' earnings call on Friday. "We performed fairly well."

    Of the three properties, the Las Vegas Hilton was the only one to report positive income for the quarter, although income dropped slightly due to a 9.2 percent increase in promotional expenses.

    The property's first-quarter net income was $6.6 million, a 5.7 percent decrease from $7 million a year earlier.

    Revenues increased 1.7 percent to $80.6 million from $79.3 million; expenses increased 3.2 percent.

    The hotel-casino reported a 6.4 percent increase in room revenue due to "an increase in occupied room nights," but it did not release specific room occupancy or average daily rates, according to its filing.

    Casino revenue in the quarter dropped 2.4 percent to $26.4 million, food and beverage increased 6.8 percent to $21.5 million, and room revenue increased 6.7 percent to $34.7 million.

    The property, which did not hold a conference call on its earnings, is owned through a joint-venture between Los Angeles-based real estate investment trust Colony Capital and New York-based Whitehall Street Real Estate Funds, a Goldman Sachs affiliate.

    All three properties are privately owned but have to report their earning to the Securities and Exchange Commission due to publicly held debt.

    Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.



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    David wrote on June 14, 2008 04:45 AM: Las Vegas Shall return!Bigger and Better!


    Hooters wrote on May 15, 2008 05:57 PM: It is no secret why Hooters is losing money. About a dozen of my out-of-towns friends booked rooms over there before telling me. I did a quick drive over there and found it a toilet stinking of cigarette smoke. I promptly informed them and they rebooked a one of the Coast properties for a football playoff weekend


    William Fisk Harrah wrote on May 15, 2008 08:05 AM: Gary Loveman has ruined the once CROWN jewel of the gaming industry, and lined his pockets with the sweat and blood of every loyal employee who was proud of the company they worked for. Now they are even changing it's name from Harrah's Entertainment to Caesar's Entertainment. Phil Satrie shhould have never brought this FAT professor into the business.


    Arthur Baker wrote on May 15, 2008 07:10 AM: It's amazing to see Stations Casinos screwing the locals more and more. The Jumbo Jackpot starts at 50G now-used to be 100G. The payout for playing when it hits used to be 50 bucks and is now 25 bucks. But they reap what they sow-Sunset Station was called a "cash cow" in the RJ a couple of years ago-but now, the only time they are busy is when they are giving away Chinese junk on a Saturday. I have a friend who is a big gambler-Chairmans card-and she told me that she seldom goes there anymore. Rotten payouts. But hey-the Fertittas took it private, so they can do whatever..But don't forget Terrible's, Tilman-you may end up in the same bed.


    AP wrote on May 15, 2008 06:24 AM: Basic supply and demand principles...The hotels were running in the high 90's for occupancy...they didn't need to give deals.


    Michael wrote on May 15, 2008 06:19 AM: The only off strip one that is truely marketing hard to locals is the Palms. Unlike every other place in town, the freebies have increased, machine payouts remain tops. Strip or off, that's the #1 place to be playing. By contrast, Station keeps cutting by the day. Payouts, staff, food quality, player club freebies, etc. Marketing has been changed with each property doing it's own uncoordinated hit & miss promotions. Earnings are tanking as a result.

    The strip properties have an odd approach to marketing. In the boom period with 100% occupancy & big wait lists, they spend gazillions on marketing. Now recession, they cut it. That's backwards!


    James Martin wrote on May 15, 2008 03:59 AM: I love Vegas, but hold no sympathy for the big hotels struggling to fill their rooms right now. A year ago, my girlfriend tried to put together a Vegas trip for her social club that would have brought 30-40 vacationers to sin city during late May/early June of 2008. Many of them would have been first timers, with good potential for repeat business. She ran into one roadblock after another. At first, none of big strip hotels were interested in making her an offer ("too early" !?). They all told her to call back late in the year and they could give her a better idea of what kind of price they could offer(greed). Meanwhile, the members in her club were hoping to have some idea of the overall cost of trip. When she called back late in the year, some still wouldn't offer her a price, while others offered ridiculous prices that we new were out of whack with the time of the year that she wanted. She wasn't about to agree(with deposit) to prices that were 3 to 4 times the rate that she knew would be available as the time got closer. She couldn't in good conscience, recommend the exorbitant rates to her friends and also have to worry about the backlash when they saw the prices come down as their vacation dates got closer. She finally threw in the towel on the trip, vowing to "never try that again". Fast forward to now and you'll find many of the same desirable strip hotels "begging" people to stay by offering reduced prices with perks added on. Sad part is if she tried to set something up again for next year, she'd run into the same problem.