Atlantic City: Exit Pinnacle, turnover at Revel; Invading Japan

It took three years and a frightful loss ($239 million), but Pinnacle Entertainment is finally shot of Lee’s Folly, the Sands Casino Hotel site that ex-CEO Dan Lee bought for $270 million during the boom years … and which promptly went bust when Lee prematurely demolished the Sands, then couldn’t capitalize his projected megaresort. Pinnacle’s successor, Boardwalk Piers is entertaining a variety of uses for the land, including family oriented attractions. (It’s currently parkland.) However, given the advent of Internet gambling in Atlantic City, the Sands land becomes potentially viable for gambling again. Don’t be surprised if Boardwalk Piers floats a “boutique casino” proposal in the not-so-distant future.

Interim Revel Resort CEO Jeffrey Hartmann is on the way out, but it’s not how it looks. The “interim” on Hartmann’s title referred to his six-month contract, which is closing out soon. Hartmann’s a restructurer, a job that’s pretty well done now. He’ll step aside in favor of COO Scott Kreeger, a marketing exec late of Station Casinos. And marketing is definitely where Revel needs to put its dimes and nickels these days. Revenues have been up in July and August, but high ADRs ($151 on average) appear to be driving down occupancy (a poor 63%). You may think you’re the market leader in hotel product but it’s the market that will tell you whether you are. Revel needs to price those rooms to move.

Casino developers have been making investment promises to Japan that dwarf what they offered to spend in Singapore. And no wonder. When one considers that — without casinos — the annual gambling market in Japan is $192 billion, no wonder Steve Wynn’s mouth waters. Ditto for Lawrence Ho, who has publicly committed $5 billion to Japanese expansion. (Wynn’s peeps haven’t said how big their investment will be, just that it will be billions more.) Everyone’s banking on projections that Japan will be a $10 billion market right off the bat, at minimum, dwarfing Las Vegas, although well short of Macao.

The National Police Association, which benefits from pachinko parlors, looks dimly on the advent of casino resorts. However, pachinko is for the bread-and-butter gambler, a class that may either be banned or discouraged from attending Nipponese casinos. Unlike other Pacific Rim countries, Japan is considered well-advanced in anti-money-laundering technology. Ergo, it is attractive in ways that the Philippines and South Korea are not. Las Vegas Sands is so eager that it says it is “open minded” about taking on a local partner — although partnerships with Sheldon Adelson don’t usually end happily for the other guy.

The Melco Crown Entertainment CEO is saying all the right things so far: Tourists won’t come strictly for gambling, yadda, yadda. The prospect of a low-tax (20%, jurisdiction) also appeals to potential operators.