If we (you, me, everybody) had a dollar for ever time we heard a rumor that Harrah’s Entertainment was putting The Rio on the block, we could pool enough moolah to amortize CEO Gary Loveman‘s recent $100,000 pay cut. Our collection plate just got a buck richer today.
This rumor could, however, be the real deal — not least because it comes from Bloomberg reporters Beth Jinks and Jonathan Keehner. It would seem that Harrah’s acquisition of Planet Hollywood has made The Rio redundant and Loveman is trawling for offers. The half-billion-dollar asking price would effectively negate the debt assumption that went into the Planet Ho purchase. However, it also (at 8X EBITDA) presumes an annual Rio cash flow of roughly $63 million, a figure of which I would be skeptical, not least because Harrah’s no longer deigns to break out individual-property results.
The good news is that Starwood Capital Group, which is currently trying to purchase Extended Stay Hotels out of bankruptcy, is one prospective bidder. Starwood’s portfolio emphasizes leisure and hospitality properties.
The bad news is that the other named bidder is — Oh no! — Colony C[r]apital. Now that James Packer is out of the U.S. casino industry, Colony CEO Tom Barrack (still being plucked like a chicken by the wily Fertitta Brothers) inherits Packer’s dubious mantle of being the sector’s worst investor. He’s already had Resorts Atlantic City taken away from him by creditors and the comparably indebted Atlantic City Hilton may soon follow. S&G doesn’t know if Barrack’s Las Vegas Hilton is experiencing similar problems but the recent incidence (corroborated by two highly credible patrons) of charging $25 to park your own car suggests LVH financial desperation of a high order.
The silver lining of a Barrack buyout is that he would probably hire newly formed Fertitta Gaming to run it for him, making it a de facto arm of Station Casinos — and bringing the Fertittas closer to the Strip than ever. (Given Barrack’s apparent lack of gaming-industry savvy, it’s entirely possible he’d just flip it to Station in return for some wooden nickels and a free spa treatment.) That would certainly be preferable to entrusting The Rio to Barrack’s right-hand casino man on the East Coast, the obstreperous Nick Ribis.
Since Barrack has a history of either A) overpaying, B) overleveraging or C) doing both, you’d have to regard him as the early favorite in this race. What doesn’t compute is why Harrah’s would shuck one off-Strip property at the same time co-owner Texas Pacific Group is conducting a panty raid on debt owed by the Palms. Where’s the sense in ditching one casino at Flamingo and Valley View, just to trade it for another (plus unsellable condos)?
Is Loveman trying to rid himself of the most famous/notorious Vegas acquisition made by predecessor Philip G. Satre? This wouldn’t be the first time logic and Harrah’s corporate strategy intersected to form a null set. At least a sale-in-progress would finally give Harrah’s an official excuse for its ongoing neglect of The Rio.
Chickenomics, cont. It seems that at least one other media outlet has been pondering the corporate ramifications of Pioneer Gambling Hall co-owner Sue Lowden‘s proposed chicken-based economy. Across the pond, The Economist offered these musings …
It’s not clear how far Ms. Lowden wants to take this idea of widening the barter economy, but it could have far-reaching ramifications, not just for health care reform but for financial-sector reform as well. For example, payment in kind would eliminate many of the risky innovations that led to the financial crisis. It would be virtually impossible to structure a chicken-based CDO; sure, you could find buyers for the breast tranche easily enough, but who would take all those necks and feet? Leverage rules become much less necessary when you can only hedge with items that actually exist; it’s hard to imagine the notional value of chicken-based hedges greatly exceeding the number of actual chickens on the planet. And all this could be accomplished without any new taxes.
Works for us.
Looks like you were right about that paint(or lack there of)
job at the Rio.
Jim, if you think that’s bad, you should see what’s become of the fading Paris-LV “balloon.” It’s a sad sight.
The tip that I’d read was from http://associatedcontent.com
(enter Penn National in the SEARCH)
Penn National has wanted into to Las Vegas market, was bidding on Fontainesbleau and lost, so they submitted a bid to Harrah’s for the RIO. My RIO employee friends said their supervisors had told them there were BIG things coming to the RIO soon…A floor managaer friend said he’d heard a press release might be out by April 1st confirming to deal…THAT DIDN’T HAPPEN…another inside
friend thinks it will be mid summer before and announcement is
made…RUMORS RUMORS RUMORS (but I bet Penn gets it…)
I would like for you to expound on the $25 to park at LV Hilton. Is that what’s next for Vegas? Paying to park at the casinos?
I don’t know how great the incidences are yet. At least one of the CityCenter hotels charges for valet parking. Paying to self-park is a mostly Downtown phenomenon; this is the first I’ve heard of it creeping onto the Strip. Taken in conjunction with the $5 cover charge to have dinner at B.B. King’s (which is somewhat capriciously applied), it suggests that properties are becoming more “creative” in their attempts at extracting every last dime from the customer’s pocket.
I just can’t believe any rumor about PENN in Las Vegas. It makes me feel like Charlie Brown and the football that Lucy is holding.
Jeff in OKC is correct about PENN. They probably offered $200 million or so for the Rio. Maybe they should buy a resort in Laughlin. That’s more their market anyway. Maybe billionaire Neil Bluhm should buy it. If not, Gary Loveman should put the Rio up for bid on ebay (I’m kidding). The Rio was great in the 90’s. It’s sad, that place was alot of fun.
It’s not unheard of to pay for parking at the Hilton (or Riviera) when there’s a large convention at the LVCC like CES or NAB.
I think the $25 parking fee at the LVH only comes into play during major conventions. They’re trying to keep people from parking at the hotel for free when the convention center is charging $10 or so.
If you get a locals “Hot Spot” sticker on your slot club card, then parking (even valet if not full) is free.
From Kevin Lewis (deleted accidentally):
“I assume that Gutboy Barrelhouse’s cash flow projections for the Rio are based on blackjacks paying even money, slot machines paying off in candy bars instead of money, a 25% rake on all poker games, a $20,000 entry fee for the WSOP Main Event, 50% of which is kept by the house, the number eleven on the come-out roll being a loser instead of a winner, and (oh yeah!) people being fitted with meters at the Rio Buffet and having to pay by the ounce.
“I am, however, touched that Gutboy is taking a pay cut, and is now only making 2.3 million/year, rather than his previous 2.4 million, as payment for his pivotal role in running a couldn’t-lose casino franchise into the ground. And the funny part of it all is, he and the other top bozos at Harrah’s don’t think they’ve made any mistakes at all, as if quintupling the price of gambling at all their casinos was a smart savvy move that could never possibly affect their customer base.”