ACH-ooo!; The Admiral’s last voyage

For the second time in a week, Hilton Hotels & Resorts has stripped its name from a Colony Capital casino-hotel. First to go was the Las Vegas Hilton, to be known next year as [your logo here]. Today comes news that the Atlantic City Hilton is hauling down its flag. Immediately and for the foreseeable future, the Boardwalk property will be …

ACH! No, seriously, in a decision so bad it must have suggested by an extremely expensive consultant, the casino will just be “the ACH.” Guess they’re trying to sound like those hipsters who reduce everything to an acronym, no matter how preposterous (like billing a recent boy band-reunion tour as “NKOTBSB“). To me, ACH sounds like a condition about which you should see your doctor but the bottom line is that Hilton wanted its name off the place, stat. And ACH it will undoubtedly remain until somebody takes pity and buys the Hilton, although Colony is going to need to come down out of the $50 million-$75 million price range first.

For starters, how many millions is that Hilton name worth? Losing your “flag” is a black mark in the hotel industry, one that both franchisors and franchisees want to avoid. Industry sources tell me that Westin Casuarina owner Columbia Sussex has an extremely frayed relationship with its franchisors but, by the same token, a chain like Marriott doesn’t want to strip the flags from its largest franchisee (ColSux) if at all possible. Hilton’s drastic Atlantic City move tells you how low the “ACH” had sunk. Heck, since it’s on pace to lose over $25 million this year, can it even stay open? Was Hilton fleeing an impending PR disaster?

Hilton did not terminate its relationship with the LV Hilton with such extreme prejudice. But, to paraphrase Oscar Wilde, to lose one Hilton affiliation may be regarded as a misfortune. To lose both looks like carelessness. One can measure the severity of the news by the fact that Colony’s media-hostile Beverly Hills Sphinx, Owen Blicksilver was actually trotted forth to do damage control. (Hitherto, Blicksilver’s vocabulary has consisted of “No comment.”) Colony’s sitting on a ticking time bomb in the form of $250 million — plus a high interest rate — that comes due on Dec. 31, 2012. If there’s one thing that Colony has been unable to do in the casino industry, it’s make good on its loans and I’d put the chances of default at better than 50/50, barring a sale.

While both Hilton and Colony are at pains to paint the simultaneous Vegas/Boardwalk events as a big coincidence, the LV Hilton has been on a long, slow decline ever since Colony acquired the place. Its entertainment program consists mainly of acts no one else in town will touch, the closure of Star Trek: The Experience left a void filled with empty promises and, in a Marilyn Winn coup, Caesars Entertainment snatched away the annual Star Trek Convention. That’s literally thousands of customers lost at one fell swoop — patrons who spend heavily while on-property. The handwriting is on the Colony wall and Hilton obviously has no reading-comprehension problems.

How undesirable is “The ACH”? Even though the math isn’t very promising, the Seminole Tribe would rather spend $275 million in order to build a casino from scratch under New Jersey‘s new “boutique casino” rules, rather than buy what used to be Steve Wynn‘s Golden Nugget and have at least $200 million left to restore it to its former glory. The Hard Rock-branded project would be sited where the Curtis Bashaw/Wallace Barr $1.75 billion Atlantic Beach Resort & Casino was meant to go, at the Boardwalk’s south end (above). By its small-scale nature, it would probably obviate one problem with which the Bashaw/Barr failsino collided: Some of the megaresort-sized acreage wasn’t zoned for gambling.

Narrow margin. Considering that the Seminoles were tipped as budgeting the project at $450 million, it sounds as though analyses like this one may have had a sobering effect, hence the more Recession-friendly budget. However, Prof. David G. Schwartz isn’t backing off his Cassandra-like warnings, writing, “Paying fourteen times the price for less than one-quarter of the footprint [of Resorts Atlantic City] is beyond delusional.”

If you’re going to invest in casinos, do it on the Hong Kong stock exchange, where gaming stocks are experiencing astronomical growth. However, fears that Macao will nationalize casinos as concessions begin to expire in 2020 remain not only present but stronger than ever, favoring operators like Las Vegas Sands and MGM Resorts International who are diversifying into other parts of Asia. The situation in Macao reminds me of the fate of management companies (most recently Station Casinos at its Thunder Valley location) who derived a good revenue stream from providing their expertise … for a while. But once the indigenous population was up to speed on how to manage a casino, they sent The Man packing. At the very least, the Chinese government likes to remind concessionaires that — as Charles De Gaulle noted — the cemeteries are full of indispensable men … a pensée that I try to keep in mind on a daily basis.

S.S. Admiral, 1907-2011. It’s off to the scrapyard for an ancient riverboat that’s been an icon of the St. Louis waterfront for as long as I can remember. Pinnacle Entertainment couldn’t find any takers for the old gal on eBay, so she’s literally being sold for parts, some of which may find their way into other ships. Given the number of times the Admiral‘s been made over, excavating down to her keel must be like digging through the Seven Cities of Troy. As a casino, she was outmoded, as an excursion vessel obsolete but it’s a sad occasion, nonetheless.