Dot-com gamblers sets sights on Vegas with the Golden Nugget

13.04.2004, Lesen Sie hier den Bericht über «Dot-com gamblers sets sights on Vegas with the Golden Nugget».

Dot-com millionaires Tim Poster and Tom Breitling knew how to get a deal at a hotel-casino and book flights to Las Vegas, but were far less expert about the gambling business. Yet the entrepreneurs have transformed themselves into gaming executives with the purchase of downtown Las Vegas' famed Golden Nugget.

Poster and Breitling, who founded and later sold the travel Web site Travelscape, bought the hotel- casino and the Golden Nugget in Laughlin, Nev., in June, paying $215 million to MGM Mirage. The pair hope to restore glamour to the Golden Nugget brand with high-end gamblers, a Fox Television reality show called The Casino, and headliners harkening to the days of Frank Sinatra.

The Golden Nugget is already a successful operation, but with its location in the faded downtown area, far from Las Vegas' glittering Strip, it is at a disadvantage compared with megaresorts such as Bellagio and Mandalay Bay. So it's a risky proposition for two young mavericks with limited casino industry experience.

In his office at Golden Nugget, Poster waved aside any doubts. Like famed casino developer Steve Wynn, who once owned the Golden Nuggets, Poster said he took chances. "I always fancied myself as a gambler," the Las Vegas native said. "I come from a family of gamblers. In my previous business... we took risks all the time."

That business, Travelscape, specialized in discount prices in hotel reservations and air-hotel packages. Poster, 35, and Breitling, 34, sold it to Expedia for about $105 million in 2000, before the dot-com crash.

In 2003, the two began raising money to buy the two Golden Nuggets. They eventually secured $175 million through a debt offering and loan, plus $50 million in equity. As part of the equity, the two staked $37.5 million of their own money and persuaded tennis star Andre Agassi and former International Game Technology chairman Chuck Mathewson to invest $5 million each. Former Expedia executive Rich Barton also sank $2.5 million into the venture.

Poster and Breitling needed to assure skeptics that gambling novices could run big-time casinos. So they persuaded senior management at the casinos to stay under lucrative contracts. So far, they have gotten a good reaction in financial circles. "These guys are fired up," said Marc Falcone, a Deutsche Bank gambling analyst in New York. "They have an energy level that hasn't been seen in this business in a long time."

But state gambling regulators were uneasy. During a tense public hearing before the Nevada Gaming Control Board in January, it was revealed that Breitling and Poster had associated with Rick Rizzolo, whose strip club was raided by the FBI last year and who is under investigation for possible ties to organized crime. In the end, Poster and Breitling received a limited gambling license from the Nevada Gaming Commission. "It was an intense process," Breitling said. Poster would say only: "I'm not embarrassed about anything I've done."

The commission also told them to strengthen their board of directors with people other than friends - people who know how to run a casino. With licensing behind them, the new owners began running the company about two months ago. Poster, who once served on the board of directors for Station Casinos, handles the gambling side, while Breitling manages the rest of the operations.

The Golden Nugget Las Vegas is considered the jewel of downtown with 1,907 hotel rooms and 2,800 employees, the largest of the 14 hotel-casinos in the downtown area. Unlike some of its neighbors, the casino hasn't fallen into a state of disrepair - MGM Mirage spent about $35 million renovating its rooms, restaurant and convention area before the sale. "The Golden Nugget has been a successful operation for years," Breitling said. "That's one of the things that attracted us."

Part of the pair's strategy recalls Las Vegas' past, when big-name acts were among the biggest draws. The Golden Nugget's grand opening weekend March 5 to March 7 featured performances by Tony Bennett and Grammy Award winner Jewel.

To cement their gambling strategy, Poster said he has reached a deal to replace coin-operated slot machines with more modern ones, an important change because slots dominate the casinos' revenues. Betting limits have been increased, and Poster said he has hired two well-known casino hosts away from Strip properties to reel in high rollers. He hired a third who used to work for Wynn. "Customers are loyal to the host more than the property," Poster said. "We operate under the old Vegas formula: This is a casino first and a hotel second."

But there is a risk for investors - if big-time gamblers win, like the million-dollar players Poster is courting, the casino's earnings can suffer. "Without a more diversified portfolio like MGM Mirage had, Poster's strategy to attract higher-end gamblers with higher table limits and higher credit lines could be risky given their financial profile," said John Mulkey, a Bear Stearns gambling analyst in New York. But, Mulkey said, the "strategy so far seems to be working." And then there is the reality television show The Casino. Breitling and Poster both hope the show, scheduled to begin airing June 8, turns the downtown casino into a hot spot when it premieres June 8. The Casino follows Breitling and Poster in their first months of running the Golden Nugget. Poster said they didn't have creative control over the series, although nothing will be shown that could jeopardize their gambling license.

But they don't know yet how the series will turn out. "I don't know what to expect," Poster said.

		
 
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