Sunday, May 8, 2011

Atlantic City's Resorts Casino tries ambitious overhaul

Sunday, May 8, 2011


In Resorts Casino Hotel's Superstar Theater, a rotating disco ball bathed the crowd of middle-aged women and senior citizens in dazzling shards of light as David Cassidy sang the Partridge Family hit I Think I Love You.

  • Efforts are being made to win back business at the nation's first casino to open outside Nevada, one that came within days of closing last winter.

    By Mel Evans, AP

    Efforts are being made to win back business at the nation's first casino to open outside Nevada, one that came within days of closing last winter.

By Mel Evans, AP

Efforts are being made to win back business at the nation's first casino to open outside Nevada, one that came within days of closing last winter.

Around the corner at the buffet, a simulated flash mob dressed as casino workers suddenly appeared, dancing around — and sometimes on — diners' tables while singing OutKast's Hey Ya!

These events marked two extremes of an effort aimed at the same goal: to win back business at the nation's first casino to open outside Nevada, one that came within days of closing last winter.

Rebuilding Resorts is proving to be a difficult, expensive proposition, even as it shows initial signs of success. The casino is handing out wads of cash to new customers, its hotel rooms are cheaper than discount motels during the week, and it's entangled in lawsuits with the former owners, a utility company who briefly cut off heat and air conditioning over a half-million-dollar unpaid bill from the old owners, and several cocktail servers who were fired after it was determined they didn't look sexy enough in revealing new costumes Resorts is making them wear.

"It's a great thing to bring additional business in, but you can see how costly it is for us," said Dennis Gomes, the veteran casino executive who bought Resorts with New York real estate magnate Morris Bailey. "The benefit is for the long term. Believe me, it's stressful."

Bottom line: the casino is still losing money, just not as much as before. Gomes predicts Resorts could turn its first monthly profit under his management in July, and expects to break even for the year.

When it opened its doors on May 26, 1978, Resorts became the nation's first casino outside Nevada. For years, it was fantastically profitable. But as more and more casinos opened in Atlantic City— there are now 11 — Resorts' share of the market fell. By the time casinos started opening in the Philadelphia suburbs in late 2006, Resorts was already in a steep decline, an afterthought for all but the bus-riding senior citizen slots player that remains its typical customer.

Gomes has a long career in the casino industry, with management jobs at the Tropicana Casino and resort (where he famously made a tic-tac-toe-playing chicken into a top draw), Trump Taj Mahal Casino and Resort, the Golden Nugget in Las Vegas, and Hilton Nevada's properties. And his tenure as Nevada's top casino corruption investigator was chronicled in the 1995 Martin Scorsese film Casino.

So when Resorts' previous owners, the Los Angeles hedge fund Colony Capital LLC stopped paying their mortgage and turned the casino's keys over to their lenders in 2009, Gomes saw an opportunity where others saw a money pit caught in a death spiral. He and Bailey, who had tried to open a casino in Pennsylvania, bought Resorts for $31.5 million, a fraction of the $140 million Colony paid for it in 2001.

The first thing he did was slash expenses, mostly payroll. The 2,000 workers on the payroll were all made to re-apply for their jobs. Ultimately, more than 200 were laid off, and nearly 500 others had their pay slashed by as much as 52%.

When Gomes took over, it soon became clear just how far things had fallen at Resorts. The casino's revenue from slot machines and table games was down 19% since the beginning of the year; it was taking in less than $436,000 a day, compared with $538,000 a day a year earlier, ranking it 10th out of Atlantic City's 11 casinos.

Resorts posted a gross operating loss of $18.5 million last year, a worsening of nearly 41% from 2009.

"It was like a ghost town," Gomes said. "On a Friday night, there was nobody in this place. On a Saturday, it looked like what you would see on a weekday. It was totally depressing. I thought, "How the hell am I gonna fill this place up?' "

The first step was dreaming up a new identity for Resorts, taking what was widely considered a liability — the building is 90 years old and smaller than the most successful casinos — and trying to turn it into a plus. Gomes and his staff rebranded Resorts in a roaring '20s theme, in part to capitalize on the success of the hit HBO series Boardwalk Empire about Prohibition-era Atlantic City. Because the place was built in the 1920s, it didn't need a makeover to fit in perfectly with the new theme: the marble floors and polished brass fixtures are luxurious reminders of that bygone era.

By Mel Evans, AP

Blanche Morro, The Singing Bartender, pours drinks as she sings at Resorts Casino Hotel in Atlantic City, N.J. The popular Morro is part of efforts being made to win back business.

A strolling violinist was hired to serenade customers as they walk through the lobby, and a stilt-walker in a giant zoot suit reaches way down to shake hands and pose for pictures with bemused visitors. Blanche Morro, known as "The Singing Bartender," mixes drinks while belting out requests.

But the roaring '20s theme bought Gomes trouble when it came to the revealing flapper costumes that the cocktail waitresses soon must wear.

Fifteen female servers were fired after a modeling agency hired by Resorts determined they did not look sexy enough in the new outfits, and several of them sued, claiming age and sex discrimination. One of them claimed having to strip almost naked in front of female co-workers and squeeze into an ill-fitting costume for the audition "'was the most embarrassing thing I've ever had to do."

Gomes said the costumes are an indispensable part of Resorts' new image.

"We tell the employees it's like you're actors and actresses; you're performers and you've got to be onstage, helping customers feel like they've stepped back into the 1920s," he said. "If you took a survey, probably 70% would say this was done fairly, and that it should be the right of any business to try to maximize their profits. The fact that we offered (waitresses deemed unattractive in the new costumes) other jobs shows we were fair."

The next order of business was getting more bodies through the door, and Resorts opened the promotional spigots full-blast. It drove gamblers to the casino and back from New York City and Long Island in luxury mini-buses for $5. Hotel rooms went for $29 on weekdays during the winter. The casino gave away 150 free rooms to Philadelphia Phillies fans at a parking lot tailgate party before the team's season opener.

In keeping with the 1920s theme, Resorts prices its buffet at $19.20 seven days a week, including all-you-can-eat king crab legs and shrimp that still make Gomes cringe when he sees customers loading up their plates. And one of the casino's restaurants offers a full steak dinner for $2.99 after 11 p.m. — a meal that goes for $20 or more at other casinos.

One of the most successful promotions is also one of the costliest: Resorts will reimburse the first $100 of gambling losses for new club card members on their first visit. Gomes says the casino is adding 1,000 new card members a day, but won't say how many they have in total; that's information that casinos tend to closely guard for competitive reasons.

Resorts also is remodeling 480 rooms in its Ocean Tower. That's something Jake Brown of Alexandria, Va. feels is badly needed.

"Our room looks kind of old," he said during a recent visit. "The bathroom, especially. Old tiles, old tub. And the mattress is kind of hard, too."

But Garth Troescher of Bethany Beach, Del. liked his room.

"The price is right and the room was nice," he said. "I like when dealers talk to you a lot. They do that here."

The promotions are working, even as they deplete the casino's budget. Resorts posted Atlantic City's biggest increase in casino revenue in February, up 16.5% from a year earlier, and March, up 11.6%. Of course, some of that is due to having such a poor starting point in 2010. And much of the rest is due to the bargain-hunting nature of the Atlantic City casino customer, who wants the most comps and the lowest prices, and will abandon any place that doesn't deliver.

Many other Atlantic City casinos have given up on this approach, deciding it's simply too expensive to shower low-rollers with free food and drink, hotel rooms, show tickets or cash. Bob Griffin, CEO of Trump Entertainment Resorts, calls it "over-incentivizing our customers."

Gomes is well aware of this. He also realizes that at some point, Resorts will need to raise its prices to a level where it can make a profit. The trick is to do that without losing the customer base it has worked so hard to regain.

"Acquiring lost business is a lot more expensive than just maintaining your existing customer base," he said. "Once you get the people back, then you look to see where you're inefficient. It's a stressful and frustrating experience, but it's something you have to go through. If people like what they experience, they'll keep coming back."

Michael Pollock, managing director of Spectrum Gaming Group, a casino consulting firm, said Gomes knows how to attract new customers, then eventually wean them off the comp gravy train so that a casino can survive.

"He has experience doing precisely that," Pollock said. "You want to build brand loyalty amid a customer base that's notoriously fickle. If you can build a sense of 'home' for customers, it's not easy, but it can be done. But first, you have to get them into the building to try the product."

Despite the progress Resorts has made in rebuilding the business since December, it is still losing money.

"The revenues are doing great, but we are still experiencing losses," Gomes said. "Our improvement is the best in the industry, around a 40% operating improvement. But it's stressful during this period because losses are going to continue for a period. Everyone is calling me this turnaround expert, and I don't like that because I won't consider this a turnaround until we're making some good profits."

Nonetheless, many casino observers feel Gomes and Bailey bought low enough that if they can keep the doors open for the next four or five years until conditions improve, they could recoup their investment several times over.

"It could prove to be a very shrewd acquisition," Pollock said.

Gomes agrees.

"It could be incredible," he said.

Powered By | Full Text RSS Feed | Amazon Plugin | Hud Settlement Statement

View the original article here


Post a Comment