Vol. 4, No.10, October 2008
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Scott Butera
President and CEO, Tropicana Entertainment
Casino Connection: When you first came aboard, things were disorganized and chaotic in the company. Tropicana had lost its New Jersey license and other jurisdictions were looking into that situation. What was your first priority when you came on board?
Butera: You’re right, this was very much a troubled company when I got here, both operationally and financially. The biggest challenge we had was deciding what was the right step in turning this around. How do we break ourselves free from some of the things that have gotten us into trouble so we can start improving the operations?
For us, that was establishing ourselves in good standing primarily with the regulatory authorities we work with. Clearly, being in the gaming business and being a gaming operator is a privilege, not a right. We wanted to establish that we’re a company that could operate in good standing, that we could operate in compliance with regulatory authorities and with laws, we could produce accurate financial statements on a timely basis, and we could get our constituents comfortable so that they’d be a little bit patient. We knew we could improve the company so that we could finally start improving the operations.
That’s what we’ve been doing over the last three to four months and I think we’ve been fairly successful.
Did you realize right away that Bill Yung had to be removed from the company, and how did you accomplish that?
I think Bill Yung got in the situation because he obviously bought an asset at the height of the market. He paid a big price for Aztar, and to effect that transaction he leveraged the company significantly. Shortly thereafter, there was a fair amount of downturn in the operations. In order to save cash to be able to make debt service on the high leverage, he had to do a fair amount of cutting. A lot of that came through labor. That created issues with the unions in New Jersey, and I don’t think that the communication of why the company was doing what it was doing was as effective as it could’ve been.
We realized that we needed new oversight. In order to be in good standing, our regulators and our investors wanted to know that there were new people at the helm. We put in a new board with three quality individuals (Brad Smith, Tom Benninger and Mike Corrigan) and myself. We’re all highly experienced, credible people that have a much different perspective on the business. So do I necessarily think that from an operational and financial standpoint Mr. Yung leaving was critical? Only in the sense that we wouldn’t have the opportunity to be here unless that was the case.
Does Bill Yung or his son Joe, who always played a part in the company, have any role at this point?
No, they do not.
So they just own some equity.
They own equity in the company, technically. Mr. Yung signed an irrevocable proxy giving up most of his rights as an equity holder to either replace or add or affect that board. So the board is essentially governing the company right now. Mr. Yung does have an equity interest that will be resolved when we resolve the bankruptcy.
Let’s talk about the Las Vegas property. One of the first things you did here in Las Vegas was reach an agreement with the Culinary Union. Why do you think that was something to accomplish very quickly?
Our employees are our greatest asset; they’re the frontline with our customers, and I really view employees and customers as almost one and the same. Clearly your employees need to be energized and enthusiastic and respected in order for your operations to work correctly. Our culinary employees had been operating without a collective bargaining agreement for almost a year. It represents half our labor force, and it was just something that we needed to get corrected right away. I’ve had a good experience with the culinary union UNITE HERE when I was in Atlantic City with Trump. We settled with the union when everybody else actually had a strike, and that worked out very successfully for us.
When you look at an older property like the Tropicana that has some physical and amenity challenges, aren’t the employees that much more important?
Yes, much more important. It’s never about the building, even when it’s new. Think about how many hole-in-the-wall restaurants you go to because they have great food and great service, and how many $10 million restaurants with lousy food you never see again. We are going to be working on improving this building. We’re going to be improving the public areas. We started running a program called Mint Mondays, which is a pool party, and we’re going to be enhancing our pool.
We’re going to be enhancing our rooms. We are going to be making significant changes to the physical plan. Despite that, it’s always about the employees and their ability to cultivate customers and take care of them.
What are your short-term goals for this property?
We have an outstanding location. We have 34 acres, we’re two miles away from McCarran Airport, and as Las Vegas Boulevard continues to get more crowded, we think that’s going to be important. We obviously have a lot of development that’s going on just south of us, as you get past Russell Road and south of that. So we’re very excited about the location. What we’re going to be doing is making investments in this property with sort of a five- to seven-year horizon.
Obviously there’s a lot of new product that’s coming online in Las Vegas. Much of what’s being developed is going to be spectacular, but it’s very much at the luxury segment. I think there’s an opportunity at the value segment. We’re going to be investing to create a great, value-oriented experience on the Strip for people who want something that’s affordable; that caters a little bit more to gaming but also has great food and beverage. We’re really excited about it. We think the Tropicana has a great home over the next four to five years, because we can go out and get a customer that really has been displaced by this market.
How about the Laughlin properties? You do have a Tropicana down there. Are they feeling the same effect that Las Vegas is feeling?
The Tropicana Express and the River Palms, two of our assets in Laughlin, have been feeling the effects of the downturn. The Laughlin market is a little bit older clientele, people on fixed incomes, so obviously consumer price increases and gas price increases have hurt that market a little bit. That having been said, we like both of those assets a lot; we’re going to be investing in both those assets.
And Tahoe? You have two properties up there as well.
I think we have one of the nicest properties in Lake Tahoe in MontBleu. We just completed a $20 million renovation of that property. It’s got amazing rooms and a very good casino floor. Clearly MontBleu is a winner for us. I think we want to take advantage of MontBleu as a little bit more of a reward destination for some of our other properties.
The Horizon property is an old, historic property. It’s got a lot of charm to it. It caters well to the local market—it’s a little bit calmer than the MontBleu property. It’s got unbelievable views of Lake Tahoe. We just put in an Elvis Presley suite. It was the only asset in Tahoe where Elvis Presley actually performed, so we created an Elvis Presley suite where you could go in there and almost feel like you were in Graceland. Both of those properties are very much in our plans.
