Casino renovation up

Casino operators in Greater Reno Tahoe are doubling down on their properties.

The more than $100 million spent or tabbed for renovations at regional hotel-casinos includes $50 million at JA Nugget, $20 million at Boomtown, $30 million at Grand Sierra Resort, $20 million at the Lake Tahoe Hyatt in Incline Village and more than $40 million at the Horizon at South Lake Tahoe.

Casino operators are bullish on northern Nevada for any number of reasons, says Carlton Geer, president and chief executive officer of JA Nugget. First and foremost, Geer says, is the significant rise in year-over-year gaming revenue at large casino properties in northern Nevada.

“If you look at the Nevada Gaming Control Board revenue reports, large casinos in northern Nevada gained about 6 percent year-over-year through December in gaming win,” Geer says.

That, coupled with other tangible signs that the economy in northern Nevada has found its legs — solid movement in the residential and industrial construction markets, a rise in revenues from room rates at properties in Washoe County, continued signs of economic recovery from neighboring California — has casino operators scrambling to upgrade their properties to capture greater market share.

“We have a real economic recovery in northern Nevada; it is tangible, we can see it,” Geer says. “And we have the recovery of the northern California economy. We want to deploy capital to reposition ourselves to become more competitive.”

Deployment of capital is a fundamental element of growth, says Dean DiLullo, chief executive officer of M1 gaming, owner of Boomtown. Repositioning Boomtown with $8 million in capital improvements was made easier by the modest $12 million purchase price M1 Gaming paid to former owner Pinnacle Entertainment in June of 2012. The property has been profitable every month since then, DiLullo notes.

“The key to any good investment comes on the buy,” he says. “You have to invest the right amount of capital without overspending — and our industry has been known to overspend. You have to make sure your capital is focused on the products the guests want.”

In addition to the regional economic recovery, there’s a continued migration of California residents to northern Nevada that’s bolstering casino revenues, DiLullo says. Northern Nevada is a safe bet for casino operators, he adds, because it’s a relatively easy place to run a gambling operation. Reno in particular has tremendous upside because of its proximity to California’s huge population base.

“Boomtown is a just a 9-iron away from California,” DiLullo says. “We love our positioning, and we think that there will be continued growth from Californians exiting to Nevada because of our better tax structure and our friendly business model.”

Drawing guests from northern California is a key aspect of the many changes taking places at Grand Sierra Resort, says General Manager Dan Uonites. The property last week unveiled LEX, its new $15 million, 25,000-square-foot nightclub, one of the final pieces of a completely renovated casino floor. The GSR is banking on the allure of the upscale nightclub experience to pull visitors from the Sacramento Valley and greater San Francisco Bay Area. Uonites holds up the successes of many Las Vegas properties with wildly popular nightclub venues, such as Marquee at the Cosmopolitan, Tryst at the Wynn, or Body English at the Hard Rock Hotel, as proof of concept.

Nightly attendance at Marquee can exceed 5,000 patrons, and revenues from those megaclubs often outstrips gaming win at Las Vegas properties, Uonites says.

“We added this nightclub to attract individuals coming over from the Bay,” he says. “If you look Vegas over the course of the years, it started to buy into the entertainment concept. It was about nightclubs, bottle service, and all these different amenities. It worked. They tapped into this new customer base, and that is what our goal is.”

In addition to the extensive renovations, Grand Sierra Resort placed a renewed emphasis on strategic marketing. The combination of those efforts, Uonites says, has better positioned the property for near- and long-term success.

“We have come a long way at our property,” Uonites says. “It was very important for us to reinvest in our product and get back out there and market aggressively and attract a new customer base.”

The Horizon at South Lake Tahoe is following a similar path. Jon Park, managing member of NevaOne LLC, owner of the Horizon, says repositioning the property built in 1965 isn’t without risk. However, the Lake Tahoe gaming market still is quite viable — total revenues at South Shore properties increased by $6.2 million to $349.7 million in 2013, the Gaming Control Board reports in its annual Gaming Abstract.

The end goal of the renovation plan is to create a destination with a diverse choice of resort-style amenities, Park says. The property will have multiple restaurant and dining options, as well as upscale bar, lounge and entertainment options similar to competing properties on the other side of Highway 50.

Creating that range of amenities to appeal to various demographics will be the differentiator to help capture greater market share among visitors, Park says.

“The property has such great history and is located in one of the most beautiful places in the world. With some care and hands-on attention, I think it will be wonderful for the community and provide a great opportunity to be unique and set apart from the other properties.”

Sometimes upgrades are just a necessary course of business. The Nugget, Geer says, is 58 years old and requires substantial capital expenditure for routine and deferred maintenance that had been delayed over the years. JA Nugget will paint the entire property in coming months and upgrade behind-the-scenes functions such as its HVAC and mechanical and plumbing systems to increase the properties airflow and energy efficiency.

In addition to the large-scale renovations, JA Nugget plans to add a new country bar, upgrade its bingo operations and move bingo, gift shop, deli and sports book operations to the main casino floor — all part of a sweeping effort to gain an edge in a crowded marketplace.

“The intent is to make us more competitive,” Geer says. “Strategically we are not just expending capital because we think it is a good thing to do — we will become more competitive and get a return on our invested capital.

“The northern Nevada tourism and gaming market is going to increase, and it is up to the Nugget to develop the strategies and tactics to get our fair share of that growth. We are working hard to get our share of that increase.”

The final piece of the puzzle, DiLullo says, is that northern Nevada continues to be a place where people want to be. Reno-Sparks will never shed its small town roots, but it’s changing and maturing into a more eclectic and vibrant city. DiLullo cites the many small businesses cropping up in Midtown as but one example.

“Look at what’s happening in Midtown,” he says. “It reminds me a lot of Portland with the pubs and restaurants.

“I was in Vegas from 1986 to 2011,” he adds. “I watched Vegas go from really unknown cuisine to world-class cuisine, from polyester to high fashion. It went from exclusively gaming to just 50 percent of their market is gaming. You are going to see Reno grow and start adding amenities. Reno will always have its own personality, but I think it can capture that boutique gaming experience and start to add more and more different amenities like Las Vegas did.”