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June 16, 2011
Tropicana Casino Pursues Vegas's Middlebrow Market
CEO Alex Yemenidjian wants the Tropicana to be the best damn pretty good
hotel on the Strip-and his bet on the middlebrow market seems to
be paying off
It's been a long time since anyone did anything in Las Vegas on purpose.
Ever since the spring of 2008, casino investors have felt like
characters from The Hangover, trying to figure out what they got
themselves into and how the hell to get out of it. Deutsche Bank's loan
to a real estate developer went so bad that the bank wound up owning a
half-built casino. Unable to offload the project, it currently operates
the Cosmopolitan Hotel. In 2009, Caesars Palace halted construction on
its new Octavius tower and is only getting around to finishing the job
now.
After the fall, Alex Yemenidjian was the first person to actually invest
in the Strip on purpose. He and Canadian private equity billionaire
Gerald Schwartz bought the Rat Pack-era, once-classy Tropicana out of
bankruptcy in 2009 after guaranteeing at least $75 million to update the
property. It was actually their 24th-favorite available property in
Vegas, but they'd looked at the first 23 before the crash and considered
them overpriced. Then the company that owned the Tropicana went
bankrupt, and Yemenidjian and Schwartz bought it in cash. By that point,
though, Yemenidjian remembers that the hotel had duct tape holding the
carpet together every few feet. And a note in the employee lounge
offering a bounty for each bedbug brought back alive.
Yemenidjian and Schwartz ended up spending $180 million to purchase the
iconic brand, the resort's six acres of grounds, a great address on a
crowded corner of the Strip, and a lot of duct tape. But instead of
building a Gucci boutique, booking Cher, or importing a Mario Batali
restaurant, the duo went full middlebrow. The new Tropicana, which
reopened in late May, features nice rooms for $70, $5 blackjack tables,
and Gladys Knight-on purpose. "Between the low end and the
snob," says Yemenidjian, "is the vast majority of this country."
Yemenidjian isn't content operating a really good pretty good hotel: He
wants the Tropicana to be the best damn pretty good hotel on the Strip.
After all, the chief executive officer is not a $70 room guy: He's
friends with Kirk Kerkorian, has slicked-back hair, and wears pocket
squares. A former studio head, Yemenidjian proudly displays Hannibal
Lecter's mask on the coffee table in his office, where giant framed
quotes line his walls-including Oscar Wilde's "Moderation is the
last refuge of the unimaginative." In a Tropicana employee lounge, the
walls are also lined with framed quotes, including some from Alex
Yemenidjian.
To let the hotel's employees know he was serious about change,
Yemenidjian began the Tropicana's renovation by spending $1 million to
upgrade its staff lounge and dining hall. Then he made everyone read
Raving Fans: A Revolutionary Approach to Customer Service. Then he fired
40 percent of them. "Our job is to keep employees out of their comfort
zone," he says. "We act as if the whole company's existence depends on
the employees taking advantage of the opportunity to pick something up
from the floor."
Yemenidjian and Schwartz spent many more millions developing a South
Beach theme at the Tropicana, mainly because, they thought, regular
people like Florida. The hotel also has some Cuban touches, since
regular people think Cuba is exotic. "I made three trips to South Beach
for research. I learned everybody loves casual elegance," Yemenidjian
says. "I can't tell you where else I went, or I will go to jail." The
rooms are nearly all white, with plantation shutters. "There must have
been a time in the last 10 years when there was a sale on chocolate
brown furniture," he says. "We managed to miss the sale."
The hotel's non-Miami touches are simple mid-market plays: the
25,000-square-foot Las Vegas Mob Experience interactive museum, a
Starbucks, and Brad Garrett's Comedy Club. Garrett, who began his career
by opening for Frank Sinatra at the Desert Inn, is best known to the
middlebrow zeitgeist as "that guy from Everybody Loves Raymond." "What
made this incredibly attractive to me was the mid-range clientele they
were going for," says that guy from Everybody Loves Raymond. "Those
people have been forgotten for the last 15 years in Vegas. The high
rollers who stay at the other properties go see Cher, they go see Cirque
du Soleil, or they go to Sapphire, the titty bar," he says. "The $150
shows are more of a destination. You have to put a shirt on."
At the Tropicana, Garrett walks through the hotel casino handing out
free passes. "I'm not Chris Rock, but these people come from Des
Moines," he says. "They watched Raymond for years. That's what Vegas
used to be about." Gladys Knight has done so well that Yemenidjian
recently extended her contract. The hotel's other showroom features
junk-rock band Recycled Percussion, a runner-up on America's Got Talent.
America's Got Talent winners are for snobs.
So far, the middlebrow mind trick is working. The Tropicana's occupancy
rate has gone from the mid-80-percents before the renovation to around
90 percent. The hotel, which used to be ranked in the bottom fifth of
Vegas properties on TripAdvisor, has now moved up to 20th place out of
288. Perhaps the next decade in Vegas will be full of middlebrow
investments, with John Tesh showrooms and 1,000-seat Olive Gardens. "The
history of Las Vegas is the destruction of the old and the building of
the new," says Jeremy Aguero, principal analyst at Vegas-based market
research firm Applied Analysis. "But in the near term, there is no
opportunity to build a new mousetrap. You have to fix an old mousetrap."
It's a good plan, but no one else is doing it. Down the strip, the
59-year-old Sahara is locking its doors. Sam Nazarian, who owns the
successful SLS hotel in Los Angeles, tried to reinvent the property as a
high-end destination for young clubgoers. Alas, despite the way it
seems, there actually aren't enough Kardashians to fill a hotel every
single night.
The only outlier from the Tropicana's rebranding plan is its 1.8-acre
Nikki Beach, a restaurant/bar/club/faux beach that has outposts in South
Beach, St. Barts, St. Tropez, and Marrakech. This is because
nightclubs-particularly daytime poolside ones-are
Vegas's only growth industry, and everyone is trying to lure the
chest-waxing set with more swim-up tables and strippers. On June 2, porn
star Sasha Grey deejayed at Nikki Beach while people drank $3,500
magnums of Cristal delivered by "wine angels" who arrived on an overhead
swing. Outside, women in bikinis and orange see-through gowns danced
near a blackjack table next to a stripper pole. "Of course there's a
stripper pole," says Tropicana President and Chief Operating Officer Tom
McCartney. "You'd be surprised if there weren't." That's a compromise
the middlebrow just won't make.
©2011 Bloomberg L.P.
From: Emil Lazarian | Ararat NewsPress
Tropicana Casino Pursues Vegas's Middlebrow Market
CEO Alex Yemenidjian wants the Tropicana to be the best damn pretty good
hotel on the Strip-and his bet on the middlebrow market seems to
be paying off
It's been a long time since anyone did anything in Las Vegas on purpose.
Ever since the spring of 2008, casino investors have felt like
characters from The Hangover, trying to figure out what they got
themselves into and how the hell to get out of it. Deutsche Bank's loan
to a real estate developer went so bad that the bank wound up owning a
half-built casino. Unable to offload the project, it currently operates
the Cosmopolitan Hotel. In 2009, Caesars Palace halted construction on
its new Octavius tower and is only getting around to finishing the job
now.
After the fall, Alex Yemenidjian was the first person to actually invest
in the Strip on purpose. He and Canadian private equity billionaire
Gerald Schwartz bought the Rat Pack-era, once-classy Tropicana out of
bankruptcy in 2009 after guaranteeing at least $75 million to update the
property. It was actually their 24th-favorite available property in
Vegas, but they'd looked at the first 23 before the crash and considered
them overpriced. Then the company that owned the Tropicana went
bankrupt, and Yemenidjian and Schwartz bought it in cash. By that point,
though, Yemenidjian remembers that the hotel had duct tape holding the
carpet together every few feet. And a note in the employee lounge
offering a bounty for each bedbug brought back alive.
Yemenidjian and Schwartz ended up spending $180 million to purchase the
iconic brand, the resort's six acres of grounds, a great address on a
crowded corner of the Strip, and a lot of duct tape. But instead of
building a Gucci boutique, booking Cher, or importing a Mario Batali
restaurant, the duo went full middlebrow. The new Tropicana, which
reopened in late May, features nice rooms for $70, $5 blackjack tables,
and Gladys Knight-on purpose. "Between the low end and the
snob," says Yemenidjian, "is the vast majority of this country."
Yemenidjian isn't content operating a really good pretty good hotel: He
wants the Tropicana to be the best damn pretty good hotel on the Strip.
After all, the chief executive officer is not a $70 room guy: He's
friends with Kirk Kerkorian, has slicked-back hair, and wears pocket
squares. A former studio head, Yemenidjian proudly displays Hannibal
Lecter's mask on the coffee table in his office, where giant framed
quotes line his walls-including Oscar Wilde's "Moderation is the
last refuge of the unimaginative." In a Tropicana employee lounge, the
walls are also lined with framed quotes, including some from Alex
Yemenidjian.
To let the hotel's employees know he was serious about change,
Yemenidjian began the Tropicana's renovation by spending $1 million to
upgrade its staff lounge and dining hall. Then he made everyone read
Raving Fans: A Revolutionary Approach to Customer Service. Then he fired
40 percent of them. "Our job is to keep employees out of their comfort
zone," he says. "We act as if the whole company's existence depends on
the employees taking advantage of the opportunity to pick something up
from the floor."
Yemenidjian and Schwartz spent many more millions developing a South
Beach theme at the Tropicana, mainly because, they thought, regular
people like Florida. The hotel also has some Cuban touches, since
regular people think Cuba is exotic. "I made three trips to South Beach
for research. I learned everybody loves casual elegance," Yemenidjian
says. "I can't tell you where else I went, or I will go to jail." The
rooms are nearly all white, with plantation shutters. "There must have
been a time in the last 10 years when there was a sale on chocolate
brown furniture," he says. "We managed to miss the sale."
The hotel's non-Miami touches are simple mid-market plays: the
25,000-square-foot Las Vegas Mob Experience interactive museum, a
Starbucks, and Brad Garrett's Comedy Club. Garrett, who began his career
by opening for Frank Sinatra at the Desert Inn, is best known to the
middlebrow zeitgeist as "that guy from Everybody Loves Raymond." "What
made this incredibly attractive to me was the mid-range clientele they
were going for," says that guy from Everybody Loves Raymond. "Those
people have been forgotten for the last 15 years in Vegas. The high
rollers who stay at the other properties go see Cher, they go see Cirque
du Soleil, or they go to Sapphire, the titty bar," he says. "The $150
shows are more of a destination. You have to put a shirt on."
At the Tropicana, Garrett walks through the hotel casino handing out
free passes. "I'm not Chris Rock, but these people come from Des
Moines," he says. "They watched Raymond for years. That's what Vegas
used to be about." Gladys Knight has done so well that Yemenidjian
recently extended her contract. The hotel's other showroom features
junk-rock band Recycled Percussion, a runner-up on America's Got Talent.
America's Got Talent winners are for snobs.
So far, the middlebrow mind trick is working. The Tropicana's occupancy
rate has gone from the mid-80-percents before the renovation to around
90 percent. The hotel, which used to be ranked in the bottom fifth of
Vegas properties on TripAdvisor, has now moved up to 20th place out of
288. Perhaps the next decade in Vegas will be full of middlebrow
investments, with John Tesh showrooms and 1,000-seat Olive Gardens. "The
history of Las Vegas is the destruction of the old and the building of
the new," says Jeremy Aguero, principal analyst at Vegas-based market
research firm Applied Analysis. "But in the near term, there is no
opportunity to build a new mousetrap. You have to fix an old mousetrap."
It's a good plan, but no one else is doing it. Down the strip, the
59-year-old Sahara is locking its doors. Sam Nazarian, who owns the
successful SLS hotel in Los Angeles, tried to reinvent the property as a
high-end destination for young clubgoers. Alas, despite the way it
seems, there actually aren't enough Kardashians to fill a hotel every
single night.
The only outlier from the Tropicana's rebranding plan is its 1.8-acre
Nikki Beach, a restaurant/bar/club/faux beach that has outposts in South
Beach, St. Barts, St. Tropez, and Marrakech. This is because
nightclubs-particularly daytime poolside ones-are
Vegas's only growth industry, and everyone is trying to lure the
chest-waxing set with more swim-up tables and strippers. On June 2, porn
star Sasha Grey deejayed at Nikki Beach while people drank $3,500
magnums of Cristal delivered by "wine angels" who arrived on an overhead
swing. Outside, women in bikinis and orange see-through gowns danced
near a blackjack table next to a stripper pole. "Of course there's a
stripper pole," says Tropicana President and Chief Operating Officer Tom
McCartney. "You'd be surprised if there weren't." That's a compromise
the middlebrow just won't make.
©2011 Bloomberg L.P.
From: Emil Lazarian | Ararat NewsPress