SLS Focusing on Fundamentals

News of Sam Nazarian selling his 10% stake in SLS broke last month, but the transaction was officially approved this week.

The Vegas Inc story about the approval had some interesting quotes from current SLS boss Scott Kreeger.

Kreeger admitted that SLS has gotten off to a rough start financially, saying "It's probably fair to say that the first year at the property was a little tumultuous."

It seems that now Nazarian is out of the picture, Kreeger is taking a "back to basics" approach to the resort. He said they are going to focus on a more "fundamental Las Vegas casino model."

In addition to making those casino changes, SLS will be adding the new Foundry Hall concert venue soon, along with converting one of the hotel towers into a W Hotel.

Marriott to Acquire Starwood Hotels and Resorts

Marriott International announced today their intention to acquire Starwood Hotels and Resorts. If the deal goes through it would create the world's largest hotel company, controlling over 1.1 million rooms.

Starwood currently has an affiliation with the Caesars Entertainment properties on the Strip, and recently signed a deal to convert one of the towers at SLS into a W Hotel.

Marriott has an agreement with Cosmopolitan, although it has been rumored that will be replaced with Hilton due to Cosmopolitan's recent sale to Blackstone.

I personally don't have a vested interest in either one of these loyalty programs, but from what I'm reading it appears that Starwood customers are worried about having their points devalued by Marriott.

Foundry Hall coming to SLS

The former Life nightclub at SLS Las Vegas is being transformed into an 1800 seat music venue called Foundry Hall, which will open early in 2016.

A Las Vegas Weekly article detailed the renovation project. The nightclub's DJ booth is being removed in favor of a stage. Audio improvements are being made, while keeping the nightclub's massive LED screens.

Live Nation will partner with SLS to book acts at the new venue, which will be a mix of permanent and standing room only seating.

The new music venue comes at a time when SLS is looking to make major improvements to the property to attract more guests. Last week it was announced that one of the hotel towers will be converted into a W Hotel brand.

SLS is still struggling financially. After reporting third quarter earnings they have lost $122.7 million so far in 2015. Parent company Stockbridge is banking on these improvements to help turn the property's fortunes around.

SLS Losses Mount in Third Quarter

A filing today with the SEC revealed that SLS Las Vegas had a net loss of $38.7 million in third quarter 2015.

SLS managed only $33.55 million of net revenue in the third quarter, which was down from $36.9 million of net revenue in the second quarter.

I like to compare SLS with somewhat similarly located Circus Circus, which managed almost double the net revenues that SLS did in the third quarter - $62.6 million.

Casino revenue at SLS was up slightly from the second quarter to the third ($9.5 million to $9.9 million). Almost every other category of business was down sequentially though.

Hotel revenue dropped from $13.1 million to $12.3 million. Food and Beverage dropped from $16 million to $13.6 million. Retail and other dropped from $1.3 million to $900,000 (likely explained by the Fred Segal departure).

Year to date the property has racked up a net loss of $122.7 million.

Parent company Stockbridge has now contributed $59.3 million this year to keep the hotel operational. That means they poured in an additional $31 million in the third quarter.

Based on these poor financial results it would seem like SLS would be on the verge of closing. However, the announcement that W Hotel will be taking over one of the hotel towers seems to indicate that SLS (backed by Stockbridge) will be around for a while.

If I had to guess - I think Stockbridge will likely make a few more deals similar to the W Hotel deal, essentially outsourcing different parts of the property. I wonder if a casino management deal with one of the regional players looking to get into the Vegas market might be on the horizon.

W Hotel coming to SLS

Starwood Hotels and Resorts announced on Monday their W Hotel brand will be taking over the Lux tower at SLS Las Vegas. In addition to the W Hotel, SLS will become part of Starwood's Tribute Portfolio.

SLS has been struggling financially since its opening. Something like this needed to happen to give the property some life after controversial leader Sam Nazarian sold off his stake.

While I think bringing the W Hotel into the fold is a good move, I have to wonder if it's the best fit for the property. I assume W guests expect only the best for the top dollar they pay, and I'm not exactly sure SLS is what I think of when I think of top notch Las Vegas luxury.

If anything this tells us that SLS is here to stay though. Parent company Stockbridge wouldn't be making this move if they were ready to bail on the property. It's good to know that they are committed to seeing this through and making the necessary changes to be successful.

Sam Nazarian Sells SLS Las Vegas Stake

Sam Nazarian and his company SBE are selling their ten percent stake in SLS Las Vegas as reported by The Wall Street Journal.

Stockbridge Capital Partners will be purchasing SBE's stake and will now own 100% of the resort.

SBE will also be transferring management of the resort to Stockbridge, who will lease the SLS brand from SBE.

Nazarian and SBE were responsible for closing the historic Sahara hotel and transforming it into SLS. While SBE has a pretty good track record of hotel and nightclub management, they might have bit off more than they could chew with SLS Las Vegas.

The casino has struggled to attract gamblers, and the restaurants and nightclubs have received a tepid response from the public. Fred Segal, the exclusive SLS retail partner also packed up and left town.

Those struggles have led to a disastrous financial performance. According to SEC filings SLS has been losing money hand over fist which has caused Stockbridge to infuse cash to keep the hotel afloat. Some kind of management change had to happen after those results.

It will be interesting to see what Stockbridge will do now to turn things around. Some people think this move paves the way for a sale of SLS, but I think Stockbridge will at least attempt to right the ship before that happens.

Fred Segal Closes at SLS

Part of the SLS business plan was to bring popular Los Angeles restaurants and shopping options to Las Vegas in an attempt to capture the LA crowd. One example of that was having Fred Segal as the exclusive retail partner of the resort.

The plan doesn't seem to be working, as this week it was reported that all seven of the Fred Segal stores at SLS have closed and left town.

Respected Las Vegas blogger David McKee tweeted: "SLS Las Vegas: Now w. 100% less Fred Segal!"

This photo has also been making the rounds, showing an empty Fred Segal location at SLS:


Photo: Stephen G. Hall.

It's no secret that SLS has been struggling to attract visitors which has led to poor financial performance. The Fred Segal departure doesn't look good, but retail only makes up about 3% of the SLS revenue stream. If they can replace those stores with something that makes more money it might actually end up being a good thing. Maybe.

Related:
SLS is struggling financially Part 1.
SLS is struggling financially Part 2.

SLS Net Loss Increases in Second Quarter

A filing today with the SEC revealed that SLS Las Vegas had a net loss of almost $49 million in second quarter 2015.

SLS managed only $36.9 million of net revenue in the second quarter. In comparison Circus Circus did over $63 million in net revenue during the same period.

Not surprisingly Food and Beverage seems to be a problem - $16 million of revenue was wiped out by $21.7 million of expenses.

Casino, Hotel and Retail seem to be doing about the same as last quarter. The bottom line was also adversely affected by a refinancing expense of $8.7 million.

The poor operating performance has caused parent company Stockbridge to make capital contributions to the company to keep SLS afloat. From the filing:

As of June 30, 2015, Stockbridge Fund III has funded capital contributions totaling $28,157,702, and has confirmed to the Company that it has the intent to provide sufficient funds to the Company, if necessary and if unavailable through other sources, through December 31, 2015 to enable the Company to pay its obligations as they become due.

The Company has initiated certain actions to increase revenues and reduce expenses in order to improve the results of operations, and the Company intends to initiate further actions in 2015 to improve profitability of the Company. However, there can be no assurance that such actions will be effective. There is no assurance that Stockbridge Fund III will provide capital contributions subsequent to December 31, 2015.

It looks like if things don't turn around by the end of 2015 the property may have to close, or be sold for pennies on the dollar in some kind of bankruptcy.

SLS is Struggling Financially

A recent filing with the SEC revealed that SLS Las Vegas isn't performing well financially. The first quarter 2015 results show low revenues with a large net loss.

Ignoring the massive $35 million loss, the revenue numbers might be more troubling. SLS managed only $37.3 million of net revenue in the first quarter. In comparison the much beleaguered Circus Circus did over $51 million in net revenue during the same period.

If those numbers weren't bad enough, noted in the filing was the news that parent company Stockbridge contributed $5.3 million to the company for working capital. Stockbridge will contribute up to $40 million until December 31, 2015 to help the company meet its financial obligations.

With low revenues and the parent company needing to throw SLS a lifeline, things aren't looking too good. SLS might be able to turn things around, but they'll need to do something to attract people to the property. With their poor location that isn't going to be easy.

Las Vegas in 2014

I've been away from the blog for a while. I'm always thinking about Las Vegas and it's about time I start posting again. Some of the topics I plan on covering soon are:

- The Cromwell
- Downtown Grand
- The Linq and the High Roller
- The Quad name change to The Linq
- SLS Las Vegas
- Resorts World
- MGM-AEG Arena
- Cosmopolitan sold
- Atlantic City

Las Vegas is constantly changing so there's a lot to write about.

Downtown Grand and SLS

Two closed Las Vegas hotels might be reopening in the near future.

First up is The Downtown Grand, which previously operated as Lady Luck up until it closed in 2006. In 2010 there were some rumblings about the property reopening, and they even had a 2012 target date. Obviously 2012 has come and gone, but now the property has a new name, and today they gave local newspapers a tour of what the new rooms will look like. The rooms look great, and will start at a very reasonable $69 a night. With definite progress and construction work ongoing it's looking more and more likely The Downtown Grand will be open by the end of 2013.

Next up, the closed Sahara might be reborn as SLS Las Vegas. After Sahara closed in 2011, owner Sam Nazarian claimed that he would reopen the property as SLS in 2014. Not many people believed that would actually happen, but now The Wall Street Journal is reporting that Nazarian has secured financing for the project. Some of the money is coming from EB-5, a program which gives green cards to foreigners who make investments in US businesses. The Journal article mentioned that The Downtown Grand is also using EB-5 for some of its financing. Construction for SLS is set to begin immediately, but there are still question marks, as much of the foreign EB-5 investment isn't available for use until it clears through government red tape.

Top 5 Vegas News Stories of 2011

Now that the calendar reads 2012, I thought I'd attempt to recall some of the top Las Vegas news stories of 2011. These are more or less off the top of my head, so I might have forgotten something, but here goes:

5. Absinthe opens to rave reviews.
Usually shows open and close in Las Vegas with little fanfare, but Absinthe got such great reviews that it really opened some eyes. I can't remember a show that has received almost unanimous positive reviews in some time.

4. Plaza renovation leads downtown resurgence.
The Plaza hotel on Fremont Street purchased the Fontainebleau's furniture and used it to complete a major renovation project, which included a makeover of rooms, public areas and a few new restaurants. Along with the improvements at Plaza, many new bars and restaurants on Fremont Street made downtown a fun place to hang out in 2011 and beyond.

3. Cosmopolitan opens.
Technically Cosmopolitan opened during the last few days of 2010, but it was the talk of the town for much of 2011 as visitors got to experience it for the first time. Despite some issues with long check-in lines, the property has received high praise for its uniqueness and many drinking and dining options. That being said, it struggled to make money because it has attracted a largely non-gaming crowd.

2. Project Linq.
The Caesars Entertainment Project Linq has been talked about for a few years now, but in 2011 the project pushed full steam ahead. We learned many details of the project, including the news that O'Sheas will be closed in its current form and re-located, likely being incorporated into Imperial Palace, which will also be re-named.

1. Sahara closes.
On May 16th 2011 Sahara closed after nearly 59 years of operation. A month after the closing, a huge liquidation sale was held on the property where visitors could take home a piece of Las Vegas history while walking around the joint for one last time. The Sahara's owners have a plan to re-brand and re-open the hotel in 2014, but we'll just have to wait and see if that happens.

Closed Sahara has Renovation Plans

The Sahara hotel closed six months ago, but the owners have a plan that would bring the historic hotel back to life.

County officials recently approved a plan that would renovate the hotel towers. An outdoor beer garden patio and a new nightclub are also planned for the property.

At the time of the hotel's closing, owner Sam Nazarian insisted that the hotel would re-open in 2014. Not many people believed that would actually happen, but these new plans make it slightly more likely.

I guess we'll just have to wait and see if the plans ever get off the ground. I've been fairly optimistic that a remodeled, re-branded Sahara could open someday, but I still have my doubts.

Which Las Vegas Hotel Imploded Next?

There's a blog post over at Vegas Tripping discussing which hotels are most likely to be imploded in Las Vegas.

I was thinking about it, and came up with these 5 hotels I think could be imploded in the near future:

Sahara - The hotel is already closed so step one is out of the way. Owner Sam Nazarian insists that he will be opening a re-branded Sahara in 2014, but most people agree that's never going to happen.

Harmon - Construction issues caused this never-opened CityCenter hotel to be capped at around 50% of its planned height. Repairing the building might be more trouble than it's worth.

Fontainebleau - Like the Harmon, this hotel might be taken down before it even opens. One of the tallest buildings in Vegas, the Font was left 70% complete when the owners ran out of money. Finishing the resort will cost well over a billion dollars, and nobody has that kind of money anymore. Another case where implosion would be cheaper than completion.

Hooters - The bankrupt hotel will continue operations for now, but if things get bad enough I wouldn't be surprised if it closed down eventually. Implosion would make room for a new Tropicana parking lot.

O'Sheas - This is a wild card because it won't be imploded, and isn't even a hotel. It will likely be de-themed and re-named for Project Linq though, which will effectively wipe it off the map.

A building that will never be imploded is the Jockey Club. Steve Friess had an interesting article in the Sun today about why the Jockey Club will live forever. The article mentioned Controlled Demolition Inc. (the company that does all of the Las Vegas implosions) already has a general plan of how to implode almost every hotel in Vegas. That's a scary thought.

Sahara Liquidation Sale - June 16, 2011

Sahara fans aren't able to visit the property anymore since it closed on May 16th, but now they will have a chance to take a piece of the action home with them.

On June 16th the Sahara is having an everything-must-go liquidation sale. Everything from room furnishings to casino games will have a price tag ready to leave the property for a new home.

The sale starts June 16th at 10am and will continue daily 10-7 Monday – Saturday & 12-5 Sunday until sold out. There is a $10 admission charge the first four days of the sale.

Seems like a great way to take home a bit of Las Vegas history.

For more information check out NCL Sales.

Sahara Website Farewell Message

With the Sahara closing on Monday after 58 years of operation, their website was sure to follow suit and recently shut down.

The message left up on the site says, "Thanks for a Wonderful Engagement" and directs prospective guests to Circus Circus.

A few weeks ago I speculated that Riviera would benefit by taking stranded Sahara guests. Even though Circus Circus turned out to be the "official" relocation destination, I still think a lot of the Sahara clientele will wind up at Riviera.

Sahara Closed

The Sahara closed its doors today after nearly 59 years of operation.

After the final guests were escorted out of the property, owner Sam Nazarian taped a note to the front door that read:

BE BACK SOON!
THANK YOU FOR
59 YEARS....
SAM NAZARIAN
5/16/11

Will Nazarian be able to keep his promise and transform the Sahara into a new luxury hotel? Only time will tell.

The hotel was open from October 7, 1952 to May 16, 2011.

Re-branded Sahara might open in 2014?

In a recent LA Times article, Sahara owner Sam Nazarian casually stated that he plans on renovating and re-opening the Sahara under his SLS brand in 2014:

"The plan from the beginning was to close the hotel for renovation. He said he was committed to reopening it in 2014 as an SLS Las Vegas, with six restaurants and two nightclubs."

As soon as the article was published people around the internet were saying how this will never happen, and that the hotel ever opening again was nothing more than hot air from Nazarian. I agree that it's a long-shot, but I want to play devil's advocate for a minute and explore reasons why it could happen:

The date of 2014 is ambiguous and gives plenty of time for a possible Las Vegas recovery. If a major turnaround does occur and the North Strip shows some signs of life with Echelon and Fontainebleau waking from the dead, then NewSahara would be able to take advantage of the resurgence.

Building a new hotel these days is expensive. CityCenter cost $8.5 billion. Cosmo was $3.9 billion. Encore was a bargain at $2.3 billion. Finishing Fontainebleu will cost $1.5 billion and it's already 75% done! Renovating is a lot cheaper. Tropicana spent about $160 million on their recent remodeling. Even if Nazarian doubled that figure to transform Sahara, it would still only be a fraction of the price of building a brand new hotel.

While a hotel can stay open while remodeling, the Sahara brand clearly didn't fit in with Nazarian's other upscale clubs and hotels. Closing and allowing some time for a complete reboot might not be a bad idea. Maybe this is what Nazarian had in mind all along when he bought the Sahara in 2007?

Will Sahara Closing Help Riviera?

Ever since it was announced that Sahara will be closing, I've been wondering how the closure will affect other hotels around Las Vegas.

People who would be inclined to stay at Sahara will probably move to a similar property. The most similar property to Sahara in terms of location, prestige and history is the Riviera.

Will any of the Sahara's customers move over to Riviera and help out the cause, or will the Sahara's closing make it even harder for a property to make money on the North end of the Strip?

Last week the Sun had an article about the Riv's struggling revenue and income situation. It looks like Riviera is in a pretty bad way financially. They can use all the help they can get, even if that means "stealing" customers from Sahara.

Sahara Closing on May 16th

Vegas Tripping is reporting that Sahara will announce tomorrow morning that the property is closing.

For the past few weeks there have been some pretty strong signs and rumors about the possible closing of the hotel. Two of the towers are already closed, along with the buffet and most of the restaurants. I believe most (if not all) of the shows have also closed or relocated in recent months.

The biggest problem with the property is probably the location. There isn't much happening that far north on the Strip these days. In better times Sahara would be able to compete by offering low room prices. Because of the economy most of the hotels in Las Vegas have great deals, so there is little reason to stay at Sahara.

UPDATE - March 11, 2011:

As expected, the press release announcing the closing was made public today. May 16th will be the closing date. The reason for closing: "Sahara was no longer economically viable." The company left the possibility for re-opening on the table stating that they would "Assess a variety of options for the property, including a complete renovation and repositioning." I think it's pretty obvious that won't be happening anytime soon though, if ever.