Shift to smaller casino firms continues
By Rob Sabo
Northern Nevada Business Weekly
Sunday, September 23, 2012
The return of Ferenc Szony to the Reno gaming market
marks yet another shift away from large corporate ownership of Northern Nevada
gaming properties.
It's a trend that's likely to continue.
Szony,
a longtime Reno gaming executive, heads newly formed Truckee River Gaming, which
bid $19.2 million to purchase the Sands Regency in Reno, Gold Ranch Casino in
Verdi and Terrible's Casino in Dayton from Las Vegas-based Affinity Gaming.
Affinity will entertain other, higher bids until Oct. 1, but if the offer goes
through Szony expects to be back in northern Nevada by the end of the first
quarter of 2013.
“Reno is home, and it always has been,” he says. “I am
looking forward to getting back to northern Nevada.”
Affinity, the
publicly held company that arose from the bankruptcy ashes of Herbst Gaming, is
the latest large corporate entity to shed Reno-area assets. Truckee River Gaming
joins M1 Gaming, which purchased Boomtown from publicly held Pinnacle
Entertainment last year, and the Mereulo Group, which owns Grand Sierra Resort,
as the newest players in the regional casino market. Mereulo bought Grand Sierra
from JPMorgan, which ended up with the property through
foreclosure.
Szony is no stranger to Northern Nevada. He's been a casino
executive in Reno since the mid 1980s, including a 10-year stint as general
manager of the Sands Regency.
In his role as president of Sands Regent
Corp., the publicly held company that owned the downtown hotel and casino, Szony
acquired Gold Ranch and the Dayton property. Sands Regent was purchased by
Herbst Gaming in 2007.
Large publicly held companies with ownership of
large gaming properties in Reno-Sparks today include Caesars Entertainment
(Harrah's) and MGM (Circus-Circus and one-half of the Silver Legacy). Publicly
held Monarch Casino & Resort Inc. of Reno owns the Atlantis.
Smaller
publicly held ownership in the region includes Affinity Gaming (Rail City) and
Jacobs Entertainment (Gold Dust West casinos in Reno, Carson City and
Elko).
The size and scope of the gaming market in Reno-Sparks simply
makes more sense for small ownership groups with a local focus, says Bill
Eadington, professor of economics and director of the Institute for the Study of
Gambling and Commercial Gaming at University of Nevada, Reno.
Large
public-company ownership is limited by the deteriorating state of the northern
Nevada gaming market, which has shed half its annual revenue since 2000,
Eadington says.
“Large publicly traded gaming companies like Caesars or
MGM, it is really hard for them to justify putting a lot of effort in their
Northern Nevada properties,” he says. “It is not worth management's time and
money. A lot of companies are putting their low-performing properties up for
sale, and the Reno market is a good example.”
Eadington points to Caesars
lack of investment at its Harrah's Reno property, and MGM's silence on the
Chapter 11 bankruptcy filing by Silver Legacy earlier this year as evidence of
where those properties rank in the corporate hierarchy. The two publicly traded
companies own roughly 70 percent of the mega casinos on the Las Vegas
Strip.
Private ownership also makes more sense here than in southern
Nevada because the owners and operators of larger casino properties — the
Ascuagas, Farahis, Paganettis and Caranos — have long-established careers in
Northern Nevada and know the local market far better than any Las Vegas-based
corporate entity. They have deep ties to the community, and with most, northern
Nevada is their sole focus.
“In spite of the fact that it's a down
market, they are here for long-term,” Eadington says. “Private ownership pretty
much fits within those trends.”
Szony, who worked for years for Hilton
Hotels Corporation and Sands Regent, says local management groups have a much
better handle on the needs of the Reno-Sparks market and can affect change much
more quickly than large corporations with multi-jurisdictional
concerns.
“If you look at family operators, the Ascuagas, the Caranos,
they all have done a spectacular job at being hands-on in management, and that
makes a big difference in the product we have in Northern Nevada,” says Szony,
who spent the past three years in Las Vegas running Affinity Gaming.
“We
are seeing a wave of new interests in ownership coming into the market. They all
are very hands-on, and they need to be in order to be successful in the Reno
market. Taking a national playbook that may work in different jurisdictions
isn't as successful as getting to know the patrons in the market.”
David
D. Ross, chief executive officer of Affinity Gaming, says that as the company
emerged from bankruptcy on Dec. 31, 2011 it shed its extensive slot route and
culled certain “non-core” properties from its portfolio because of the
relatively small revenue they generate.
Affinity Gaming still holds Rail
City Casino, however, mainly because the small casino on Victorian Avenue fits
the company's property profile. Rail City has about 1,000 slots on its casino
floor, Ross says, and together the other three properties it plans to shed
barely reach that mark.
Affinity Gaming also divested three small casinos
in Las Vegas in 2011. Handing the reins back to Szony is the best solution for
all parties, Ross adds.
“This is his family. These are his kids, and he's
going home. This is the best outcome for the employees and for Reno. He knows
that market, he lives there, and we are very happy with where we sit today on
that transaction.”
Ross says Affinity Gaming remains bullish on both
northern and southern Nevada despite the state's prolonged economic woes. (The
company also has casino interests in Missouri, Iowa and Colorado).
High
unemployment in Nevada, along with neighboring California, means the downturn in
the Silver State is far from over, Ross says, but businesses in Nevada have
already navigated through the worst of it.
“Certainly no one has ever
seen the downturn that we are seeing — the magnitude of it is unprecedented,” he
says. “But we are counting on the economy to continue to slowly
improve.”
Despite the prolonged — and apparently irreversible — decline
in gaming revenues from the California drive-up market, revenues from local
players has increased significantly, Eadington notes. Northern Nevadans account
for 40 to 50 percent of regional gaming revenues versus about 10 percent in
2000, he says.
Gaming revenue in Northern Nevada will stabilize and
recover when the local economy rebounds, Eadington adds.
http://www.nevadaappeal.com/article/20120923/BUSINESS/120929939/1070&ParentProfile=1058
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