pacomartin
pacomartin
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April 1st, 2010 at 8:04:46 AM permalink
Hooters year end report came in. The casino only made $18 million in 2009. Total revenue is down to $46 million (from $66 million in 2007). They were losing money two years ago so now they may be giving up the ghost.

Just to show you how bad that it, the Hotel San Remo in 2004 was making $12.7 million in the casino and $33.1 million overall. The casino sold for $74 million and $190 million in upgrades.

It goes to show you how hard it is to fit in one of these niche markets. They never could earn anywhere near enough to pay for the acquisition and renovations that they did years ago.

If they just close the place it may help Tropicana's efforts to remodel and attract the budget customer. But it seems like nothing closes, it just gets sold and remodeled.
pacomartin
pacomartin
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April 26th, 2010 at 9:14:16 PM permalink
I started this idea on another thread, but I would like to repost since I've had more time to think about it. Plus I found more operational data on Hooters.

--- CURRENT FINANCIAL STATE OF HOOTERS CASINO --
Hooters will certainly go bankrupt soon. The casino revenue of $18m last year is equivalent to $50K per day.
Table games made $6.7 million ($18,356 per day) for 24 table games
Slots made $11.0 million ($30,137 per day) $49 per machine per day for 613 machines
Poker made $0.4 million ($1,096 per day)

Pit revenue is $32 per occupied room per night. I am guessing that most of the pit players are staying in the hotel, as are most of the slot players

Looking at five equivalent casinos near the strip (RIVIERA, CASINO ROYALE, SLOTS-A-FUN, TERRIBLE'S, TUSCANY) the slot average is $76 per machine per day). Two year's ago Hooters notice this discrepancy and said We believe that our slot revenue win per unit can be increased to a more competitive level in future periods by focusing on special slot promotions, direct marketing programs and other programs targeted to increase casino traffic. Clearly those efforts were not successful.

The pit revenue is very small to a the major strip casinos which would earn 2.5 times that amount on the same collection of games.

Average daily room rate decreased to $49 from $66 in 2008.

Their 6 executive probably don't want to lose their salaries
Chief Operating Officer = $300,000
President = $275,000
Sr. VP of Food & Beverage = $170,887
Chief Financial Officer = $170,887
VP of Human Resources = $112,645
Chief Executive Officer = $100,000


--- BROAD OUTLINE OF THE PLAN --
The idea is to give guests the option of paying a surcharge on their room to let them play the pit games. In exchange the pit game pays would be reduced to the point of almost zero house average. After crunching the numbers I have decided that the only way to make this work is to have it as a limited happy hour for two hours a night probably 6-8 PM. There would also be a late night session (2-4 AM). A third session would be from (9-11AM). You would annoy some players who don't want to pay the fee, but it is a necessary risk.

Although originally I wanted to convert the casino entirely to pay for play I decided it was non-functional idea. The problem is that if you change it for the night you have to be limited in the number of passes that you sell. Once people pay for this right, they will get upset if positions are not available in the pit. You simply can't replace the normal revenue for the evening with fees.

The entry fee would be $50 for the two hours. Both craps tables and both roulette tables and half the blackjack tables would be available.

The two proprietary games (let it ride and 3 card poker) would not be eligible since you can't change those odds. Neither would PAI GOW POKER and TEXAS HOLD EM since it is too complicated to change all the games. Ideally you would remove some blackjack tables and put in a 3rd craps table.

It would be important to have collateral benefits. If it brought a level of excitement to the casino with people shouting it might bring in more slot players who like the energy. If it sells rooms or food that is also good.

--QUESTIONS--
Would you pay $50 for the right to play for 2 hours? Keep in mind that very large bets would be prohibited. However even at $5 or $10 on long shots like hardways or prop bets in craps with true odds would make it possible to be up several thousand dollars.

Would it work with blackjack? You would have to deal from a single deck so that the player is conscious of a change that favors him since he is paying a fee for the right to play. But you would have to require flat betting so that the card counters don't skin you. If you deal from a shoe, then the rule changes would be subtle (like DAS permitted, dealer hits a soft 17, etc.).

How would you try and save Hooters? They are still losing over $14K per day despite massive cuts in expenses that are leaving the rooms dirtier than ever. The casino revenue was $14.3m in slots, $11.0 million in table games and $0.53 in poker in 2006 (corporate high).
gambler
gambler
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April 26th, 2010 at 10:57:57 PM permalink
No, I would not try to save Hooters. While I am a big fan of Hooters resturants, I did not like their casino at all. I find the place filthy and don't see where the renovations went.

Now, will someone swoop in and buy Hooters? Quite possible. It's location is relatively okay, but the bargin shopping casino owner who buys the location will definately want to change its name.
pacomartin
pacomartin
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April 26th, 2010 at 11:44:58 PM permalink
Quote: gambler

No, I would not try to save Hooters. While I am a big fan of Hooters resturants, I did not like their casino at all. I find the place filthy and don't see where the renovations went.

Now, will someone swoop in and buy Hooters? Quite possible. It's location is relatively okay, but the bargin shopping casino owner who buys the location will definately want to change its name.



I was less concerned with saving Hooters, per se, as I was in looking to see if my pay for play casino idea makes sense fiscally. If not pay for play then some other experimental technique to galvanize pit revenue. For the four years that they owned the casino table and slot revenue has dropped (with a minor jump in slot revenue in 2008). Most other casinos without baccarat tables are performing similarly.

Year Table ($mill) Slots (per machine day)
2006 $11.0 $73
2007 $9.5 $62
2008 $8.9 $67
2009 $6.7 $49


The table revenue is $18K per day. To simply replace you would have to sell 360 passes at $50 each. That would probably be impossible with only 150 positions in the pit. At $100 per pass, you would sell 180 which would work, but it would be much harder to sell.

I have decided it would be easier to sell 40 passes for 2 hours @$50 apiece at three different times during the day. It may be necessary to reduce the price late at night or in the morning. The players would have the 2 hours to play craps, roulette and some blackjack at near zero HA. They would need to show their passes to be included at the reserved tables. The concept would work better if they replaced some of the blackjack tables with a 3rd craps table. Blackjack revenue is severely off in the last 2 years. Bets would be tied to the P/L bet in craps. There would be no odds since you can place several bets at zero HA at one time. Although you are collecting the fee, there should probably be reasonable maximums to reduce variance for the casino.

I figure that you can collect up to $2 million in pay for play fees in a year with three 2 hour sessions per day. Also since men often want to play these games, their wives or girlfriends might play slots and drive up those rates. Since some people will show up that can't get into the session because it is full, they may stay and play slots. You may sell more rooms since people would like to play the late night session.

============

Obviously Hooters thought the location was good. They paid $76 million for the property in put in another $190 million in 2005. They never made a profit. Revenue never went over $66 million and now it is under $47 million. At least two buyers have come and gone.

Tropicana was making about $160 million in 2007 ($60 million gaming revenue), but it went bankrupt the next year. The new owner (a former MGM executive) formed a company and bought it and renovated it at the cost of $120 million. Excalibur and NY/NY are the two most profitable of MGM-MIRAGE casino (as a percentage). Only Circus Circus is cheaper than Excalibur, but CC is the only property losing money.

So, let me modify the question. In this period of plummeting room rates, slot, blackjack, craps and roulette what would you do with a property like this if you were the buyer? The only things going up are baccarat and penny slots. And the penny slot thing is starting to peter out in the oldest gaming areas. Some casinos are over half penny slots now.

The per machine slot revenue is very low compared to anything else on the strip.

Maybe nothing will work. It's too close to the Motel6. They think that they can turn around Tropicana. If the property goes for cheap enough maybe Tropicana will purchase it as an extension of their property. Rio was hiring strippers to swim in their topless pool for a while. Maybe that is the only thing that will work for Hooters.
Wizard
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Wizard
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April 27th, 2010 at 4:46:11 AM permalink
I think the place needs more sex appeal. For the most part, the place looks like a downtown joint. Given the name, the whole place should be like a party pit, with pretty girls everywhere. However, they just don't have a good location for that. I would consider replacing the whole casino with a bikini bar.
It's not whether you win or lose; it's whether or not you had a good bet.
pacomartin
pacomartin
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April 27th, 2010 at 5:46:32 AM permalink
Quote: Wizard

I think the place needs more sex appeal. For the most part, the place looks like a downtown joint. Given the name, the whole place should be like a party pit, with pretty girls everywhere. However, they just don't have a good location for that. I would consider replacing the whole casino with a bikini bar.




So we have a vote for simply dumping the pit and installing a bikini bar. Presumably the lost $18K per day in pit revenue would be replaced by food and drink sales, and increased slot revenue. A non-mathematical solution. The problem is that the casino is still carrying a huge debt load, and without increased revenue is still unstable.

Maybe I will shift my pay for play idea to Terrible's that only has 9 tables. I think they will have to replace blackjack tables with craps tables since the idea doesn't work very well with blackjack.
joshv
joshv
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April 27th, 2010 at 6:12:35 AM permalink
I think Hooters grossly over-estimated their own brand value from the very beginning, especially in a place like Vegas. Of course, having a crappy casino & hotel only made it worse.

For as much sex as there obviously is in Vegas, it's still (in it's own way), pretty understated. For example, a business traveler can stay on the strip, hang out in a casino with attractive waitresses everywhere, go watch some bikini bull riding, watch a sexy pirate show, find a party pit nearby, etc., and all his expense report (or the credit card statement his significant other looks over) will say is Treasure Island with a dinner at some place called Gilly's.

With Hooters, all the wink-and-nod subtlety goes out the window. Without getting into the merits of the place itself, the name carries a stigma that probably keeps a lot of people from spending their money there.

IMO, they'd be better off as the San Remo (or whatever) and just establish a reputation for having the hottest girls of any affordable casino in town- ie, a taste of downtown without the hassle.

As for the pay-for-play fair odds casino idea, I'm not entirely sure. A player would have to feel like he could make back the entry fee within the amount of time he expected to play there. I'm a low roller, $5 & $10 blackjack if I can find it, so I can go a long time before I lose 40 or 50 bucks on a normal day, even against a house edge inching toward 1%.

I think I'd be sure to include things like full pay VP in there, and definitely some sort of blackjack game, flat bet or CSM or what have you- the rate of mistakes will keep you profitable. For every person who's studied basic strategy & plays it right, there are 10 more who've skimmed it but hate to hit 16s or love to play hunches anyway.

BTW, long time Wizard reader, big fan, love the sites, etc etc.
ruascott
ruascott
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April 27th, 2010 at 6:34:15 AM permalink
Two things...

1) Good odds
2) More skin

Right now Hooters has neither. You get more skin at any 'party pit' in the city. From what I've read, their odds suck on most of their games as well (6:5 B/J).
ruascott
ruascott
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April 27th, 2010 at 6:36:11 AM permalink
As far as your question regarding pay-to-play...never would work. For ever 1 person that would pay, there would be 20 that don't know odds at all and would be immediately turned off and go to any other place.
DJTeddyBear
DJTeddyBear
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April 27th, 2010 at 6:41:20 AM permalink
Quote: joshv

I think Hooters grossly over-estimated their own brand value from the very beginning, especially in a place like Vegas.

On my recent trip to A.C., I had dinner Friday evening, around 10pm, at Hooters in the Tropicana.

It was the first time I EVER ate at any Hooters.

Quite frankly, I have no idea what the appeal is, or how they stay in business, or why the place was filled to capacity. There were no available tables, but I was able to sit immediately at the counter.

The waitress saw me examining the menu for a long time, so she had to know I've never been to a Hooters before. At any rate, I ordered a Cheeseburger. I was not asked if I wanted fries, but was shocked when it arrived without them. I then ordered fries.

Gang, in my younger days, I worked in all sorts of restaurants. During the busy hours, fries were ALWAYS either ready to be served, or coming out of the frier. So why did it take a full five minutes to get my fries?


So I wonder why they stay in business.

And I wonder how much worse conditions can be at the Hooters casino.


And I am scared to consider that there is (or was) a Hooters airline.
I invented a few casino games. Info: http://www.DaveMillerGaming.com/ 覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧覧 Superstitions are silly, childish, irrational rituals, born out of fear of the unknown. But how much does it cost to knock on wood? 😁

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