Stratosphere company

Stratosphere, saw its earnings drop 10.9 percent to $36.7 million.
Arizona Charlie's Decatur saw revenues slip 6.4 percent to $16.8 million and
Arizona Charlie's Boulder saw revenues drop 10.0 percent to $9.9 million
The Aquarius in Laughlin was able to increase revenues by 3.4 percent to $24.4 million.

The company is called American Casino & Entertainment Properties. The purchase of this company for $1.3 billion (sale finalized) in February 2008 was one of the most ill advised in a long string of ill advised purchase. Goldman Sachs took a real super-beating on this company. The total revenue of $87.9 million is down from $114 million 2 years ago.

The purchase price was based on re-assessment of the land from $75 million in 2006 to $750 million in 2007. The idea was that an empty 17 acre plot of land north of the Stratosphere was worth a fortune.

A few years ago, the Stratosphere was one of my favorite places to play. They offered great service, good value, nice odds on craps, a cheap single zero roulette wheel, and friendly craps dealers.

Today, I still think they offer a good value, but its location finally made me decide to find other places to play. The closest casino is the Sahara, which is run down and old. They have also closed several of there resturants, and while they had plans to open new ones, it never really materialized.

I understand its parking is excellent and that its wireless access is free and no one much cares if you sit dawdling over a drink while using a laptop.

It is perhaps best viewed as an oasis. An attractive place to be if you are stuck in a trackless desert wasteland. For all the cheap rooms in the area, it offers real value. Its just that most people will want to go to a different area of town and the Strat simply can't offer enough of an incentive to prevent that.

No matter what crazy trapeze they put on the rooftop or how gorgeous the waitress is, the place will appeal only to those who are oblivious to the surrounding area.

Quote: FleaStiff

I understand its parking is excellent and that its wireless access is free and no one much cares if you sit dawdling over a drink while using a laptop.

It is perhaps best viewed as an oasis. An attractive place to be if you are stuck in a trackless desert wasteland. For all the cheap rooms in the area, it offers real value. Its just that most people will want to go to a different area of town and the Strat simply can't offer enough of an incentive to prevent that.

No matter what crazy trapeze they put on the rooftop or how gorgeous the waitress is, the place will appeal only to those who are oblivious to the surrounding area.

MEDIA NOTICE I was quoted in the LVRJ again today. The write up that I did was more extensive and talked about some of financial shenanigans that Goldman Sachs pulled off, but that was too depressing so Arnold led off with the Sky Jump and the renovated rooms. At the risk of being a spoilsport the Sky Jump (even with related T-shirt sales) is unlikely to bring in more than $1 million in a quarter. The renovated rooms are also not likely to increase revenue by more than $1 million per quarter.

I think that Goldman Sachs should have one of their conventions in their own casino. No one can accuse them of gold bricking if they do that.

Something about this quote troubled me on the initial reading of this article...

"(The number of jumps) far exceeds expectations for the startup," Riolo said. "We actually don't have a fully trained crew and we're not open to the extent of the hours that we will be in the middle of the summer when we are in full operation."

I am sure he didn't mean it exactly as it sounds (???) but I really would think twice before plunging on a wire from 855 feet if the management says that they "don't have a fully trained crew"...shouldn't at least the crew running the operation on a limited basis be fully trained? The fully trained operators should be training new crews to expand the hours of operation.

Quote: RonC

The fully trained operators should be training new crews to expand the hours of operation.

That can be a very dangerous practice. Read up on Deming's "Rule 4 of the funnel", if you are not familiar with the effect. One particularly good example of a disaster that apparently came from this effect was the bonfire construction incident at Texas A&M in 1999.

Quote: RonC

Something about this quote troubled me on the initial reading of this article...

"(The number of jumps) far exceeds expectations for the startup," Riolo said. "We actually don't have a fully trained crew and we're not open to the extent of the hours that we will be in the middle of the summer when we are in full operation."

I am sure he didn't mean it exactly as it sounds (???) but I really would think twice before plunging on a wire from 855 feet if the management says that they "don't have a fully trained crew"...shouldn't at least the crew running the operation on a limited basis be fully trained? The fully trained operators should be training new crews to expand the hours of operation.

I have no knowledge of the situation, but I will lay even money that what you are looking at is a poor choice of words. I believe the message they were trying to convey was, "We have only had time to FULLY train enough crew to only be open partial hours. Once we have more crew FULLY trained, we will have more hours of operation."

Quote: RonC

"We actually don't have a fully trained crew "

His lawyers are going to kick his butt when they get a lawsuit. Nobody even has to get hurt for somebody to sue over this thrill ride. You can sue for mental stress. And you have an executive who has provided you with your front line defense.

When I worked on SONAR for the Navy everybody sued us. We had people who sued us for ruining their sex life because of exposure to sound from SONAR. We were sued by whale watching companies for chasing the whales away from Hawaii. We were sued by Hawaiian native groups for interfering with their right to worship. We were sued by environmental activist groups primarily for ostensibly not following procedures of environmental law. In one imaginative lawsuit we were sued by the whales themselves defended by a rather brilliant, but highly eccentric lawyer. Lawyer client communication was all done by telepathy. I actually am not joking.

We were sued by one guy who claimed that he was hurt by the sound from the SONAR. I asked him how he figured that one out. He was jumping in the water from a small boat in order to prevent us from turning on the SONAR (we can't hurt people even if they put themselves in harm's way). I asked him if he could explain the logic of how he could pull off the activist protest and still claim he got hurt. He explained to me that we had damaged the water itself when we turned on the SONAR the day before, and he was hurt just jumping in the water.

The native Hawaiian religion lawsuit was actually kind of funny. Indigenous Hawaiians did not worship whales, they worshiped sharks. They had lost the ability to sail for long distances after they migrated from Polynesia, but sharks were plentiful near shore. They didn't get back the ability to use long range ships until the Europeans came in the late 18th century. They simply adopted whale worship along with everyone else in the 1960's and now it is a big part of their economy. But the Navy can't go into a Hawaiian court and tell a native Hawaiian group that they don't know their own culture.

It's like the pigs and luaus. There were no pigs in Hawaii until the Europeans brought them.

Quote: Doc

That can be a very dangerous practice. Read up on Deming's "Rule 4 of the funnel", if you are not familiar with the effect. One particularly good example of a disaster that apparently came from this effect was the bonfire construction incident at Texas A&M in 1999.

I agree there can be dangers to the "train the trainer" method if the guidance given is not "set in stone" (not up to an individual to deviate from the training package; that can only be changed by a defined change process). The bonfire may or may not be a good example because they continually tried to build it bigger and there was also alcohol involved...the process was changing each year and the training likely also grew further away from the proper standards.

Quote: RonC

...the process was changing each year and the training likely also grew further away from the proper standards.

I think that is almost exactly what Deming's rule 4 predicts.

The recreational parachute business survives just fine, and it has to deal with several grisly deaths often of young people every year that are all judged to be caused by human failure of some sort.

This ride is not dangerous. Bungee jumping if not done correctly can be dangerous. This ride is only the illusion of danger. My comments previously have to do with nuisance lawsuits. I don't genuinely think there is an ounce of real risk in this ride.

There will be more people hurt on roller coasters this year, simply because 100 million people will ride a roller coaster. Somebody will do something stupid. Nobody is going to get hurt out of the 100 people a day who do this sky jump.

I don't know if the "crew" related to ticket sellers and crowd control or reservations personnel.
If it referred to operational personnel, good for them! they didn't try to open up with excessive overtime or poorly trained personnel.

Anyway, the SkyJump will make headlines and memories and photo opportunities, but it won't pull in all that many people and most who use it will stay elsewhere.

Most of the developments in Vegas are really taking place on Wall Street anyway. Move stock price or per share earnings and get a zillion dollar bonus, move some fresh furniture into a room and all you get is a sore back.

Quote: FleaStiff

Most of the developments in Vegas are really taking place on Wall Street anyway. Move stock price or per share earnings and get a zillion dollar bonus, move some fresh furniture into a room and all you get is a sore back.

When Goldman Sachs bought this company they valued the Stratosphere and the vacant 17 acre lot next to it at $640 million. What kind of commissions did that bring? Last quarter it earned a gross revenue of $36.7 million dollars on an average daily room rate of $43.39.

The sky jump may bring a million dollars gross out of which they have to pay crew and maintenance costs.

This graph provides a 6 year revenue history for the company. The original 3 casinos were all acquired by Carl Icahn over 10 years ago. He was still in the process of renovating the recently acquired Aquarius Laughlin (formerly the Flaming Laughlin) when he began negotiations to sell to Goldman Sachs.

The company was sold as a group and formerly had an appraised value of just over $300 million. When it was sold for $1.3 billion Goldman Sachs attached a dollar amount on each property to back up the $1.1 billion dollar loan. The values are indicated on the chart. The vacant lot by the Stratosphere is 17 acres, and was considered primary for future development.

If possible the chart traces revenue for the original three properties. The Laughlin Aquarius is the only one that increased revenue last quarter.

The dotted red lines are projections based on a document that was leaked to the web that showed the basis for the sale. Obviously they didn't make it even for the first quarter of the sale.

The massive losses over the last 2 years means that Goldman Sachs has been doing some very creative financing. I am not sure I understand it, but somehow I think they shifted the losses to the company as a whole so that they could exploit the bailout money.

I put the blue swooping arrow to give you an idea of the statistic quoted in the press release. The executives pointed out that the percentage drop in 2010 (1st quarter) was not as bad as the percentage drop in 2009. They also pointed out that revenue in Laughlin had gone up. Most of the rest of the press release was about Skyjump and the new furniture.