Majestic Research

Las Vegas Business Press

Downtown Evolves: Nightclubs Bloom; Las Vegas Club Could Become Condos

By Valerie Miller
Published: March 27, 2007

Downtown resorts are reminiscent of an old Clint Eastwood movie—"The Good, the Bad and the Ugly.” Amidst stalled projects and some lackluster new owners, the city’s oldest casinos are showing signs of improvement.

The Golden Nugget has embarked on its second phase of a $200 million renovation, which includes an expanded casino floor, events center, sushi bar and a yet-to-be-named nightclub. A $20 million swimming pool, complete with sharks, was unveiled late last year at the downtown property. Landry’s has already spent $100 million to revamp the 61-year-old Nugget since buying it in 2005, according to Landry’s CEO Tilman Fertitta.

“I’d like to see some other major properties invest money,” he said of downtown hotels. “We have shown that you can invest money and get a return.” Fertitta sees some signs that it’s happening with developments like the Four Queens Hotel & Casino’s planned Canyon Club.

That 10,000-square-foot nightclub is the brainchild of Lance Sterling, the force behind the successful House of Blues. It’s set to open next month and will be modeled after the Los Angeles night spot of the same name. The Canyon Club aims to draw club hoppers in their thirties through fifties, Four Queens spokesman Dennis Hershey explains. Owner Terry Caudill has invested $20 million in the hotel-casino since acquiring it three years ago.

Casino nightclubs are definitely “in” downtown. Besides the Canyon Club and the Golden Nugget’s entry, the Stratosphere Tower opened its retro-themed Polly Esther’s Nightclub less than two weeks ago.

Hershey said Glitter Gulch desperately needs places to party: “We needed an attraction so that our customers didn’t go to the Strip for entertainment.”

Making entertainment the focus, $20 million has also been invested in upgrades for the 66-year-old El Cortez Hotel & Casino, just a couple of blocks east of the Fremont Street Experience.

Unlucky Lady Luck

Other renovations in downtown have proved less successful. The remodeling of the Lady Luck Hotel & Casino on Third Street has come to a halt. Demolition of smaller buildings around the defunct, 700-room property has left the area resembling a war zone.

Nor did fortune smile on the 46-year-old Lady Luck earlier this month. The secondary lien holder of the property, Winston Hotels, opted out of its $20 million investment. Winston—which is being taken private—exercised its option of taking $15 million, or 75 cents on the dollar, from the primary lien holder and loan packager, Canpartners Realty Holding Co. IV LLC. The Lady Luck’s loan is in forbearance, meaning it has defaulted and payment plans are being reworked.

The Lady Luck closed in February 2006 for what was scheduled to be a nine- to 12-month renovation. The 5.5-acre site was purchased by Downtown Resorts, then called the Henry Brent Co., in 2005. Representatives from Downtown Resorts could not be reached for comment.

In between the glitzy undertakings of the Golden Nugget and the stagnant state of the Lady Luck are operators looking for other ways to keep up with the times. Boyd Gaming has spent more than $10 million to remodel the rooms in its three downtown hotels, says Boyd spokesman Rob Stillwell. The casinos in the California, the Fremont and Main Street Station also received a makeover.

A big question mark is what the future holds for the five well-worn Tamares Group-owned sites. Tamares is now “researching” the idea of turning the Las Vegas Club into a condo-hotel project, explains Larry Woolf, the licensed operator of four Tamares casinos.

Is The Worst Over?

Golden Gate Hotel & Casino owner Mark Brandenburg doesn’t want to see downtown lose its charm as it gets a facelift. “I really believe that there is something very special about Fremont Street. The Golden Gate and Fremont Street are sufficiently unique.”

The worst, some say, is in the past. “We really see downtown as being on a upturn,” said Stillwell.

Majestic Research Director Matthew Jacob agrees downtown gaming revenue numbers should improve this year. “Last year, downtown revenues were down six or seven percent in the February and March period,” he said. “That creates a situation where it is easier for the market to create a positive comparison because they have a low bar to clear.”