Majestic Research

Bodog Nation

Tropicana Makes a Splash: Successful Casino Operator William Yung III Is Ready to Take on the Las Vegas Strip as He Revamps an Icon

By Patrick Crowley
Published: January 31, 2007

Fort Mitchell, Ky. – A Days Inn hard by Interstate 75 in tiny Richwood, Ky., is a long way from the Las Vegas Strip’s most famous intersection.

But those locales form the bookends of the career of William Yung III, the casino operator’s version of a whale that rolls into town with a pocketful of cash looking to make a big splash.

You’ve probably never heard of Yung and his privately held, Kentucky-based hospitality company, Columbia Sussex, a quiet yet aggressive and growing player in the casino industry.

But you will.

Just wait until his company begins work later this year on a $2-billion combination tear down and rebuild on The Tropicana, a historic Las Vegas property that Yung now owns as part of his eye-popping $2.75-billion buyout of Aztar Inc., the Tropicana’s former owner.

“That’s one of the best pieces of property in the world,” the soft-spoken Yung, 65, says in his modest office atop a five-story suburban business tower just south of downtown Cincinnati. “It’s worth $1 billion.”

By the time Yung is finished with The Trop, as it is known, the 34-acre site that shares the corner of Las Vegas Boulevard and Tropicana Avenue with some of the biggest names on the strip—sMGM Grand, New York New York, Excalibur and Luxor—should fit in nicely with its more upscale neighbors.

Successful casino operator William Yung is ready to take the Las Vegas Strip by storm. Plans for the $2-billion remodel roughly include 10,000 hotel rooms, 80,000 square feet of casino space, nearly 1,000 condos, 645,000 square feet of convention and meeting space, and retail space covering 275,000 square feet. The existing towers will likely stay but the rest will be new.

Estimated at 11 million square feet, Yung’s Tropicana will be one of the largest buildings in the world.

“Bigger than the Pentagon,” he says with a smile.

The main entertainment attractions at The Tropicana—the showgirl-heavy Folies Bergere and magician Dirk Arthur—are likely to survive the pending changes. But more entertainment will be offered, Yung assured.

And though Yung is becoming more entrenched in the gaming business—with the purchase of Aztar, Columbia Sussex now owns 13 casinos in the U.S. and Caribbean—he is coming to Vegas to do what he knows best; hotels and the hospitality industry.

“Where most everybody builds as a casino play, I’m building as a hotel play,” Yung said.

His strategy is simple; people go to Vegas to do more than gamble.

“People go out there not just to gamble, but to have a good time,” Yung explained. “They go out there for meals, they go out to be entertained, they go out for a nice hotel. And they go out to gamble, but you have to offer the full package.

“There is a lot of money to be made, especially at that location.”

As long as Yung does it right he should be able to make the splash he is seeking with the rebuilt Trop, according to Majestic Research Analyst Matthew Jacob.

“The Tropicana site is ripe for development,” Jacob said. “All of the surrounding properties are 16 years old or less. The Tropicana is historic. It opened 50 years ago. Over time a lot of those kind of first-generation strip resorts have been redeveloped in varying degrees. Building a new property on that site can yield much higher cash flows than regenerating the existing property.”

New properties help everyone on the Strip because it creates a buzz that benefits most if not all of the city’s entire casino industry.

“Anytime a new property opens in Las Vegas it raises the bar,” Jacob said. “Not only does that property get a lot of attention, it tends to help most of the other market. People don’t have to stay at a new property to enjoy it. Players and visitors don’t go to one resort; they gamble at five or six places, spreading their spending around.”

Yung captivated the gaming industry last year as he slugged it out in a bidding war with other suitors to eventually take control of Aztar and its casinos. Along with the Tropicana in Vegas, Columbia Sussex also picked up the Tropicana in Atlantic City; the Ramada Express in Laughlin, Nev.; Casino Aztar riverboat in Evansville, Ind.; and another riverboat in Caruthersville, Mo., that Yung is attempting to sell.

The buy boosted his casino stable to 13 and includes The Westin in Las Vegas; the Horizon and MontBleu in South Lake Tahoe; the River Palms in Laughlin, Nev.; the Amelia Belle and Belle of Baton Rouge in Louisiana; and The Vicksburg and Lighthouse Point casinos in Mississippi.

Columbia Sussex recently completed construction of the $200-million Westin St. Maarten. And in May it paid $200 million for the Casino Queen on the Mississippi River just outside St. Louis.

Yung was first approached about a potential buyout of Aztar’s by a broker that called him. He wasn’t overly enthusiastic because of the Atlantic City Tropicana.

“I was always scared of it because of Atlantic City.” He was worried about competition from a new gaming market was opening in neighboring Pennsylvania.

Besides, it wasn’t like Vegas. The crowds, the city and the properties were growing too old. At least that’s what he thought.

“I went up and spent a few days there and started to get comfortable.” Aztar had refurbished the Tropicana and the crowds were “a lot younger,” as he put it.

“It wasn’t just the white hairs coming down. It was a whole new crowd.”

Yung eventually became enthralled and outbid the publicly traded Pinnacle Entertainment Inc. to win control of Aztar and its casinos.

With the Aztar purchase, which has received approval by state regulators, Columbia Sussex has revenues of nearly $5 billion, 80 hotels, 26,000 rooms in 32 states and three foreign countries and more than 28,000 employees.

And it all started back with that Days Inn in rural Kentucky back in 1972.

Yung grew up in Bellevue, Ky., a bucolic Ohio River town in the shadow of Cincinnati’s skyline. He graduated from the University of Cincinnati with a psychology degree and was working in manufacturing when he borrowed the money to build a Days Inn along what eventually became a growing corridor of I-75 in Kentucky about 15 miles south of Cincinnati.

“Ever since we used to take family vacations to Florida I loved hotels,” he said. “As I got older I always thought it would be a good business to get into.”

After opening the Days Inn in Richwood—which he no longer owns—Columbia Sussex was born. Over the years Yung used a methodical growth strategy, buying and building in favorable and growing markets, always with borrowed money.

“You’re looking at 35 years of my life,” he said gesturing to a map of the U.S. that is dotted with pins that represent his holdings. “It didn’t come overnight. We kept growing but we moved slowly.”

Columbia Sussex centralizes functions that a single hotel can shell out millions of dollars a year to perform—accounting, payroll, purchasing—at the firm’s Kentucky headquarters.

The company’s hotels, he says, run profit margins of 35 percent; the industry average is about 10 points lower.

He sees no need to go public or sell stock to raise money. Lenders, he says, are always willing to make loans to successful, well-run companies.

Even today with his company’s revenues in the billions of dollars, the main owners of Columbia Sussex are he and his family.

Yung prefers staying out of the limelight. “I have no ego,” he says.

But he’s now a player on gaming’s biggest stage. That part, he can do without.

“I don’t do it for the notice; I’m shy,” he said. “It’s just a good business to be in.”

He doesn’t gamble; at least not in casinos. Dollars slots are about it. But he doesn’t seem to flinch at making a $3-billion bet on the Vegas Strip.