During the past decade, Penn National Gaming was named as a potential buyer of nearly every Strip resort that was for sale or rumored to be on the market.
So it was no surprise when the regional gaming company announced April 29 it would spend $360 million to buy the Tropicana Las Vegas.
The transaction, which is expected to close by the end of the year, not only gives Penn National its long-sought address on the Strip, but keeps alive an historic name and a Rat Pack-era property.
Most of those places from the 1960s and 1970s have been relegated to the Las Vegas history pages.
“There is not a lot left of the hotel from when it first opened because of expansions, but it’s good for the city that we will still have the name Tropicana,” said David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas.
A week after Penn National’s deal was announced, the Riviera closed and is scheduled for demolition this year. A day later, Resorts World Las Vegas began rising out of the former Stardust site. The hotel-casino was demolished in 2007.
SLS Las Vegas opened last year out of the shell of the Sahara, which closed in 2011. The Sands, Frontier, Dunes and Desert Inn have all been wiped away.
Penn National CEO Tim Wilmott made no mention of rebranding the Tropicana as one of the company’s Hollywood-themed casinos when the deal was announced. He said the property fills a void for Penn National and gives the company — which operates 26 casinos nationwide — a new option for its 3 million-member customer database.
Last week, Penn National Chief Operating Officer Jay Snowden told the Nevada Gaming Control Board that 25 percent of the company’s customers regularly visit Las Vegas.
Penn National, which took over ownership of M Resort in Henderson in 2011, attracts some of that business to the stylish 390-room hotel-casino. But the property is about 10 miles from the heart of the Strip.
Snowden admitted most of its customers want to be in the middle of the action. The Tropicana fulfills that wish.
Goldman Sachs gaming Steven Kent called the Tropicana “very complementary” to Penn National’s regional properties.
Kent told investors the Tropicana’s average room rate of $154 a night “will likely resonate with the typical regional gaming customer who wants a fun weekend in Las Vegas but may not be willing or able to pay the rates charged by the higher-end properties.”
Schwartz said it’s good for Las Vegas to have midpriced hotel offerings. With 1,500 guest rooms and a 50,000-square-foot casino, the Tropicana adds to an important niche.
The Tropicana is just one development in Penn National’s pipeline that has analysts singing its praises.
The company last year opened two slot machine-only racetrack casinos in Ohio. Next month, it plans to open the $225 million Plainridge Park casino in Massachusetts, a slot machine-only facility attached to the Plainridge Park Racecourse. Penn National also is building and will manage a $360 million Indian casino near San Diego for the Jamul Indian Village, which is expected to open next year.
“We expect Penn to benefit meaningfully from its three new projects that are coming online,” Kent told investors. “In our opinion, this will position the company to grow faster than its peers and the broader U.S. regional gaming market. We expect Penn will be the master of its own destiny, given its new capacity.”
Kent is not alone in his assessment.
J.P. Morgan gaming analyst Joe Greff said the Tropicana fits nicely into Penn National’s portfolio and makes the company an attractive investment opportunity.
“(This) makes strategic and financial sense to us, as it allows Penn to fulfill its long-term goal of having a Las Vegas Strip asset that will enable it to leverage its database,” Greff said.
Snowden told the Control Board the Tropicana is in good shape. Current owners Alex Yemenidjian and the Onex Group invested more than $200 million in remodeling much of the property over the past three years.
“We think we are getting a quality asset with a great legacy of 60 years of history here in Las Vegas,” Snowden said. “We think our database is going to respond very favorably to the recent renovations that have been made at that facility.”
The Tropicana’s previously failed owners — Columbia Sussex — planned to build 8,000 hotel rooms on the 35-acre site.
Schwartz said Penn National has the more prudent and correct idea. It also keeps a property named Tropicana operating on Tropicana Boulevard.
“It’s good they’re keeping the name,” he said. “It preserves something.”
Howard Stutz’s Inside Gaming column appears Wednesdays and Sundays. He can be reached at email@example.com or 702-477-3871. Find on Twitter: @howardstutz.