If he had his way, Gold Spike owner Stephen Siegel would see his 160-room hotel-casino continue to compete for downtown gambling customers against the 1,037 rooms at the Plaza, which are closing in the next 60 days.
Instead, the founder of the Siegel Group, says he now has to explain away another slew of bad news that has seemingly engulfed the downtown casino market over the past few years.
Siegel, who spent roughly $32 million to purchase and remodel the Gold Spike and the adjacent Travel Inn, said Plaza ownership’s plans to close the hotel tower and portions of the property for a year-long remodeling reflect poorly on the market.
The Plaza expects to lay off more than 400 workers.
"It makes everyone’s job tougher," said Siegel, who runs three other casinos and a collection of apartments and extended-stay properties. "You don’t want to see 400 people lose their jobs in a terrible economy. You need to create jobs. You can operate and renovate a business without closing it."
Siegel said he and other downtown casino operators have taken steps to halt a prolonged decline where gaming revenues have fallen more than 33 percent in two years. He recently announced plans to bring in Golden Gaming Group to operate the Gold Spike’s casino.
Several downtown casino operators sympathized with Tamares Group, the Liechtenstein-based company that owns the Plaza, Las Vegas Club and Western Casino.
In an e-mailed statement, a Tamares official said the 39-year-old Plaza was in dire need of a hotel room remodeling project. "Operational difficulties" was one reason given for the closure of the tower that anchors the intersection of Main and Fremont streets at the western edge of the Fremont Street Experience.
A portion of the Plaza’s casino, several restaurants and the showroom will remain open.
However, some operators expressed concern the Plaza would turn into another Lady Luck. The 743-room hotel-casino on Third Street closed for a planned renovation in February 2006, laying off almost 700 workers. The property has been shuttered since.
"(The Plaza’s) customer base is dependent on rooms," said one downtown gaming observer. "I don’t see how it survives without hotel rooms. What is the attraction for people to cross Main Street to go to the casino?"
El Cortez general manager Mike Nolan said the Plaza needed to renovate its hotel rooms more than six years ago, but had not been able to accomplish the task.
No one, he said, especially rival operators, wanted to see the hotel tower close.
"We’re all competitors, but we all root for each other to succeed," Nolan said. "Losing rooms isn’t good for anybody downtown."
El Cortez ownership spent $20 million between 2005 and 2007 to renovate the nearly 70-year-old property’s 300 rooms, casino, restaurants and other public spaces. Last year, $7.5 million was spent to transform the neighboring Ogden House Motel into the Cabana Suites, a 64-room boutique property.
"You have to move forward or you will get left behind," Nolan said.
The three downtown casinos operated by Boyd Gaming Corp. generated about 9.5 percent of the company’s revenues in the second quarter. For the first six months of 2010, Boyd said, its downtown revenues have declined about 6 percent.
The company relies on Hawaiians for the bulk of its downtown business and is supportive of the market.
"We are very confident in the prospects for downtown and are fully committed to it," Boyd Gaming spokesman Rob Meyne said. "Obviously, we’re disappointed to hear the news that the Plaza’s hotel will be closing temporarily. We want to see more hotel rooms open in downtown Las Vegas, not fewer."
In December, Binion’s closed its 280-room hotel tower and laid off about 100 employees.
Owner Terry Caudill said his intention is to remodel those rooms and bring the tower back on line, although he may have to bring in an equity partner to complete the project. He also wants to reopen the 80 rooms in the original Binion’s property that he has never opened since acquiring the casino for $32 million in January 2008.
Caudill is hopeful downtown’s prospects will rebound in 2011, when convention business is expected to pick up on the Strip.
"What happened with the Plaza is not really a surprise," said Caudill, who also operates the Four Queens. "I’ve said in the past that downtown needs upgraded rooms and that is our goal at Binion’s. We did put money into Binion’s that has allowed us to survive and weather this storm."
Gaming revenues downtown have collapsed over the past two years as the failing economy has taken a chunk out of discretionary dollars consumers once spent. Hotel room rates have declined to record lows along the Strip. Downtown, known for its low-priced hotel rooms, no longer became a cheaper alternative.
Downtown casinos last reported a monthly gaming revenue increase in June 2008, when casinos collected $48.3 million from customers, a jump of 10 percent from the previous year.
In July, downtown gaming revenues were $32.1 million, a 19.2 percent decline from July 2009.
Brian Gordon, a principal with Las Vegas-based financial consultant Applied Analysis, said the downtown market has matured quickly over the years and is need of reinvestment.
"A lot of redevelopment efforts have been proposed but haven’t taken hold," Gordon said. "Once some additional investments are made, I think there will be opportunity to recapture lost market share."
The Golden Nugget opened a 500-room hotel tower expansion in November, pressuring the rest of the market. According to several travel Web sites, room rates at the Golden Nugget are anywhere from $49 on weeknights to $159 on weekends.
Gordon said development along the 61-acre property once controlled by Union Pacific Railroad, including the $100 million Cleveland Clinic Lou Ruvo Center for Brain Health, which opened this year, and the under-construction $470 million Smith Center for the Performing Arts, will help downtown.
The issue still being debated is how to connect the Fremont Street casinos and the Fremont Street Experience with the projects along Grand Central Parkway.
Contact reporter Howard Stutz at email@example.com or 702-477-3871.