Historic Tropicana poised for pricey renovation

New Tropicana co-owner and chief executive Alex Yemenidjian is still getting himself and his team acclimated to their new surroundings.

A former top executive at MGM Grand Inc., Yemenidjian is working 15-hour days trying to revitalize one of the Strip’s remaining historic properties, which he acquired July 1.

Without the luxury of being able to tear the property down in the current economic environment, Yemenidjian and his partners, Canadian private equity firm Onex Corp., are launching a nearly $100 million plan to renovate the 52-year-old property.

Much of what the Tropicana of tomorrow will look like is a project in flux.

The boardroom outside his office is covered with sketch boards, photos, and carpet and floor samples of what the new rooms will look like.

Yemenidjian, who ran MGM Studios after leaving the gaming industry, plans to transform the property into a South Beach Miami-themed resort.

He plans to go before county planners later this year with extensive construction plans that include building a new nightclub that will overlook the Strip.

The property’s revitalization took its first public step Aug. 6 with the unveiling of a new "Tropicana Las Vegas" logo.

Question: You talked about a large remodel of the property before the gaming regulators. Has that begun and what changes should the public notice first?

Answer: It has definitely begun. I spend approximately 40 percent of my time in design and construction meetings dealing with the physical transformation of the property. The first phase is the complete refurbishment of the employee dining room, the construction of a new employee lounge, and the renovation of all back of house offices and common areas. This phase has been designed, permits are being pulled and construction begins August 24th. It will be completed before the end of this year.

The second phase is our convention and exhibition center, all our hotel rooms and all related common areas. We are about 75 percent done with the design of this phase and we expect to complete construction by next spring.

The third phase is the renovation of most of our dining facilities. The design of our new buffet is almost done and we will start designing the remaining restaurants in the next few weeks.

The balance of the project is more complex. We are now in the design development stage and, as soon as we have complete construction documents, we will go out to bid. But we will be implementing many cosmetic changes in the casino as we go along, so the public will certainly begin to notice meaningful changes before the end of the year.

Question: What has been the biggest challenge in the first month since taking over the ownership and operation of the Tropicana?

Answer: Without question, the biggest challenge has been dealing with issues that are left over from the bankruptcy proceeding. I have never before acquired a company that was in bankruptcy, and the process is long, inefficient and very expensive. For someone who thrives on efficiency, the bankruptcy process is very frustrating.

Question: One of the issues that is still pending from the bankruptcy is the use of the Tropicana name. What is the status of the pending lawsuits on the use of the Tropicana name and are you talking to Tropicana Entertainment to get the dispute resolved quickly?

Answer: We are not currently in discussions with Tropicana Entertainment regarding the pending lawsuit, so most likely this issue will be resolved in court.

Question: Is there anything that has surprised you in the first month?

Answer: I have been pleasantly surprised by the tremendous reservoir of good will that exists in our work force. The team members love this company, love their jobs and are beaming with pride. Considering how previous administrators have neglected the property, neglected the operations and neglected the employees, it was very refreshing to find that despite all that neglect so much pride and passion can be harnessed. And regardless of what happened in the past, I am keenly aware that change can be scary for many of our team members. But change also irrigates the human condition.

Question: What is the biggest challenge for your team being new to the market and operating in this environment?

Answer: Actually, most of our team has very extensive experience in the Las Vegas market. Of the 11 vice presidents, only one has no experience in this market or in the gaming industry for that matter, and that is by design. That is Nancy Gregory, our vice president of entertainment. Given that the execution of a successful entertainment strategy in this fiercely competitive environment is probably the most difficult challenge we face, I wanted to have someone who was only constrained by the limits of his or her imagination.

Question: What has been the biggest challenge building a gaming company from scratch?

Answer: The biggest challenge right now is the lethal combination of the economic downturn coupled with a severe supply-demand imbalance in Las Vegas. To be sure, building a gaming company in the midst of an economic downturn like the one we are currently experiencing is akin to trying to build a house in the middle of an earthquake. Room revenue is the only segment of our business that has any meaningful pricing power, and that segment has totally collapsed. And to make matters worse, there is a huge supply of additional capacity coming into the market in the next 12 months while demand is actually contracting. So we are all hoping that the excitement of the opening of the CityCenter project creates more demand than it consumes.

Question: Your partnership with Onex Corp. is the property’s fourth ownership in three years. Many of the employees have been here through the upheaval from the absent ownership of Aztar to Columbia Sussex’s mismanagement and bankruptcy. How do you heal the morale and convince the staff of you and your partners’ vision?

Answer: In an environment characterized by broken promises and sustained neglect, in order to have any credibility with the work force, any new promises have to be followed by swift execution and delivery. It is no accident we are fast-tracking the physical transformation of the property, and that we are starting with the employee dining room and the employee lounge before anything else.

Question: How are you reaching out to customers to let them know about the changes?

Answer: We are not reaching out to the customers just yet. We don’t want to promise anything if we are not ready to deliver on that promise.

Question: When you left MGM Grand you said you had wanted to return to the casino business as an owner. Did you think the opportunity would be on the Strip?

Answer: Frankly, I didn’t know. Since December of 2007 my partners and I have seriously looked at more than 20 opportunities, both domestic and international. We did not limit ourselves geographically. We continue to look for additional acquisitions or greenfield opportunities in various markets, including additional acquisitions in the Las Vegas market. That our first acquisition happened here is fortuitous because we always wanted our new gaming company to be headquartered here. And we are keenly aware that this is the major league: (MGM Mirage majority shareholder) Kirk Kerkorian is the smartest man I know, Steve Wynn is the best designer of hotel-casinos in the world, Sheldon Adelson went from 0 to 60 faster than a Ferrari, and (Harrah’s Entertainment Chairman and CEO) Gary Loveman presides over the largest hotel-casino company in the world. In this league, you don’t lose your lunch.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

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