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New
CEO looks to turn around Trump casinos in Atlantic City, N.J.
As
reported by The Philadelphia Inquirer
ATLANTIC
CITY, New Jersey - James Perry has the money, a new management
team and Donald J. Trump's support, but turning around the developer's
ailing Atlantic City casinos will require something more.
"You
need the patience of Job because it always takes longer than
you think," said Perry, who was plucked out of retirement
over the summer to become chief executive officer of the Trump
Taj Mahal, Trump
Plaza and Trump
Marina casinos. "This is not going to happen overnight."
Perry and
chief financial officer Mark Juliano face the daunting task
of reversing a decade of decline for Trump's casinos in a fiercely
competitive gambling market.
As customers'
tastes and Atlantic City have changed, the Trump properties,
two of which opened in the mid-'80s, did not. As a result, they
lagged not only in having new attractions, but in appearance.
October
revenue figures released yesterday by the New Jersey Casino
Control Commission showed how far they have to go.
Overall,
the 12 Atlantic City casinos reported $428 million in revenue,
up 10.2 percent from October 2004. All three Trump casinos reported
a total of $86.3 million in revenue for October, down 11.6 percent
from the same month last year.
So far this
year, of the three Trump casinos, only the Trump
Taj Mahal is seeing growing revenue. Year-to-date revenue
at the Taj is up 2.2 percent from a year ago, while Trump
Plaza and Trump
Marina are both down, 3.9 percent and 4.9 percent, respectively.
The 2 1/2
year old Borgata
was again the city's top grossing casino, taking in $63.3 million
in total revenue last month. The Taj
Mahal was fourth with $43.1 million. Trump
Plaza finished ninth among 12 casinos with $25 million,
while Trump
Marina was second to last with $18.2 million.
"The
company needs credibility," Perry said in a recent interview
at the Taj Mahal,
Trump's flagship property that opened in April 1990, and the
source of many of his financial problems in Atlantic City. "The
company has to reenergize itself as an operator."
In May,
Trump Entertainment Resorts Inc. emerged from bankruptcy with
a $500 million line of credit from Morgan Stanley to make much
needed upgrades to its Atlantic City casinos and expand into
other gambling markets, including Pennsylvania.
"Going
from cash conservation and cobbling sufficient funds to pay
the bills, to a growth and rejuvenation mode is difficult,"
said Barbara J. Cappaert at KDP Investment Advisors, a high-yield
debt research firm based in Montpelier, Vt. "It's going
to take time."
Trump said
by teaming Perry, known in the industry for cleaning up balance
sheets, with Juliano, who's known for capital reinvestment moves,
he's hoping to give his casinos a one-two punch.
"This
is a great team," said Trump yesterday. "They are
going to bring those properties up to a level that they've never
seen before."
Perry, 58,
has candidly told Trump it will take at least three years for
a turnaround. He said Trump gave him a mandate.
"Mr.
Trump said three things to me, 'No. 1, I want to be proud of
these properties. No. 2, I want the properties and the people
in them to be successful. No. 3, I want to de-lever the company,'
" Perry said.
As a condition
of the reorganization plan that the Bankruptcy Court approved
earlier this year, Trump had to step aside as CEO of Trump Entertainment,
the company that runs his casinos. He retained his role as chairman.
Trump had
blamed onerous interest payments on junk bonds used to finance
his crown jewel -- the Taj
Mahal -- for his inability to reinvest in the properties.
This summer
his casinos finally got new carpeting and slot machines. Hotel
rooms and suites have been refurbished. Public areas are being
redesigned. A new $150 million hotel tower is in the works for
the Taj Mahal.
"We
need to bring the hotels up to speed physically, and go from
what we like to call survival mode into growth mode," said
Juliano, 50, who was previously president of Caesars
Palace in Las Vegas, a property known for its elegance and
ability to attract high rollers. He shares Perry's pragmatic
approach.
"These
are no different than any other hotel," he said. "People
have expectations. If you meet them or exceed them, you build
brand loyalty and repeat visitation."
But to get
there, Cappaert said the Trump casinos needed to lessen their
dependence on the day-tripper bus crowd -- typically made up
of lower-end slots players who don't spend the night -- and
on cash promotions, such as free coins or slot cards.
"It
doesn't build loyalty," she said.
While other
casino operators, like Harrah's Entertainment Inc., use sophisticated
computer systems to track customers and encourage repeat business,
the Trump casinos are only now looking to purchase software
to better manage customer data.
Argosy Gaming
Co., a riverboat casino operator based in Alton, Ill., was highly
leveraged and almost bankrupt -- much like the Trump casinos
-- when Perry came in and turned things around. In 2000, Argosy
was named gambling company of the year, and Perry CEO of the
year. He retired from Argosy in 2002.
"He
has such a vision and has the ability to articulate what needs
to be done," said Virginia McDowell, who started last week
as Trump executive vice president and chief information officer.
She is one of a handful of former Argosy executives that Perry
has brought to Trump.
Argosy was
recently acquired by Wyomissing, Pa.-based Penn National Gaming
Inc., which is rumored to be interested in buying one of the
Trump casinos. Neither Penn National nor Trump officials deny
that interest.
"If
somebody comes in and offers more than what you think you can
earn, as a publicly held company, you have a responsibility
to check it out," Perry said.
Last week,
Trump Entertainment finalized a deal to sell its riverboat casino
in Gary, Ind. Perry said the $227 million in net proceeds from
the sale will go toward improvements at the Atlantic City casinos
and expansion projects, including a potential Trump casino in
Philadelphia.
Juliano
said the Trump brand is at a premium because of the success
of Trump's TV show, The Apprentice.
"It's
very difficult to separate their identity from Trump, if not
impossible," he said of the casinos. "They're still,
because of the Trump name, must-see attractions in Atlantic
City. All they need to do is get brought into the next century."
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