New South Coast hotel-casino banks on market-tested formula - Thursday 29th of December 2005

Although Coast Resorts has spent an unprecedented $600 million on its new South Coast hotel-casino that opened last Thursday, its otherwise eschewing risk on the project. Tried-and-true business formulas run throughout the South Strip property, which resembles a larger, more primary-colored version of the companys successful Suncoast Hotel & Casino in Summerlin.

"At the end of the day, if you come to Coast Casinos," said General Manager Michael Gaughan Jr., explaining the propertys restaurant mix, "youre looking for a steakhouse or Italian or a buffet, which we have at all our properties." Son of Coast Resorts CEO Michael Gaughan and grandson of Coast patriarch Jackie Gaughan, Michael Jr. is parent company Boyd Gamings Johnny-on-the-Spot for completion of the 1,900-room property.

South Coasts oyster bar and Mexican restaurant replicate eateries that have won favor at other Coast casinos, says the younger Gaughan, citing Suncoast and The Orleans in particular. The companys initial goals, he added, were to reproduce what customers expect from a Coast property.

South Coast General Manager Michael Gaughan Jr. stands in the table game pit of the new, $600-million South Strip hotel-casino.

One 11th-hour deviation from the master plan can be found where the ticketing area for South Coasts cineplex was to have been. Off to one side, crudely segregated from the rest of the gaming floor, a handful of poker tables have been placed in the empty space. According to a Coast spokesman, this was an in-progress adjustment made in order to capitalize on the recent popularity of poker.

COASTS BATTLE-CRY: TALLY-HO!

"If you count customer service as giving customers what they want, they have done a good job -- like Station (Casinos) has -- of giving customers quality food at the right price and decent value on their machines," said Dennis Conrad, president of Raving Consulting, which advises casinos and casino-related businesses on marketing and customer service.

"I would say that theyre known for a competitive locals environment and enough value in the players club to make people want to play there," Conrad added. "Theyre not Station, but Id say they are certainly a decent competitor. Station probably pays attention to what they do."

Asked if Coast is taking any risks with its newest venture, Gaughan responded that "on the surface, I guess youd say the equestrian center would be the unknown, in the sense that theres not (one) anywhere else in town. From our standpoint, its one of the components that were probably the most comfortable with."

Michael Jr. observes that his father has been involved with horse events for over three decades, including the National Finals Rodeo. In fact, Gaughan Sr. sits on the board of Las Vegas Events, presenter of the NFR, one of the very few national equestrian events that Coast regards as too big for its new roping-and-riding venue.

"Weve done it before," Gaughan Jr. said of equestrian exhibits. "We kind of understand it and realize its the real niche that hasnt been met here." He added that the pull of the equestrian center will be augmented by South Coasts 80,000-square-foot exhibit hall (plus a 22,000-square-foot grand ballroom and 48,000 additional square feet of meeting space), far more real estate than any Coast property has dedicated to conventions previously.

"We needed a very much expanded facility," Gaughan said, "to be able to satisfy all the needs of the equestrian center and still have the convention space that might be more typically found here in Las Vegas."

Since the horsey set wont be able to avail itself of the equestrian facility until mid-February, and Coast and Boyd are still working with Clark County to develop an I-15 off-ramp at Silverado Road, the younger Gaughan is counting on the locals-player base to tide South Coast over in the short term. "Well shift to more of a tourist base" once access is improved, he said, "for no other reason than weve already master-planned for a third tower, which will bring in more people. As time goes on, hopefully we dont lose those locals but we just build that out-of-town (base)."

Gaughan doesnt dispute reports that Boyd Gaming, which absorbed Coast in October 2004, pushed the latter to begin South Coasts Phase II well before Phase I had opened. Similarly, the movie theaters were relocated to the casinos second floor at Boyds behest, but Gaughan describes the relationship between the two corporate cultures as collaborative.

"Michael Gaughan Senior has had pretty much the ability to make the decisions hes wanted to make," Gaughan said of his father, "except on the financial standpoint." For those, the semi-autonomous Coast CEO needs the approval of Boyds top management.

"Theyre confident in his skills and his track record," the younger Gaughan said. "Really, theyve done a great job of letting Michael Gaughan finish this project, see it through and operate the property."

Far and away Coasts most expensive project ever, South Coast saw its budget skyrocket from an initial $315 million to nearly double that amount. Gaughan doesnt waver when the exponential increase is mentioned, attributing $100 million of the extra tab to the early start of Phase II. As for Phase III, "Well have to wait and see. It will probably be in the next couple of years, but were not in a hurry. The main thing is to get this portion up and running at full steam and make sure that we are taking care of the customers whoever they are as well as possible in the current state before you start expanding."

One thing those customers may notice is a shrinkage in the number of advantage video poker games that pay out 99.5 percent of coin-in or more. Conrad says that Coast is part of an industry-wide trend when it comes to tightening the supply of loose machines. He also observes that Coasts player club rewards players not on the basis on how much coin is fed into the slots but on how much the one-armed bandits return to the customer. "Im not sure if thats a good deal, bad deal or whatever," he said. "Everyone else is based on coin-in."

Is Coasts system less generous? "I would think so," Conrad answered, "based on the fact that the coin-out is going to be 5 percent less than the coin-in. All else being equal, coin-in is probably a better system, but I dont know (Coasts) payback percentages."

A WORK IN PROGRESS

Open the wrong door at South Coast and youll find yourself standing in an empty, concrete cavern. In anticipation of subsequent phases of development, Coast has built 80,000 square feet of expansion space into the extant hotel-casino, which looks to the untrained eye like a finished project. Part of that additional footage was gained by bumping the cineplex up to the second floor, where its neighbors include a 64-lane bowling alley/nightclub and a Kids Tyme recreational center.

"Logistically, its probably the best concept," Gaughan said of the mid-course reconfiguration. "The ability to expand your facility as needed -- and not have to have the cranes, scaffolding and everything on the outside of the building -- was a big driver for us and it was a very easy decision to make, because its pretty tough to be in that position. It does tend to disrupt traffic."

Traffic of the vehicular sort is something Gaughan expects to obtain more easily by the end of 2006, when he anticipates that Las Vegas Boulevard will be widened to six lanes as far south as Cactus Road. Still farther south, where St. Rose Parkway meets Las Vegas Boulevard, two casino-resorts have been announced, one of them backed by local mega-developer Gary Goett.

Gaughan professes to be unconcerned. "I dont know how long its going to take for those to open and there are a number of other projects that are future-planned south of us," he said. "Theyll feed us and well feed them. If we do everything were supposed to do right, that competition isnt going to hurt us."

To prove his point, Gaughan cites his familys Gold Coast and Orleans properties. "The Rio moved in, the Palms moved in. It hasnt hurt us. We continue to grow at a pretty good pace almost every year."

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