Harrah’s has so many billions in debt reporters are hailing the company for not being crushed by it yet. The one action the company has taken recently that surprised many was to take over Planet Hollywood through assuming more debt. And, as I noted this morning, yesterday brought rumors Harrah’s is trying something similar with Palms. To many a company that has billions in debt taking on more debt seems counter-intuitive. But Harrah’s only chance for paying off its debt is that casinos in Vegas (and, elsewhere) become wildly profitable again. If that does not happen, most every casino company in Vegas will likely be going bankrupt in the next few years or forcing their creditors to accept huge losses. And, if the return to massive profitability does happen, well, the more casinos owned the better for paying down debt. Or, at least that was my theory of Planet Hollywood and Harrah’s. It isn’t a bad idea among weak choices. But if Harrah’s has made some such calculation with Palms and Palms Place they are making a huge error. Why? Because without George Maloof the Palms is simply an off-Strip property even further from the action than the Rio (which Harrah’s already owns).
While other resort companies have had their finances endlessly dissected in the media that has not been the case with The Palms. I can not speak for the local business press. But I suspect that as a private company, operator and owner Maloof can keep much of the casino’s business out of the newspapers. That would be his choice. Even in boom times Maloof was never much for discussing the money aspects of his property. And, as a result, I think few have credited just how good George Maloof is at running a casino. Unlike the impeccable business credentials of Harrah’s head Gary Loveman (or the make-believe MBA of another former resort company head), Maloof is unlikely to impress Wall Street types with his UNLV degree. But he gets the business of gambling very specifically. He knows how to create atmosphere to make his casino appealing to players every bit as much as gawkers. That is the Maloof secret and something Harrah’s can only destroy. And, that is no insult to Harrah’s.
I assumed with the construction of Palms Place as a residence/condo/hotel without gaming, Maloof was facing the issues faced by similar projects at Planet Hollywood, Vdara at CityCenter and Trump in terms of selling units. But until yesterday, I had heard nothing specific on the money situation over at the Palms beyond one casual conversation tinged with dark humor I had about the state of the Vegas economy in general with Maloof (Palms specifically never was mentioned) a couple months ago at an event.
But if you are a fan of Vegas, The Palms without George Maloof is simply inconceivable. Maloof made The Palms the center of celebrity culture and that helped Vegas boom for the past decade. And, Maloof did this without appearance fees and other ploys outside traditional casino room comps. Maloof just made Palms a cooler place than any other casino in town. This is where celebrities went. And, they brought tourists who wanted to see them.
Harrah’s should figure out that you can’t buy the Palms because the property is a massive expression of Maloof’s personality that he has poured a decade of his life into creating. Perhaps, even more than Wynn, no casino’s value is so linked to an owner. Wynn has had years to craft managers, at every level, who can carry on with his style should he retire one day. Maloof is still the creative force not only for Palms but for much of Vegas in terms of innovation and presentation.
The one key to understanding what makes Maloof so impressive has nothing to do with celebrity and suites with stripper poles. And, that is what almost everyone misses about the Palms. Here is the view from FT.com about the Harrah’s purchase rumors that makes my point:
“Harrah’s might take a more utilitarian approach with Palms and Planet Hollywood, by toning down some of the glitz and boosting appeal to middle market customers. Then the idea would be to feed those customers to other properties in the Harrah’s portfolio.”
People want casinos without glitz? The ignorance here is breathtaking and one assumes Harrah’s executives know better. The Palms actually already caters to the middle market customer. The casino also heavily works the local market. That is in a nutshell the genius of Maloof: he owns an off Strip property that he made the signature of Vegas hip while never forgetting his core audience was locals and middle class tourists. Other resort companies have forgotten the regular tourist in a myopic pursuit of the wealthiest patrons, not Maloof.
Yes, Palms has a handful of suites so luxurious they generate press. But they have many, many more affordable rooms, even in the Fantasy Tower. Yes, they have expensive restaurants, but there is also a food court with a McDonalds. There is no food court in CityCenter. Yes, that is a significant statement about both properties. Guess which one gets gamblers better?
So, while there are the hot nightclubs you read about at Palms there is also a lounge and regular bars. Similarly, there is the Playboy Club for those who want to live large while downstairs at Palms there are locals lined up for specials in various low stakes gambling promotions.
That is the magic of Maloof; he has managed to make Palms many things at once while doing all brilliantly. Without Maloof’s constant fine tuning and firm operational control, The Palms has little to no chance of retaining anything like its current value as a porperty. Robert Earl did not make Planet Hollywood worth more though he was a good salesman for the property. Maloof is different. He gets gamblers, celebrities, locals and tourists. For now he is an irreplaceable part of The Palms’ market value. Without Maloof, few would see a need to keep driving past the Rio if they want a Harrah’s middle marketed property. (Photo: Sarah Gerke)