|By Benjamin Spillman, Las Vegas
Review-JournalMcClatchy-Tribune Business News
Nov. 2, 2006 - One of the Strip's last remaining value hotels is shifting from a search for buyers to the pursuit of new customers.
Operators of the Riviera, fresh off a failed attempt to hook a buyer for the 51-year-old resort, hope new technology and an influx of customers from the now-defunct Stardust will boost their bottom line.
They discussed the strategy Wednesday during a conference call with investors regarding mostly positive third-quarter earnings for the Riviera and its parent company, Riviera Holdings Corp.
It was the first earnings report since shareholders rejected a proposed buyout by a group of investors offering $17 per share for the 2,070-room hotel on Las Vegas Boulevard and a smaller casino in Colorado.
Riviera Holdings CEO William Westerman supported the buyout but pledged his loyalty to the company "for now and the foreseeable future."
Westerman and Riviera Las Vegas President Robert Vannucci said they hope to increase the value of the company in part by converting 100 percent of slots in the Nevada and Colorado casinos to ticket in-ticket out machines and by luring former Stardust customers.
"The Stardust closure will increase demand for our rooms," Vannucci told investors. He said Stardust's value-oriented, old-school customers are "more comfortable with our style of operations" than they are with newer, costlier Strip resorts.
But the Riviera will have a harder time snaring Stardust customers than it did luring former customers of the Westward Ho when that aging casino closed in November. That's because the Riviera made a deal with Westward Ho's operators for that casino's customer data for marketing.
Stardust is operated by Boyd Gaming Corp., a leader in value-oriented gambling that intends to steer customers to its other properties, Vannucci said.
"We attempted to do something similar with the Stardust. They wanted to move their customers to their own properties," Vannucci told investors.
Despite the distraction of the failed merger, Riviera Holdings reported some positive results in the third quarter.
The company's loss narrowed to $432,000, or 4 cents, per share, for the three months ended Sept. 30, compared with a net loss of $1.2 million, or 11 cents per share, a year earlier.
Net revenue for the quarter was $50.3 million, nearly identical to the same period last year. For 2006 to date, net revenue was $154.5 million, down 1 percent from the year before. But Westerman said the decrease was due to a strategic decision to turn over gift shop operations to an outside vendor.
"We don't think we are in the gift shop business," he said.
Third-quarter cash flow, defined as earnings before interest, taxes, depreciation and amortization, was down slightly at Riviera Las Vegas at $5.7 million, compared with $5.8 million in 2005. Net revenue at Riviera Black Hawk in Colorado rose $300,000, a 2 percent gain. And cash flow at the Colorado property increased 3.2 percent to $4.9 million.
For 2006 to date, Riviera Las Vegas increased its cash flow 1.2 percent to $22.5 million.
Morgan Joseph gaming analyst Adam Steinberg said during the call the buyout talk didn't detract from the performance of the company.
"Overall, a pretty impressive quarter considering some of the distractions," Steinberg said.
After spending about $2 million to make Riviera more appealing to buyers, Westerman said the focus is now on operating the company on a five-year horizon. But Westerman didn't close the door on a potential future sale.
"We will always listen to any bid that is credible. But we are certainly not doing anything to solicit," he said.
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