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Tropicana's $180 million Renovation Turning Heads

Moving from Number 80 in Customer Rankings of Top Las Vegas Hotels Before the Re-do to Number 20

By Liz Benston, Las Vegas SunMcClatchy-Tribune Regional News

May 27, 2011--The history of the Las Vegas Strip has been a tumultuous one, defined as much by the wrecking ball as by the construction of some of the world's largest and most expensive resorts.

That economic model, the primary force driving decades of tourism growth for Las Vegas, came to a crashing halt in the downturn as financing for new resorts dried up, leaving casino owners with two options: do nothing or renovate.

Alex Yemenidjian opted for the latter when he bought the Tropicana out of bankruptcy in 2009, elevating it to a competitive mid-market property. The tactic seemed questionable in a town that has razed most of its mob-financed casinos and replaced them with lavish megaresorts tailored for newer and more profitable audiences.

Critics questioned whether the Tropicana brand, which had long been known for dingy rooms, tacky decor and iconic Folies Bergere showgirls, could be salvaged.

Now, nearly two years later, the Tropicana bears little resemblance to its former self. Besides renovating all of its available rooms and public spaces under a South Beach theme, the Tropicana has changed all of its restaurants and entertainment, including the recent arrival of Gladys Knight in the main showroom. The property's most extensive attraction opened Thursday: a nightclub and attached outdoor pool lounge under the Nikki Beach brand. Even parts of the property visitors never see got a full makeover, including the first upgrade under Yemenidjian: a $1 million employee dining room.

For a property that had changed little from the 1980s, the $180 million transformation is dramatic -- and swift.

It also has little parallel in Las Vegas.

The 54-year-old Tropicana is one of only four remaining hotels dating from the Strip's early resort era still in operation. Of those, the Riviera -- which, like Tropicana, recently emerged from bankruptcy post-recession -- has not announced major renovations under new ownership. Like its pricier sister property, Caesars Palace, the Flamingo has been renovated periodically over the years to maintain its appeal.

Tropicana, by contrast, had gone to seed under at least three owners as strategies to upgrade the property came and went. Plans to tear down the building and erect a major new resort had been discussed more than a decade ago. During the height of the economic boom, different owners proposed the most ambitious expansion in Las Vegas history, including plans to build multiple hotel towers onto the existing resort for a total of up to 10,000 rooms.

The facelift made sense because of Tropicana's location at the bustling south end of the Las Vegas Strip and one of the busiest intersections in town, Tropicana President Tom McCartney said. The original structure, which opened as a luxury resort in 1957, had been well preserved over the years, with mature landscaping and reasonably-sized rooms, he said.

The resort has yet to earn a profit from its upgrade, though losses have narrowed as the now-renovated property is generating more revenue from all types of customers, including tour groups, last-minute tourists and business customers.

Though renovated rooms and service upgrades have so far been well-received, financial analysts such as Jacob Oberman say it's too early to tell whether the face-lift will pay off, especially given that business has been somewhat disrupted over the past year while work was under way.

Rising room rates are a big help, he said, as every $10 improvement in rate likely translates into a few million dollars in pretax earnings per year, said Oberman, director of gaming research and analysis for CB Richard Ellis' Global Gaming Group.

The arrival of Nikki Beach and its Club Nikki nightlife venue -- high-margin businesses drawing crowds of young customers in the downturn -- could further lift earnings, he added.

Midmarket hotels have suffered more than higher-end properties in the downturn as visitors could afford discounted rooms at the more luxurious hotels.

"It costs about the same amount to service a room and check you in whether you're at Bellagio or Tropicana," Oberman said.

Despite optimism about improving tourist traffic and spending patterns, CB Richard Ellis estimates revenue from nonluxury Strip hotels open for at least a year to be flat this year.

McCartney doesn't sound worried. Instead, he sounds relieved.

The timing of the downturn worked in Tropicana's favor, yielding an upgrade at much less cost than the boom years and allowing the property to pass on those savings to customers in the form of affordable prices, said McCartney, a Strip veteran who formerly ran the Planet Hollywood resort.

Casino operators in Las Vegas have discussed the negative consequences of lowering room rates to the point where they attract customers who go elsewhere for cheap entertainment because they can't afford to eat in a property's restaurants or see its shows.

The opposite is happening at Tropicana because it has achieved a pricing balance among its new offerings, which were designed for post-recession consumers seeking value, McCartney said.

"People can afford to stay here and participate in other activities while they're here," from the 24-hour Starbucks to the casual Italian restaurant by noted Chef Carla Pellegrino, he said.

"We're not competing at the high end. There's a very large middle market in Las Vegas."

In years past, the Tropicana served as a conveniently located dorm offering cheap rooms for budget seekers who spent money elsewhere. Tropicana is now a "net importer" of customers, McCartney said.

Tropicana executives use the catchphrase "aspirational yet accessible" to describe their business model -- buzzwords that happen to be all the rage in boardrooms across the country.

The new rooms are one example, with plantation shutters made from synthetic white material rather than cloth that can easily wear out or look outdated. Save for an iPod docking station with an alarm clock and a 42-inch flat-screen TV, there are no objects d'art or high-tech features in the rooms, which have a muted tropical theme to match the property's South Beach-inspired design. Like each new design element of the hotel, the furniture was selected by Yemenidjian for its balanced appeal between modern and casual -- an intended departure from the generic minimalism or trendy opulence favored by many hotel chains.

"Some hotels don't know what they want to be," said Tropicana Service Excellence Manager Kennon Wolff, who formerly worked at a four-star hotel. "People want a look they can recognize, without it being stuffy or ostentatious,"

The new entertainment lineup may seem a confusing mishmash for younger and older audiences. That's all according to plan, as the Tropicana casts a wide net in its effort to attract Baby Boomers alongside Generation X and Generation Y customers who weren't necessarily frequenting the property, McCartney said.

"It's important to have diverse entertainment offerings available at different times of day. It doesn't make sense to be too narrow."

After a building boom of luxury hotels many people can no longer afford, the middle market is "definitely the place to be" for Las Vegas hotels, gaming industry consultant Daniel Shumny said.

Still, budget hotels have a rough road ahead as high-end properties use discounted rooms to compete for customers, he said.

The Tropicana, meanwhile, is a brand that has outlived its expiration date, Shumny said. The new owners would have been better served by tearing it down and waiting to rebuild when the economy recovers.

"It has this image as the place where my grandparents used to go," he said.

Anthony Curtis, publisher of the Las Vegas Advisor newsletter, calls the makeover a successful effort to bring the property up to par with newer competitors.

"They've followed through on what they said they would do," Curtis said.

The property has been ramping up its advertising efforts, using the slogan "We're changing everything" to get the word out. Online customer reviews are helping those efforts, as the renovation included retraining staff in the standards of luxury hotels, McCartney said. Among other things, employees must walk customers in need of directions to their destination and be able to explain resort amenities in detail.

On, Tropicana has moved from a No. 80 customer ranking of top Las Vegas hotels before the renovations to No. 20, ahead of many higher-end hotels. Tripadvisor, a travel website known for extensive customer reviews that have become required reading for hotel managers nationwide, features mostly positive comments about the Tropicana, including the following post from a visitor last week: "I had stayed there a few years back and it was not a great experience. They have really turned things around ... The staff is really nice, helpful, knowledgeable and excited about the new direction of the hotel."

Such comments mark a change from years past, when customers shared horror stories about dirty rooms and service that was lacking.

Occupancy and room rates have crept up over the past several months, resulting in higher gambling, food, beverage and entertainment revenue, according to company earnings reports. After previous management stopped selling rooms to convention groups in anticipation of major renovation work, the Tropicana's convention business has been reborn, with remodeled convention facilities and a new group sales staff, McCartney said.

"All the indicators are moving in the right direction."

Nostalgia may sell books and movies but isn't an effective marketing tool for Las Vegas hotels.

"You will hear people grousing that they want the old prices but they also want the best," Curtis said. "If you want to compete on the Strip you have to be new. They couldn't do that with the old Tropicana."


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Copyright (c) 2011, Las Vegas Sun

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