If you’re in the market for a casino, Larry Woolf may be just your man.
Woolf, chief executive of Navegante Group, is the former chairman and chief executive of MGM Grand in Las Vegas. Woolf and his son founded Navegante in 1995 after developing the Casino Niagara for the Canadian government. The company manages the Casino Fandango in Carson City as well as the Plaza, Las Vegas Club, Western and Gold Spike – four downtown casinos that his company has rescued from financial woes. Woolf, who receives constant referrals from regulators, real estate agents and bankers, specializes in guiding casino newcomers through the complex process of obtaining a gaming license.
During this time of unprecedented investment in Las Vegas, Woolf’s dance card is very full these days, allowing his company to pick and choose purchases and new development projects with the greatest growth potential.
Question: How did you get into the management consulting business?
Answer: I’ve been in the casino business all of my adult life. I was the president of Caesars Tahoe when (former Caesars World Chairman) Clifford Perlman was going to be the chairman of MGM (Grand Inc.) and build a 5,000-room resort and he’d indicated to me that he wasn’t going to stay in that position and helped me with the introduction to Mr. Kerkorian and MGM. In 1990 I moved from Lake Tahoe to Las Vegas to be the chairman and president and CEO of MGM Grand.
We took three years to design and build the MGM, the green monster on the corner. After five years there I was going to retire but got busy with a couple of consulting projects. I bid on a project in Ontario in Niagara Falls for the government to design, build and manage their casino and we won that bid over 27 other companies, a number of them publicly-traded companies. That propelled us into the design, development and management arena of gaming.
We’ve been kind of the go-to guys since then. If someone wants to do something in gaming and they don’t understand exactly what to do or they don’t have a license and they need some help, they come to us. We probably talk to one group a week. Someone will say, „I want to buy the Sahara, can you help?“ We’ve kind of become the go-to guys as to figuring how to make it work.
Do many gaming management consulting firms that do what you do?
There are a lot of management consulting firms but a lot of them specialize in something like employee training, employee friendliness, IT, hotel reservations, database marketing. A lot of them have a specialty. There aren’t many that can come in from the top and put it all together.
When we signed the deal in Canada we signed on a Monday and by Wednesday I had 30 people in here flying to Canada, each in their own particular discipline, each a consultant in their own area. Their job was to find someone in Canada, train them in their discipline and leave within 100 days. We had a food and beverage person, an IT person, a player development person, a slot host person. They all went up there and hired Canadians, trained them and left town. That left us with a core group of maybe five management people to guide the new Canadian management team through the process.
We’re probably one of the only ones that can do everything, including designing and building. We took responsibility for the construction, the design, the purchase of the slot machines, the training of the people. We had 300,000 applicants for the jobs in Niagara Falls. We interviewed 100,000 people, we narrowed that down to about 30,000 people. Out of that we hired about 4,000 people. The unemployment rate at that time was about 12 percent so there were an awful lot of people excited about going to work in the gaming industry. There aren’t many management companies that can start from zero and in six months have designed, built, put together a management team and opened with 4,000 new, trained employees.
I’ve been hearing lately about unprecedented interest from investors interested in buying Las Vegas casinos and getting into the business. What’s your take?
There are huge investment firms with a lot of money that have Las Vegas on their radar screen. There are people coming to town now that would never have considered coming to town before, that are basically real estate developers, real estate companies, that deal in real estate all over the world. I talked to one group that said, „being that we are still here probably means we are too late.“
They are very conservative real estate investors and Las Vegas is on their radar screen now, which means there was an awful lot of opportunity lost in the last five years before they got here. They look at everything that is for sale. Whatever they do they say, „Who’s going to run this place for us?“ They need someone who’s licensable, they need someone with a good reputation who can put it all together. They can’t just go out and hire a hotel manager, a casino manager, an IT manager and then manage that from the New York corporate office of Goldman Sachs. They need someone they can just turn it all over to.
Some of the companies coming to town are hotel companies. They say, „We can do the hotel side.“ But they still need someone to do all of the other stuff. There are a lot of insurance issues, indemnity issues, licensing issues, contract issues that we’ve dealt with enough times. The entry into our field is hindered with a lot of problems and we’ve tackled all of those at one time or another. If a large company comes to town and says, „I want to buy X property“ and they talk to a lawyer in town they say, „Call Larry Woolf.“ If they go to a real estate company, CB Richard Ellis, who refers us a lot of clients, they know that we’re going to represent them well and we’re going to tell the client what they should do. We’re going to give them a roadmap.
If they come to us first we’ll recommend attorneys, we’ll recommend real estate people, we’ll recommend gaming legal counsel. We generally say they should get licensed but it may take two years. So if you want the purchase to move forward quickly then we assess the casino and we can maybe get that down to six months. The purchase that would normally take two years for them to close completely can now be expedited by inserting us into the equation.
This is a good segue for talking about the Hard Rock, which is being sold to Morgans Hotel Group out of New York – a company with no casino license or casino experience. Are you involved in that deal?
We had a client (interested in the Hard Rock). We were restricted from working with anyone else until that client stopped bidding. Morgans has the contract and we have no more obligation to our client. We have talked to Morgans but we have no agreement with them.
A few months ago, your company took over the management of the former Barrick properties in downtown Las Vegas, which were bought out by landlord Tamares Group. How are things progressing so far?
Tamares owns all the real estate. We have leased the four properties with casinos from them. We’ve been here 90 days and we’re on track to set some very good revenue and profit numbers for the properties. It is going extremely well.
Is this a good time for downtown or is it more about improving management at the property level?
It’s a good time for all of downtown in that there’s an awful lot of money coming to Vegas, seeing the prices on the Strip and then taking a look at downtown. There are a lot of potential buyers looking at downtown. There have been a lot of purchases of assets downtown and there’s going to be a lot of money put into those purchases over time.
In the meantime midrange hotels on the Strip are getting torn down. All of these millions of customers coming to Las Vegas — we all can’t spend USD 300 a night for a poolside view at the Hard Rock — they have to stay somewhere else. If you tear down the Tropicana, the Sahara, where are they going to stay? It’s logical to think that some of that business is going to move here and some of that business is going to move to Laughlin, where it’s affordable. That means that overall room rates downtown are probably going to start to go up. It’s certainly not going to be USD 300 a night but there will be sensible, reasonable room rates. The speculation is that downtown is probably the best value for your investment dollar in Nevada.
Your company is in line to manage the Reno Hilton. Can you talk about what’s in store there?
We have an agreement to lease the casino from a group called Grand Sierra. They have not closed escrow yet. It’s expected to close this month. We’re expected to be on the Gaming Commission agenda in late June. If that occurs we’ll probably take over July 1. We’ve spent about 18 months working on that deal.
You own the Casino Fandango in Carson City. Do you have any plans to expand that property or expand elsewhere in Northern Nevada?
Yes. We currently have announced we’re going to build a movie theater by Casino Fandango. We’re looking at putting in some rooms, although we’re not required to by statute. It’s potentially possible that we’d double our investment in Carson City.
Do you see that with SB 208 restricting the growth of suburban casinos in Southern Nevada that Northern Nevada looks like a better place to invest?
No. I think you might get a little more value for your money in Northern Nevada. Each individual investor has different criteria. Some of them like bargains. Some of those bargains were when Harrah’s bought Caesars and they spun off some properties. Two of them happened to be in Northern Nevada. I think it just depends on your motivation as a buyer, where your best investment is. A lot of the big money, they want to be in Las Vegas, they want to be on the Strip. That gives them some sticker price shock. Then they reevaluate. The Hard Rock is not on the Strip. Red Rock is not on the Strip. They reevaluate the necessity of being on the Strip.
The company taking over the Reno Hilton has discussed building an outdoor waterpark. Is that a significant marketing strategy and do you see outdoor activities being a successful way to promote Reno’s flagging casinos?
Reno has become quite a hub for outdoor activities with kayaking and skiing. It’s become quite the theme for Reno. It’s a younger, more athletic crowd. Grand Sierra’s vision is to do an indoor-outdoor waterpark. It used to be, „Is there a pool, is there a health club, is there a casino?“ In the future its going to be, „Do they have a waterpark and is it indoor-outdoor?“ In the Midwest these indoor waterparks are tremendously successful. They believe this will create a new dynamic for the Reno Hilton, which has a lot of rooms, and would set some sort of precedent that in the future, a big resort like Red Rock is going to have to have an indoor waterpark in order to be competitive. Right now you have to have a casino, restaurants and shopping. Everybody has a great pool. But those pools don’t go year round.
I think of a waterpark as a family destination like a Wet ’n‘ Wild. Could these cater to adults in a casino environment?
Sure. An indoor water feature where you can go out in the wintertime and be by the pool is probably a good model. If it’s an indoor water area you can have an adult only area, you can have bars. It’s just taking what normally is great in the summertime, a busy pool, and creating a year-round attraction.
A number of companies see Asia as the next big growth market for casinos. How do you see that market growing in the next few years?
Obviously everyone’s familiar with Macau. Our company was one of the original bidders in Macau. We didn’t end up with the bid but have been consulting in Macau since then. We used to make one trip a month to Macau and now it’s once a quarter. We are also involved in a deal in Taiwan. We’re speculating that the domino effect will take place in Asia and every major Asian country is going to have to address gaming. Singapore is now and Korea has gaming in place, Japan has not adopted gaming but there’s a lot of talk about it. Taiwan has talked about it a lot.
Most of it is very similar to the United States. You’re tired of seeing people in your state or your region or your country lined up at the airport flying out of the country to take their gaming dollars somewhere else. Eventually, to be competitive, they will put in gaming in most every Asian city. We have assembled 27 acres at this seaside resort area (in Taiwan) speculating that gaming is going to pass and we will be an early mover in that market.
Did Macau trigger this domino effect?
Macau has always been there and always done very well. But since publicly-traded companies that have analysts tracking them are in Macau and since they’re making news that they’re leading the Strip in gaming win, Steve Wynn selling a license for USD 900 million — those news pieces have put Macau in the limelight.
Are there any other countries that also have growth potential? Or would you say Asia has the strongest growth prospects anywhere?
I think it’s assumed that Asians, because of their religious and cultural background, are big gamblers. I don’t want to say they believe in gambling but they risk a higher percentage of their net worth on a regular basis than anybody else on the planet. It’s been my observation that the warmer the climate the more the people in that area are likely to gamble.
Most people enjoy recreational gaming and want gaming nearby. Eventually it will be everywhere. Fortunately it is a high employment industry. Reasonably decent paying jobs are available and that stimulates an awful lot of economic growth in the area. Where cities will give Chrysler a USD 10 million incentive to put a plant in their area that employs 300 people a casino will come and employ 4,000 people and stimulate the economy an awful lot more and draw people across the border.
Casino Windsor (in Canada) had so much business that Detroit put in gaming. Atlantic City was doing so well that Connecticut put in gaming. Eventually Rhode Island is going to get tired of their customers leaving and is going to put in gaming. Most people don’t have a real moral objection to gaming.
A number of states have rejected gaming expansion. Do you think it’s inevitable that more states will have casinos? Are there certain states that have more potential than others?
Maybe Utah will be the last one. Right now we’re looking at a project right on the border with Texas because Texas looks like it’s going to be a while before they put in gaming. All along the Texas border every state’s going to have a gaming casino, in Oklahoma or New Mexico. Eventually Texas may get tired of watching that money go across the state line and do gaming. It’s a domino effect. If you’re in government you’re going to have to consider gaming sooner or later.
Pennsylvania is expected to put in slot machines at racetracks by the end of the year. Just about every major company bid for a license there but some have since pulled out, citing high casino taxes. What’s the growth potential there?
The old saying is fish where the fish are. There are a lot of people living there. If you don’t have to market a lot to attract people you can pay a higher tax rate. If you have to market and pay a lot of expenses and you have to build billion-dollar buildings, that’s different. Las Vegas has grown because it has a low tax rate. The higher the tax rate, the lower growth potential the market has. The states that are really smart will put in a low tax rate but require redevelopment money to come back into the community. Unfortunately some of the states are greedy and want a higher tax rate and they don’t understand that lower taxes stimulate more growth.
Tribal casinos seemed to be a hot growth area a few years ago. It seems companies aren’t so excited about getting into that market.
Those Indian tribes that met all of the criteria in order to get a compact have pretty much been activated and have management contracts now. There are still a few opportunities but it’s so difficult. Those that were easy were done and have managers in place. Some of them are still being worked on so it’s a huge expense and there’s no guaranteed pot of gold at the end of the rainbow.