Ameristar Casinos, Inc.

Ameristar Casinos, Inc.

3773 Howard Hughes Parkway
Suite 490 South
Las Vegas, Nevada 89109
Telephone: (702) 567-7000
Fax: (702) 866-6397
Web site: http://www.ameristars.com

Public Company
Incorporated: 1993
Employees: 4,226
Sales: $264.4 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: ASCA
NAIC: 713210 Casinos; 721120 Casino Hotels; 722110 Full Service Restaurants

Ameristar Casinos, Inc. owns and operates five casinos with adjacent hotels, as well as related food, beverage, and entertainment services, in Nevada, Iowa, and Mississippi. On the high desert plateau of Jackpot, Nevada, the Horseshu Hotel and Casino provides gambling entertainment in a rustic, western setting, while Cactus Pete’s Resort Casino offers a desert theme. The Ameristar Vicksburg is a dockside casino in the style of an 1870s riverboat located on the Mississippi River in Vicksburg, Mississippi. Ameristar also operates a riverboat casino from Council Bluffs, Iowa, across the Missouri River from Omaha. Land-based facilities at Council Bluffs include the Main Street Pavilion, with restaurants, hotels, family entertainment, and child care center. Ameristar’s only Las Vegas area casino, The Reserve, provides gambling and entertainment in the exotic, colorful simulation of an African game reserve.

Small-Time Operation to Public Corporation

Before the town of Jackpot, Nevada, had a name, Don French and “Cactus Pete” Piersanti moved their slot machine gaming operations to the high desert plateau from Idaho. In 1954, French opened the Horseshu Casino, and Piersanti opened Cactus Pete’s Desert Lodge; Cactus Pete’s incorporated with three shareholders in 1956. The two tiny casinos prospered on the “grind,” casino lingo for obtaining small profits from a large volume of customers who play slot machines, rather than on high stakes gamblers. Located on Highway 93 at the border of Idaho, the Horseshu and Cactus Pete’s thrived on visitors from Idaho, Oregon, Washington, Montana, northern California, and southwestern Canada, as well as on middle-income travelers driving to and from Las Vegas and other points in the southwestern United States. The two gambling sites slowly expanded over the years, beginning with the 15-room Desert Inn Motel at Cactus Pete’s in 1958. Table games, such as poker, blackjack, craps, and roulette were added at both properties over the years. Then, in 1964, the Horseshu came under the direction of Cactus Pete’s.

The death of one of Cactus Pete’s shareholders led to a change in ownership in 1967, with the addition of three new shareholders. When one the new shareholders, Ray Neilsen, of Neilsen and Miller Construction, which had contracted work on the properties, died in 1971, his wife Gwen inherited Neilsen’s shares, while his son Craig became involved in the daily operation of Cactus Pete’s. Craig Neilsen became president in 1984, and became sole owner of the corporation in 1987, which included both properties by that time.

As the casino industry became more competitive and market-oriented in the 1980s, Craig Neilsen adapted. In an increasingly market-driven industry, free food and drink were no longer sufficient to attract customers. A new marketing strategy included “slot club cards” which strengthened Cactus Pete’s repeat-customer base. The personalized cards, inserted into the slot machines, provided the casino with information as to which machines regular customers preferred, and the amount of time and money spent at each machine. The amount of a customer’s game play determined what free gift a customer might acquire, such as a free meal, free t-shirt, or free hotel stay. Personal information obtained when players signed up for a club card allowed casino managers to add a personal touch to customer retention. When a computer has tracked a frequent player on a slot machine, the manager might send a casino employee over to offer a free meal or to send happy birthday wishes.

Neilsen initiated a $22 million expansion of Cactus Pete’s in 1991, transforming it into a 25,000 square foot casino and destination resort for the northwestern United States. New amenities included a sports and keno lounge, the Bristlecone Emporium gift shop, the Ruby Mountain Ballroom, and an Olympic-sized swimming pool. In 1993 Cactus Pete’s Resort Casino received a Four Diamond rating from the American Automobile Association, and would receive that designation annually.

With the proliferation of legalization gambling in the early 1990s, Neilsen sought to expand his casino operations outside of Nevada. A public offering of stock in Fall 1993 coincided with incorporation as Ameristar Casinos. Neilsen maintained 86.9 percent ownership of the casinos and became president and CEO of Ameristar. The stock offering funded final construction on the Ameristar Vicksburg casino which opened in February 1994 in Vicksburg, Mississippi. The 35,000 square foot dock-side casino, permanently anchored on the Mississippi River, 45 miles west of Jackson, included four bars, two restaurants, a cabaret, and a showroom, as well as a restaurant on the bluff overlooking the casino, the Delta Point River Restaurant. Gaming included poker, blackjack, roulette, craps, and over 1,000 slot machines. The tourist traffic in this area involved passers by on Interstate 20 and visitors to Vicksburg National Military Park. Local residents and residents from eastern Louisiana provided a more regular customer base. The project included acquisition of 18 acres across from the dock for future development and a 20-acre mobile home park to provide housing rentals for employees and other local residents.

In 1995 Ameristar obtained one of three gaming licenses to operate a riverboat casino in Council Bluffs, Iowa, on the Missouri River. Ameristar planned a complete destination resort and entertainment center for the region, designed in the architecture of a late 1800s rivertown much like Council Bluffs itself. The 272 foot long and 98 foot wide riverboat casino encompassed 40,000 square feet on two levels, with high ceilings to create the grand, spacious atmosphere of a land-based casino. In addition to 1,098 slot machines, gaming activities included craps, blackjack, roulette, Caribbean stud, Spanish 21, Pai Gow, 21 Madness, and Let it Ride. A legal requirement for the riverboat casino involved two-hour cruises a minimum of 100 days during the excursion season, from April 1 to October 31. The Ameristar Council Bluffs casino opened for business in January 1996, after a voyage along the Mississippi and Missouri Rivers from Jennings, Louisiana.

Ameristar opened the Main Street Pavilion on the land adjacent to the riverboat dock in June 1996. The 68,000 square foot Pavilion featured a main street designed in the style of the Victorian era, with restaurants and a variety of entertainment choices for children and adults. In a joint venture with New Horizon Kids Quest, the Pavilion included a 10,000 square foot activity center for children, which provided childcare on an hourly basis while parents gambled. The center accommodated 200 children for up to five days with hours of operation from 10:00 a.m. to 10:00 p.m. daily, and until midnight on Friday and Saturday nights. The Main Street Pavilion also included a 160-room hotel, with panoramic views of the Missouri River, which opened in November after a five-month delay. Visitors had access to the riverboat via an enclosed ramp from the Pavilion.

The proliferation of gambling casinos increased competition as well as opportunities for Ameristar. Specifically, the casinos in Jackpot experienced competition from Native American casinos which opened in Pocatello, Idaho, western Washington, and northeastern Oregon, as well as from casinos in Alberta, Canada, which sought to attract customers from the same geographical areas, the northwestern states and southwestern Canada. Ameristar responded by upgrading the slot machines to state-of-the-art equipment, with touch screens and color and sound effects, by remodeling the 3,500 square foot Horseshu casino, and by increasing its marketing efforts. The Ameristar Vicksburg faced competition from new casinos in Bossier City and Shreveport, Louisiana, as well as in Philadelphia, Mississippi.

Relocation to Las Vegas in 1996

Ameristar entered the casino market in the Las Vegas area through a merger with Gem Gaming, Inc. That company had begun construction on The Reserve casino in Henderson, Nevada, then a fast-growing suburb of Las Vegas and one of the fastest growing suburbs of the United States. Ameristar redesigned the project to elaborate on the African safari theme, to allow for more gambling space, and to enable possible expansion in the future. To oversee design of the new casino, Ameristar hired Henry Conversano, designer of the Mirage in Las Vegas and The Lost City at the Sun City Resort Hotel and Casino in Sun City, South Africa. The Reserve casino and hotel featured colorful murals, artificial aica trees, jungle sounds, and hand carved statues of large animals, such as elephants and giraffes, with some statues designed as encasements for slot machines. Exotic murals covered the exterior of the building, while monkey gargoyles perched on the hotel towers and replicas of elephant tusks bracketed the sign 120 feet tall.

Key Dates:

1954:

Don French and “Cactus Pete” Piersanti establish casinos in the Nevada desert, in an area that would become known as Jackpot.

1987:

Craig Neilsen becomes sole owner of gaming properties in Jackpot, Nevada.

1991:

Neilsen transforms Cactus Pete’s into a destination resort.

1993:

Neilsen incorporates properties as Ameristar Casinos Inc. and takes the company public.

1994:

Company’s first casino outside Nevada opens in Mississippi.

1998:

Grand opening for The Reserve casino and hotel in Las Vegas.

The Reserve began as a $90 million project, but Ameristar’s changes added $45 million in expenditures. The 42,000 square foot casino included 1,380 slot machines, sports book keno, a bingo hall with 300 seats, and 25 table games, for roulette, blackjack, poker, and craps. Amenities included four restaurants, including Congo Jack’s, where the front of a small airplane has appeared to have crashed among the tables, three bars, and a 224-room, nine-story hotel, which offered an introductory rate of $19.95 per night. Future expansion on the 53-acre property would involve additional hotel towers, multi-level parking, and additional restaurants and bars. Credit problems related to the acquisition of Gem Gaming delayed the opening of The Reserve until February 1998, but thereafter, Ameristar relocated its corporate offices from Twin Falls, Idaho, to Las Vegas in conjunction with entry into the Las Vegas market.

For The Reserve’s promotional campaign, Ameristar hired Seiniger Advertising, a specialist in the entertainment industry. Advertising for the The Reserve amplified the African safari theme. The main tagline for print, local television, bus wraps, and outdoor advertisements described The Reserve as “A whole new breed of casino.” A print advertisement showed an orangutan with a stoic look and underlying text which stated, “We know a good poker face when we see one.” The text under a picture of a cheetah advertised The Reserve’s restaurants saying, “If the food were any fresher, you’d have to chase it.” A 30-second television promotion showed elephants, giraffes, and other animals running across the African plains towards the casino.

Marketing targeted local residents of the Henderson-Green Valley suburbs. With 70 percent of The Reserve’s customer base expected to come from within a ten-mile radius, Ameristar introduced the first “self-comping” players club in the Las Vegas area. Like Cactus Pete’s slot club cards, The Reserve players club allowed regular customers to earn free meals and discounts. The casino and hotel also attracted travelers along Lake Mead Parkway, with new road construction expected to increase traffic near the casino.

For its first ten months of operation, February 1, 1998 to December 31, 1998, operations at The Reserve resulted in a loss of $16 million, including pre-opening costs of $10.6 million, and a loss of $12.7 million for the company overall in 1998. Ameristar intensified its marketing efforts, adding cash back opportunities for frequent players, and improved its operating margins, particularly in the area of food service.

Activities Outside Nevada in the Late 1990s

The controversy over legalized gambling had mixed effects on Ameristar. A 1998 Mississippi referendum to amend the state constitution to halt legalized gambling would have closed the Ameristar Vicksburg, but a state judge found the referendum invalid due to a mistake in its filing. Ameristar expected citizens to place a revised version of the referendum on the ballot in 2000. However, local concerns about gambling may have assisted the Ameristar Council Bluffs as the Iowa Racing and Gaming Commission regulated the number of gaming licenses to those already existing in 1998, thus eliminating any possibility of new competition without first overturning the regulation.

Ameristar maintained strong market positions at its casinos outside Nevada. Revenues at Council Bluffs increased steadily with growth in the gaming market there. Revenues increased 24.8 percent, from $70.3 million in 1996 to $87.8 million in 1997, followed by an additional 11 percent increase in 1998 with revenues of $97.7 million. At Vicksburg revenues declined from $66.2 million in 1996 to $64 million in 1997, largely attributed to a decline in the size of the gaming market there. Ameristar maintained a leading position, however. Revenues increased to $68.5 million in 1998 with a new hotel and increased gambling revenues.

Ameristar expanded hotel facilities adjacent to its casinos in Mississippi and Iowa. In June 1998 the company completed a hotel in Vicksburg. The eight-story, 144-room hotel included a presidential suite, four luxury suites, and 16 king spa suites. Ameristar leased property at Council Bluffs to Kinseth Hotel Corporation to build a Holiday Inn Suites. The 140-room, limited service hotel opened in March 1999, with an enclosed, climate controlled walkway to the Main Street Pavilion.

In July 1999 the company began construction to add a third floor gaming deck to the Ameristar II riverboat at Council Bluffs, as well as land-based entertainment and parking facilities. The $41 million project involved the creation of the first shipyard in Iowa where Lee Vac Shipyards fabricated the ship’s deck, which the company maneuvered as a whole onto the riverboat, allowing the casino to remain open throughout the new construction. The expansion increased the size of the river-boat casino to 37,000 square feet, with a capacity for 2,830 people, making it the largest riverboat casino in Iowa. Ameristar increased the number of slot machines to 1,446 and the number of game tables to 51, and added 18 state-of-the-art video poker and video reel slot machines. The Center Sports Bar featured 19 televisions with flat plasma screens, 40 inches by 20 inches, state-of-the-art technology for viewing sporting events as well as promotions. The grand opening celebration in November 1999 included a traditional boat launching ceremony, with a christening and champagne toast. In December 1999 Ameristar signed an agreement with Players Network to provide a closed circuit television network for its hotel patrons in Council Bluffs. The Players Network programs included instruction on casino gaming, sports and racing events, entertainment, and promotions and events at the casino-hotel property.

In fall 1999 Ameristar sought to revive a casino project in South St. Louis County, along the Mississippi River in Missouri. The company signed a letter of intent with Futuresouth Inc. to take over the lease for a potential casino site in Lemay, Missouri, on the Mississippi River. Ameristar expected the project to include restaurants, meeting facilities, ample parking; it would be structured to enable future expansion of the casino and additional amenities. As construction would take place on the site of an old lead plant, clean-up was estimated at $1 million. As part of the deal, Futuresouth, a local group of business people, maintained some interest in the casino project, giving Ameristar some initial political strength over its competitors.

Several factors added complexity to the case, however, as Isle of Capri’s Lady Luck Gaming acquisition gave that company a financial edge in its endeavor to attain a potential casino site farther south. Moreover, a citizens organization opposed the casino in Lemay, speaking to the Missouri Gaming Commission of their concerns that gambling would be detrimental to local businesses and destroy the town’s quaint atmosphere. Another citizens group formed in favor of a casino development in Lemay, citing the funds gambling taxes would generate for schools and senior citizens and noting Ameristar’s donations to computer programs for schools in Iowa City.

Principal Subsidiaries

AC Food Services, Inc.; AC Hotel Corporation; Ameristar Casino Council Bluffs, Inc.; Ameristar Casino Las Vegas, Inc.; Ameristar Casino Vicksburg, Inc.; Cactus Pete’s Inc.

Principal Competitors

Harrah’s Entertainment, Inc.; Harveys Casino Resorts; Station Casinos, Inc.; Isle of Capri.

Further Reading

“Ameristar Breaks Ground For Hotel,” Biloxi Sun Herald, April 13, 1997, p. G2.

“Ameristar Casinos Announces Settlement of Arbitration Proceedings with Former Gem Stockholders,” PR Newswire, May 7, 1997.

“Ameristar Casinos, Inc. Responds to Jury Verdict in Pike County, Mississippi Litigation,” PR Newswire, November 1,1999, p. 3,259.

Dorr, Robert, “Ameristar Faces Credit Pinch,” Omaha World Herald, March 28, 1997, p. 16.

——, “Ameristar Plans $41 Million Expansion of Facilities,” Omaha World Herald, April 15, 1998, p. 17.

——, “Ameristar Says Hotel Delay Hurt Profits,” Omaha World Herald, February 21, 1997, p. 16.

Berns, Dave, “At Last, The Reserve Opens,” Las Vegas Review-Journal, February 12, 1998, p. ID.

Buyikian, Teresa, “Seiniger’s Wild West,” Adweek (Western edition), February 23, 1998, p. 4.

Carroll, Chris, “Lady Luck Gaming’s Sale Makes Casino More Likely, Leading Local Investor Says,” St. Louis Post-Dispatch, October 25, 1999, p. 5.

“Casino to Provide Child Care,” Omaha World Herald, June 11, 1996.

DeFrank, Sean, “King of the Jungle,” Las Vegas Review-Journal, February 4, 1998, p. 1A.

Edwards, John G., “Earnings Rise for Casino Firms,” Las Vegas Review-Journal, April 21, 1999, p. ID.

Faust, Fred, “Company Proposes a New Casino South of Jefferson Barracks Bridge,” St. Louis Post-Dispatch, August 25, 1999, p. C7.

——, “The Contest for the Next Casino License Gets an Interesting Twist,” St. Louis Post-Dispatch, October 11, 1999, p. 2.

——, “Las Vegas Company May Seek to Revive Lemay Casino Plan,” St. Louis Post-Dispatch, August 24, 1999, p. C7.

Little, Joan, “Lemay Residents’ Group Opposes Proposed Casino,” St. Louis Post-Dispatch, October 18, 1999, p. 2.

——, “New Group Forms to Defend Virtues of a Casino in Lemay,” St. Louis Post-Dispatch, November 1, 1999, p. 1.

Langfitt, Frank, “Casinos Go from Sleazy to Slick—and They Want to Bring Their Act to Maryland,” Baltimore Morning Sun, May 28, 1995, p. IF.

“(No) Chance Encounters,” Advertising Age, September 6,1999, p. 42.

Palermo, Dave, “Rough Going Along the River: Casinos Stifle Heritage Tourism, History Buffs Say,” Biloxi Sun Herald, November 16, 1997, p. Al.

“Players Network Announces First Affiliate Contract Outside of Nevada,” PR Newswire, December 7, 1999, p. 6,334.

—Mary Tradii