Riviera Holdings Corporation
Riviera Holdings Corporation
Incorporated: 1955 as Riviera Hotel Company
Sales: $201.35 million (2004)
Stock Exchanges: American
Ticker Symbol: RIV
NAIC: 721120 Casino Hotels; 722110 Full-Service Restaurants; 722410 Drinking Places (Alcoholic Beverages)
Riviera Holdings Corporation owns and operates the Riviera Hotel & Casino in Las Vegas, Nevada, and the Riviera Black Hawk Casino in Black Hawk, Colorado. The firm's focus is on price-conscious gamblers aged 45 to 65, and its casinos feature reasonably priced lodging, entertainment, and food; hundreds of slot machines (many playable with pennies or nickels); and a variety of card, dice, and roulette tables. The Riviera Hotel offers 2,100 rooms and a 125,000-square-foot casino, as well as restaurants, bars, and clubs where variety, comedy, and "adults-only" performances are offered. One-third of the hotel's revenue comes from business conventions. The Riviera Black Hawk casino, which is restricted to $5 wagers by Colorado law, offers a large gaming area along with several restaurants and entertainment venues. CEO, President, and Chairman William L. Westerman owns 17 percent of the firm's stock.
The roots of Riviera Holdings date to April 20, 1955, when the Riviera Hotel and Casino opened in Las Vegas with a star-studded premiere featuring Hollywood icon Joan Crawford as hostess and showman Liberace performing on the stage of the Clover Room. The nine-story hotel (then Las Vegas's tallest) had been built on the famous Highway 91 "Strip" at a cost of $8.5 million by a group of Miami investors headed by Sam Cohen. Situated on 25 acres of land leased from Gensbro Hotel Co., it featured 300 rooms, several restaurants and bars, an Olympic-size swimming pool, and a casino with 116 slot machines and 18 gaming tables.
Las Vegas was then in a building frenzy, with nearly 100 new hotels opened since 1953, including several luxury ones such as the Dunes and Royal Nevada. With competition so fierce, it was not surprising that the Riviera's owners quickly found profits elusive. As costs soared out of control, including the then unprecedented fees paid to such entertainers as Liberace (earning $50,000 per week), by July the hotel was close to bankruptcy with debts of $2.5 million. In September the Riviera was taken over by a group of Vegas veterans led by Gus Greenbaum, who had formerly run the Flamingo Hotel, built a decade earlier by notorious racketeer Bugsy Siegel. Under Greenbaum's experienced management team, the hotel's financial picture improved markedly, and in early 1956 plans were announced for a $2 million expansion that would add 200 new rooms and enlarge the casino and dining room areas.
In December 1958 Gus Greenbaum and his wife were murdered, allegedly by underworld operatives, and a few months later the Riviera was sold to a group of investors associated with the Fremont and Sands hotels. October 1959 saw a new $2.4 million remodeling announced that would add 114 guest rooms and an atomic-themed three-level rooftop nightclub.
The 1960s was a golden era for Las Vegas, as members of the "Rat Pack" performed in clubs and prowled the lounges in the wee hours. Acts playing the Riviera during the decade ranged from the Duke Ellington Orchestra and Louis Armstrong to Liberace, Engelbert Humperdinck, and Rat Pack member Dean Martin, who later took a 10 percent ownership stake.
The year 1965 saw the hotel's owner, now known as Hotel Riviera, Inc., purchase the land beneath it from Gensbro, and two years later the hotel was expanded with a new 200-room wing, a 9,000-square-foot lobby, and 10,000 square feet of new office and meeting rooms. Organized crime associations contin-ued to surface, with several shareholders indicted on charges of "skimming" gambling revenues in 1967.
Sale to Riklis in 1973
In 1973 Turkish-born Meshulam Riklis, owner of Boston-based AITS (American International Travel Services), bought the Riviera for $56 million. Two years later the new 17-story Monte Carlo tower was opened, which added 300 guest rooms, 60 suites, and a penthouse. It was followed in 1977 by the San Remo tower, which added 200 rooms and an Italian restaurant.
In August 1983 the hotel's owners filed for bankruptcy protection after they were unable to make payments on a $52 million loan. The following year Riviera management decided to move away from high-rolling gamblers to focus on families, and added a Burger King and a video arcade, along with five-cent slot machines and other low-wager betting options. By now Riklis had married entertainer Pia Zadora, and hotel restaurants Kady's and Kristofer's were named after their two young children.
In 1985, under longtime Riklis associate and new President Arthur Waltzman, the Riviera emerged from bankruptcy. That same year a new entertainment offering, "Splash," debuted. A music and dance variety show starring impersonator and actor Frank Gorshin, its set featured a 20,000-gallon aquarium in which swimming routines were performed. Another show added that year, "An Evening at La Cage," showcased female impersonators and dancers. The year 1987 saw the addition of "Crazy Girls," a topless comedy revue. All three would remain in continuous operation in the ensuing years, with occasional updates to keep them from becoming stale.
In 1988 the Riviera opened the 1,000-room, 24-story Monaco Tower. Built at a cost of $28 million, it gave the hotel a total of 2,100 rooms. Expansion continued in 1989, when a new 70,000-square-foot casino addition was begun. A fire touched off by welders in September forced a complete evacuation of the hotel and caused an estimated $3.5 million in damage. The casino's Burger King and adjoining video arcade were later closed for good. The company had likely been spared worse damage because Nevada had instituted strict safety codes in the wake of hotel fires in 1980 and 1981 that killed nearly 100 people.
In March 1990 the Riviera's newly expanded casino, touted as the world's largest, was opened. With 1,600 slot and video poker machines, 90 table games including blackjack, dice, poker, and roulette, and a 200-seat lounge, the hotel's 125,000-square-foot gambling area now extended from the front of the original 1955 building almost to the sidewalk of the Strip. Soon afterward a 250-seat race and sports betting parlor, a 24-hour food court, three new restaurants, and a second swimming pool were added as well. The firm, which had spent some $150 million on renovations since 1984, had revenues of approximately $200 million per year at the close of 1996.
1991 Bankruptcy Leading to New Ownership
Increasing competition, an economic recession, and a downturn in travel during the 1991 Persian Gulf War led to a drop in revenues at many Las Vegas casinos, and in December 1991 the Riviera again filed for Chapter 11 bankruptcy protection. The firm had been unable to make payments on its secured debt of $126 million. In early 1992 company head Arthur Waltzman was replaced with William Westerman, another longtime business associate of Riklis, and layoffs were announced that brought the hotel's total workforce down from the mid-1991 figure of 2,300 to less than 2,000.
On July 1, 1993, the hotel officially emerged from Chapter 11 protection, with ownership transferred from the financially troubled Riklis to the Riviera's bondholders. The firm's unsecured debtors also would receive 50 cents on the dollar. The company would now be known as Riviera Holdings Corp., with William Westerman serving as CEO, chairman, and president, after President Al Rapuano had resigned over publicity about his ties to organized crime figure Joey Cusumano.
The new owners soon announced that the Riviera would concentrate on middle-income adult gamblers instead of families, with in-house entertainment emphasized over such well-known headliners as Frank Sinatra and George Burns, both of whom had recently appeared there. The firm also began to step up its marketing efforts, and reached out to travel agents with commissions and other incentives for steering tourists to the hotel.
In December 1995 the firm began working with Donaldson, Lufkin and Jenrette to look for acquisition or merger opportunities, and soon afterward formed a subsidiary in Mississippi to seek approval to operate a casino there. The year 1995 also saw the Splash showroom closed for six months for remodeling. Revenues for the year topped $150 million, down from $154 million a year earlier, though net income rose from $4.8 million to $6.3 million. Occupancy was 98 percent, one of the highest rates in Las Vegas.
In 1996 a new subsidiary, Riviera Gaming Management, took over operations of the bankrupt 700-room Four Queens hotel and casino in Las Vegas for a $1 million annual guarantee versus 25 percent of the increase in cash flow generated through its efforts. The year also saw the company's stock begin trading on the American Stock Exchange.
In March 1997 the firm announced plans to build a $50 million casino in Black Hawk, Colorado, in conjunction with Eagle Gaming L.P., which would own 20 percent of the operation. The limited wager casino (in which no bets over $5 were allowed) would be the largest in the state. Construction would be funded by the sale of 1.5 million new shares in Riviera Holdings.
At the Riviera, we take pride in serving our customers in the tradition and style that made Las Vegas famous. Offering top value for your room, food and entertainment dollar with a personal touch is in what we take pride. Our repeat business is indicative of the many fond memories created by a trip to the Riviera Hotel and Casino, the Entertainment Center of Las Vegas.
The year 1997 also saw the Riviera Hotel begin expanding its convention facilities to 150,000 square feet, as well as adding "Nickel Town," a new casino that included several hundred five-cent slot machines. Notes worth $155 million were sold during the year to help fund the new growth. The firm also had recently attempted to win a casino license in Detroit when that city voted to allow gaming, but lost to three other firms.
In the fall of 1997 San Diego-based racehorse owner Allen Paulson struck a deal to buy Riviera Holdings for $75 million in cash and assumption of $175 million in debt, along with the Four Queens, owned by Elsinore Corp., for $54 million. For the year the firm had revenues of $153.8 million and net income of $2.1 million, down from $164.4 million and $8.4 million in 1996. Not long after these figures were released, Paulsen backed out of the deal, alleging he had been given inaccurate information, and sued his financial advisors and the hotels.
In September 1998 ground was broken on the new $75 million Black Hawk Casino, and the following year another $45 million in bonds was sold to finance it. In July 1999 the firm agreed to pay Allen Paulsen $5 million, keeping part of the $6 million he had put into escrow before agreeing to buy the hotel. In December the firm's contract to manage the Four Queens ended.
Black Hawk Casino Opening in 2000
In February 2000 the Riviera Black Hawk Casino opened. The 300,000-square-foot facility featured 990 slot machines, 12 gaming tables, a 280-seat restaurant, and a 490-seat entertainment venue. Marketing plans included a "slot club," which gave members various incentives to make repeat visits. Revenues for the Black Hawk's first months of operation were underwhelming, and the firm subsequently boosted its promotional efforts.
The September 11, 2001 terrorist attacks on New York and Washington, D.C., had a devastating impact on tourism, and Las Vegas, already hurt by the recent economic slowdown, was hit hard. In October the Riviera closed its poker room, which would be remodeled to add more slot machines, and the fourth quarter of the year saw room occupancy fall below 80 percent. The firm had total revenues of $202 million and a loss of $6.4 million for 2001. One bright spot was the Black Hawk casino (whose business came, in large part, from regional gamblers), where revenues were up significantly over the previous year.
Early 2002 saw the firm propose a $152 million riverboat hotel/casino in Missouri on the Mississippi River, with plans also afoot to build a 600-slot racetrack/casino in New Mexico. In the summer the company offered $215 million in new bonds to refinance its existing debt. Results for 2002 were poor, with revenues falling to $188.3 million and losses hitting $24.7 million.
After Donald Trump bought a 10 percent stake in the firm in 2002, in early 2003 Italian investor Fabrizio Boccardi offered $30 million plus assumption of $216 million in debt to purchase it. Sales continued to decline during the year as the start of the Iraq War and the SARS outbreak caused tourism to plummet, but the firm's convention bookings were up, with 298 hosted during the year. In November the company's bid for the New Mexico "racino" was rejected, resulting in a $1.3 million writeoff.
April 2004 saw Donald Trump sell his 10 percent stake in the firm, and in August another takeover bid was received from D.E. Shaw Laminar Portfolios, but it was rejected by the Riviera's board. In September, the firm's bid for a Missouri gaming license was rejected, resulting in another $600,000 writeoff.
At this time the northern end of the Las Vegas Strip was seeing the stirrings of a revival. With Vegas kingpin Steve Wynn pledging $2.4 billion to build a new "megaresort" near the Riviera and other resort and condominium plans on the drawing board, the Riviera began to receive new attention from investors, in part because of the value of its land. Members of management soon broached the possibility of demolishing the hotel and building a new $800 million resort on the site, or refurbishing the existing facilities for $500 million. The company's losses were also narrowing, as both the Las Vegas and Colorado operations saw improved earnings. The firm's stock, which had been threatened with delisting by the American Stock Exchange in 2003, was trading at more than $44 per share by year's end, up from slightly more than $5 in January. In February the company announced a three-for-one stock split, and began looking at options to increase shareholder value with advisor Jefferies & Co.
Early 2005 saw profits continuing to rise, but they fell off again during the second quarter of the year, in part because of complicated new accounting rules, as well as $500,000 spent celebrating the hotel's 50th anniversary. The firm was planning to raise room rates from their average of $59 as activity on the north end of the Strip increased, however, and profits were expected to rise as Wynn's resort neared completion.
- The Riviera Hotel opens, but losses mount and it is sold to the Gus Greenbaum group.
- After Greenbaum's mysterious murder in December 1958, a new investor group buys the hotel.
- A new wing is added.
- The hotel is sold to Meshulam Riklis's AITS, Inc.
- Two new towers are added to the hotel.
- Riviera emerges from Chapter 11 bankruptcy protection.
- The new 24-story Monaco Tower opens, boosting guest rooms to 2,100.
- The company again seeks bankruptcy protection.
- Ownership is transferred from Riklis to the firm's bondholders.
- Riviera Gaming Management, Inc. is formed to facilitate expansion out of state.
- Stock begins trading on the American Stock Exchange; a contract to run the Four Queens hotel is signed.
- The Riviera Black Hawk Casino opens in Colorado.
- The stock price surges due to purchase offers and new construction in the area.
After 50 years, the Las Vegas hotel and casino owned by Riviera Holdings Corp. had gone from cutting-edge to retro, and its customer base had evolved downward from high rollers to middle Americans. With new developments nearby making it more attractive to investors and the public, and the firm's Colorado casino doing well, the company looked to a return to profitability in the near future.
Riviera Operating Corporation; Riviera Black Hawk, Inc.; Riviera Gaming Management, Inc.
Harrah's Entertainment Inc.; MGM MIRAGE; Boyd Gaming Corporation; Wynn Resorts, Ltd.; Las Vegas Sands Corporation; Isle of Capri Casinos, Inc.
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