OUTSIDE the Tropicana Resort & Casino in Las Vegas, doorman Steve Wagner asks guests if they enjoyed their stay. Half complain, he says, citing everything from dirty rooms to insects.
"Boy, this place needs to go," said Wagner, 48, who has spent half his life at the once mob-linked property, which opened in 1957 and was hailed by the Saturday Evening Post as the "Tiffany of the Strip."
"Nothing that exists in this hotel should probably stay."
"The Trop," now in Chapter 11 bankruptcy along with eight other properties owned by Columbia Sussex Corp founder William J. Yung III, is caught in a credit squeeze, Bloomberg News reported.
A US$2.5 billion plan to turn the Tropicana into the world's largest resort casino was canceled last year after tightened lending markets made it harder to raise funds. Now a lack of financing for potential buyers makes a sale infeasible, said Scott Butera, chief executive officer of Tropicana Entertainment LLC.
"Unfortunately, the Tropicana's hands are tied," said Daniel Y. Rubin, a lawyer at O'Melveny & Myers in New York who has represented MGM Mirage's controlling stakeholder, Kirk Kerkorian. "Making an investment to build a new casino probably feels a lot like making an investment in subprime mortgages, in terms of speculation that isn't paying off."
Yung's problems stem from his agreement to buy the Tropicana's former parent, Aztar Corp, at the top of the real estate market in 2006. Then, last December, he lost his license to operate his biggest gaming asset, the Tropicana Atlantic City, after New Jersey gaming officials found him lacking in "business ability" and "integrity."
The New Jersey finding is on appeal. Nevada's Gaming Control Board is conducting a separate investigation of the Trop, said gaming board member Randall Sayre.
On June 6 Yung resigned as Tropicana Entertainment's CEO after lenders and bond holders demanded his ouster. The Kentucky businessman, 67, declined to comment about his resignation or anything related to Tropicana, said spokesman Hud Englehart.
Yung, who was replaced by Butera, remains on the five-member board, which now has three outside directors. Next month a bankruptcy court will hold a three-day hearing to decide whether he should be removed from that position as well.
Falling real-estate values and a drying up of credit for development projects are hurting business and consumer spending, leaving Las Vegas feeling like it has a "hangover" after being the fastest-growing major United States metropolitan area from 1986 to 2005, said Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas.
It had the biggest house-price drop of any US city during the first quarter, at 26 percent. Convention revenue fell 7.1 percent to US$2.86 billion in the same period, and gaming revenue on the Strip slipped 3 percent to US$1.67 billion.
More than US$30 billion in new residential and gaming projects, including the Tropicana rebuilding plan and the Crown Las Vegas skyscraper, aren't going forward because companies can't get financing, said Las Vegas-based analyst William Lerner of Deutsche Bank AG.
Tight credit also is keeping older sites like the Imperial Palace and the Riviera Hotel and Casino from accessing capital they need to upgrade facilities and stay competitive, Lerner said.
"The problem is we've not yet seen the full impact of the credit crunch," he said. He declined to comment on Deutsche Bank's role in financing the US$3.8 billion Cosmopolitan Resort & Casino, which fell into foreclosure during construction.
Yung, who turned Columbia Sussex into the largest US licensee of full-service Marriott hotels, agreed to buy Aztar for about US$2 billion and the assumption of US$676 million in debt. The deal was financed with US$3.1 billion in credit facilities and notes arranged by Credit Suisse Group AG.
Yung planned to redevelop the Las Vegas Tropicana by 2010, turning it into a complex with five towers, 10,000 rooms, and 86,613 square meters of casino, retail and convention space. The makeover was called off last year.