Reno Gazette-Journal from Reno, Nevada • Page 39

2F SMALL BUSINESS DAY 3F PEOPLE 5F MONDAY FEB. 27, 1995 STEVE FALCONE, BUSINESS EDITOR: PHONE, 788-6322; FAX, 788-6458 GAMING Shareholders will have final say in Boomtown deal INSIDE HUNG A better, he explained, even after sharing its total revenue with HFS. Par-A-Dice is expected to bring in an additional $36 million a year in profit. Ultimately, the shareholders will decide if they want the plan, Parrot said, which likely won't go to a vote until May. If the shareholders reject the deal, Boomtown goes back to business as usual, with no fees or forfeitures.

However, if another bidder comes in with a sweeter offer than HFS's deal and Boomtown accepts, Boomtown would have to pay HFS a $2.5 million forfeiture. Of course, if the deal with another bidder amounted to something such as the sale of Boomtown for $200 million, Parrot explained, $2.5 million would amount to nothing more than a "rounding error." a matter of fact, he said Boomtown will end up with a $20 million cash flow at the end of this fiscal year. But even with that cash flow, Boomtown won't be able to expand operations as far as Parrot would like to see. "With the deal we would have ready access to capital," he said. Access to capital is a great, Turner agreed, but only if the company has a new gaming license somewhere and is just waiting on financing.

Even then, Turner said, Boomtown could probably cut a better deal. Parrot said the loss of 20 percent of Boomtown's revenues may make shareholders nervous. But with the added revenue from Par-A-Dice and future projects which can be put together with more access to capital the company's overall profit will look projects. Sound pretty good, right? Wrong, says Bruce Turner, gaming analyst for Salomon Brothers. There's a catch to the deal that he and other analysts don't like: HFS may have too much to gain namely 20 percent of all of Boomtown's revenues before taxes its existing and future properties.

"It's not a good deal," Turner said. "I don't believe there is any reason to do this deal." The shareholders' primary concern with the plan, he explained, is the idea of giving up percent of the company's revenue for a deal Boomtown doesn't really need. Parrot agrees that his company fine the way it is and doesn't really need an acquisition or merger to help the bottom line. As is well taken, considering that Wall Street analysts generally don't like any deal that is difficult to explain to investors. After sifting through the complex description of how the transaction will take place, one is left with the general understanding that Boomtown will own National, which in-turn will own the Par-A-Dice riverboat casino in Illinois.

Boomtown will also be able to refinance its debt with HFS at a lower interest rate than it is now paying and will have access to 100 million in capital for future on at 20 is rock roll. Hard Rode Hotel By James Robbins GAZETTE-JOURNAL As investors continue to mull over Boomtown plans to purchase National Gaming from hotel franchising giant Hospitality Franchise Systems, the question that keeps cropping up is: why? Despite the negative reaction to the Reno-based company's deal which has even found its way onto the pages of the Wall Street Journal Tim Parrott, Boomtown chairman and chief executive officer, is sticking to his guns. Well. least until the shareholders tell him its time to holster the plan. The deal announced last March is complicated to say the least, Parrot admitted last week, which is why he believes there is so much negative feeling about it.

His point Strategy: The Stateline company looks to a market niche, not its name in lights. By James Robbins GAZETTE-JOURNAL When the Hard Rock Hotel and Casino opens in Las Vegas next month, most people probably won't notice its connection to Harveys Casino Resorts. Nonetheless, the Lake Tahoe-based company will run the day-to-day operations and hold 40 percent equity in the project, even if its name isn't in lights over the door. The Lily Pond company, a spinoff of Peter Morton's Hard Rock America, will hold the remaining 60 percent. "It wasn't intended to be a venture that would spread the Harveys name," said Thomas Ytur-bide, president and chief executive of Harveys.

While the company's business philosophy is to spread into markets "where we have the ability to dominate the market right from the start," Yturbide said, "if that's not possible, we look for a niche position." And niche would be a good way to describe the Hard Rock Hotel. Located a few blocks off the Strip, the hotel wouldn't be that noticeable from the outside by Las Vegas standards if it weren't for the 90-foot guitar out front. Morton purposely kept the project to a manageable scope $90 million as a direct assault on the trend toward mega-resorts in the town. He promises his property will be "a small, cool hotel-casino as opposed to the big, uncool ones." However, gaming analysts have no doubt the size of the project won't take away from a healthy bottom line. "I think it's going to be a tremendous project," said Jason Ader, Smith Barney gaming analyst.

"Most Vegas casinos cater to a much broader market." But as far as any other properties in town that are tailored to a "hip 21 to 40 market" are concerned, Ader said, "they just don't exist." Harveys had a serious interest in delving into the Las Vegas Market back when Caesars Palace was the biggest operation on the Strip, Yturbide said. But the Mirage resort soon touched off a building boom that raised the ante for other companies looking to make their mark in Vegas. "The entry level is really about 1 billion," Yturbide said. "We as 0 1 CELEBRATING: Hard Rock Cafe founder Peter Morton beneath a 90-foot guitar at the Hard Rock Hotel, under construction in Las Vegas. Stateline-based Harveys is building the hotel.

Follow the guitar strings LAS VEGAS (AP) You can't miss the place; just look for a guitar. There's a 90-foot guitar over the entrance, a bar featuring an ornate guitar-bedecked religious shrine, guitar-shaped roulette tables, and slot machines sprouting 'hogs' and guitar neck handles. Welcome, rockers, to your kind of place the Hard Rock Hotel and Casino. "We're not looking at the hotel as just a field of dreams," said Hard Rock Cafe founder Peter Morton, leaning on a counter at the All Saints Bar, a resplendent shrine adorned with electric guitars. "People won't come just because of the name.

To get people to come here we have to deliver a great product. We're going to do that." Morton offered the observation during a walk through of his latest venture, a $90 million hotel geared to rock faithful who have transformed his Hard Rock cafes into a cult phenomenon. "This is our biggest project to date," Morton observes, dodging construction workers scurrying through the property's unfinished circular casino. "We've been getting reservations by the thousands. But I'll be concerned until it's open, operating and successful." Opening is scheduled for March 1 0, with a nationally televised concert on MTV.

Morton promises his hotel will be "a small, cool hotel-casino as opposed to the big, uncool ones." Room rates will run 150 per night. The resort is adjacent to his Las Vegas Hard Rock Cafe, which opened five years ago and did $22 million in business last year 40 percent of it on merchandise sales. The Las Vegas cafe is one of 30 around the world, 16 of which are owned by Morton. Morton is not intimidated by his competition 3.000- to resorts on the Las Vegas Strip, a mile away. "We want to be the friendliest, the polite est hotel in Las Vegas," he said.

Hard Rock interviewed 12,500 job applicants and selected 950 employees who would help meet that goal. "Because we're small we'll be able to offer great service," Morton said, passing beneath a chan- See GUITAR on page 3F STEVE FALCONE Greenspan has friends in Dow places It must have been a pleasant week in the household of Federal Reserve Chairman Alan Greenspan, as the man who increasingly appears to the U.S. economy's helmsman took on heroic proportions. The stock market, for instance, seemed to place him on a pedestal when, a day after he told a congressional committee that the economy appeared to be slowing so hint, hint maybe interest rates won't have to be raised again, investors pushed the Dow Jones industrial average over the long-awaited 4,000 mark. Hooray, we're in for a soft landing, they said.

A little bit of bad news went a long way: There'll be no inflation, no recession, just a few extra people out of work and a bit of pain in the housing industry. While the market was celebrating, Greenspan was cozying up to the Republicans in Congress. They were looking for an easy way to cut spending, and they had a good idea: Adjust the consumer price index (the government's measure ofinflation) so it calculates a little lower. That would change a whole host of items that are adjusted according to the CPI. Annual social security increases would be smaller, and the indexing of income tax rates would result in higher taxes, a nifty budget-balancing act.

Do it, Greenspan told the congress people. (There's considerable truth in this effort, of course. The CPI traditionally has overstated inflation by, for example, not considering improved quality of products.) Economics is more complicated when it deals with the personal, however. If the markets were relatively joyful last week, I'm not sure the general public was sharing in the feeling. The past couple of recessions have left some psychological damage behind, I think.

People are much less sure of their stability, having seen seemingly secure jobs disappear in a wave of downsizing and re-engineering. And the increases in interest rates have taken more of a toll on individuals than they might have in the past. It used to be that you could avoid interest rate hikes simply by not borrowing money. Your old loans had fixed rates that could last as long as a 30-ycar mortgage. Today, however, much of the money we borrow is tied to an interest rate that can change regularly as the national rates change.

Lots of folks got out of their adjustable-rate mortgages when rates hit bottom a couple of years ago (though not all of us were so smart), but credit card rates may still come back to sting them this year. That extra money going to financial institutions is not going to retail institutions or service providers. If your mortgage payment went up 1 00 this year, say, that's 1 00 a month that Raley's or Wal-Mart or the Century Theaters or the Nugget buffet won't sec. For the markets, that's the good news. If we were wasting that $100 a month on consumer goods, and if producers couldn't keep with the demand (possibly because they can't, or won't, hire more workers), prices would increase.

Better to sop up that money with higher interest rates than higher prices. OK, maybe we'll thank the helmsman of the economy when the business cycle avoids turning negative later this year or next. In the meantime, however, I think most folks will not feel as comfortable with the economy as the investors on Wall Street last week. Steve Falcone Is business editor of the Gazette-Journal. Write to: P.O.

Box 22,000, Reno, Nev. 89520; or phone 788-6322. Camrac films Canada rail By Susan Skorupa GAZETTE-JOURNAL Jim and Shirley Mitchell can vouch for the time-honored adage that necessity is the mother of invention. In the process of learning that lesson, they filmed a Canadian railroad documentary for the Canadian National Railway Historical Society and BC Rail. The necessity aspect popped up in Vancouver, B.C., where it rained non-stop on the days before the Feb.

1 9 shoot. On the day of the shoot, the sky partially cleared, Jim Mitchell said. But waterfalls on the canyon walls that Canadian steam engine 3716 passed between were wetting the four cameras attached to the train. "We had to build windshield wipers for the cameras because there was so much water coming off the walls," Mitchell said. "So we went to a Mercedes dealer and bought wipers to put on the cameras and it worked." The Canadian groups wanted a video rail adventure story of the steam engine on a winter excursion from Vancouver through the Whistler's Peak ski resort and on to Pemberton.

They chose the Mitchell's Camrac Studio in Reno because of the company's use of multiple cameras on the locomotive, said Terry Furgesson, who organized the shoot. "They produced a remarkable story that I saw on PBS about the 4449 Daylight steam engine, which was America's Freedom Train in 1976," Furgesson said. "We felt that between their consumer video distribution network and the fact that Cam-rac's other programs have been broadcast nationally down in the States and in Japan, we expect this new video program will bring more rail tours to British Columbia," he said. In early February, the Mitchells scouted locations in the il-derness along the railroad's right-of-way to find shooting locations. "In places, the track is actually cantilevered off sheer rock walls," Jim Mitchell said.

"You wouldn't believe that a big steam engine could pass through safely." Mitchell said the terrain was so trecherous, each train is pre ceded by a pilot truck that See CAMRAC on page 3F ACE Awards: Winners of the American Marketing Association's annual marketing competition were: large organization, Carson-Tahoe Hospital; small organization, Stremmel Gallery; tourismgaming destination organization. Clarion Hotel-Casino; non-profit, American Cancer Society; large budget special event. Best in the West Nugget Rib Cookoff; small budget special event, Eldorado's 1 3th annual Great Italian Festival. Stephanie Kruse, owner and creative director of Stephanie Kruse and Associates, was honored as Marketer of the Year. Charleston 5 'Sahara Convention I center 4irv- r-r urvLy irianmiyu i i yt ropicana McCarran 1 1 A Irttarrtatinnol 2 miles AP LOCATION Paradise Harmon, Las Vegas PARTNERS Harveys Casino Resorts, Hard Rock Cafe Gabriel MorbnGazette-Journal concerned about quality." So, will Harveys' name ever be seen in neon lights over the Las Vegas Strip? Yturbide said Harveys' management contract with Hard Rock doesn't preclude such a concept, but so far he doesn't have any plans for any ventures there.

The contract also makes Harveys the management partner if Hard Rock decides to open more hotels in the future. In the meantime, the Hard Rock Hotel should provide "meaningful" extra earnings for Harveys, Ader said, which could help boost the company's stock. Yturbide said that could happen right away. Harveys Central City Colorado showed a profit in its first month of operations of about $470,000, not including one-time opening costs, Yturbide said. He is convinced the Hard Rock has a similar opportunity for early profits.

"We Really believe it has a chance of doing that," he said. Special lo the (iaette Journal Costello IS v(rT I if as in of COST $90 million SHOWROOM 1,200 seats HOTEL 340 rooms CASINO 28,000 square feet OPENING March 10 (tentative) Source: Hard Rock Hotel and Casino "It's going to be a tremendous project. Jason Ader, Smith Barney a company can't afford that." Harveys relationship with Hard Rock development an investment banker they both used. Yturbide said Harveys had been working with the banker in 1992 to purchase Bally's in Reno, he said, when Hilton stepped in and bought the property, which is now the Reno Hilton. About the same time, the banker was trying to cut a deal between Harrah's and Peter Morton to open the Hard Rock Hotel, he explained.

When that fell through, Yturbide said, "the banker brought us together." It was a natural match, he said, since "both companies are very utMANQ SERVICE FAX SOLUTIONS: Jackie lflllro7 I I Today's focus: Jackie Costello. Business: Fax Solutions Inc. Vitals: 5365 Mae Anne Suite A6. Office hours: 8 a.m. to 5 p.m.

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