It was a bit surprising to hear the chief executive of a major casino operator describe the Strip resort his company recently bought for $360 million as a "dormitory."
The comment about the Tropicana Las Vegas wasn't meant to be derogatory.
Penn National Gaming CEO Tim Wilmott said the regional gaming company is committed to improving the Strip resort by bringing in nongaming amenities so that customers won't have to walk across Tropicana Boulevard and the Strip to the MGM Grand, Excalibur or New York-New York for a good meal.
The Tropicana's 1,500 hotel rooms and suites "are in excellent shape and high quality," Wilmott said. Occupancy is strong.
The resort's four restaurants, however, are not meeting the company's expectations.
Wilmott said the Tropicana's food and beverage revenue is dwarfed by the restaurant revenue produced at the company's M Resort in Henderson, which has less than one-quarter of the hotel capacity as the Tropicana.
"We see a lot of potential with the Tropicana and improving the restaurants will be one of out initial efforts," Wilmott said during an interview at the Global Gaming Expo.
Wilmott said restaurant upgrades will be coming in 2016. Penn National wants to evaluate what type of food outlets make sense for the resort and its customer base.
"That will be an important change we need to bring to the Tropicana," Wilmott said.
Penn National closed on the Tropicana purchase in August. Wilmott said at the time the company would spend $200 million in upgrades over the next four years.
The initial effort is to improve the casino's slot machine floor with new games and to upgrade the resort's technology into Penn National's player rewards system, which has a 3 million-member database. The company operates nearly 30 casinos and racetracks across the U.S.
Penn executives have said more than a quarter of its customers like to visit the Strip, which made the purchase of the Tropicana a company priority. Penn spent more than seven years evaluating a Strip casino acquisition.
M Resort, which the company has owned since 2011, attracts some of the business, but the property is 10 miles from the Strip.
Wilmott said the Rat Pack-era property has an "historic name" and "great location" at the Strip's southern end.
Penn National used G2E, the gaming industry's largest trade show and convention, as way to draw analysts to the Tropicana. The investment community had a similar take on the resort. The hotel rooms, upgraded by the previous ownership, were in good shape. The restaurant and nongaming amenities were lacking.
"We have to say we were impressed with the property's look, especially the room product," Stifel Nicalous Capital Markets gaming analyst Steven Wieczynski told investors. "It's pretty clear though there is a ton of low hanging fruit that Penn management will be able to identify and correct in order to drive profitability at the property much higher."
Wieczynski said casino improvements were also clearly needed. He said the Tropicana is generating less gaming revenue than any other Penn property, including the company's casino in Bangor, Maine.
"As we walked the gaming floor it was pretty clear that this will be a key target for Penn management in the near term," Wieczynski said. "Penn believes they will be able to improve the customer gaming experience by refreshing the slot floor while offering a wider array of table games."
Union Gaming Group analyst Christopher Jones said the restaurant offerings would be "a departure from Penn National's regional food and beverage offering." Jones also told investors the Tropicana will benefit from business brought to the area by a new 20,000-seat sports arena that will open next year behind New York-New York.
Penn spent $250 million this year to open the Plainridge Park Casino in Massachusetts, the state's first casino.
The company is now focused on Tropicana, bringing the general manager of its Kansas Speedway casino to Las Vegas to manage both Tropicana and M Resort.
With Penn spending $390 million to open an Indian casino near San Diego next year, Wilmott said the company was looking at developing a new Southern California customer base in which to market both the Tropicana and M Resort.
"We have a long-range plan for the Tropicana," Wilmott said. "We love the location and it offers our company a tremendous opportunity."
Contact reporter Howard Stutz at firstname.lastname@example.org or 702-477-3871. Follow @howardstutz on Twitter.