Tropicana not the tired, old lady on the Strip anymore

By Liz Benston

Saturday, Oct. 30, 2010 | 2 a.m.

When Toronto-based Onex Corp. acquired the Tropicana Las Vegas out of bankruptcy last year and installed Alex Yemenidjian as CEO, the plan wasn’t to survive on bargain hunters amid dated surroundings.

Yemenidjian, a former MGM Grand executive who later served as CEO of the Metro-Goldwyn-Mayer movie empire in Los Angeles, saw bigger potential in the 53-year-old property. More than a year into the job and all of the Tropicana’s rooms, the convention center, casino floor, some restaurants and other public spaces have received a South Beach-inspired makeover.

An exhibit featuring mob-era memorabilia, a new high-limit salon, sports book and spa will open over the next several months. An integrated nightclub, outdoor beach club and restaurant run by Miami’s Nikki Beach opens in April. Amid a difficult economy, the Tropicana exited bankruptcy with negligible debt and money to pursue $180 million in upgrades.

In a town where elaborate nightclubs have become ubiquitous, how crucial is the nightclub?

If a property wants to cater to Gen X and Gen Y, that is the new entertainment. Clearly we want to cater to that market, but not ignore the Baby Boomer, which is 70 percent of the Las Vegas market. Whatever a show is to a Baby Boomer, a nightclub and beach club are to Gen X and Gen Y. With Nikki Beach, we’re going to be unique to other offerings in town. And it will widen our customer base significantly.

Who is the Tropicana’s target customer and is that changing?

Before we got here, our target market was anyone looking for a bargain. Our objective is to change that and transform the property to cater to the middle market, which is everybody who comes to Las Vegas except for the extremes. It’s also very large in terms of age and range of income. We’re not interested in the very low end because there’s no margin in that business. And we’re not interested in the very high end because those customers have different expectations. The most successful properties in Las Vegas are both aspirational and accessible as opposed to those targeting a narrow market.

What are customers saying so far?

If you go on Tripadvisor today, you will see we are rated four out of five stars by guests. We have lots of stories about customers who tell us they’re blown away by the transformation and the rooms. I went to the pool last month during the day to look something up, and I was coming back in a suit in 110 degrees and there was a lady next to me wearing a Bellagio visor who said, “I stay at Bellagio, I stay at Caesars Palace and nobody has the service you have here.” From a guest service point of view, there’s a huge difference, and it’s evident in what customers tell us and what they say about us online.

Morale was low when you took over the Tropicana. How did you set about repairing what layoffs and poor management under previous ownership had caused?

Employees here had been used to a certain way of doing things that was no longer acceptable. Everybody went through a different kind of training. Before, if your performance was mediocre you blended in, and if you were extraordinary you stuck out like a sore thumb. Now it’s the other way around. Forty percent of employees who were here when we acquired the property are no longer here. We also discovered an amazing reservoir of goodwill. We have people who have worked here 10, 20, 30 years who love the Tropicana and the fact that we came along and implemented these transformations. They are thrilled to work at the new level that’s expected of them. We have an excellent balance between the superstars who were here a long time, but didn’t have an opportunity to shine before, and the new superstars we hired when we took over.

How did you deal with undesirable employees?

We closed and reopened certain venues as part of the renovation process and rehired some of the same employees in addition to new people. We also terminated employees who didn’t live up to the new standards. Service excellence is something we’ve set out to conquer. We decided to measure our service by the same criteria that the Four Seasons in Santa Barbara measures service — it has the toughest service standards in the entire chain.

Some casino operators say they’re in the entertainment industry, not the gambling business. Are they really that similar?

It’s extremely similar. For someone sitting at a slot machine, we’re renting that person three feet by three feet of entertainment space much like someone watching a movie. We’re not in the goods and services economy. We’re in the experience economy. If you think you’re in the casino or hotel business, you’re going to be totally commoditized in Las Vegas. If you own a 300-room Marriott in Minnesota, you’re in the hotel business. If you own a slot parlor at a racetrack, you’re in the casino business. In Las Vegas, we’re strictly in the entertainment business. We’re all competing for people’s discretionary entertainment time, whether they go to a movie, a restaurant or a casino.