Friday, Feb. 7, 1997 | 11:59 a.m.
Tonight, the perception will change.
Long a locals favorite, the Rio Suite Hotel & Casino has never generated the following on Wall Street many believe it deserves.
Its off-Strip location and dual-pronged marketing strategy have confused investors who, in trying to simplify a complex industry, tend to categorize gaming operators as either locals- or tourist-oriented, rarely both.
But when Rio unveils its $200 million Masquerade Village expansion tonight, the old guidelines will go out the window. Rio has carved itself a unique niche in the Las Vegas gaming-entertainment scene, creating a hybrid resort offering appealing attractions destined to draw tourists and locals alike.
"What they've done," says Dave Ehlers of Las Vegas Investment Advisors Inc., "is create a new Rio. Words can't convey what the public is about to experience.
"I get the same feeling I get in New York-New York, which generated enormous customer acceptance when it opened," he says. "I believe there'll be similar customer acceptance at Rio. I think New York-New York and the Rio will make a great quinella."
"They've done a terrific job of integrating retail shops, restaurants and entertainment right above the casino floor," says Andrew Zarnett, a gaming analyst with Ladenburg, Thalmann & Co., who is one of the few Wall Streeters afforded a preview of the expansion project.
"The uniqueness of the entertainment product, coupled with the additional 1,000 rooms, will drive a significant increase in volume that will spill over into the existing casino."
The new "village" features a sensual blend of sumptuous restaurants, eclectic retailers and vibrant entertainment designed to stir feelings of romance and excitement. The resulting atmosphere is what makes Ehlers and others optimistic about Rio's future.
"We're trying to make it an all-encompassing, truly wonderful environment," says James "Jay" Barrett, Rio president. "We want it to be a place with a lot of things to do from the local and tourist points of view.
"We know there are a lot of wonderful attractions in this city that offer a multitude of choices, so you have to distinguish yourself. We want to offer things that will bring people back here again and again."
To that end, Rio has assembled a staff of talented executives, including some of the world's top food and wine experts.
"We've used our restaurants and wine offerings as a tool from the very beginning to distinguish ourselves from competitors," says Barrett. "We have a host of people who've spend their lives loving fine food and wine. Their professionalism has been a great marriage with our other offerings."
It's more than simply food and wine, however.
The "Masquerade Show in the Sky" will feature three themed parades celebrating Mardi Gras and Carnivale festivities from New Orleans, Rio de Janeiro and Venice complete with five colorfully decorated floats moving along a 950-foot track 13 feet above the casino floor.
The village includes 30,000 square feet of casino space and 32,000 square feet of retail space, topped by 1,028 new suites and seven restaurants in the new 41-story tower. While just 400 of the new suites are open today, the remainder will become available by mid-March, boosting the room count to nearly 2,600.
The expansion is expected to change the way Wall Street looks at Rio.
"For one thing," says Barrett, "Wall Street has no idea what the village is all about. Very few people have had a real chance to see it. I think that once people can go in there and experience it first hand, the perception of Rio will change."
Adding to the perception shift will be the realization of what Rio has become.
"Historically, Rio has been viewed as a small company and put in a category as a single-property owner, as distinct from large-capitalization companies with multiple locations," says Barrett.
"But it's now the 11th largest hotel in the world, a complete, full-service destination resort that derives a significant portion of its business from locals. And we have almost 40 more acres of raw, undeveloped land next door that affords us tremendous upside potential."
Rio's recent private placement of $125 million of 10-year notes at 9.5 percent already speaks to Wall Street's growing confidence in the company's credibility. "It was essentially a one-day transaction with no road show," says Barrett.
Proceeds from the offering will be used to reduce amounts outstanding under Rio's $200 million bank credit line and position the company for future development of new 3,000 room hotel on the adjacent acreage.
Barrett declines to speculate on the theme or timing of any new resort.
"We've always tried to build what the market's telling us it wants," he says. "We'll open up the village, let the rooms come into play and analyze the results.
"It's always easy to think in terms of a simple expansion of rooms, but the real key is putting together a complete package."
With the new Masquerade Village, Rio has done just that.
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