Friday, Dec. 28, 2001 | 10:44 a.m.
The Reserve's transformation into Fiesta Henderson will be complete this weekend -- and owner Station Casinos Inc. will discover whether a brand that draws well in North Las Vegas will find success elsewhere in the Valley.
This weekend's "grand re-opening," capped by a Saturday night fireworks show, completes a five-month, $12 million remodeling of the Henderson hotel-casino located at Lake Mead Drive and Interstate 515.
In 35 steps, the African safari motif morphed into a Southwestern party theme. The two Fiestas will also be linked through a single slot club card, the "Club Amigo."
The goal, Station says, is to launch an expansion of the Fiesta brand that goes beyond North Las Vegas and Henderson. Station owns four land parcels in the Las Vegas Valley that could be used for additional casinos, and Station Chief Financial Officer Glenn Christenson said one day "there will almost certainly" be more than two Fiesta casinos in the city.
"One of the reasons we wanted to acquire the Fiesta was we wanted a second brand in the market, and we felt the Fiesta had the second-best brand name in Las Vegas," Christenson said. "When we had the opportunity to acquire the Reserve, it occurred to us that by branding it a Fiesta, we could take advantage of economies of scale and help bring critical mass to the brand."
But it may also help give the Reserve a second chance, one analyst said.
"It may not make as much sense in the short-term, but they may want to signal they've upgraded and improved the property, and changing the name might be the best way to do that," said Larry Klatzkin, gaming analyst with Jeffries & Co. "It could be a way to re-introduce the properties and get people to come in."
The Reserve had its problems on the balance sheet ever since it opened its doors in 1998. Under initial owner Ameristar Casinos Inc., the property recorded negative cash flow of $9.5 million in its first year. In 1999, it eked out a $426,000 cash flow profit, and raised that to $6.1 million in 2000. It was on track to hit $11 million in 2001, Klatzkin said.
But Ameristar was used to churning out $20 million-plus in cash flow per year from its Midwest riverboats. And for a $125 million investment, even $11 million in cash flow wasn't acceptable, Klatzkin said.
"I think Station is looking for multiples of that ($11 million)," Klatzkin said.
Bargain offerings made the Reserve a gem under Ameristar for the local player, said Anthony Curtis, publisher of the Las Vegas Advisor. But it had two strikes operating against it, he said -- a strange theme and a tough location.
"In the beginning, the Reserve was a very strange property. It was almost like this castle in the middle of the desert," Curtis said. "It had some really awesome video poker schedules, but it was never able to draw people in, because it was so far out there. A lot of people loved the Reserve, but it was a pretty small group in general."
Ameristar finally cut bait in January, and agreed to a casino swap with Station. It bought riverboat casinos in Kansas City, Mo., and St. Louis from Station for $475 million in December, then sold the Reserve to Station in January for $70 million. Ameristar took a $57.2 million loss on the sale.
The move came just weeks after Station bought out the Fiesta from the Maloof family for $185 million.
Station has never divulged the financial performance of its individual properties, so it isn't known how the Reserve has done under Station, though Christenson said it is performing better financially than it did in 2000. Since buying the Reserve, Station has pumped $20 million into its renovation.
"We've been very pleased with the Reserve and the way it's performed. It's performed right up to our expectations," Christenson said.
But for the local customer, the situation changed drastically at first, both at the Reserve and the Fiesta.
"All the things that made them (the Reserve) viable dried up during that 'Stationization' period," Curtis said.
But that is changing, Curtis said.
"They're really putting their foot forward to show they're a value place, a locals place," Curtis said. "And what they're doing with Fiesta in general is one step beyond what they're doing with Station. Everything I've seen is real positive."
And the new theme should help, he said.
"They almost had to make that change," Curtis said. "The jungle theme was always dark and brooding, and I think that turned people off a bit."
Population growth may also help the property in the long run. Henderson was the nation's fourth-fastest growing city in the 1990s, increasing its population by more than 170 percent in just 10 years. That fast growth was one of the reasons Station was willing to co-invest in the $300 million Green Valley Ranch Station Casino, located just a few miles west of the Reserve.
"I like to think we bring something to the table with our experience in the local market, but clearly the growth in that area has helped contribute to the growth of that property (the Reserve)," Christenson said.
But will the new name and new theme work? Klatzkin isn't sure, at least not yet.
"It definitely gives them a shot," Klatzkin said. "They're going to have to convince customers it's a redone property. If it's as good as they think, people come back."