South Lake Tahoe Poised for a Comeback
After years of gaming revenue decline due to tribal casinos in California, South Lake Tahoe readies itself for a rebirth. Renovations to Harveys Lake Tower (l.), the opening of Hell’s Kitchen restaurant, a new conference center to break ground and ski resort transformation speak to a new day.
Atlantic City has its Boardwalk and the Atlantic Ocean. Biloxi has the Gulf of Mexico. Monte Carlo has the Mediterranean. While all those locales have scenic surroundings, a case could be made that Lake Tahoe surpasses them all for unvarnished beauty.
Yet, you rarely hear much about the handful of hotel casinos in this part of the world, or the decline suffered when tribal casinos came to California, long a source of business for South Lake Tahoe resorts. Perhaps it’s because these properties are small potatoes compared to other Nevada destinations. South Tahoe reported $66.1 million in gaming revenue in 2018, compared to $6.5 billion on the Las Vegas Strip and $636.9 million in Reno.
“Investors don’t really focus on the area materially,” SunTrust Bank gaming analyst Barry Jonas said.
But despair not. Times are changing in South Lake Tahoe, from the coming of a new conference center to improvements to venerable casino resorts.
Gordon Ramsay liked Lake Tahoe so much he chose Harveys Lake Tahoe for the location of his third Hell’s Kitchen restaurant, after Las Vegas and Dubai.
“I absolutely fell in love with this area from the breathtaking views of the lake to the amazing skiing nearby, Lake Tahoe has it all. It’s a perfect location for a third Hell’s Kitchen restaurant,” Ramsay said in a news release.
Named for the popular TV show of the same name, the restaurant is part of $41 million in renovations at Harveys, which includes a complete remodel of all Lake Tower rooms, plus new balcony suites. The lion’s share of the funding goes towards the remodel of 519 rooms, said John Packer, a spokesman for Caesars Entertainment, which owns Harveys along with Harrah’s Tahoe. Most of these projects have been in the works for some time, Packer told GGB News.
“We always want to keep our products and services as fresh and up-to-date as possible, and it was time for the Lake Tower,” he said. “The Harveys Mountain Tower was remodeled a few years back and the balcony suites remodeled last year.”
Inspired by nature and the seasons, the new rooms feature a spacious layout with the use of natural surfaces. Wood accents are contrasted by the linen textures throughout the room. Additionally, plush carpeting in a deep blue chevron pattern mimics the lake waters. The redesigned bathrooms provide high-level amenities with neutral walls contrasted by dark quartz stone and dark iron accents. Additional highlights include power-charging ports and flat-screen TVs.
“With the newly redesigned guest rooms, the completion of the balcony suites and the opening of Hell’s Kitchen, Caesars Entertainment is committed to elevating guest experiences at our resorts and advancing the Lake Tahoe tourism economy,” said Brad Belhouse, regional president for Caesars Entertainment in Northern Nevada.
Ramsay’s location required the venerable Sage Room to relocate to the space formerly occupied by 19 Kitchen Bar. “The new Sage Room space was refurbished and redecorated with much of the artwork and other artifacts from the original Sage Room,” Packer said.
The restaurant will also leave Sage Room’s iconic, hand-hewn wooden beams intact. The beams were made from trees that were removed when the road to the property was initially built and have been a prominent design piece since the original log building that housed Harveys Wagon Wheel casino, which first opened in 1944.
The relationship between Caesars Entertainment and Ramsay began in 2012 with the opening of Gordon Ramsay Steak at Paris Las Vegas and has continued to flourish over the years. The partnership has currently yielded five restaurants on the iconic Las Vegas Strip, three on the East Coast and one at Caesars Palace Bluewaters Dubai, bringing the total number of restaurants within Caesars Entertainment currently to nine worldwide.
The high-energy restaurant and bar will shine the spotlight on Hell’s Kitchen recipes, including many of Ramsay’s signature dishes. The chef expects to be in the house in late March for an “official” grand opening. “We know that Mr. Ramsay is extremely busy with existing and new projects. We expect that he will visit Lake Tahoe intermittently,” Packer said. Harveys plans to complete the Lake Tower renovations by June. Caesars Entertainment hopes to announce other projects later in 2020, he added.
Harveys is not the only Lake Tahoe resort looking to change. The 500-room Mont Bleu, a resort that went through three names and five owners in 41 years, now belongs to Eldorado Resorts. The company acquired the property last year as part of its $1.8 billion purchase of Carl Icahn’s Tropicana Entertainment. CEO Thomas Reeg indicated Eldorado will need to dispose of at least one of the three casinos it will own in Tahoe once a $17.3 billion merger/buyout of Caesars Entertainment concludes early this year. Since the combined assets of Eldorado and Caesars covers about 60 gaming properties in 18 states, including 18 casinos in Nevada, potential antitrust violations abound, according to CDC Gaming Reports.
Park Cattle Company opened Mont Bleu in 1978 as Park Tahoe. It was acquired by Caesars World a year later and renamed Caesars Tahoe. A $40 million investment completed the hotel. The resort was managed as a smaller version of Caesars Palace in Las Vegas. When Harrah’s Entertainment acquired Caesars for $9 billion, the new company sold Caesars Tahoe for $45 million to Columbia Sussex in 2005 to avoid federal antitrust scrutiny. The property was renamed Mont Bleu a year later. Icahn acquired the property in 2010 when Columbia Sussex went bankrupt and it became part of Tropicana Entertainment.
In a November conference call, Reeg said, “Northwest Louisiana and in the Tahoe area” are “markets where you should expect us to be active” in terms of a casino sale prior to the deal closing.
“It’s pretty clear that management wants (the Caesars merger) to get closed as soon as possible and is willing and ready to dispose of any assets that need to be removed,” Stifel Financial gaming analyst Steven Wieczynski told investors following the earnings call.
Mont Bleu has a strategic location. It offers a northern parking lot for construction of an events and conference center community leaders believe helps the market become less dependent on gaming revenues. Space inside the center has been designed to include meetings and conferences of various sizes with ability to seat 6,000 for concerts, 4,500 for sporting events and 2,000 for large banquets.
“We’re not competing with Reno. This is not a large center, but it’s the right size,” said Carol Chaplin, CEO of the Lake Tahoe Visitors Authority.
South Lake Tahoe’s casino market peaked in 2000, when the region collected $141 million in pre-tax gaming revenues. The next year, revenue fell 16 percent mostly the result of tribal gaming. South Tahoe continued a gaming revenue slide that saw declines in eight out of the next 15 years, including dips of 11 percent in 2008, 23 percent in 2009, and 11 percent in 2010.
Through November of 2019, gaming revenues were down 3.3 percent compared to 2018—less than half of what Tahoe produced nearly two decades earlier.
One gaming insider suggested Caesars’ Harvey’s-Harrah’s combination “already has the monopoly” on the Lake Tahoe market, which is another reason Mont Bleu is being shopped.
“We believe Eldorado remains comfortable with its ability to dispose of single assets in Tahoe at multiples that promote financial deleverage,” Deutsche Bank gaming analyst Carlo Santarelli said in November.
Eldorado made a few cosmetic changes to Mont Bleu since acquiring the resort. But the company put its attention on adding amenities to its three Reno properties, Eldorado, Silver Legacy and Circus Circus. And except for Harveys, Caesars has focused enhancements in Las Vegas.
South Tahoe has two other casino-resorts: Lakeside and Hard Rock Lake Tahoe.
Paragon acquired a 68 percent interest Hard Rock Lake Tahoe in 2016 and franchised the name from Florida’s Seminole Indian Tribe. The property, known over the years as Sahara Tahoe, High Sierra Resort and Lake Tahoe Horizon, is flourishing, CEO Scott Menke said, according to the Nevada Independent. He said the company upgraded the 25,000-square-foot casino and 539 hotel rooms that offer views of either Lake Tahoe or the Heavenly ski runs.
Hard Rock is a short walk to the conference center site that Menke termed a “game-changer” for South Lake Tahoe.
“The town has nothing like it, and you have to be prepared 365 days a year,” Menke said. “To be able to accommodate special events and conferences makes us a true destination. It adds to everything else the market has to offer.”
The legislature approved the funding mechanism for the project, which allows the visitors bureau to impose a $5 per night room tax on all hotel, motel, and short-term vacation rentals in Tahoe Township. The tax, which kicked in July 1, is expected to raise $91 million to pay off the construction bonds.
Chaplin said additional approvals are needed from the Tahoe Regional Planning Authority. She hopes construction will begin in May with an 18-month building timeline. A project manager has been hired for the development.
“It’s a nice amenity that will not only drive visitation, but also provide jobs,” Chaplin said. She hopes to attract non-gaming businesses to Tahoe. In the most recent Gaming Abstract covering fiscal 2018, South Tahoe collected 54 percent of its revenues from gaming. Statewide in fiscal 2018, resorts received 57.2 percent of their revenues from hotels, restaurants, retail and entertainment. In Las Vegas, the non-gaming revenue figure was 66 percent.
In 2012, Vail Resorts management acquired the company that owned Heavenly and two other ski areas for $18 million. The ski resort was upgraded, and the changes led to an investment that included retail, restaurants, improved lodging, and a pedestrian mall.
Hard Rock picked up on the pedestrian mall idea and created Guitar Plaza at the property’s front entrance. The space is marked by a giant guitar and offers outdoor seating and dining, as well as live and pre-recorded music. The patio is the only outside event space in the South Tahoe corridor.
“It used to be kind of dumpy, but now it looks nice and it’s one of the best things about the area,” said former Harrah’s Entertainment CEO Phil Satre, who was in charge of the company when it purchased Harvey’s in 2000. “When I started, Lake Tahoe was really rocking. I’d love to see Tahoe take off again.”
Menke concluded, “Tahoe is a great market and it continues to change. There is a lot of opportunity.”