Posted by: Chris Palmeri on November 16, 2009
I once told my colleague Dean Foust, who was writing an article about the Hooter’s restaurant chain, that a planned Hooter’s casino in Vegas was a sure thing. “I’d invest in that,” I said. Scantily-clad women, beer, gambling, what could go wrong?
Alas, the latest results for 155 East Tropicana, the entity that owns Hooter’s Las Vegas, shows that in Vegas there are no sure things. The company lost $14.5 million for the first nine months of this year on revenues of $35 million. Among the results, a 20% decline in food and beverage sales. That’s a lot fewer chicken wings.
A Securities and Exchange Commission filing says the company has received a notice of default from its lenders and is actively trying to restructure its $147 million in debt.
The filing says “the company does not believe that cash on hand at September 30, 2009 of $5.6 million and expected cash flows will be adequate to meet the total financial obligations.”
Hooter’s Las Vegas suffered problems fundamental to all bad real estate investments—a second-rate building in a crummy location. Half its 696 rooms were closed in the third quarter due to plumbing issues. And as Union Gaming analyst Bill Lerner notes, road construction in front of the off-the-Strip property discouraged walk-in visitors.
Even football great Dan Marino punted. His restaurant inside Hooter’s will be renamed the Mad Onion in December.
Maybe the frat boy crowd has less money to gamble. Or maybe people don’t want to go to an establishment in Vegas that they can visit in their own home town.
In my own defense I don’t think Hooter’s management did a great job marketing the casino. I once saw ads for it targeting families. Clearly not the right demographic.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.