Michael Gaughan, Owner and Ceo, South Point Hotel & Casino
February 6, 2008
South Point Hotel & Casino owner Michael Gaughan discusses his decision to return to entrepreneurial operations and the intricacies of the Las Vegas locals market.
You’re now solely operating South Point, one of the locals casino properties in Las Vegas you envisioned and helped build when you led Coast Casinos before selling the company to Boyd Gaming. How does it feel to be back at the helm of one of your properties?
It’s a lot more fun. I do much better as an entrepreneur than I did in the corporate structure (with Boyd Gaming).
The South Coast, as it was known before you took back over and rebranded it, was not doing as well as was hoped for under Boyd’s control. What are some of the corrective actions you took when taking back the reins?
The main thing I did, which I was lucky with, is that I brought a bunch of people from Coast Casinos with me. I put a better team out here. Secondly, all places start slow and we had made some mistakes with marketing. I was still running this place—I had the five properties then. But we were under fire at the Suncoast Hotel & Casino with (Station Casinos’) Red Rock property coming into the area at the time, and I was spending a lot of time up there. I probably should have spent a little more time here. This place didn’t do badly, but it didn’t make what we thought it should make initially.
I know there were a lot of infrastructure issues with nearby roadways not being completed or under construction as well…
That’s true. Las Vegas Boulevard went down to two lanes a half mile from the property. That was fixed. I also couldn’t get the people from the west side of I-15 to me because they were working on St. Rose Parkway and they were also working on Blue Diamond Road (the two chief feeder roadways from west to east at the time). Unless you were east of me, you couldn’t get to me.
Yet, the south Las Vegas market was still a vastly underserved market in terms of casino properties.
Yes. And we changed our marketing a little bit. Even before I bought the place back, it was beginning to turn around. When you do things in a casino, nothing happens overnight. It’s like planting seeds. When you make changes, it takes a while to see. There’s nothing wrong with trying things. If you try it and it doesn’t work, go onto something else.
You’re in the midst of a significant expansion of the property as well.
We’re adding 850 hotel rooms and the new tower. That will bring the total number of rooms here to about 2,150. That’s the most of any locals property in Las Vegas. I’ll have two new restaurants open in December—Baja Miguel’s, with Miguel’s Tequila Bar and Primarily Prime Rib. We just opened up the Silverado Lounge. We’re going to build an island bar on the other side of our table game pit beginning at the first of the year. And we’re also going to build a high-rollers room back in the corner. My poker room is just a hole in the wall poker room right now, so I’ve got plans for a better poker room. I’d also like to get a sushi bar in here as well. I miss having sushi at least once a month. I have 40,000 square feet of dirt out in back of the sports book that I can do something with. When I get my tower done, I’ll be in this place for about $700 million. To rebuild this place would probably take $1 billion to $1.1 billion if I were to do so.
Both you and your father, Jackie Gaughan, are considered by many to be legends in the locals casino market in Las Vegas. What do you attribute to the successes you have had?
Well, he’s a legend, I’m not. But it boils down to knowing your customer and what your customer wants. You have to be able to give them what they want. It’s promising them less and giving them more. You keep the quality of your food product up and your prices reasonable. My slot machines return probably more than most (casinos) in town. You have to provide great service for your guests. You have to keep your place clean. Cleanliness has always been a big factor.
How did you get your start in the casino business?
I got here (to Las Vegas) in 1952. I had always wanted to work in the gaming business. I went to work at my first job at the Flamingo pool when I was 13 or 14 years old. I also spent about five summers in the kitchens. I also did summers at the Vegas Club and at the El Cortez. Then I dealt for a summer at the El Cortez and the Flamingo.
From there, how did you get into operating your first casino?
My father wouldn’t pay me. No, seriously, I decided to go out on my own at the Royal Inn Casino, which was on Convention Center Drive, but is no longer there today. Later, I partnered with Steve Wynn on the takeover of the Golden Nugget. I sold out to Steve and took that money and built the Barbary Coast. We built that property for $11.5 million and it always made more than that every year. It gave me enough to be able to go out and build the Gold Coast. The Barbary Coast was much more successful than I thought it would be, and the Gold Coast was also very successful. Then we built The Orleans property. It was there I found out about the value of rooms. The more rooms I built, the more (money) I made. I opened up with about 800 rooms and we wound up adding 1,000 more with two additions. We then built Suncoast, which was a huge success. When I broke ground at the Suncoast, Alta Drive didn’t go through and Rampart Boulevard was only two lanes. The first time I looked at the site, there were no roads out there—I took a helicopter in.
Did you use earlier models like The Orleans to help fashion the Suncoast?
No, I knew the Suncoast was going to be more of a locals place. The Orleans is about 70 percent tourist and 30 percent locals. The Gold Coast is the exact opposite of that, while the Suncoast is about 95 percent locals. The Barbary Coast was about 90 percent tourists and 10 percent locals. Local people just do not want to go onto the Las Vegas Strip.
What are some of the tips or lessons you learned from your father that have stuck with you to this day?
If you operated—and survived—in downtown (Las Vegas), you could survive anywhere. Downtown was a great training ground. It was great training for understanding local gamblers. Downtown did all of the locals business in town until (the Fertitta family’s) Bingo Palace was opened. I also spent a lot of time with Benny and Jack Binion, who are also great local marketers. What happened with downtown is that the locals market has changed. Downtown used to be the locals area and there really wasn’t anywhere else. Now, you have different areas of town where there are (locals casinos). You have Sam’s Town, Boulder Station, Nevada Palace all in one general area. You have Palace Station, The Orleans and the Gold Coast, which kind of forms another area, etc. And in each of these areas, you have anywhere from two to four or five hotels. The problem with downtown is that it’s the weakest area economically. And instead of two or three places, you have 13 or 14 properties downtown.
The idea with building local casinos away from downtown, is essentially to bring the experience closer to where the customers live, correct?
Well, you also have to know how to take care of local people. Locals don’t ask for a whole lot. They want food, good slot machine percentages, good atmosphere and service. How they’re treated is very important. You also have to work with your employees. You have to have happy employees. I don’t walk along the floors of this property talking about the South Point team, but for the most part, my relationship with my employees is pretty good. And the biggest comment I get from people is how warm and nice it is here.
How would you describe your leadership style?
I let the department heads run their departments they way they need to. There’s me, my department heads and my employees. There aren’t a whole lot of people between myself and my employees. I have my own advertising agency…I always have. I have my own art-department. I get more control that way. When I did this deal (to buy back the South Point), I had no reservations, I had no benefits, I didn’t have a legal department. When I came here, I didn’t have offices. I share an office with my partner, Frank Toti. When I build my new offices, my art department will be right next door to me. I could spend hours in marketing and advertising. I’m very hands on in that regard. To me, it’s a lot of fun.
When you operated the Gold Coast, it became a popular spot for rodeo and horse enthusiasts…
We’re bringing that out here (to South Point). I got the PRCA (Professional Rodeo Cowboys Association) convention away from the Mirage. I have 10 horses that I own in the national finals this year. I spend a lot of time at the rodeo. I got inducted into the hall of fame this year.
What are some of the other hobbies you have away from running a casino property?
I ski. I have a racing team—a NASCAR truck team—the South Point team. I’m also an old off-road racer. I did that for about 27 or 28 years. My wife has cutting horses. I have bucking horses. I’m also on the NFR (National Finals Rodeo) Committee. That event will be here (in Las Vegas) until 2014 after we got the contract extended.
The Gold Coast was also the first casino property in Las Vegas to have a movie theater as an amenity. Now it’s a popular model nationwide…
When I started with having the first movie theater, everyone told me I was nuts. If you’re going in the locals market you have to give people a reason to come. I had the movie theaters. I had the bowling alleys. Now I have the equestrian center and convention facilities. I’m going to have eight restaurants shortly. If you think locals are going to come just for the gambling, you’re mistaken. I do quite well with things like bowling. At one point, I was the bowling baron of Vegas. I had 268 lanes of bowling between the properties. And it always did well.
How has the locals gambling market changed compared to say five or 10 years ago?
They’re (the customers) are a pretty knowledgeable market. They know what machines to play, what machines not to play. They know good food from bad food. To them, a lot depends on the atmosphere. They know what they want.
What wouldn’t work in a locals casino today?
High limits on your table games. Having high-priced food. Those things don’t do well with locals.
What about trends we’re seeing now on the Strip like nightclubs and ultralounges?
I tried a nightclub here. We tried Fever. It was a disaster. We have a gorgeous showroom and it served as the nightclub. But I didn’t get the people I wanted to get. I got the people I didn’t want to get, and the people I didn’t want started to scare away some of my regular customers. Now, I’m raising my showroom up out of the ashes so to speak and I’m operating it as a lounge as well…and that seems to work.
What are your future plans? Any chance of branching out the South Point brand, or exploring new properties or markets?
I’m retired. The only thing I might look at is if they pass gambling in Omaha, Neb. I went over and looked at Macau a few of weeks ago. It’s fabulous over there. If I was 20 years younger, it would be great to get involved over there. But there’s really no way I would look at (creating another Coast-like brand again). I get about two or three offers every week to do something. I tell them I’m 64 years old and I want to spend more time with the family.
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