The Plaza Turns 50

On its 50th anniversary, the story of The Plaza offers a timely reminder of the early pioneers of Downtown Las Vegas, their business strategies and how future generations built on their legacy to enable an unlikely revival of Downtown Las Vegas.

Next Stop, Las Vegas!

At the beginning there was the railroad. 

At the midway point between Salt Lake City and Los Angeles the relatively verdant Las Vegas seemed the most suitable location for a station on the Union Pacific Railroad. Opening in 1906, the station was to be the cornerstone of the city, with customers alighting to what was to become Fremont Street. The modern station was built in 1940, servicing rail passengers to and from Las Vegas. The Art Deco architectural treat was demolished in 1969 to make way for The Union Plaza Hotel and Casino at No.1 Main Street.

Las Vegas businessman Frank Scott is mainly forgotten. As an entrepreneur and banker, Scott’s vision was a thriving Downtown Las Vegas, anchored by a resort on the site of the railroad station. 

After years of negotiations, by the late 1960s, Scott had persuaded The Union Pacific Corporation to develop the station at the gateway to Fremont Street. With Upland Industries, a subsidiary of Union Pacific, funding $9.8m of the $10.5m construction for the initial 22 story, 504 room property. The Union Plaza Hotel and Casino soft opened on June 2, 1971, with the Grand Opening a month later.

It was an ambitious project for the area. A new train station was integrated in the resort (only closing in 1997 when train services ceased) and with a casino floor at 66,000 sqft, it was the largest in the world at that time. Scott wasn’t a casino operator and brought in a stellar group of experienced and aligned equity investors, selected to enable success. J.K. Houssels of The Tropicana, who had previously owned The El Cortez, (which celebrates its 80th anniversary this year) was in. As was Jackie Gaughan, who had bought the iconic hotel from Houssels. Nevada Senator Howard Cannon was an original investor, as were father and son team Sam and Bill Boyd, who took 12.5% of the equity ownership with responsibility to operate. Sam had been a successful General Manager of Fremont’s Mint Hotel and Bill was a lawyer with a growing reputation. Together, the Boyds had already bought and operated The Eldorado in nearby Henderson to great success. 

All parties were onboard for the exciting journey ahead.

On Track 

The Union Plaza opened at a formative time for Las Vegas. In 1971, Downtown casinos were still operated by many of the World War II veterans that had set up home in the Silver State, or the remnants of the Mob that had yet to be purged. A few miles away on The Strip, a new generation of resorts were redefining the discipline, with themed Caesars Palace dominating. In 1969, Kerkorian opened the entertainment heavy International to compete against the leading properties of the age, including the Desert Inn, Riviera, Sahara and Sands. The center of gravity was already moving south.

The Union Plaza was positioned to compete not just against The Strip, but Fremont rivals and the locals’ casinos, but was neither a fully integrated resort with the full range of amenities seen on The Strip, nor was it a traditional gaming saloon. With over 150 more rooms than any other property Downtown, continually filling the rooms of Union Plaza was to be a challenge.

As many of the key investors were active in the gaming industry, there was no shortage of contributions to the proposed strategy of the property.  

The influence of Jackie Gaughan was evident, with The Omaha bar as the main social hub, which was also the home of The Sun Spots, the live band that originated in Manilla and became fixtures at the property for decades. The hotel suites were named after the Derby (a nod to Gaughan’s passion for horse racing) and other mid-western regional references were dotted throughout the property like easter eggs. As the hotel was located on the site of the train station, there was a nod to that history as a theme, with uniforms evoking those worn by rail workers, but unlike a fully themed property like Caesars Palace, this was not pervasive. As an effective and highly experienced property President and part of largest shareholder group, Sam Boyd was able to implement many of the operating ideas that had been successful in Henderson, such as the revolutionary move to have women dealers – a move that was as controversial with other Executives as it was overdue. Boyd also brought entertainment to the property’s showroom in the shape of musical theatre, which despite initial skepticism, also proved successful in attracting locals for nights out.

In operating a Las Vegas casino, it is vital to identify your customer and give that customer what they want. At The Union Plaza, with so many competing shareholders, determining the target customer and delivering continuity of strategy was an ongoing point of contention. For some of the owners, The Union Plaza should be aimed at the established Downtown customer, for others, the customer should be locals or rail passengers from California and Utah, or even the Hawaiian customer that Boyd was familiar with from his time living there. 

The divergent opinions on strategy among the ownership group came to fore, despite the financial success of the young property. With a wide range of business interests in the city it was Sam and Bill Boyd that were first to amicably alight in 1973. They parlayed the profits locally, opening The California in 1975, followed by Sam’s Town in 1979. Today, with a market cap of over $7bn, spanning 27 casinos in 10 states, Boyd Gaming set the template for local and regional casinos in the USA.

After the Boyds’ departure, operations were assumed by innovative operator and investor Jackie Gaughan, already an established figure in Downtown Las Vegas, known for his hands-on approach and customer engagement. Gaughan had a clear vision of who his customer was and who the Union Plaza customer should be; Gaughan was the man for Middle America.

During his initial stewardship, the property took a pivot, taking the innovative and revolutionary step to open the first modern casino Sportsbook, a move that was shortly followed by Frank Rosenthal at The Stardust, and then in time, nearly every property in town.  Gaughan, in line with the collegiate spirit, and alongside many of his friends, backed a young Steve Wynn to acquire an ownership interest in the Golden Nugget, only yards from the front door of The Union Plaza. Wynn was to build a luxury tower in 1977 at The Nugget, driving high rollers from The Strip to Downtown. The within a couple of years, the Golden Nugget was to surpass The Union Plaza as the largest property in the locale. Avoiding the temptation to compete with the Nugget for high-end customers, in 1983 The Union Plaza added another tower and convention facilities to capture the emerging midweek convention business, bringing the total room count to over 1,000. 

Theoretically, Fremont Street is the ultimate competitive environment, with operators selling the same product, at the same time, at the same place, at the same price to the same people. With little room for real strategic differentiation, carnyesque tactics were adopted to drive business. 

Gaughan was well known for coupons and fun books, the Golden Gate’s 99c Shrimp cocktail drove business, Binion sought poker players, creating the World Series of Poker as one of many attempts to drive players to his property. In a time before Players’ Clubs and loyalty programs, the owners themselves were omnipresent, shaking hands and engaging with customers directly. 

Meeting the owner of a casino, whether Gaughan, Boyd, Binion or even Wynn, engendered an element of emotional loyalty and customer connection that was to last decades. Latterly, operators sought to differentiate customers, such as Boyd in The California with a focus on Hawaiian players, but for the majority of the properties, customer segmentation was a highly nuanced move.

In 1990, Gaughan acquired the holdings of The Union Plaza initiator Frank Scott, followed by Upland Industrial’s participation in 1993, becoming the majority shareholder and ending the relationship with Union Pacific. With the “Union” link terminated, and initially against his instinct, the property was renamed “Jackie Gaughan’s Plaza”. Ownership as a brand was not new to Downtown as a differentiator as Binion’s Horseshoe, Sam Boyd’s Fremont and many of Bob Stupak’s ventures would testify, with the aim of implementing the owner’s philosophy with that of the experience inside.  Customers would reflect on the friendliness and family feel of the property, plus the good value. It really was Jackie Gaughan’s Plaza.

Changing Direction

Surprisingly, gaming in Downtown Las Vegas remained unaffected by the various crises on The Strip during the 1980s, as the market for their gambling centric hospitality offering remained robust. 

Anecdotally, it was believed that much of the performance was due to the ongoing outsized market share of Wynn’s highly successful Golden Nugget. However, by the end of the decade, Wynn’s focus was on opening The Mirage, which prompted generational development on The Strip and the beginning of Fremont Street’s decline. 

In Chart 1, (all charts unadjusted for inflation) during the 1984-1995 period, Downtown Las Vegas underwent a dramatic shift in gaming revenue mix. Table games revenue peaked and declined to a neutral position and slot revenue increased, substantially by the decade’s end. As a proportion of total revenue, slots increased from 55% to over 70% of the term. It was never to drop below 70% again.

As an attempt to improve its fortunes, 1995 saw the opening of The Fremont Street Experience and the pedestrianization of Fremont Street.  Over the following decade, (Chart 2) there seemed to be no apparent benefits to the Fremont Street Experience canopy to casino revenues and was certainly not to the benefit of The Plaza, as it was located outside the perimeter of the canopy and across Main Street from the pedestrian precinct. Gaughan was to keep the property out of the Fremont Street Experience for the duration of his ownership.

The effects of Strip development and proliferation of regional gaming were to shock operators’ business models and indicated Downtown Las Vegas was particularly vulnerable to systemic movements in the expansion of gaming, losing business to local and regional casinos and to nearby Laughlin, which had a similar value offering on a larger scale. Table revenues seemed in structural decline as reliance on the predominantly older female slot customers increased to make up the balance. 

Despite the prosperous economic conditions, total gaming revenues peaked and declined towards the middle of the decade. At year end 2004, it was evident that the model that had been successful for decades was broken. Due to the high levels of vagrancy and perceived levels of crime, locals avoided the area. Bill Boyd, Michael Gaughan, (son of Jackie) and the Fertitta family built well regarded locals casinos in the Las Vegas suburbs to meet the growing population across the valley, and dominate that market to this day.

For many tourists, Downtown was not an attractive place to spend their valuable leisure time, thus leaving patrons as aging and less affluent, predominantly from the mid-west and Hawaii. These were the customers that had been targeted decades before, in the 1970s and 80s heyday.

In 2004, aged 84, Gaughan sold The Plaza, Gold Spike, Vegas Club and Western casinos, plus over 60 acres of land to Barrick Gaming and Tamares Real Estate for $82m. Tamares was to acquire Barrick’s interest in the portfolio the following year.

In his final deal, Gaughan traded the El Cortez to long-term associate Kenny Epstein in 2008, continuing to live in a suite at the property, regularly playing poker and mixing with hotel guests, until his passing in 2014.

All Change

London based Tamares seemed an unlikely owner for a portfolio of legacy assets in what seemed a moribund gaming market. Led by Finnish native, Chaim “Poju” Zabludowicz, the group had invested widely from telecoms to real estate but had no track record in Las Vegas and no experience in operating casinos.

Tamares was not interested in the casino business per se, but having witnessed and benefitted from urban regeneration in other cities, such as New York, Washington DC and London, Poju believed that Downtown Las Vegas was ripe for such a transformation. As part of Tamares’ London based real estate investment team, Jonathan Jossel had studied gaming and casinos as part of his college degree, something that none of the previous owners of the Plaza had done between them. Charged with implementing Tamares’ real estate strategy, the young executive relocated to Las Vegas to survey the possibilities. Poju’s investment was early, but others were soon to follow.

With an ambitious, if slightly controversial Mayor in Oscar Goodman at the helm, there was a desire to drive business and commerce Downtown. Shortly after Tamares’ investment, the Epsteins were active in investing and refurbishing the El Cortez and other assets on Fremont East, real estate group CIM acquired the shuttered Lady Luck in 2007 to become the Downtown Grand, Derek Stevens made an initial investment in The Golden Gate in 2008 (which was a precursor to acquiring Fitzgerald’s in 2011 to form The D, and Circa which opened in 2020) and latterly with the arrival of Tony Hsieh in 2012 and his Downtown Project, there was a concerted effort, and capital, to reinvent Downtown Las Vegas. 

From a vision perspective, Poju was ahead of the curve, but unlike leased real estate, casinos are complex operating businesses.

With an external casino operator engaged to manage The Plaza, Tamares’ focus was primarily on real estate, however as the Great Recession of 2007-2009 hit, Las Vegas was affected worse than any other city in the USA and both gaming revenues and visitation across the city went into freefall; between 2005 and 2010 gaming revenues fell 25% in Downtown Las Vegas. (Chart 3) 

The Plaza had to take radical steps.

With acquiescence from Tamares, at the age of 29, Jossel applied and was awarded an unrestricted gaming license, becoming the youngest unaffiliated person to do so in the history of the city.

In a move that was as opportunistic as was bold, The Plaza acquired furnishings from recently bankrupt Fontainebleau, a casualty of The Great Recession, and closed the property for a full renovation. Reopening in 2011, Jossel retained the name The Plaza, when others were promoting a rebrand.

“With the Great Recession in full force, we saw the renovation as an opportunity to make the Plaza ready for a new generation. We didn’t want to implode, rebuild or even rename the property, as others did, as we understood the importance of the brand and legacy. We invested in the rooms, the casino and all the amenities, but tried to retain the culture that our customers had experienced over decades.” – Jonathan Jossel, President of The Plaza

An astute student of Downtown operators, Jossel sought to modify the property for a new age, lifting from history and retaining the ethos that had been inculcated over decades Downtown. Where Binion focused on poker, Jossel saw bingo. Not sexy, but for the thousands of annual bingo players coming from across the USA to play the game, tournaments at The Plaza have become a pilgrimage. 

Back on Track

The stunning return of Downtown Las Vegas was far from inevitable. Between 2011 and 2019 gaming revenue Downtown increased by 39.3%, outpacing The Strip, which posted an 8.9% increase over the period.

At the time of the great recession, several commentators were ready to write off Downtown as moribund, but the turnaround provides lessons for all casino and resort operators across the USA. 

As mentioned, the exit of the old guard and new ownership provided an injection of capital, with almost all major properties undergoing some form of modernization. The City of Las Vegas supplemented this by implementing a gentrification program, complemented by opening and improving a significant range of non-casino related additions, such as The Mob Museum, Neon Museum, formation of the Fremont East Entertainment District and the various investments of The Downtown Project, driving younger patrons in particular. This reinforced Steve Wynn’s adage that amenity is the cause and revenue is the consequence.

The promotion of Downtown as a value driven, authentic experience chimed with the visitation trends; as Las Vegas became less a gaming center and more a tourist destination, a visit to Downtown was a tourist activity. The demographics began to skew younger; in 2011 the average age of the Las Vegas visitor was 49 but by 2018 this was 45.1. In 2011, 34% of Las Vegas tourists visited Downtown but by 2018, this was 46%. In real numbers, this equates to an increase of 6.1m to over 19.3m visitors. For context, in 2018, double the number of people visited Downtown Las Vegas than Barcelona.

Younger customers are less driven to slot devices that their parents are, instead tend to be more likely to play table games. This is evidenced in the near doubling of table revenues over the past decade, notwithstanding the 30% increase in slot play as well.

Final Destination

The cooperation that existed with past generations of owners is also present, to an extent. 

The Boyds and Gaughans did business on a handshake, which has left future generations to untangle issues like property rights and easements, usually amicably. The principle that guided this cooperation is that something that is good for one of the operators, is good for all.

However, the notable exemption is with the Slotzilla zipline. Opening in 2014, as part of the construction, a decision was made to build a concrete wall which would obstruct the view from Main Street down Fremont Street for the first time since 1906. The action was taken to apparently disadvantage The Plaza, as it was not part of the Fremont Street Experience. On a commercial level, it appears unnecessarily churlish and contrary to the spirit of community cooperation. Moreover, for those with an eye on Las Vegas history, it is cultural vandalism of the highest order, denying the continuity of a rare historic aspect to visitors and locals alike. For those that honor the legacy of Las Vegas, it is a shameful reminder of the small-mindedness that can arise on occasion.

Nonetheless, 50 years on, Frank Scott’s vision of an exciting Downtown Las Vegas is again in vogue.

The Plaza is now neighbor to the first new, ground up resort in Circa and within short order the “wrong side of the tracks” at Symphony Park will be connected to Main Street via a pedestrian park, opening up the property to increased footfall and local access to residential and commercial tenants. Fremont East, once a no-go area, has become an alternative hangout for locals and tourists, much of which was instigated by Jossel, as Tamares are a major real estate owner in that part of the street. Further south, The Arts District has new restaurants opening weekly, despite the Covid pandemic. 

Jossel has built on the foundations set by the early generation of owners. Like Boyd, he has not been afraid to experiment against the conventional wisdom, by partnering with the former Mayor Oscar Goodman in developing the award-winning restaurant, Oscar’s, now in its 10 year and like Goodman himself, had become an essential fixture Downtown.

Resembling Jackie Gaughan’s iteration of a family atmosphere, the property today meets the needs and expectations of the customers. They know that other places have newer facilities with greater amenities, but The Plaza is genuine and honest. Whereas Gaughan was there with a handshake, as is Jossel, a social media star, with a Podcast and thousands of Twitter followers – a 2021 barometer of customer engagement! In Jossel, The Plaza has a steward worthy of comparison with his august predecessors.

As The Plaza celebrates her golden anniversary, the iconic entrance glitters brighter than ever, marking the intersection between Main Street and Fremont Street. No longer towering over its rivals in height, as younger challengers have emerged, it stands poised with maturity and a renewed confidence, comfortable with its place in a highly competitive market – a market that it helped build not just once, but twice.

As appropriate to the property, martini glasses should be raised high to toast the efforts of all those involved in this remarkable story, past, present and future.

Oliver Lovat leads the Denstone Group, which offers strategic consultancy on customer-facing, asset-backed investments, including casinos. He is Visiting Faculty at City, University of London Business School.

This article first appeared in Global Gaming Business Magazine.