Many locals casinos choosing familiar chain brands over traditional coffee shops
We’ve said goodbye (or nearly so) to dressing up for a night out, all-night buffets, free lounge entertainment and 99 cent shrimp cocktails. The latest Las Vegas icon to fall victim to changing market conditions: traditional coffee shops in locals casinos.
The changes have been most prominent at properties owned by Station Casinos, which has or is in the process of replacing all of its coffee shops with Coco’s Bakery Restaurants, Denny’s or the Original Pancake House, and Boyd Gaming, which has replaced the coffee shops at the Gold Coast and Sam’s Town with TGI Friday’s and added Friday’s restaurants along with coffee shops at the Suncoast and The Orleans.
So far, reactions have been mixed.
"I think it’s horrible," said George Maloof.
So much for mincing words. But Maloof, owner of the Palms and Palms Place, said replacing coffee shops with chains endangers a great Las Vegas tradition that goes back to the ’40s and ’50s.
"There’s something special about a great coffee shop," Maloof said. "When you turn it into a chain, it no longer becomes special."
But Kevin Kelley, chief operating officer of Station Casinos, said the changes are a response to customer demand and are part of a larger trend.
"Our business model needs to evolve," Kelley said. "When we first started with Palace Station, Boulder Station, Texas Station and Sunset Station, there weren’t a lot of national brands in the valley. Fast-forward to today, you see brands all over."
Which, some would argue, has led to a loss of community personality, as independent restaurants fade in the shadow of the chains’ financial resources and marketing acumen.
More chains, it seems, leads to less diversity and fewer choices.
"Our numbers tell us different," Kelley said. "We saw our cafe numbers declining, even in the good times. You could go out and look on the street and you’d see parking lots jammed with cars at places like Applebee’s."
Although Station Casinos is in bankruptcy proceedings, company spokeswoman Lori Nelson said the move away from coffee shops is not a cost-cutting measure.
"Sometimes it saves us money, and other times it costs us money to get the operator we want," Nelson said.
Kelley said company representatives looked at the trends and talked to guests.
"When you get into the volume food business like cafes, we’ve found that the national brands have that brand recognition and awareness in our guests’ minds that’s more powerful than our offering," he said.
Representatives of Boyd Gaming apparently have discovered the same thing, at least at some of their properties. Company spokesman David Strow said the TGI Friday’s that opened a few years ago at The Orleans quickly became one of the most popular of the chain’s outlets nationwide. That popularity, he said, led to bringing Friday’s into the other properties, along with outlets of national fast-food chains.
"What we’re looking for there are just well-recognized brands that resonate with the customer and give people a reason to come visit our properties," Strow said.
Vince Eupierre, chief executive officer and chairman of Mancha Development Group, which operates the Denny’s restaurants in Station properties and is bringing in Coco’s, said the arrangement is mutually beneficial for his company and the casinos.
"In our case, it’s very good, because you have a lot of people in the casinos looking for breakfast, lunch and dinner," Eupierre said. At the same time, he added, "you provide the consumer with a brand name that they like."
But Tom Willer, vice president of marketing for Cannery Casino Resorts, isn’t buying it. The Cannery, Eastside Cannery and Rampart Casino all have their own, company-operated coffee shops. The main reason, he said: the ability to control all aspects of the operation.
"It is our desire to run a 24-hour cafe," Willer said. "It wouldn’t be the same objective from an outside operator who would find themselves subsidizing marginally profitable periods or periods of time when operating losses would be incurred."
Because the company has control over pricing and portion size, he said, they’re able to run specials "that wouldn’t stand the scrutiny of the institutional pricing formulas," plus holiday menus or menus specifically tailored to the community that might differ from a standardized corporate menu.
"What is sacrificed in the end is service, diversity, operating hours, quality control, flexibility over pricing and the ability to have a food program that goes hand in hand with a casino marketing program," Willer said — although Kelley and Strow maintain those issues can be addressed through the terms of the contracts.
Anthony Lucas, an associate professor of casino management at the University of Nevada, Las Vegas, said he thinks "goofy operating philosophies" are behind many decisions to bring in a national chain.
"I believe they’re probably doing it because they operate them at a loss," Lucas said of traditional casino coffee shops. "The reason why is they drop their prices because they believe they’re either attracting or retaining hungry gamblers. Then what happens empirically is you start to fail to see significant and positive correlations between gambling volumes and restaurant volumes."
The best solution, he said, is to "stop operating your restaurants at a loss." Instead, he said, they decide, " ‘We’ll just have an external restaurant company come in and run it at a profit.’ The danger in this is you lose control of the customer experience. If it’s under your roof, it’s you; if the restaurant operator isn’t up to your service standards, there’s problems. And that happens a lot. A lot of them rue the day they decided to bring in external restaurant operators."
Kelley and Strow emphasized that their companies aren’t planning to abandon in-house restaurants.
"There’s some things we do really well," Kelley said. "We’re very proud of our buffets, which have progressed in quality of food and service."
Steakhouses and Italian restaurants are other areas where Kelley thinks the company will maintain sole ownership.
"It’s easier to have those kinds of specialty restaurants that have a narrower following," Kelley said.
Strow said that in addition to continuing to operate its own restaurants, Boyd has partnered with some local companies such as the Fellini Group, which has Salvatore’s at the Suncoast, and Kevin Wu and Karrie Hung, who have Ping Pang Pong and The Noodle Exchange at the Gold Coast.
"It’s all about creating an experience that’s going to appeal to the largest range of customers," Strow said.
Maloof — the name of whose Palms coffee shop, 24/7 Cafe, says it all — remains unconvinced.
"I’ve had a lot of opportunities; I’ve had calls," he said. "They tell you you should lease it out and not worry about the operations of that.
"I’ve never been interested, because I’ve been in this city for a long time. It’s just part of the tradition of Las Vegas, going late at night to a coffee shop."
Contact reporter Heidi Knapp Rinella at hrinella@reviewjournal.com or 702-383-0474.
