Reorganizing Tropicana Recasting Brand as Well

LAS VEGAS-Tropicana Entertainment LLC is tacking a brand repositioning onto its business restructuring. Currently reorganizing under Chapter 11 of the US Bankruptcy Code, the owner of the Tropicana Las Vegas and 10 other gaming properties has retained branding expert Hornall Anderson of Seattle to “elevate its service and value standards” by helping the company “define and deliver a customer experience that appeals to cost sensitive, value conscious customers.”

Tropicana Las Vegas is best known for its prime strip location, its expansive pool area, which includes one of the only indoor pools in Vegas, and its relative value, however; it is also known for shabby rooms with old, broken appliances and overzealous timeshare salespeople, according to Internet postings. The property has also been known for its topless review “Les Folies Bergere,” which was recently stopped after 40 years.

The company’s chief marketing officer Riad Shalaby says the initial phases of the project will focus on winning back customers. The stated plan is “to put time and money into education and training, our facilities, and our e-commerce channel,” and to develop “a more attractive set of entertainment, gaming and retail options for our customers.”

“We’ve had a unique opportunity to analyze the gaming, hospitality and entertainment markets and it is clear that as people begin digging their way out of the recession, customer service and value are going to be increasingly important in our category,” he says. “So, our brand revitalization effort will concentrate on delivering value-centered experiences that distinguish our properties. We’ll listen to what our constituents tell us and create the kind of entertainment experiences that they value.”

Hornall Anderson has worked with several large brands including Madison Square Garden, The Space Needle, Starbucks, Jamba Juice, Nordstrom, Holland America, and T-Mobile. Tropicana says it chose the company because it is known for “helping companies invent category defining approaches to consumer business by integrating design and experience as a way of sparking brand preference and customer retention.”

Last month, Tropicana Entertainment LLC filed its plan of reorganization with the federal bankruptcy court in Delaware. The plan calls for a substantial portion of the company’s $2.74 billion of long-term debt to be converted to common stock, thereby substantially deleveraging the company’s balance sheet and, in theory, leaving it with a serviceable amount of debt and positive cash flow.

Specifically, the plan would split the company into two entities. The OpCo would hold 10 of the company’s 11 resorts while LandCo would be comprised solely of the Tropicana Las Vegas. The secured component of OpCo’s $2.3 billion indebtedness would be converted to common stock and the unsecured component canceled, while all $442 million of LandCo’s secured debt would be converted to common stock. In addition, neither former owner William Yung nor any of his affiliates will own any equity in the reorganized Tropicana. Creditors reportedly blame Young for the company’s decline.

Beyond that, Tropicana says its five-year plan calls for the company to grow its revenue base, maintain its current level of operating expenses and improve net income. During that period the company expects to make $275 million of capital investments to refurbish and revamp its casinos and resorts.

Tropicana Entertainment filed for Chapter 11 bankruptcy in May 2008 after it defaulted on nearly $2.7 billion in bonds. The default was prompted by the New Jersey Casino Control Commission’s vote Dec. 12, 2007, not to renew the license for Tropicana’s Atlantic City property, its biggest asset. In August 2008, Tropicana president and CEO Scott Butera was named to the four-man team appointed by the courts to guide the company through bankruptcy. In September, negotiations began with the Cordish Co. for the sale of the Tropicana Atlantic City for $700 million but the deal has since stalled.