TWELVE
The Curse of Naked City
When Lyle Berman unveiled a life-size, 24-carat-gold-plated statue of Bob Stupak holding a pair of dice, surely it was meant as a testament to their friendship and as a symbol of Stupak’s importance to the Stratosphere project. After all, the Stratosphere was Stupak’s idea, even if the credit for completing it belonged to Berman. But with six weeks to go before the opening of the resort, the statue quickly came to symbolize not only the financial excess of the project, but also of the two men’s costly, gold-plated relationship. For his part, Stupak gave Berman a pair of solid gold dice.
For reporters, Stupak and Berman waxed philosophical about the importance of getting to know a fellow across a poker table, how relationships forged in high-stakes situations gave keen insight into the mettle of men. Privately, they had ceased making more than the most perfunctory attempts at civility. With state gaming regulators calling for Stupak to stay away from daily operations at the casino, the destiny of Stratosphere—all statues and niceties to the contrary—was in Berman’s hands.
Besides, weren’t statues usually reserved for dead legends?
Like the Pete Bauer character he had played in that decade-old “Crime Story” episode, Stupak would later lament that his ideas still worked, but that no one would give them a chance. Although he was being disingenuous when he staked a claim to creating Double Exposure blackjack, crapless craps, and other casino gimmicks, he had certainly promoted them as none before him. After coming so close to being perceived as a Vegas visionary, he instead had become a gold-plated afterthought. In a town that hates to dwell on its history, he had become a part of the past.
There was more to the game than recognition and respect. If he couldn’t have fame, Stupak was determined to at least have fortune. As his seven million shares of Stratosphere climbed in value, early in 1996 he began quietly selling off blocks of stock.
In a business that makes beggars out of prognosticators, the value of stock in companies that have recently gone public follows a traditional arc: a steady climb prior to opening a new property, a sharp drop in the first quarter, a leveling off, then another climb toward opening-day prices. In recent years, Rio, MGM Grand, and Palace Station stocks all had taken similar rides before becoming steadier investments. But those companies were marked by experienced, energetic management teams and vastly superior locations. Stratosphere’s operation was as yet unproven. And its most experienced officer, Bob Stupak, was on the outside looking in.
His scarred poker face did not betray his thoughts and feelings. He continued to press forward as a man out to win public opinion both as a philanthropist and an unabashed promoter of the project.
The Big Shot’s media debut February 10 held the interest of local reporters and helped generate national attention for the project. Journalists awed by the world’s highest thrill ride barely noticed that carpeting was not down in areas of the resort and that construction crews were still pouring hundreds of yards of cement in a round-the-clock attempt to complete the convention area and aquarium site in the back of the building.
Stupak, smoking like a fiend once more, stole the show atop the tower.
“Oh my God, I’m scared. Let’s start before I wimp out,” he said. “People have doubted me my whole life. But there’s nothing I ever started that I haven’t finished.
“When you’re a kid in school and you want to go to the bathroom, you hold up your hand higher than everyone else to call attention to yourself. And that’s what the Big Shot is all about. It calls attention to myself, to the joint.
“And to tell you the truth, it’s great to be here to ride it.”
If the local media were exceptionally kind to Stupak, a man they had beat like a snare drum for many years, the public also appeared to have finally warmed up to his profile and his project. By early March, more than 25,000 people had applied for 2,500 jobs at the Stratosphere. It looked not only like a winner, but a fun place to work as well.
Even Stupak’s old nemesis, Culinary Local 226, appeared to be making progress toward organizing the service workers. It wasn’t as if the Stratosphere would have escaped the notice of Culinary officials John Wilhelm and D. Taylor: their offices were little more than a block from the construction site.
On March 15, after numerous delays, the $550 million Stratosphere Tower finally set an opening date it could live with: April 30, 1996. Painters were still dancing on scaffolding hundreds of feet in the air to touch up the tower’s makeup. The back portion of the hotel would never be done in time. Ongoing construction on the latest room expansion, scheduled to give the resort nearly 2,500 rooms, would instead give it a half-done look on opening night. But the decision was made. With daily six-figure construction costs soaring and Grand’s 14 percent financial package hanging over the deal like a wrecking ball, delaying the opening further was not an option. If they weren’t careful, by the time they finished they would be bankrupt.
Stratosphere felt certain that its colorful World’s Fair theme would attract corporate sponsorships and millions of tourists. Just as the Eiffel Tower, Seattle Space Needle, and CN Tower had excited film and soft-drink manufacturers, so too did the megaresorts of Las Vegas. The MGM Grand Hotel & Theme Park signed an exclusive soft-drink deal with Coca-Cola in 1993, and the $70 million Fremont Street Experience downtown signed an exclusive contract with Coca-Cola in 1995.
A week before opening, Stratosphere announced its deal with Pepsi-Cola Company. Not only would Pepsi be the official drink of the tower, but the seventh floor of the pod would be renamed the Pepsi-Cola Observation Deck. Shuffle Master Gaming had previously acquired the rights to place the name of one of its popular casino games, Let It Ride, on the Stratosphere’s High Roller roller coaster.
Things appeared to be going well, and if Lyle Berman was nervous about the prospects of paying the interest on his $203 million high-interest debt, it didn’t show.
“What’s my biggest concern when we open? Crowd control,” he said to a Wall Street Journal reporter. “I think we’re going to be absolutely inundated.”
As Stratosphere prepared for its grand opening and VIP party, it was obvious to even casual observers that the project was still a work in progress. But it didn’t appear to be progressing all that quickly despite hundreds of workers and giant cranes operating around the clock. Although Stratosphere officials had feasted on weeks of mostly positive press, they had failed to send out a clear message that the ever-expanding hotel portion of the resort would not be completed in time for opening night.
In a business in which first impressions count far more than they should, Stratosphere had made a fundamental blunder that promised to reverberate for weeks to come. Finding a casino under construction or expansion was common in Las Vegas, but no operator wants to open before his joint is ready. In recent years, casino bosses had taken to conducting intensive training and intricate rehearsals for thousands of employees. Many operators understood the value of customer service as a way to make first impressions lasting ones, not only with visitors, but with the media as well.
For instance, it would have cost almost nothing to inform the media that Stratosphere’s elaborate fire-alarm system, because it featured highly sensitive technology, was almost certain to go off once or twice before the opening. For whatever reason, the explanation was not passed on.
On April 25, less than a week before the Stratosphere opened to the public, kitchen smoke in the 12-story pod did set off the fire alarms. Hundreds of construction workers and Stratosphere employees were evacuated. Not surprisingly, the media descended on the resort. Print reporters worked the bottom floor, while television cameramen shot live footage from helicopters hovering outside the pod. What would normally have been a news note became a big story.
“The bottom line is: there was no problem,” a Clark County Fire Department battalion chief said.
His words were lost amid pictures of smoke billowing from the tower.
Despite its high financing, systems glitches, and unfinished construction, Stratosphere had caught fire on Wall Street. Its Nasdaq symbol had become a hot investment. Fueled by Grand’s seemingly magic touch within the casino industry and the media’s unabashed confidence in the project, Stratosphere had climbed from $4 per share to more than $12 as workers vacuumed the carpets and polished the brass railings in preparation for the opening.
The company’s investment brokers gloated.
“Not bad for a company that never had a dollar in revenue,” securities analyst David Ehlers crowed. Ehlers had touted Stratosphere in his industry newsletter and magazine columns for months.
“Criticism of this project has evaporated,” Ehlers wrote in his Las Vegas Sun business column a few weeks earlier. “In its place, we sense a long-term shift in the place Bob Stupak will occupy in Las Vegas’ rich history. Stupak, simply, has given Las Vegas an unforgettable memorial to his vision.”
“There’s a lot of excitement and hype creating interest in the stock,” Stratosphere investment specialist Mike Moody said. Though he was concerned that the share price might mirror the arc of MGM Grand and the like, he remained high on the project. Other analysts were willing to project Stratosphere’s stock price at $17 by 1997.
Time magazine gushed over the project and its developers, insinuating that the city’s big players would have to go a long way to top the Stratosphere’s theme and statement. In an over-the-top town like Las Vegas, Stratosphere was the quintessential exclamation point.
There was little mention in the business media of the fact that Stratosphere’s bondholders were due to receive 10.8 percent of the cash flow in addition to their 14.25 percent on the mortgage notes—an effective interest rate of more than 20 percent.
Only Business Week refrained from embracing the resort.
“A few things about the Stratosphere are not so glamorous,” Ronald Grover wrote. “For starters, the tower is located on the seedier end of the Strip, miles away from the crowds. The effective interest rate on most of its $244 million is a sobering 20 percent. The cost of building Stratosphere ballooned from $67 million in 1994 to $550 million this year, as new attractions and features were added, including 2,500 hotel rooms, a $35 million aquarium, and a $6 million, 70-foot mechanical gorilla that will climb the exterior of the tower, carrying as many as 48 tourists along with him.
“… Now that Stratosphere is built, will the throngs materialize? To make its steep debt payments and cover its operating costs, Stratosphere has told investors that more than 14,000 people a day will pay an average of $5.35 to take the elevator ride to the tower’s top. It figures that 53 couples daily will pay an average of $350 to get married in one of its three sky-high wedding chapels. If it meets those expectations, the company says it will generate $244 million in revenues and $81 million in operating cash flow for its first full year of operation. Those numbers are better than Circus Circus … which is better located and has long been among Vegas’ most profitable casinos.
“Stratosphere’s promoters are certain that the casino’s sheer size and bizarreness will be its salvation. ‘You can see this tower from the moment you hit town, whether it’s from the airport or a car,’ notes Stratosphere President David R. Wirshing, a veteran casino manager. No doubt. But will tourists drop enough cash to make Vegas’ tallest gamble pay off?”
In Las Vegas, the city that loves a winner to the exclusion of all else, it was a question surprisingly few people were asking.
“I was chairman of Stratosphere and figured I could do things like I did when I ran Vegas World,” Stupak told a reporter 72 hours before the grand-opening fireworks began. “I commissioned a company to design a ride and agreed to pay them $2 million. When Lyle found out, he went ballistic. He let me know I couldn’t do things the old way anymore.”
Even if their relationship had grown tempestuous, no one appeared to notice. Nor was anyone likely to put the self-styled Polish Maverick in a media straightjacket any time soon.
“Every time the stock moves up twelve and a half cents, it’s a million dollars,” Stupak bragged. Still, he added, “I don’t have near the money I need. If I wanted to buy a Gulfstream IV, I couldn’t afford it; it costs $25 million and about $5 million a year to run. I’m not saying I want one, but if I did, I’d need more money.
“There’s a thousandaire, and I’ve done that. There’s a millionaire, and I’ve done that. The next step is billionaire, and I’ve set a personal deadline for the turn of the century. That’s my next step.”
The kinder, gentler Bob Stupak appeared to have disappeared in a blizzard of Stratosphere stock, but he continued to campaign for the affection of southern Nevadans. He took out a full-page advertisement in the April 28 edition of the Las Vegas Review-Journal. The headline was simple:
THANK YOU, LAS VEGAS
Tomorrow, Las Vegas will witness a miracle. The opening of the Stratosphere Tower represents nearly six years of hard work, constant dedication, and unyielding courage from everyone involved with this project. I am tremendously proud to provide Las Vegas with its most magnificent attraction ever.
Personally, I too am grateful, but for more than just the Stratosphere Tower. As you know, on March 31st last year, I was in a terrible accident. It looked like I was leaving Las Vegas for good. For five weeks I was in a coma, somewhere in another world. But I came back. Bit by bit, slowly but steadily, I came back. And I don’t intend to ever leave again.
I also learned something new. During those long, laborious months of recovery, I received an outpouring of love and prayers from many of you. I received thousands of letters from people who wanted to let me know that they were behind me, that they believed in me, and wanted me to be well again. And that, more than anything else—more than all the physical therapy, more than all the operations—helped me recover. I learned that the power of love is a healing power. It helped me believe in myself, and brought light to even the darkest moments. Thank you, all of you, for this comeback.
Tomorrow will be a great day … a day of miracles. Being here to share it with my family and friends is another miracle. And when you think about it, neither of these miracles would be possible if it weren’t for the love, support and dedication of so many people. The Stratosphere Tower is as much for me as it is for you. It’s also for my father, Chester Stupak, who isn’t around to see it. Those of you who know me know my father was the greatest influence in my life. Without him, none of this could have happened. And in my heart, I see the Stratosphere as a monument to him, as much as it is a monument to this great community.
Thank you, Las Vegas, for making it all come true. And more than anything else, thank you for believing in me.
With my warmest regards, I remain yours,
Bob Stupak
__________________
It was no time for acrimony, no time to reveal the fact that his relationship with Stratosphere’s executives was nonexistent. It was not the right time to explain to newspaper readers that control of the resort’s day-to-day operations—from the casino marketing strategy to the price of a cup of coffee—had been taken from him. Nor was it the right time to explain that, as part of his deal with Berman, Stupak agreed to depart the chairmanship within 90 days of Stratosphere’s grand opening. It was no time to reveal that he had sacrificed his own position in order to make his dream come true. Because the dream was still his.
Special guests had received small plaques requesting their presence at the VIP party and opening preview at the Stratosphere a day before the public was officially to be set loose on the place. Such soirees are common in Las Vegas, and casino operators occasionally try to outdo each other when it comes to the stars on the guest list, as well as the food and drink. Stratosphere’s party was marked by a mob of people. Where 2,500 were expected, more than 5,000 appeared with invitations to celebrate the opening of the tower and casino.
Partygoers who used the resort’s rear parking garage walked past a massive construction site gone silent for the first time in weeks. There were a few celebrities, politicians, and casino bosses in the crowd, but the interest was in the resort itself: Its theme drew from world’s fairs from Paris to Seattle. The 97,000-square-foot casino was dotted with comical characters who represented the carnival atmosphere, the vertical Circus Circus look of the place.
As he had with so many other resort openings, Nevada Governor Bob Miller made his way through the crush of humanity. He braved the long lines and took the elevator ride to the top, but refrained from experiencing the Big Shot.
“I’m sure there have not been so many people this high since the last Grateful Dead concert,” Miller joked. “… I can’t think of anyone who has defied the odds as often or more successfully than Bob Stupak.”
Noticeably absent were most of the city’s casino titans. Horseshoe Club President Jack Binion, who had supported Stupak as a friend and business confidant for many years, turned out, as did John Woodrum of the Klondike. But by the time the crowd had begun to feast on hundreds of pounds of fresh shrimp, few other casino executives had appeared.
Celebrities were few, but one stood out: Gary Busey. The award-winning actor, who like Stupak had survived a motorcycle crash and a severe head injury, paid his respects to the Polish Maverick and his big dream.
For his part, City Councilman Arnie Adamsen was giddy. He carried with him a lengthy fact sheet and the knowledge that he had been one of Stupak’s few supporters in the project. The rest of the City Council was present, as was Mayor Jan Jones. But Adamsen’s brag sheet was the big news of the night and revealed just how much the city’s elected leaders believed in Stupak’s project:
1. Additional tax revenues estimated in excess of $2.5 million annually.
2. Estimated job creation of over 2,000. Previous employees of Vegas World and residents of the Meadows Village area have been given hiring preferences.
3. New roads and infrastructure in the Meadows Village neighborhood.
4. A new city park, the Chester Stupak Memorial Park.
5. Title to the Stupak Community Center, plus $100,000 toward the construction of a daycare facility at the Center.
6. 15 percent of the incremental property tax revenues to be used for affordable housing within an area near the impacted neighborhood.
7. Generous relocation benefits for all displaced residents ($500-$2,500).
8. Anticipated spin-off development in the immediate area.
The list, though impressive on its face, recalled the many promises made by the casino industry and its political allies when Atlantic City legalized gambling. Gaming lobbyists carried similar lists when they attempted to convert citizens in other states to the tax-revenue, employment, and urban-renewal wonders that materialized when a casino came to town. Unlike the beleaguered Boardwalk, however, which suffered generations-old maladies and vast urban blight, Meadows Village was only one run-down neighborhood in an otherwise booming city.
So it was a moment for optimism, fireworks, and champagne. City leaders could almost feel the changes brought on by the amazing tower on the edge of the barrio.
And not one person had put so much as a nickel in a Stratosphere slot machine.
“Like a lot of people, I’ve had a love-hate relationship with Bob,” Adamsen said later. “But you had to be impressed with his project.”
But a funny thing was happening to the Stratosphere on its way to making Las Vegas history. During a massive, $60,000 fireworks display, accompanied by a radio simulcast featuring the music of Pink Floyd, smoke from the pyrotechnics again set off the sensitive alarms in the observation pod. Many Stratosphere workers were unsure whether to conduct a full-scale evacuation or merely direct skittish visitors to the two refuge floors designed to protect guests in emergencies. Some partiers were instructed to use the stairs—all 100 flights—to reach the ground. Still others were told to line up and wait for the elevators, which were understandably busy with the alarms echoing throughout the neighborhood.
The smoke-clearing system worked as designed, vacuuming the vapors from the building, but it was little consolation for the visitors who had been frightened and those who had taken the stairs. Television crews captured it all on videotape.
Before midnight, Stratosphere opened amid celebration and confusion.
Upon the tower’s opening, Las Vegas oral surgeon Daniel Orr II, who worked many hours to reconstruct Stupak’s shattered mouth and palate, wrote:
“In spite of the magnificent structure I can see so well from my front yard, I don’t consider the Stratosphere Tower your greatest accomplishment. I’ll never forget the first time we met. You weren’t conscious secondary to major central nervous system injury, your head and face were literally swollen to the size of a basketball, you had been totally transfused from hemorrhage of the pelvic area, etc., etc., etc. I remember thinking that Bob Stupak was quite an accomplished individual, but that he was certainly going to die. I avoided talking with Phyllis and Nicole because I didn’t want to dampen their spirits. A day or two later, I noticed that you’d begun to fight. How could a man in a coma fight? It’s like nothing I’ve ever seen before. You’d been compromised to death’s door, had tubes in literally every orifice and then some, had been tranquilized and paralyzed, placed on a ventilator, and physically soft restrained. A day or two after our first meeting, as you were being slowly weaned off total life support, you chose not to die, but to fight for life in any way you could.
“… There were so many things that could have killed you, Bob, but you beat them all as your strength continued to grow. In my life, I’ve seen just a handful of true miracles related to my profession, and you are one. I thank you for living, and I thank you for fighting back to the top of the heap here in our humble little village.”
__________________
More than 18,000 people per day ascended the tower during the first week, but in that short time one minor event came to symbolize the growing list of problems with Stratosphere: on May 9, a 15-pound piece of the High Roller roller coaster came loose and dropped 35 feet onto the observation deck. It was a metal cylinder from one of the motors used to propel the cars around the track. A quick check of the cars revealed that all but one of the cylinders had been properly calibrated. Fortunately, no one was riding the roller coaster at the time, and no one on the observation tower was standing near where the heavy part landed. Still, the story made front-page news and led some television newscasts.
To be sure, not all of the Stratosphere’s attractions fizzled. The talented Danny Gans, for one. Signing the handsome impressionist, comedian, and singer showed genuine insight. Gans was capable of mimicking scores of celebrity voices. He was so accomplished that he earned a role as Dean Martin in the television miniseries “Sinatra,” and he filled Stratosphere’s showroom nightly.
But locals were none too pleased with Stratosphere’s center-Strip menu prices at the resort’s cafes and restaurants. They also balked at taking the $7 ride up the elevator to the observation deck and paying another $5 each to experience the Big Shot and High Roller. The fact the CN Tower charged $9, the Eiffel Tower $10, and the Seattle Space Needle $8.50 for adults to ride to the top was lost on southern Nevadans who had long since grown accustomed to receiving special rates at “their” hotels.
By the end of the first month of operation, Stratosphere’s problems were impacting the bottom line. Its revenues after five weeks were $26.8 million: $19.1 million in hotel revenues and a dismal $7.1 million in the casino. Those numbers were especially telling considering that the tower was an unabashed success, attracting 445,000 visitors. At 80 percent, hotel occupancy was below the Las Vegas average of 93 percent and the traditional 100 percent for just-opened megaresorts, but Stratosphere’s $71 rack rate was unprecedented in the history of the location. (Indeed, Stupak had often lamented that he had to give away his rooms as part of his vacation program.) Employees recognized the trend: visitors were coming to the tower, all right, but they weren’t sticking around to feed the slots and take on the table games.
Stratosphere President Dave Wirshing was outwardly confident that the revenue figures would improve dramatically once the additional 1,000 rooms were completed, giving Stratosphere the Strip standard of 2,500, but at the moment, the casino numbers were downright perplexing—a full 10 percent below the industry average of 50 percent of total revenues.
Not even Bob Stupak could put an optimistic spin on that one.
“Everything is relatively OK,” he said without conviction.
Years after his experience at Vegas World, David Sklansky joined Stratosphere as a gambling consultant. In the wake of the miserable opening, Sklansky said, “The first thing I did was bring up some of the thoughts that Bob and I had talked about. But everybody miscalculated on how little people would transfer their interest in the tower to an interest in the casino.”
The Stratosphere was one tall flop in the making, and Grand’s lack of a highly developed marketing plan was beginning to take its toll. Locals were grousing about the Stratosphere, but it was nothing compared to the whipping nationally recognized financial analysts were giving it.
“What I think is happening is that the people who are attracted to a facility like that are not necessarily the people who are going to sit down and do some serious gambling,” Salomon Brothers analyst Scott Renner told the Wall Street Journal.
“The hype moved the stock more than it should have,” Dennis I. Forst of Hancock Institutional Equity said. “Frankly, it says more about the securities business than the gaming business.
“In a super-competitive Las Vegas gambling market, no one can simply throw open the doors and expect the masses to rush inside to get a look at another ocean of slot machines. The tower was a magnificent hook, but it alone could not guarantee success.”
“The biggest mistake a company can make is to open too soon. First impressions last a long time,” Jason Ader of Bear, Stearns & Company said. “Most of the problems are fixable. But these are the growing pains of a young company learning about the business.”
Philadelphia-based casino-industry analyst Marvin Roffman, who visited the Stratosphere not long after it opened, was impressed with Stupak’s big idea, but underwhelmed by the resort and its location.
“I must tell you I never thought the tower would get built,” Roffman said. “I was one of the skeptics. What do I think of the tower? I actually like the tower. I really think it’s a wonderful thing.
“Is it an attraction? It’s an attraction. But is it going to make money? That’s the big question.”
Long lines for the elevator to the top, upscale prices, and the obviously inferior location weren’t going to help matters.
“The problem is the numbers in the casino are absolutely terrible,” Roffman said. “And there seems to be a problem with Mr. Stupak. There’s going to be a transition coming up and until that happens we think there’s a problem here. I was told by one of the people (at the company) that until he’s phased out, they expect to have problems. I have the highest regard for Lyle Berman. He’s a very astute businessman and pays great attention to detail.”
After climbing to $14—with financial-industry predictions of a higher climb in the coming year—Stratosphere plummeted to $5.81 after one month of operation. Even considering the traditional stock shakeout that occurs after casinos open, Stratosphere was falling too fast to hold onto investor confidence. Its public relations machine simply could not overcome the resort’s real and perceived problems.
Perhaps to improve its eventual stake in the market or possibly to offset the crush of negative stories being printed after its opening, Stratosphere officials announced yet another hotel expansion that promised to increase the number of rooms at the resort to 4,000 by 1999. It gave investors something to look forward to, but the future would materialize without the King Kong ride, which was scrapped with little fanfare. Privately, other changes in the resort’s design were in the works as well.
From the SEC Schedule 13D filed by Bob Stupak July 1, 1996: “Mr Stupak is also considering resigning as Chairman and as a member of the Company’s Board of Directors. In his opinion, because Grand currently owns approximately 42 percent of the common stock and is the controlling stockholder, Mr. Stupak’s ability to influence the Company’s operations and strategic business decisions is extremely limited. Nevertheless, Mr. Stupak recognizes that until a merger or other form of business combination is consummated, the interests of the Company’s stockholders other than Grand may best be served by Mr. Stupak remaining as a member of the Board of Directors where he may continue to exercise some influence on decisions and actions … which he could not do if he disassociated himself from deliberations of the Board of Directors.”
All the while, Bob Stupak kept smiling and kept selling his stock as it plummeted back to its original asking price.
“This is going to be the biggest thing ever to hit Las Vegas,” Stupak said as the Stratosphere opened. “How can you miss knowing we’re around?”
But by then Stupak knew it was he who would not be around much longer.