Trump Hotels & Casino Resorts, Inc.

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Trump Hotels & Casino Resorts, Inc.

founded: 1995

Contact Information:

headquarters: 2500 boardwalk
atlantic city, nj 08401 phone: (609)441-6060 fax: (609)441-7926 url: http://www.trump.com/

OVERVIEW

Trump Hotels & Casino Resorts (THCR) is one of the largest casino entertainment companies in the United States. It owns and operates three major casino hotels in Atlantic City and a riverboat casino facility on Lake Michigan near Chicago. The company is the vehicle for the resort development activities of famed businessman Donald Trump. Originally a privately held firm, Trump Hotels & Casino Resorts went public in 1995.

COMPANY FINANCES

In its final three years as a private company, the Trump Organization's revenues dipped from $313 million in 1992 to $301 million in 1993, and to $295 million in 1994. The initial public offering (IPO) of Trump Hotels & Casino Resorts stock took place in June of 1995; net revenues sank to $196 million that year. In 1996 the company's revenues surged to $976 million, though THCR reported a net loss of $66 million. In 1997, the company's revenues hit $1.4 billion, and the net loss was pared to $42 million.

ANALYSTS' OPINIONS

A March 9, 1997 New York Times article offered a grim prognosis for the future of Trump Hotels & Casino Resorts. The firm, founded in 1995, had not done well in the stock market, the article said, and analysts were not betting on a turnaround in its performance. However, Trump proved otherwise almost a year after Financial World had cited Atlantic City, where much of Trump's gaming operations are located, as the gambling industry's hottest growth area.

By 1998 analysts were cautiously optimistic, perceiving Trump's stock to be undervalued. "Management appears more focused on balance sheet management and operating profitability, rather than emphasizing a strategy that targets market gains," wrote Credit Suisse.

HISTORY

Donald John Trump was born in 1946, the son of a wealthy New York builder and real estate broker. His parents' minister was the Rev. Norman Vincent Peale, author of the best-seller The Power of Positive Thinking, and later Trump would say that Peale's positive-thinking philosophy had a great impact on his attitude in business. Trump had a pivotal experience at age 18, when he attended the opening of the Verrazano Narrows Bridge in New York. At the ceremony he saw politicians taking credit for the building of the bridge they had previously opposed, while the 85-year-old engineer, Othmar Am-mann, who had taken on the difficult challenge of designing the beautiful structure, went unnoticed. "I realized then and there," Trump told The New York Times, "that if you let people treat you how they want, you'll be made a fool. . . . I don't want to be made anybody's sucker."

When Trump completed his education, he went into the real estate business, managing one of his father's properties, and quickly proved that he had learned his lesson at the bridge opening. In the early 1970s, he specialized in turning unprofitable properties into profitable ones, and growing the business. When his father's company, the Trump Organization, turned its attention from apartment buildings in the city's outer boroughs to investments in Manhattan, the 27 year-old reached an important turning point in his career. The Penn Central railroad had gone bankrupt, and Trump proposed the building of a major convention center on the site of its railyards. The city, financially troubled at that time, jumped at the plans, seeing a way to improve its economy, and though it did not hire Trump as the developer, it did pay him $500,000 for his idea.

From that point, Donald Trump's career accelerated. Over the next 15 years, he acquired a number of commercial and hotel/casino properties and built others, such as Trump Tower on Fifth Avenue in Manhattan. In a joint venture, Trump and Holiday Inn built the Trump Plaza Casino in Atlantic City, New Jersey. But by the late 1980s, the steam was starting to run out of the Trump engine. Trump failed to purchase Resorts International, a property he had fought to acquire, and his Taj Mahal was deeply in debt, soon to go bankrupt. The early 1990s found Donald Trump at a low point, struggling to overcome his debt problems and get back in the game once again. By 1995, when he established Trump Hotels & Casino Resorts as a public company, Trump seemed to be again moving in a positive direction.

STRATEGY

Donald Trump often has employed the strategy of working with government to build his business. The prospect of increased local sales taxes and employment often has prompted municipal governments to grant him real estate tax abatements and other incentives.

Growth, market share, and publicity seemed to be Trump's primary aims when he owned the hotels and casinos privately, which led him into heavy debt. A period of control by his creditors in the early 1990s, followed by the 1995 IPO, has resulted in a somewhat more conservative strategy in an effort to gain profitability.

INFLUENCES

Donald Trump's business ventures have always borne the stamp of his personality. He is perhaps the best known of a group of colorful big-money players whose complicated personal lives get as much attention in the tabloids as their business dealings do in the financial journals.

Trump is known as an expert negotiator and an adept at—as the title of his 1987 book called it—The Art of the Deal. But when it came to the nuts and bolts of management, he tended to recklessly overextend himself financially, running into huge debt in the 1980s as he pushed his empire forward.

By 1990, Trump's Taj Mahal Hotel in Atlantic City had gone bankrupt, and the entire business staggered under a heavy burden of debt. Trump owed money to 70 banks, which consolidated his debt and put him on a monthly allowance, a humiliating circumstance for a man who had always known wealth.

Within five years Trump was able to prove his resilience, and he worked his way back into the financial game. In 1991, his creditors reduced his personal debt to just over $150 million, and he began proving to them that he could pay off large sums of it. In 1995, they gave him a three-year extension on his payments. Although he managed to disengage himself from some unprofitable ventures, the question remained whether Donald Trump would be able to get his business back in the black by the end of the 1990s.

Trump's Atlantic City base at first lagged behind Las Vegas in casino industry growth. Operators found it more difficult to make a profit in New Jersey's tougher regulatory environment, and the congestion and crumbling infrastructure of Atlantic City made it more difficult to lure customers. But by the late 1990s, regulatory changes, such as the approval of 24-hour gambling and improvements in transportation facilities and general economic conditions, contributed to revenue growth, and the densely populated Eastern Seaboard helped push Atlantic City past its competitor as the leading generator of gambling revenue.

CURRENT TRENDS

The casino business is intensely and increasingly competitive, with ever-growing numbers of new gaming areas being opened up in regions seeking increased tax revenues and employment. The casinos vie to outdo each other in providing luxurious amenities to attract "high-rollers" such as the three Asian-based gamblers who dropped $10 million at the Taj Mahal casino in 1997. While such players wager $50,000 or more per play in table games, their patronage can drop dramatically in response to such conditions as the Asian economic crisis of 1998.

FAST FACTS: About Trump Hotels & Casino Resorts, Inc.

Ownership: Trump Hotels & Casino Resorts is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: DJT

Officers: Donald J. Trump, Chmn., 50, 1997 base salary $6,000,000; Nicholas L. Ribis, Pres., CEO, & CFO, 52, 1997 base salary $4,500,000; Robert M. Pickus, Exec. VP & Secretary, 42, 1997 base salary $465,000

Employees: 16,985

Principal Subsidiary Companies: Trump Hotels & Casino Resorts operates a number of subsidiaries including THCR Enterprises, Inc.; THCR Holding Corp.; THCR/LP Corp.; Trump Atlantic City Associates; Trump Atlantic City Corp.; Trump Casino Services, LLC; Trump Communications, LLC; Trump Indiana, Inc.; Trump Plaza Associates; Trump Taj Mahal Associates; Trump's Castle Associates, LP; Trump's Castle Funding, Inc.; and Trump Castle Hotel & Casino, Inc.

Chief Competitors: Trump Hotels & Casino Resorts competes with other hotel, casino, and real estate firms, including: Bally Entertainment; Circus Circus; Harrah's Entertainment; Helmsley; Hollywood Casino; Players; and Tishman Realty.

The volatility of the "high-roller" business has led Trump Hotels & Casino Resorts to shift its emphasis to attracting the more numerous high-end players who drive in to the resorts and wager $5 or more per play at slot machines and $25 or more per play in the table games. The Trump World's Fair, a section of the Plaza and open to the Boardwalk, lures walk-in traffic and caters to the thousands of middle-market guests bused in every day. Looking to the future, the Trump Marina targets younger guests with contemporary entertainment and promotions like the "Wild Side" marketing campaign.

PRODUCTS

Trump Hotels & Casino Resorts operates three luxurious casino hotels in Atlantic City. Trump Taj Mahal is billed as the most opulent casino hotel in Atlantic City. The Trump Plaza touts its prime Boardwalk location. The Trump Marina, acquired in 1996, aims to take advantage of its unique harbor position. The company also operates the Trump Indiana Riverboat Casino in Buffington Harbor, 30 minutes from Chicago.

CORPORATE CITIZENSHIP

In order to be licensed by the Casino Control Commission, companies must demonstrate financial stability and integrity. Additional burdens of citizenship have been laid upon Trump Hotels & Casino Resorts in agreements with state and local governments. The company pays into funds for the improvement of Atlantic City's transportation infrastructure and to foster economic development. A similar agreement in connection with the riverboat casino provides development grants in Gary, Indiana. Under Indiana laws, the riverboat casino must designate 10 percent of its goods and service contracts to minority- and female-owned businesses, and operate in compliance with federal and state clean water and wet-lands requirements. On an individual basis, Donald Trump has served as a co-chairman of the Vietnam Veterans Memorial Commission.

GLOBAL PRESENCE

Trump plans to seek additional opportunities both in the United States and abroad as new areas legalize gambling facilities. Meanwhile, the company aims to draw international guests to its Atlantic City casinos. "Player development representatives" look for potential patrons in Canada, Latin America, Europe, Asia, and the Middle East. The luxurious Taj Mahal has opened special themed rooms and added Asian games to appeal to these "high rollers."

EMPLOYMENT

"Our performance last year could not have been accomplished without the support and professionalism of our employees," Trump wrote in a 1997 letter to shareholders. The company has almost 17,000 employees, approximately 10,000 of whom are full-time. About half of these are covered by collective bargaining agreements. For union employees, Trump pays into multiple-employer pension plans in accordance with the union agreements. For its non-union employees, the company maintains a 401(k) retirement savings plan.

Atlantic City casino employees must be licensed or registered with the Casino Control Commission and meet standards relating to financial stability, good character, business ability, casino experience, and New Jersey residency. The strict requirements result in a good bargaining position for prospective employees who can meet them.