Downtown Las Vegas casino operator Terry Caudill has a player-friendly philosophy. By David McKee
If you want a square deal in Las Vegas, it’s hard to find a better option than Downtown’s Four Queens Hotel & Casino and Binion’s Gambling Hall. Both are the pride and joy of maverick operator Terry Caudill. A five-decade veteran of the gaming industry, Caudill is known for personifying the Downtown tradition of good food (Hugo’s Cellar is the stuff of legend), a good gamble — and no resort fees.
Caudill is cagey about his early years in Idaho, where he was raised, went to college and where his values were instilled. But he followed military service during the Vietnam War with graduate training at the University of California-Santa Barbara. Finding himself at loose ends, he and the first Mrs. Caudill set off for Reno, where he wrote keno and dealt craps at now-bygone Harrah’s Reno. After a six-year interval as a CPA, Caudill returned to the gaming business for a decade at Circus Circus Enterprises. He followed a decade-plus at Circus with a brief interregnum as a bar owner and real estate developer.
But he was bored. So his eye lit on a challenged Downtown casino, the Four Queens and the rest is history. Soon afterward, Binion’s fell upon evil days and had its gambling license pulled. A somewhat shambolic period of revolving-door management ensued before Caudill stepped in as buyer, shortly before the Great Recession. He’s weathered that challenge, as well as that of the Covid-19 shutdown, as he describes in this conversation.
Necessity is the mother of invention and Caudill has met challenges with innovation. Too much payroll? Bring in ticket-in, ticket-out slots. Not enough dealers? Introduce mini-craps, a half-sized version of the game that plays by the same rules but requires neither as much floor space nor as much staff.
Getting Caudill to talk about himself is not easy. Modest by nature, he’d rather extol his employees or his executives, most of whom have been with TLC Gaming for decades. Is it any coincidence that Caudill’s initials coincide with the popular acronym for ‘tender loving care’? We began our discussion in the middle, as it were, right after Caudill’s UCSB graduation.
Where were you when the casino bug bit?
In Reno, if you want to pay your rent you went to work in the casino industry. I had a math degree so they put me to work writing keno. That was in 1973, before we had computers. We had charts to guide us but you had to figure it all out in your head. I did that for just a few weeks.
By the early Eighties, Circus Circus was preparing to go public. I had worked on the audit, so I was familiar with them. When they went public in ’83, one of their requirements was the Securities & Exchange Commission and Nevada Gaming Commission both wanted them to have an internal audit department. Finally, they made me an offer I couldn’t refuse to create an internal audit department from scratch.
One year later they created another new position for me called ‘corporate vice president and chief accounting officer,’ and that’s what I did for the last 10 years in my career up there. I was the corporate comptroller over all the properties and did the annual report. Glenn Schaeffer was actually the CFO but his background was in English. So I worked hand-in-hand with him on most of the finance-and-accounting issues. I was there for 11 years and enjoyed the first 10.
How would you describe their operating philosophy?
Circus Circus was very low-cost, high profit margins. We had the highest profit margins in the industry. Bill Bennett basically would say, ‘I don’t want the people with the hundred-dollar bills. I want the guys with the twenties.’ He wanted to cater to middle America. Ironically, Mr. Bennett didn’t set out to attract families. He set out to attract the middle class. Well, the middle class happened to have families. They wanted to come to Las Vegas, enjoy the casino, and the midway and carnival games made it natural that we accommodated families. We didn’t necessarily seek them out.
When I say that I try to emulate Circus, I’m looking more at the customer. Middle market, not high rollers at all. Never been in that business. I like just normal people. They come with a certain, limited budget and they have enjoyment and some entertainment in return. They go home and tell their friends, ‘Oh, we had a great time.’
The other thing that fascinates me is the interaction between math with human psychology. I’ve seen people come here and lose a thousand dollars. They’re getting ready to leave and they’re on their way to the airport, they hit a $500 jackpot while they’re waiting for their ride. When they go home, invariably what they will say is, ‘I won $500.’ They don’t talk about the thousand that they lost. That’s basically our marketing.
How do you manage your company’s money?
I squeeze a buffalo nickel. When Covid hit I had to go to my banks unexpectedly. One of my bankers didn’t know me very well. He said, ‘Terry, have you thought about cutting your costs and saving money?’ I said, ‘Well, to tell you the truth I recycle paper clips and rubber bands, and I buy my clothes at Kohl’s when they’re on sale. I think I know how to save money. I don’t think we’re going to solve this problem by cutting expenses.’ My upbringing in Idaho, you learned to use everything to its fullest. So I’ve always been one to be very, very conscious of not wasting anything. That went hand-in-hand with Circus’ philosophy and has served me very well in the casino days.
When did you leave Circus Circus and what did you do next?
When we had new management at Circus Circus, our philosophies didn’t exactly jibe. That's when I left, at the end of ’94, and I had already acquired three bars, two Loose Cabooses and a No Red Ink. I decided I was going to pursue the bar business full-time. And I did. We started buying ‘em, renovating and we got up to 15 bars. In 1999, we built the Chicago Brewing Co. It’s a brew pub and we brew our own beer there. It has gaming. That’s the last bar I did. Once I bought the Four Queens, we didn’t buy or build any more bars. We’ve sold several off over the years. We’re down to six now from the original 15. All the time what I really wanted to do was get back in the casino business. I had been looking for a property that basically was a size that I could afford.
What interested you about the Four Queens and what was it like when you took over?
When we bought the Four Queens, it had been in a foreclosure. It had not had any capital expenditures for about 10 years, including maintenance. It was a mess. We had to go through every square foot of it and get everything up to speed.
We were the first casino to actually go 100 percent ticket-in, ticket-out. Everybody else thought we were crazy. We had used it in the bar business, so I knew it worked. It took a little bit of training. Our top-end restaurant, Hugo’s Cellar, was very popular. If you’re playing quarter slots and they call you for Hugo’s and you’ve got to push ‘cash out,’ you’ve got two or three buckets of quarters that you need help with. You’ve got to stand in line at the cage. Then you go to Hugo’s and they say, ‘Sorry. You didn’t respond so we’ve canceled your reservation.’ Under TITO, they call your name, you push a button, the ticket comes out, you go have your dinner, enjoy yourself and when you come out of dinner, you can take that same ticket, put it in any machine on the floor and continue gambling right where you left off.
We’re always looking at ways to save money, to do things cheaper through innovation and technology. The bottom line is, all the profits we made at the Four Queens the first three years went right back into the property. But we took a property that was making about $5 million EBITDA and went up to $12 million fairly quickly.
Soon afterward, Binion’s Gambling Hall ran into trouble and you eventually bought it. What intrigued you about Binion’s and what did you find when you bought it?
When Binion’s came on the market, we said, ‘We know the formula. We know what to do. We think we can make this more profitable.’ A lot of people think that Harrah’s owned Binion’s for a while. They never actually did. We bought it from a company called MTR Gaming. When Binion’s became available, Harrah’s put it in escrow. What Harrah’s actually wanted was the rights to the Horseshoe name, because they were working with Jack Binion in the Midwest, and they wanted the rights to the World Series of Poker. They only wanted the intellectual property. They didn’t want the actual, physical property. They sold the physical property to MTR out of West Virginia out of escrow.
So MTR ran it and one of the reasons people are kind of confused is Harrah’s agreed to manage it for MTR for a year or so. When Harrah’s stopped managing it and MTR took it over themselves, they did not know downtown Las Vegas. It is a different animal.
You have to walk the floors. You have to see what’s going on. You cannot manage these properties from 2,000 miles away. So MTR got themselves in trouble. In 2007, which is the best year this city had ever seen up to that point, they lost money and EBITDA. I looked at their numbers and said, ‘We can trim literally a million dollars a month off of these expenses.’ And we did.
We closed the sale in March of 2008. Well, that summer was when the recession hit. It started with four-dollar gas. Then Lehman Brothers failed. I was on a cruise in the eastern Mediterranean. I came home from a Thanksgiving cruise and said, ‘Guys, we got a problem. We’ve got to go into bunker mode here.’
What did you do?
When we bought Binion’s we got an extra $7 million from the bank to buy slot machines, new carpet, redo the public restrooms, basically the public floor. We got all that done. The rooms were in very, very bad shape. Our plan was that as soon as we started making money we would put it back into the rooms and renovate them floor-by-floor. In 2009, the rooms were bleeding money so badly we had to close them down, in hopes of reopening them soon. They had a coffee shop that was very famous for 99-cent steak dinners but it was losing $2.5 million a year, so we had to close the coffee shop. But the casino floor continued to do well and a lot of people were surprised we were able to keep the property open, not lose it or have to shut it down during the recession. It was a good five years before things started coming back.
But we managed to keep Binion’s open. It was basically through gaming and liquor sales. We put bars right out on the street, kind of like a Bourbon Street philosophy and they got us by. To this day, we still have not been able to reopen that 300-room tower that we had to close.
We have reopened the Apache Hotel, which are 80 rooms that existed at Binion’s. They were originally opened in 1932 and we were not able to do much of anything with them structurally. They were grandfathered in. If we did anything structurally we would have to redo them. They had wood floors, wood studs, that kind of thing. All we could do were cosmetic things. We thought, ‘Let’s play off of the history, decorate them and treat them like 1932 rooms.’ A lot of things that are hard to explain have occurred to people, including some of my employees. So we thought, ‘Let’s just go with that and open those 80 rooms for right now. Let’s play up the ‘haunted’ aspect. Those are doing very well.
Our original goal had so much potential. Binions had bought the old Mint. They never had integrated The Mint during their reign so there were a lot of things we wanted to do there. One of them was to add a 700-room tower on the back corner. Jack Binion had the same vision but never really got anywhere with it. I still have every intention in the world of building that tower and reopening the 300 existing rooms. Binion’s, as a property, should be able to easily — easily — support a thousand rooms. Right now we have to completely depend on walk-in business.
I’ve always had my eye on Binion’s. I just love the history. When we took over, people were like, ‘Are you going to change the name?’ No! We love the Binion name. We want to basically pay homage to Benny Binion. He had a colorful past, being a gunfighter and a gambler. But he also was a great innovator. He was one of the first to put carpeting in casinos. He was one of the first to offer free drinks while you’re gambling — I’d still like to shoot him for that one. He was one of the first to send limos to airport to pick up high rollers. He has the second electric elevator in the entire state. He knew how to attract people with his 99-cent steak dinners and stuff.
What’s your philosophy on “resort fees”?
I don’t believe in resort fees. They’re a misnomer and a ripoff. Resort fees were originally intended to have things like the spa that people may choose and, if they chose to use those things, it was an extra cost. That is not what’s going on today. The resort fee is nothing more than a disguised part of the fee. You don’t get a different set of amenities with or without the resort fee in 99 percent of the cases. A resort fee is dishonest. It’s just trying to hide part of your actual cost.
With no resort fee, I ask myself, ‘Why aren’t we the first ones to fill up? Why aren’t we 100 percent full every night. But I’m not going to change my philosophy. We’re not going to have a resort fee. It’s a ripoff. It’s deceptive. We’re not chasing the last dollar.
Another part of our strategy is we don’t set our policies and procedures on a day-by-day basis. I set operating strategies on a three-to-five-year horizon. I’m not saying saying we don’t have to tweak once in a while but we try not to have a knee-jerk reaction every time something changes out there in the world. We’re more likely to stay the course with what we believe is the right long-term approach and not make some short-term reaction. It helps us to be more stable, steadier, predictable.
What is the importance of your workforce?
What is the heart and soul of the success of our operation? It’s my employees. It starts with “ my employees. Our motto is ‘Friendliness and cleanliness.’ That starts with them. The employees take care of my customers, so if I take care of my employees and they do a good job, then they in turn take care of my customers. We rely very, very much on repeat business and that comes very much from our employees taking care of our customers. It’s my employees who make that happen.
Another principle that I believe is that value has always been a driving principle for us. I’ll listen to complaints about pricing because we always have to raise prices from time to time. But I don’t ever want to hear complaints about quality. You have to provide the quality. Then you decide if you can provide that in a cost-effective manner.
What’s the current gambling inventory at the two casinos like?
Right now, as of the end of April, the Four Queens had 837 slot machines and 27 table games. Binion’s has 653 slot machines and 31 table games. Those numbers go up and down a bit. But they’re both significantly down from when we first took over. We have found that if you have the right mix of machines you don’t need quite as many. That’s another way of saving a little bit of money because during what you consider a busy period, like a Saturday night, you’d be lucky if 30 percent of your machines are occupied. That’s good. That’s a lot. [laughs] But if people come in and think you’re going to see 90 percent of the machines occupied, no, you don’t see that. Both properties were over a thousand when I took ‘em on. But we found that we could eliminate some of those machines and it wouldn’t impact the drop at all.
Are you a satisfied CEO at this point or do you have any as-yet-unrealized dreams?
I’m never satisfied. There’s always something to do. There’s always something to learn. There’s always something new and exciting in this business.
Editor’s Note: This interview has been edited for length and clarity. Select portions previously appeared at LasVegasAdvisor.com.
