Wednesday, April 18, 2007

Time for Trump Entertainment to tell 'The Donald': "You're Fired!"

The “Trump” name is a powerful one. Nearly every day I'm approached by one company or another wanting me to put that name on some product or service. They know that with the Trump stamp of approval comes immediate recognition and an expectation of quality and success. – Donald J.Trump (February 21, 2006)

In the view of the 10Q Detective, publicly available information suggests that Mr. Trump’s bombastic boastings belie the truth. Trump’s likeness and/or name on casino properties do not seem to be driving incremental gambling revenue or traffic through the front doors.

According to numbers published by the New Jersey Casino Control Commission, two of the three casinos that bear his name—Trump Plaza and Trump Marina—ranked dead last in terms of gambling revenues among the 11 casinos in Atlantic City (January – March 2007).

In addition, Trump Entertainment Resorts (TRMP-$17.10), the casino holding company that emerged from bankruptcy proceedings in 2005 and bears his name, reported operating losses from continuing operations of $23.2 million in fiscal 2006—hit by declines in slot machine foot traffic and the repayment of $130.1 million in interest expense (TRMP owes a whopping $1.4 billion in debt).

I have made the tough decisions, always with an eye toward the bottom line. Perhaps it's time America was run like a business. – Donald J. Trump

In actuality, Mr. Trump, who beneficially owns 28.8% of TRMP’s common stock, is concerned about one bottom line—his own.

Although Mr. Trump received no remuneration for serving as the Chairman of the Board during the fiscal year ended December 31, 2006, ‘the Donald’ did receive about $1.9 million in service payments. This remuneration is separate from a trademark license agreement for use of his name and likeness that Trump signed with TRMP when the Company emerged from bankruptcy.

The Company also entered into a development agreement with the Trump Organization, pursuant to which the Trump Organization has the right of first offer to serve as project manager, construction manager and/or general contractor with respect to construction and development projects (with an initial budget of at least $35.0 million) for casinos and casino hotels and related lodging at the Company's existing and future properties.

In September 2006, TRMP amended the development agreement (Agreement) with the Trump Organization, LLC to provide that so long as Trump Organization LLC does not exercise the rights originally granted under the agreement, it would be paid a monthly retainer to provide cost saving services for any Project and would receive a percentage of any cost savings realized through its efforts!

Trump Organization LLC did not exercise its rights under the Agreement with respect to the hotel tower currently under construction at the Trump Taj Mahal. Ergo, TRMP paid about $1.0 million, including minimum monthly fees of $350,000 and cost saving commissions of $701,000 to Trump Organization LLC during the year ended December 31, 2006.

In the course of business, TRMP engages in various transactions with other entities owned by Mr. Trump, including $79,000 for leasing certain office space in Trump Tower in Manhattan, $87,000 for the periodic use of Mr. Trump’s airplane and golf-courses to entertain high-end customers and $319,000 for costs provided to pilot and maintain Mr. Trump’s airplane. Additionally, in the ordinary course of business, TRMP purchased $563,000 of Trump labeled merchandise, including $470,000 for Trump Ice bottled water served to its customers, from third party vendors. (While TRMP does not directly pay royalties on such merchandise to Mr. Trump, he may be entitled to royalties from third party vendors.)

Donald Trump has described himself as the “hottest brand on the planet.” In an interview with BusinessWeek last year, Mr. Trump bragged that he made $240 million just from lending his name to 42 buildings that are currently under construction around the world.

Granted, whether he puts his name on bottled water, vodka, business suits, or even luggage, it sells—initially. What the Donald will never admit, however, is that his celebrity brand name lacks staying power.

After the success of Donald Trump's television series The Apprentice, in 2004, Milton Bradley / Hasbro reissued Trump: The Game back to stores. The game was DOA.

In 2005, Donald Trump launched the Trump's blog, which is subtitled "ideas and opinions from Donald Trump and the TrumpU Facility," which is connected to Trump University, an online education Web site begun in May 2005. The recent Alexa three-month average rank for his blog/university website was 25,020—lower than his competitor, Mark Cuban ( #19,104), but higher than his nemesis, Rosie O’Donnell ( #40,842).

Green: /blue: Trump /red:

In January 2006, Trump launched GoTrump, an online travel website, dedicated to “the art of the travel deal.” The site features some Trump properties as well as other hotels and travel deals worldwide. Its latest three-month average traffic rank: 222,071 – as compared to #61 and #80 for and Orbitz, respectively (Alexa ranking).

And then there is The Apprentice: Season 6. Contrary to Trump’s repeated boasting that it is “the number one show on tv,” the rankings for national prime-time network television (March 26-April 1) as compiled by Nielsen Media Research place his show dead last in its time slot, with a 57 ranking and only 6.0 million viewers. (In fact, The Apprentice, shown on Sundays at 10:00 PM on NBC, lost 42.5% of the audience from its lead-in, the popular Deal or No Deal, ranking #26.)

When I build something for somebody, I always add $50 million or $60 million onto the price. My guys come in; they say it's going to cost $75 million. I say it's going to cost $125 million, and I build it for $100 million. Basically, I did a lousy job. But they think I did a great job. – Donald Trump

The crux of this exercise is to demonstrate that real estate mogul Donald cares about Donald—not the shareholders of the casino holding company bearing his name.

I mean, there's no arguing. There is no anything. There is no beating around the bush. "You're fired" is a very strong term. - Donald Trump

It’s time the Board pointed their fingers at Mr. Trump and said, “you are fired!”

Editor David J. Phillips does not hold a financial interest in any of the companies mentioned in this posting. The 10Q Detective has a Full Disclosure Policy.

1 comment:

Anonymous said...

This is not a comment on Trump. I wanted to let you know that "intelligence" is spelt wrong in the list of intellectual briefings under Grammar Girl. Superb blog, by the way.