The Seminole Tribe of Florida, which bought Hard Rock International last week for $965 million, is keen on expanding the lodging and gaming potential in the Hard Rock name, which is now found mainly on restaurants. Started in London 35 years ago, Hard Rock Caf has become a ubiquitous global brand, recognized in many of the 41 countries where it operates. But the concept is based on a musical style born in the 1950s that has waned somewhat in its appeal to younger generations.
The Seminoles hope to leverage the Hard Rock name by keeping the 124 cafes going, while expanding the hotel end of the business. The ambitious deal made some credit analysts concerned that it might strain the tribe's ability to repay bonds sold to fund construction of its casinos. Last week, Fitch Ratings downgraded the bonds one notch to BBB.
A better-known service, Standard Poor's, meanwhile, affirmed its BBB-rating, saying the tribe has "adequate flexibility to accomplish the transaction." Hard Rock has hotels in Chicago and Orlando and casino-hotels in Hollywood, Tampa and Biloxi, Miss. A casino-hotel with the Hard Rock name in Las Vegas is owned by Morgans Hotel Group, parent to the Delano Hotel in Miami Beach.
James Allen, CEO of Seminole Gaming, said the tribe would like to open 25 to 50 hotels under the Hard Rock name nationwide over the next decade. The two Seminole properties, in Orlando and Tampa, accounted for 25 percent to 30 percent of the $68.3 million in operating profit reported by Hard Rock International in 2005.
The tribe bought Hard Rock from a British company, Rank Group PLC, which said, in divesting the business, that future growth at Hard Rock "requires significant capital investment." Efforts to reach Rank Group spokesman Nick Fox for elaboration were unsuccessful. Indian gaming revenue in Florida grew 36 percent last year to $1.
3 billion, according to the Indian Gaming Industry Report, produced by Alan Meister, of the Analysis Group. Gary Bitner, a Seminole spokesman, said the tribe "gives Hard Rock the muscle and capital to really grow." Scott Berman, a lodging analyst with PricewaterhouseCoopers, in Miami, said that success by Hard Rock in its limited foray into the hotel business has forced some of the industry's traditional players to take heed.
"I think Hard Rock has set the bar," Berman said, when it comes to affordable hotels aimed at a younger demographic. "I can certainly understand the Seminoles' interest in expanding the hospitality side.
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