Peter Morton is a born restaurateur. His father, Arnie, ran Playboy clubs, hotels and casinos before opening his own restaurant in Chicago, Arnie’s, and then a chain of high-end steakhouses. His grandfather was also in the restaurant business.
In 1971, at the age of 24, Morton and a partner opened what may have been the first themed restaurant, the Hard Rock Caf & #233;, in London. It spawned a global chain of Hard Rock Cafes, one of which was an eatery in the Beverly Center whose investors included Steven Spielberg.
In 1980, Morton opened an entirely different type of restaurant on Melrose Avenue in West Hollywood Morton’s. The upscale eatery quickly became a hangout for the nomadic Hollywood crowd, especially on Monday nights when the TV and movie industry turns the restaurant into a commissary.
In 1995, Morton teamed up with Harveys Casino Resorts to open the Hard Rock Hotel in Las Vegas. To concentrate on developing the Nevada casino, Morton in 1996 sold the rights to his Hard Rock Cafes to the Rank Organization PLC for $410 million. The following year, he bought out Harveys’ 40 percent stake in the Las Vegas Hard Rock casino and began a $120 million expansion of the property.
A believer in giving back to society for his success, Morton, who is one of Los Angeles’ wealthiest residents with an estimated net worth of $600 million, is an active donor to environmental and social issues. From his private office at the back of his Melrose restaurant, Morton aired his views on gambling, food and his road to riches.
Question: How would you describe the restaurant business in Los Angeles these days?
Answer: I think the restaurant business is great. It is one business that the New Economy or the Internet has not been able to infiltrate. People have to eat, and they can’t use the Internet to eat. Basically, the restaurant business in Los Angeles is intact and viable.
Q: You started in an unusual way in London with the Hard Rock, a hamburger joint. How did that happen?
A: I was in London and I wanted to introduce American food, and I had a love of rock ‘n’ roll. It was a combination of both. There was no American food, no Wendy’s or McDonald’s or Burger King. I thought it presented an opportunity.
Q: Was this a gut feeling or did you do an analysis of the market?
A: It was a totally gut feeling. I was there and I said, “Jesus, wouldn’t it be great to get an American milkshake and French fries?” I was just traveling through Europe as a college student, and it just happened. It was that simple.
Q: Did people think you were crazy to try to open an American hamburger joint in London?
A: Absolutely. They said the location was wrong, people aren’t interested in eating American food. There was a litany of negative comments. Within months it was a success and people were lining up, and still are.
Q: So why did you sell the Hard Rock chain to Rank International?
A: I was paid a handsome sum of money, $410 million. They wanted to buy the hotel/casino in Las Vegas, but I wasn’t interested (in selling). I felt I could sell the chain, which was a respectable asset. I felt the theme restaurant market had become saturated, and I had been doing the Hard Rock restaurant thing for over 20 years, and I was tired of doing it and wanted to focus my energies in other areas. Plus, I was being offered the sum of money that I felt was pretty close to the top of the market. I could also keep what I viewed was the prized asset, the hotel/casino in Las Vegas.
Q: Why did you never go public with the chain when so many others have?
A: The same reason I never took the hotel/casino public. I am not interested in a public company. You lose a certain amount of freedom, and you are subject to an intense amount of scrutiny. The only real reason to go public is to use public markets to finance your respective enterprises, and I have never had a problem in (obtaining financing). The closest I got was when we did a $120 million bond offer for the hotel.
Q: Why do you think the themed restaurant business tanked?
A: I don’t know any more than anyone else, but I felt it was oversaturated. I made a real effort to deliver great quality and great value for the money. That is something I prided myself on.
Q: But your competitors didn’t?
A: I believe that is true, yes.
Q: Do you take any solace in the fact that Planet Hollywood has fallen on hard times, after you sued the chain for allegedly ripping off your concept?
A: I filed a lawsuit against them for a multitude of reasons. I received a large sum of money to settle the matter and the numbers have to be kept confidential, and I felt vindicated. I felt further vindicated by what happened to them. I believe in karma, what goes around comes around. If you abuse people in situations, it makes it difficult to succeed in the long run.
Q: What attracted you to Las Vegas?
A: I had a Hard Rock there and a few acres came up for sale and I started assembling land. I thought it would be a good investment. I assembled 20 acres and then I decided to build a Hard Rock Hotel and Casino.
Q: Why did Moody’s Investor Service late last year lower its ratings on the Hard Rock Hotel Inc.’s subordinate notes?
A: We reported a record first-quarter cash flow of $10.1 million this year, and the (first quarter of the) previous year, the cash flow was a little more than $4 million. I brought in new management in August of 1999, and I had just finished a $120 million expansion. Needless to say there were some management issues, and the management team wasn’t performing as effectively as they should have, and I consequently brought in new management from the Tropicana hotel and it turned around. I expect cash flow this year of 25 percent of $150 million in revenue (or $37.5 million).
Q: Do you plan to expand further in Las Vegas?
A: I have the ability to expand. I haven’t decided. I am just digesting the first expansion and I am happy at the way it is going. I think I have to work this more before I consider expanding it further. I think one of the great attractions of the hotel is that it is not too large. It is not one of those monolithic glass boxes that have thousands of rooms and where you are literally one number out of 5,000, and the service is totally impersonal.
Q: Do you plan on branching out the Hard Rock-brand casino to other cities?
A: I considered it, and I have offers on the table for other gaming opportunities, both in joint ventures and franchises. I am moving slowly and carefully. I am not in a rush. I am enjoying my life, and the last thing I want is a problem.
Q: For a successful businessman in a flamboyant industry, why are you so low-keyed?
A: I found a business where I could make a good living. I wasn’t smart enough to be a doctor. I felt more comfortable being low-keyed. To me, what is important are my children and to focus your energies in trying to improve the community you live in. At the end of the day, money alone and seeing your name in the paper doesn’t make you happy.
Q: Why did you become involved in environmental issues?
A: Once I really began to start making money in the Hard Rock Cafes in the late 1970s, I felt I had to channel my energies to something else, and I went onto the board of the Natural Resources Defense Council, which, I believe, is the most effective, results-oriented, and respected environmental organizations in the country. And then I got involved in the Everglades Foundation. I consider the Everglades one of the great environmental wonders in our country. You have to fight with great energy to save it. If you don’t have an environment, you don’t have a planet, and if you don’t have a planet, there is no point in having anything else.
Q: What are your plans for investing in the Internet?
A: I invested in Akamai Technologies, which went public on Oct. 21, 1999. It speeds up the Internet. It is in the business of content and streaming on the air. I became an angel investor and the day it went public it hit $145 a share I think it was the fourth highest IPO last year. It was like hitting the lottery. I happened to make money (in the hotel and restaurant business) through discipline and hard work, but then to make millions of dollars one day by simply writing a small check was quite amazing.
Q: Do you plan on using the Internet to expand your Hard Rock franchise entertainment, nightclub acts, music?
A: We are doing that. We are doing shows out of our facility in Las Vegas. Primarily, it is concerts, but you can do anything on the (Hard Rock hotel/casino) Internet site: shopping, making hotel reservations, watching a show or going to our pool cam and looking at women with small bathing suits on. Our Internet site will be revenue-generating from an advertiser point of view.
Q: A lot of people still think the mob runs Las Vegas. Who really does?
A: It’s not true. It is run by the Nevada gaming commission and major public corporations. Every hotel basically in Las Vegas, except for my hotel/casino, is public.
Q: How did being born in Chicago prepare you to deal with the fluid world of Los Angeles?
A: I go back to Chicago to get my dose of reality.