Tilman Fertitta talks to MAXIM about building his business empire, his commitment to customers and his most recent acquisition — a star-studded NBA team with stratospheric ambitions…
Tilman Fertitta is a relentlessly civic-minded businessman and TV celebrity who could probably win the mayor’s job in Houston if he wanted it. But why downgrade? Fertitta owns the new Post Oak tower going up and the luxury hotel and Rolls-Royce showroom that will reside there. He owns the city’s aquarium. He owns the Kemah Boardwalk amusement park south of Houston. He’s chairman of the University of Houston System Board of Regents. His company, Fertitta Entertainment, owns more than 500 restaurants both locally and nationally, including Landry’s, Mastro’s, Rainforest Café, Morton’s the Steakhouse, and Bubba Gump Shrimp Co. And in his spare time he stars in his own reality TV show on CNBC, Billion Dollar Buyer.
The show’s title became even more fitting when Fertitta wrote a check for a reported US$2.2 billion to buy the Houston Rockets of the NBA, the highest price ever paid for a basketball team. He bought the Rockets because he’s a lifelong fan. And because, well, he really wanted to own them. “I knew where the ballpark [was],” he says, referring to the other bidders. “And I knew this is what it was going to take to buy it. I was going to buy this basketball team and that’s it, period.”
Buying the Rockets was even more satisfying for Fertitta considering that he was outbid when the team came up for sale almost 25 years ago. He wasn’t going to come up short again, even if he had to spend an extra US$100 million or so to win. “You gotta remember the New York Yankees sold for US$10 million in [1973] and the Cowboys sold for US$140 million in the [late ’80s],” he explains. In other words, major sports franchises never go down in value. Still, he reasons, baseball is history — and the NFL is now iffy. Basketball is youthful and global. “If you try to look into the future 10 years, 20 years, 50 years,” he says, “I think the best franchise to own in America today is an NBA team.”
Fertitta brings to the Rockets his rare mix of determination, skill, and work ethic. His company — restaurants, hotels, casinos, amusement parks, an aquarium, and other assorted assets — will bring in almost US$4 billion in revenue. He’s also an active philanthropist: He recently donated US$1 million to a Hurricane Harvey relief fund, and in 2016 he gave US$20 million to the University of Houston to help transform its basketball arena. Fertitta was in some ways born for business. He grew up in the restaurant his father owned, learning from the ground up. Although he could do everything from peeling shrimp to loading in the fish order, he realised he had a head for numbers. By the time he was a teenager he knew he could run the family business. His ambition was bigger, though.
After dropping out of business school (he says it didn’t have much to teach him), he borrowed US$6,000 to invest in a seaside hotel in Galveston, Texas. A few years later, the savings and loan crisis hit Texas-based banks extra hard and leveled the real estate industry. Fertitta took the opportunity to buy out his partners. “When the world fell apart in Texas in the ’80s,” he says, “when I bought my partners out, I said, ‘I think I will start building restaurants — since you won’t be building any.’ ” It would become a pattern that served him well.
When the economy tanked, Fertitta would be on hand to soak up risk as if it were Gulf sunshine. “When things are really good, we forget they’re ever going to be bad again,” he says. “And when things are really bad, we forget they’re going to be good again.” And in 2008 and 2009, things were really bad. By then, Fertitta’s outfit, Landry’s Inc., was a public company, and the stock, like many others, had been hard hit. Increasingly, CEOs had been subject to close scrutiny under the Sarbanes-Oxley Act. Fertitta had had enough. “You’re the majority owner of the company still, even as a public company, and all the auditors wanted to do was look at my American Express bill,” he says. “It just didn’t make any sense, and I just said, ‘This is ridiculous.’ The stock had fallen. And I said, ‘I’m just gonna take it private and own it 100 percent again.” So Fertitta bought the company back to become sole owner, winning a lengthy battle.
In addition to building more Landry’s locations, Fertitta continued to acquire struggling restaurant companies: Joe’s Crab Shack in 1994; Crab House restaurants in 1996; Rainforest Café in 2000; Muer seafood restaurants, Chart House, and Saltgrass Steak House in 2002. There would be a lot more over the next decade, including high-end places such as Morton’s the Steakhouse, Vic & Anthony’s Steakhouse, Brenner’s Steakhouse, Grotto, and La Griglia. Last year, he bought New York City’s BR Guest restaurants.
Fertitta made a big leap in 2005, buying the Golden Nugget Casino in Las Vegas. The logic is simple: It’s the big-box theory. “If you’re gonna do 50 restaurants that do US$5 million each, that make a million each, you gotta go out and find 50 general managers, 50 locations. Takes a lot of corporate support. You go out and you do one casino, it’s one general manager that does it and it does US$250 million and it makes US$50 million.” And you can also install your US$5 million-a-year restaurants in them. He would expand Golden Nugget to five locations, including Atlantic City, where he bought out the struggling Trump Marina casino and turned the property into a thriving Golden Nugget.
There are no spare customers. This is the mantra by which Fertitta operates and the essence of his management style. You are either gaining customers or losing customers, so everything you do as a business has to be focused on them. As a manager, Fertitta continues to be obsessed with details. “You teach the culture — there’s no spare customers — and you pay attention to the details, and you set a strategy and a culture for your company. But you can’t micromanage when you’re this big. I’m not out over there picking out the fish,” he chuckles. The same will apply to the Rockets, who have one of the best operations in the NBA but also the misfortune of being in the same division as the league champion Golden State Warriors. Last season the Rockets added standout guard Chris Paul, who joined the NBA’s MVP James Harden in the Rockets’ backcourt. “It’s nice to have a James Harden and a Chris Paul,” says Fertitta. “This is a superstar league. If you don’t have a superstar, you’re not getting to the playoffs and you’re not getting past the first round of the playoffs.”
And if the Rockets should sign a third superstar to get them up to championship level, they know the guy holding the chequebook will add another zero if he has to. Because in 10 years fans might forget whatever it is that Fertitta spent to get the team, the players, and the arena. But they always remember the championships. ■
BY BILL SAPORITO
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