Sitting on the terrace of the Oak Room, the 25th-floor members-only sanctuary in Houston's luxurious Post Oak Hotel, Tilman Fertitta is making his introductions when he spots an errant piece of potato chip on the floor. He instinctively scoops it up and discards it--though he does, in fact, own the joint, so there are plenty of wait staff at his disposal to do this sort of tidying up. But it's second nature to a billionaire who learned the restaurant trade from the ground floor and can't stifle his inner busboy.

Fertitta has stepped outside on this warm sponge of a Houston evening to escape the typically frigid air conditioning within--is every thermostat in this town set to 60 degrees in the summer?--that's overmatching his standard dark T-shirt and jacket. But noise from the traffic on the I-610 freeway below is incessant, so he rises and prowls the terrace as if to assess any possibility of ending this acoustic outrage. "There must be something we can do," he says.

Maybe he'll have the highway moved.

Over the past four decades, Fertitta has built Fertitta Entertainment, a restaurant, gaming, hospitality, amusement, and sports conglomerate--and become a business celebrity, with his own TV show, Billion Dollar Buyer--by demonstrating an ability to pay attention to little things and pull off big deals in whatever proportion is necessary.

He became an entrepreneur at age 20. About 10 years later, after buying control of a small Houston-area restaurant company named Landry's in late 1986, he embarked on a classic roll-up strategy, giving him 522 restaurants today under some 60 brands, including Mastro's, Willie G's, Bubba Gump Shrimp Co., Chart House, Saltgrass Steak House, Bill's Bar & Burger, Morton's, and, most recently, Del Frisco's. Fertitta and his family also own four aquariums and a Hilton, a Holiday Inn, and a Westin, among other hotels, plus a Bentley and Rolls-Royce dealership. There's the Pleasure Pier in Galveston and another one in Kemah, Texas. Oh, he has casinos, too. And an NBA basketball team. This year, those assorted businesses will generate around $4.6 billion in revenue and throw off $800 million in ebita.

"I'd like to say I'm the smartest guy in the room, but I'm not," he tells Inc., which may or may not be false modesty. You can't go to any of the company's websites without seeing his permanently grizzled mug gazing from the cover of his new book, Shut Up and Listen, which pretty much makes the case that of course he's smarter than you. "But I do more things better than most people," he concedes.

He's got a point there. "Do more better" could be his mantra. It's essentially the difference between being an investor and being an operator. Over time, Fertitta taught himself to be a master executive and applied those skills to an ever-expanding number of business lines. "People called him a restaurateur," says Rick Liem, his longtime CFO. "But he's really an entrepreneur, and a really, really good businessman. I don't care what the business is. He will figure it out."

One of the things he figured out was the gaming industry. In 2005, as CEO of Landry's Restaurants Corp., then a public company, he spent nearly $320 million to buy the Golden Nugget casinos on Fremont Street in downtown Las Vegas and in Laughlin, Nevada. He had no experience in the casino business, and the price was a steep multiple. When he first brought the idea to his M&A guru, Dave Jacquin, founder of North Point Advisors, the advice was not ambiguous. "I told him, 'This is crazy,' " says Jacquin.

But I have a plan, Fertitta responded. And the plan was: Tilman Fertitta. "He makes the bet on himself," says Jacquin, "and then he makes those bets pay off."

The bet was to spend $300 million to renovate the Fremont Street Golden Nugget and build a new tower, despite some classically bad timing. When the financial crisis struck in 2008, the ferocious downturn that followed impaled Vegas. The industry's biggest company, Caesars Entertainment Operating Co., would eventually go under, weighed down by more than $20 billion in debt. Landry's, too, had debt maturing in 2008--and lenders were evaporating.

But Fertitta proved to be one of the few in the industry who performed during the tough times. "Throughout the crisis, he did a remarkable job operating his company," says Rich Handler, CEO of Jefferies Financial Group, the investment bank that backed him in refinancing the company's debt. Fertitta would go on to buy three more casino properties, including the bankrupt Trump Marina Hotel and Casino in Atlantic City, all of which would be rebranded as Golden Nuggets. The casino division will produce $300 million in operating profits this year on revenue of $1.1 billion.

Two years ago, Fertitta made another highlight-reel acquisition. When his hometown NBA Houston Rockets became available, he directed Landry's to write him a dividend check for $1.7 billion so he could fulfill a lifelong dream and buy the team. He'd been a season-ticket holder for 40 years and at one point a minority owner. The price tag: $2.2 billion. To clinch the deal, he made a down payment of $100 million to then-Rockets owner Leslie Alexander. "I told him, 'If I can't close, the money is yours,' " Fertitta says.

He closed in 50 days, an NBA record for a franchise transfer. The price was an NBA record too. Told that he might have overspent by a couple hundred million, Fertitta's response was: "What's $200 million in 10 or 20 years?" He meant that the value of a modern NBA franchise goes in one direction--up. (The Brooklyn Nets just changed hands for $2.35 billion.)

Bold moves such as buying the Golden Nugget and then the Rockets may give the impression that Fertitta, 62, is your swashbuckling, bet-the-ranch Texas wildcatter. He certainly has the toys: a pair of Gulfstream GVs, two helicopters, and a 164-foot yacht called Boardwalk. (He's ordered a bigger one, too.) He built the Post Oak Hotel not because Houston needed a five-star hotel, but because Tilman Fertitta needed one. He spent $400 million to build it. He paid cash.

But the flash can be deceiving. Last October, he offered to buy the recapitalized Caesars, an audacious proposal given that his Golden Nugget casino hotels are still jacks compared with Caesars' kings. When Eldorado Resorts offered $17.3 billion for the company, a deal he found too rich, Fertitta quickly folded. "I would have been gambling my whole company, and I have a pretty good program as it is," he tells Inc. "When I was smaller, I took huge risks, but now that I've made it, I can't do that."

Following the Rockets acquisition, the company started grinding out its $4 billion in debt like a homeowner dutifully paying down a 30-year FHA mortgage, only in this case to the tune of $200 million a year. Fertitta's goal is to make sure "the paddle doesn't hit my ass"--the unforeseen risk that can strike any entrepreneur. Avoiding the paddle, and taking advantage of companies that don't, has made the increasingly conservative Fertitta increasingly wealthy.

With the restaurant industry saturated and economic slowdown in the air, Fertitta is experimenting with new ways to finance deals. "We don't have the flexibility to do some of the things my dad relied on in the past," says Fertitta's son and aide-de-camp, Patrick, 25. "So it's just being a little bit more creative." For instance, Fertitta and Jefferies filed an IPO for a special purpose acquisition company, or SPAC, which is a vehicle that can be used for anything--like, say, merging with another restaurant company.

In other words, if the economy goes south, Fertitta wants to be ready. "You gotta remember," he says, "I'm worth $5 billion today because I'm an opportunist."

Fertitta believes he was put on earth to be an entrepreneur. As a kid, he says, "I never watched cartoons. I carried a briefcase." His father, Vic, owned a restaurant called Pier 23 on the water on Galveston Island, a beachfront near Houston. Fertitta began working there in his teens and gradually mastered each piece of the operation, from the kitchen to the front of the house, until he could essentially run the place without adult supervision. He was, he realized, particularly adept at numbers.

"People called him a restaurateur, but he's really an entrepreneur. I don't care what the business is. He will figure it out."

A restless student, Fertitta bounced from Texas Tech to the University of Houston, making his first investments along the way. He dropped out because of financial considerations: "I was making too much money," he says. (No hard feelings: He's now chairman of UH's board of regents.) In 1978, he began dabbling in retailing with a women's apparel store, and then hawked Shaklee's vitamins and health supplements at franchise stores that he opened around Houston. The Shaklee experience was valuable, he says, because it taught him how to make presentations in front of large groups and prepare sales decks.

He proved to be an early adopter. When video arcade games exploded in the early 1980s, he became a distributor of Pac-Man and other machines, splitting the take with local hotel, bar, and store owners. Decades later, he would be out front on online betting in his Atlantic City casino and quickly built a category leader. He also formed a construction company and built homes and small shopping centers as the Texas real estate market boomed, financed by easy money from local savings and loan companies.

He was $2 million in debt when the commercial real estate market toppled, begetting the savings and loan crisis of the mid-1980s. Though later that credit crunch would seem like small change compared with the Great Recession, every S&L in Texas failed. There was no lending, and no hope. But with the help of an attorney who worked for his cousin's law firm, Fertitta renegotiated his debt on favorable terms. He then used everything from equipment leases to credit cards to get back in the game. "You could not borrow money in Texas for 10 years," he says of the banking meltdown. The helpful lawyer, Steve Scheinthal, was so impressed by what he saw that in 1992 he quit the cousin's law firm to work for Fertitta--and has never left. Why? "Because he was dynamic, and he was brash, and he was a visionary," says Scheinthal, who is now the company's executive vice president. "He had ideas, and they all seemed to make sense."

One good idea: They could compete with the dominant seafood restaurant brand, Red Lobster. After buying control of Landry's and its sibling, Willie G's, in 1986 from the Landry brothers and their partners, Fertitta set to building. There were some dud Houston locations, but eventually Landry's--upscale but accessible--began to catch on.

What he lacked was a currency to fund growth. Red Lobster and the fast-growing Outback Steakhouse each had access to equity shares. So in 1994, Landry's went public. "I was doing $40 million [annually] and making $4 million," Fertitta says. "You go public as a hot concept, and you wake up and you're worth $100 million."

A lot of entrepreneurs can't adjust to public ownership or cope with the hyenas in Lower Manhattan. Fertitta proved he could play Wall Street hardball in a two-year quest that took the company private again in 2010 for $1.4 billion, as he fended off activist investors who accused him of lowballing the price. "He is one of those unique operators who understand capital markets as much as Wall Street does," says Jefferies's Handler.

That understanding has shaped the restaurant segment. In the aftermath of the recession, Fertitta played the great white shark in a sea of wounded seals, devouring chains ranging from tourist trap Bubba Gump to high-end steakhouses like Mastro's. The company's recipe: Buy restaurants with strong concepts and great locations but subpar execution and swiftly bring them up to Landry's standards. That means, if necessary, a redesign, as with Morton's, and no skimping on maintenance, which has always been one of Fertitta's bugbears. "You've got to spend maintenance capex dollars," he says. "That's the best advice I can give anybody who operates a big company."

The most recent pickup of a flailing competitor: the Del Frisco's steakhouse chain, which Landry's agreed to buy in late September for a reported $300 million. Explaining the opportunity, Fertitta says, "It's a great brand and a poorly run company." He will simply roll Del Frisco's into his own well-oiled machine.

Fertitta is among the few industry CEOs who have held every restaurant job and studied every aspect of running a successful eatery. "You couldn't go to a restaurant with him and not be taught a lesson," says Patrick Fertitta, "either from a server's perspective, or the way a dish is prepared, or how a host or a hostess deals with a wait." It galls Patrick's father that CEOs of publicly traded restaurant companies couldn't so much as fold a napkin properly while being overpaid to underperform in the top job.

Although Fertitta votes for mass over class, his company won't run with commodity dining players such as Chili's, Olive Garden, and Applebee's, which spend heavily on promotions, or "buying the business," as it's known. Across the industry, same-store sales are flat, a function of an increasing number of restaurants, so competition is heating up. "There are no spare customers" is a well-known Tilmanism. At places such as Willie G's, the wait staff will treat you to a well-rehearsed dining experience, from the obligatory server introduction to the grand tour through the menu. Just don't expect any all-you-can-eat shrimp deals.

People who have been with Fertitta the longest will tell you that his strength isn't a gambler's gut instincts but a mathematician's rigor in problem solving. He preaches one message consistently: Know your numbers. Unless you fully understand how you're making money or losing it, you have a hobby, not a business, and you're likely to fail. "If you don't have a financial statement to go on, you're basically operating out of a cigar box," he says. "You don't know shit." It seems like fairly prosaic advice, but if other companies had followed it, he probably wouldn't be buying them.

Every Wednesday, corporate and Golden Nugget execs gather in Fertitta's office for a call to review the prior week's numbers. The meeting covers occupancy rates, number of room nights versus the prior year, and standard industry barometers such as revPAR (revenue per available room) and ADR (average daily rate), while noting subtle changes in the calendar--one less Saturday night in a month, say--that influence revenue.

The attendees home in on the fine detail. The Golden Nugget in Laughlin is down 79 room nights in August but is still running near 90 percent occupancy. There's a storm headed toward Biloxi, home to another Golden Nugget, and local officials have prohibited swimming, but the beach is open; media reports say the beach is closed. ("Fucking stupid media," says a voice from Biloxi.) New competitors have opened in Atlantic City but profits are up $700,000 over last year. Why? A.C.'s managers haven't caved to discounting. It's a valuable lesson. "You don't have to give it away," Fertitta yells out. "That's how casinos go out of business. They give too much away."

After the meeting, Fertitta points to his watch. "We cover more in 17 minutes than most companies do in an hour because I will not have long meetings," he says. His attention span is about as long as this sentence. Besides, the numbers tell him everything.

At his restaurant unit, executives get flash reports every morning detailing how each location performed the previous day. Exceptions are spotted quickly, which makes it difficult for a small problem to become a bigger one. That's another Tilmanism: Focus on the 5 percent of your business that isn't working well. "We can manage our business to within 1 percent of the forecast," he says.

At the next meeting, in a conference room attached to his office, the issues are local, pertaining to the Post Oak Hotel and the Oak Room, the hotel's glossy, decorated-to-death aerie. About a dozen people are there, and someone hands Fertitta a draft of a football promotion going out to members. He quickly realizes that the club isn't open on one of the proposed dates. "If I don't catch this, you'd send it out," he admonishes the group. "There's too many of y'all here [for that]." (After the meeting, he will say, "Mistakes seem to jump out at me.") Then he selects a new robe for guests at the Post Oak, one that can weather 45 or 50 washes. It's a level of detail beyond most CEOs. But, he says, "I'm there, so I might as well make the decision."

He is unfailingly gracious with people--as if everyone he meets were a customer--and unfailingly direct, too. "One of the things my people like about me is that everybody always knows where they stand," he says. "I am very straightforward." At the gaming meeting, Fertitta chided one executive for not appearing at a dinner for high rollers the previous evening. The two meetings serve as a summary of his management style: deeply analytical yet with an understanding of the customer experience. And he leaves with decisions in hand.

Last summer, Fertitta made another seemingly risky decision. His Rockets traded away all-star guard Chris Paul and committed to spend $207 million for the contract of Oklahoma City's all-world guard Russell Westbrook, who will serve as an on-court partner for Houston's all-universe guard James Harden. "The basketball people wanted to do it and I approved. Pretty simple," he says. "They know how important it is for me to win."

The trade rocked the NBA, but Fertitta says absorbing Westbrook's contract was a smart risk. Because of NBA open-book policies, he knows the player budget of every team and the salary of every player--which makes life easy for a numbers guy like him. "This is what an entrepreneur does," he says. "Every business stands on its own, and you can't get caught up in the noise."

In an era when decisions by stars about where they'll play can decide championships, the owner is becoming another player. "Smart free agents are picking owners now," says Rockets GM Daryl Morey. "And Russell picked Tilman."

Fertitta isn't planning to retire anytime soon, but he won't be making these decisions forever. Son Patrick is clearly in the succession line, and his three siblings have always known they'd be joining the firm. Patrick's older brother, Michael, 27, is finishing law school, while younger sister Blayne, 22, and brother Blake, 19, are still undergrads. Unlike their father, they will finish college before they go to work. "From an early age, not only did he encourage us to get involved in the business, but it was expected. It was demanded," says Patrick.

And they will likely have more on their plates. Fertitta described the Rockets purchase as generational, a platform for the future that could easily include more teams. With one casino brand and just five locations--and an industry in constant churn--there is clearly room to add. Fertitta Entertainment could even become a public company again and shift some of the risk to shareholders.

Not that Fertitta is afraid of risk. Fearlessness is in the job description for empire builders. It's recklessness that can destroy them. Fertitta has found his fortune by understanding the difference.

The Fertitta Portfolio

The holdings of a college dropout--restaurants, casinos, hotels, pleasure piers, and an NBA basketball team.

Restaurants | 2018 revenue: $2.6 billion 

Landry's has rolled up more than 60 brands, including Mastro's, Morton's, Bill's Bar & Burger, Willie G's, Bubba Gump, and Saltgrass Steak House.

Gaming | 2018 revenue: $1.1 billion 

Fertitta made the Golden Nugget in Vegas pay off despite buying it just before the 2008 recession.

Entertainment and hospitality | 2018 revenue: $500 million

Amusement venues include the Galveston Island Historic Pleasure Pier and four aquariums. Fertitta also owns the five-star Post Oak Hotel in Houston, the San Luis Resort in Galveston Island, and a Hilton, a Westin, and a Holiday Inn.

Sports | 2018 revenue: $400 million

Fertitta paid a then-record $2.2 billion for the NBA's Houston Rockets. (He's spent a lot on players, too.)

 

From the November 2019 issue of Inc. Magazine