Judge OKs cash flow to fund Prestige Travel operations

A family of seven tried to check in at the Luxor on Friday, only to be turned away even though they had a paid reservation through Prestige Travel.

With the prospect of similar scenes being repeated across the valley, Prestige Travel, one of the largest agencies in Nevada, filed for Chapter 11 bankruptcy protection on Tuesday along with what will grow to 34 accompanying actions to compel hotels to honor bookings.

Prestige attorney Samuel Schwartz said that the company has long had in place letters of credit to backstop its bookings and most hotels were voluntarily conducting business as usual. But court papers noted that talks to reach a deal with MGM Resorts International, by far Prestige's largest creditor, had broken down and put the travel company's viability at risk.

Following a Friday afternoon hearing, at which U.S. Bankruptcy Court Judge Bruce Markell approved the cash flow to fund operations for the next few weeks, Prestige co-founder Kathy Falkensammer said she was not sure where the Australian family trying to find lodging at the Luxor, an MGM property, ended up.

Another hearing is scheduled for Thursday to consider the actions to compel the hotels to accept the Prestige reservations and tap the letters of credit only for certain expenses incurred after the bankruptcy filing.

Kathy and Leo Falkensammer started Prestige as one office in 1980, growing it to the 10 current locations.

Prestige accepts payment for individual reservations and packages, then forwards the money to the travel providers.

While Leo Falkensammer said the stores are having their best year ever, the online division had become a cash drain. Prestige tried to keep abreast of the industry trend to web bookings, he said, but the losses mounted as Strip properties increasingly drove more bookings through their own sites.

Between that and the slower economy, said vice president Leo H. Falkensammer, the son of the founders, Prestige's "profit margins significantly decreased and the (company) experienced difficulties in keeping up with its financial obligations with several hotels in the state of Nevada."

To try to restore positive net income, Prestige laid off 90 people on Tuesday and largely ceased online bookings. It now has a payroll of about 80 people. Through March, Prestige projects revenues of $9.8 million and net income of $76,000, with profits starting to flow in January.