How low can Vegas go?

It's been three years ago since the LV Business Press did this article on a report I wrote.
Las Vegas Business Press article

At the time, the 2007 abstract showed a net profit for downtown at 10.7% (the 2008 report was not published yet). At the time, I was worried that the bad months which began in July 2008 for downtown would drive the net profit for downtown to as low as the 2002 number of 0.1%. The report said that cost cutting would have to be at historic levels. The FY2008 profit level for downtown ended up being 2.8%.

Flash forward to 2011 and the lowest grouping of casinos (urban Las Vegas outside of the Strip and Boulder strip) reports a loss $1.32 billion on revenue of $2.184 billion (gaming and non-gaming). That is a staggering loss of 60.4%.

Principal Casinos in this group are
ORLEANS HOTEL AND CASINO
RED ROCK CASINO RESORT SPA
SANTA FE STATION HOTEL (in City of LV)
SOUTH POINT HOTEL AND CASINO
SUNCOAST HOTEL (in City of LV)
PRIMM VALLEY RESORT & CASINO
RAMPART CASINO
SILVERTON CASINO LODGE LAS VEGAS
CANNERY HOTEL CASINO
TEXAS STATION

I know that a big chunk of that loss is accountant write-downs on property value. But they have been doing that for several years. The value of the property must be so low that there is no equity to borrow against.

How is it possible to sustain those kind of losses? And how are the Fertitta brothers and the Boyd family still ultra rich?

Quote: pacomartin

How is it possible to sustain those kind of losses?

It isn't possible. There's a point of no return when
even if a good recovery comes, the debts are just
too high to remain in business. We're going see a very
different Vegas in the next few years, trimmed down
to the bone casino wise.

Aside from unemployed workers, what's the impact of those places close. As a tourest I care about the strip, maybe downtown, and MAYBE the M if I want to go far afield. If you're a local I know these casinos are supposed to appeal, but traffic is so light and parking is so cheap what's the big deal about just going somewhere else, like downtown?

In other words, I can't figure out the appeal in these suburban casinos anyways.

Quote: sunrise089

In other words, I can't figure out the appeal in these suburban casinos anyways.

A great many people actually like vanilla! So these plain vanilla locals casinos actually do have appeal. They do mail to people in their area, they do get visitors. Some have unique offerings to particular interest groups: bowling, golfing, etc. but mainly its a matter of geography.

Rampart was a casino that was somewhat disconnected with the hotel and so the fact that the hotel/resort is unable to meet its loans can have an effect.

Tourists like the glitz and glamor of the Strip but locals often avoid glitz, glamor, traffic and parking problems and go for better odds or better freebies at the locals casinos.

Quote: sunrise089

As a tourist I care about the strip, maybe downtown, and MAYBE the M if I want to go far afield.

There were a number of analysts who felt it was a mistake to spread out. The original locals places like Palace Station, Sam's Town, Texas Station, Santa Fe Station, and the Arizona Charlie's were pretty downscale. But Rampart was built by an Swiss company, and had visions of becoming an ultra-exlusive Mobil 5 star resort. They lost more money in two years than you would ever think possible.

The prestigious resorts began to follow after Rampart. There was Green Valley, Red Rock, M Resort, Casino MonteLago at Lake Las Vegas (and arguably South Point). At first it seemed an unexpected miracle that such an industry could develop around the strip.

The entire locals casino industry seems to have imploded. When the Strip got in trouble, they began trying to lure the more affluent locals on weekdays with special prices for shows, free limousine rides, and a chance to sample the cuisine of many world famous chefs. Alliante casino was almost a poster child for the stupidity of trying to build a fancy casino in a new neighborhood before the people even moved there. With the meteoric drop in real estate, there is nothing to support this industry.

However, these areas only dropped by large percentages. The money being lost on the strip is a lower percentage, but in actual billions of dollars, it is just as bad.

I see it that way too paco.

"Its so bad in Vegas, even Lake Mead is leaving".
"Its so bad in Detroit, even the gas is 30 proof"
"Its so bad in Cleveland, the houses are worth more as firewood", and many others

I was reading an article by a guy who's lived in
Vegas for 10 years and says 80% of his friends
are long gone. The other 20% talk about leaving
all the time. He said Vegas has gone from a cool
place to live, to a city full of pool-party and party-
pit morons. When he tells people where he lives,
nobody but nobody is impressed anymore. They
think he's a low life that has no skills to get a job
somewhere else. The times they are a changin..

Forbes rated NY as the coolest place among single
people, and Vegas as the coolest among married
people. They also ranked Vegas as 25th nationwide
for nightlife.