Can Vegas recover?

Perhaps what Vegas needs is something spectacular. I mean, spectacular by Las Vegas standards.

How about a hotel with a Nordic theme, or Viking theme, or both, with the world's biggest indoors ski slope in the world. Skiing in the desert year round, think about it.

Quote: Nareed

Perhaps what Vegas needs is something spectacular. I mean, spectacular by Las Vegas standards.

How about a hotel with a Nordic theme, or Viking theme, or both, with the world's biggest indoors ski slope in the world. Skiing in the desert year round, think about it.

Ski Dubai offers skiing in the desert year round. Although that is in a shopping mall, not a casino.

None of us have a crystal ball to know whether Vegas can or cannot recover. The US economy has been languishing now for years despite the fact that the US government has thrown trillions at the issue to try to reboot.

The business model for Vegas is a mix of gaming and non-gaming revenue. The strip is controlled by corporations with interests through the world, so a bad performance in Vegas can be offset by other profitable operations such as Macau. I think it will take a long time for these corporations with central operations in Vegas to remove their core business, especially when it has been profitable in the past.

That said, we can agree or disagree with the business model that the vegas properties have taken. Maybe they've come to learn that cheap hotel rooms don't fill them with gamblers and that the model no longer works. For MGM for example, they have a number of properties at various levels of luxury up and down the strip, so they know what mix of hotel room price and promotions gives them the best performance for the corporation -- it may be still a loss for them overall, but it's the least loss possible.

It apparently isn't a matter of visitation per se, as in "filling the hotel rooms"--factoring in the dramatic overbuilding of the last several years, occupancies are relatively high--but of filling them productively. The games everywhere in Vegas, but particularly on the Strip, have been tightened so much that they squeak: blackjack with eight times the former house edge, video poker with twenty times the former house edge, a 25% increase across the board in poker game rakes (Harrah's properties), etc. etc. etc. What has been lost is the delicate balance between shearing the sheep and skinning them alive. High table limits and horrible rules means that the customer gets crushed quickly and brutally. This actually DECREASES gaming revenue as the player who gets pounded through the floor, losing $800 in one evening's session, may just put that other $1200 back in his pocket and go see a show or have dinner the following night. Give that guy a fighting chance, hold his losses to $200, and he'll be back at the tables tomorrow.

What amazes me about all this is that any one Strip casino, operating independently, could loosen up all its games to, say, 1995 level, and be buried with customers. No doubt that's what Harrah's Quest to Buy the Entire Strip was designed to prevent. Also, there is probably honor among thieves--I'm sure there is "subtle persuasion" among the casinos not to have anyone break away from the ranks.

Quote: Nareed

Perhaps what Vegas needs is something spectacular. I mean, spectacular by Las Vegas standards.

I don't know if it could be done, but I'd like to see them build a 10 or 20 story hotel underground. With a big open forum area. Probably have to wall it off with glass to prevent the potential for base jumpers and suicides.

Quote: Nareed

Perhaps what Vegas needs is something spectacular.
How about a hotel with a Nordic theme, or Viking theme, or both, with the world's biggest indoors ski slope.

Sounds great, but Steve Wynn complains about the fact that he built great attractions that draw visitors and other casinos skim his customer base by dangling cheaper rooms and cheaper buffets in front of those who came to see the fountains or the volcano.

Skiing, rock climbing, golf? They would all be good "draws" but the trick is to get the skier off the slopes and into the casino.

I like that upthread post that said it was more akin to skinning the sheep than to merely shearing its fleece off. Yet that seems to be how Harrah's succeeds. Ignorant drunken tourists feeding coins into a slot machine after being brainwashed to think "its entertainment, the casino is going to win anyway".

Does anyone know why that Waterworld thing ever closed? Would an indoor ski slope survive only if it were linked to a casino? With all the bankers breathing down the necks of the casinos would anyone ever advance funds for a ski lift?

They built City Center and nobody came. Perhaps a ski slope would work only if it was naked skiing and all skiers slid off the ski slope into a hot pool filled with naked revelers, gin and pheremones.

Quote: Nareed

How about a hotel with a Nordic theme, or Viking theme, or both, with the world's biggest indoors ski slope in the world. Skiing in the desert year round, think about it.

I believe that at one point the "Moon Resort" that is now proposed for the Bahama's, (and has been for some time but doesn't appear to be going anywhere), was going to be located in Las Vegas.

If you go to Moon World Resort and select "tour" and then "Planet Ice and Space Odyssey Tower" you can see renderings and images of a model they did of their ski area. I'm kind of thinking that trying to maintain snow and ice within a large glass dome in the desert, (or the Caribbean), isn't the brightest of ideas. At least Ski Dubai has a 5' thick insulated roof.

Unfortunately an even more spectacular tourist attraction is not going to make the city. You can't have a city with a single source of income. Every industry has its ups and downs.

Phoenix has four companies that are about as big or bigger than Harrah's Entertainment. All major corporations are in different industries. The city has more diversification so that it is slightly better able to handle a downturn. Gaming cannot support the growth. It simply doesn't produce enough jobs.

Petsmart produces as much revenue as MGM Resorts, and it doesn't lose money at a spectacular rate.
Republic Services waste management produces as much revenue as Harrah's.

Fortune 1000	Corporation	Revenue	Profit
#264	Harrah's Entertainment	$8,907.4	$827.6
#360	MGM Resorts	$5,978.6	-$1,291.7
#456	Las Vegas Sands	$4,563.1	-$354.5
#634	Wynn Resorts	$3,045.6	$20.7
#962	Boyd Gaming	$1,641.0	$4.2

Phoenix & Maricopa County, AZ

Fortune 500	Corporation	Revenue	Description
#142	Avnet	$16,229.9	(world's largest franchised distributor of electronic components)
#154	Freeport-McMoRan Copper & Gold	$15,040.0	(world's lowest-cost copper producer)
#222	US Airways Group	$10,458.0	(airline)
#278	Republic Services	$8,199.1	(waste management)
#393	PetSmart	$5,336.4	(pet care)

This reporting is the last month of the fiscal year (which ends on June 30)

The Fiscal Year 2010 numbers resemble those of FY05 for the Vegas strip, and FY04 for the state of Nevada.

$5,620,463,390 FY10 Strip
$5,578,873,889 FY05

$10,327,446,480 FY10 State of Nevada
$10,109,953,867 FY04

Assume you could turn back the hands of time and Steve had not built the Wynn or the Encore, Sheldon had not constructed the Palazzo, Jim had not built City Center and Donald had not built Trump International. Assume MGM hadn't bought out Mandalay Bay Inc. or they had not built the condo-hotels like Palms Place or Trump Tower or the condominiums like Allure. Assume Goldman Sachs hadn't bough American Casino Enterprises (Stratosphere) for $1.3 billion or Harrah's and Station Casinos hadn't gone private for so much money. Assume Boyd Corporation had not torn down the Stardust or El-Ad Group had not torn down the New Frontier.

If somehow you could undo all of that, then in theory everyone would still be profitable.

Quote: pacomartin

If somehow you could undo all of that, then in theory everyone would still be profitable.

It's hard to say. The definition of "profitability" is something different from "cash flow" or "debt service". Properties built recently still have to amortize their building and start-up costs; an established property like, say, the Mirage is now in a strictly cash-flow mode, with largely fixed operating expenses. What has crushed Stations, almost crushed Harrah's, and is crippling the CityCenter megaprojects is the assumption that cash flow from existing projects could be used to finance new boondoggles, even if those new projects were slow to make money. Like any major endeavor based on a shaky assumption, the boom has collapsed like a house of cards (or of condos).

What hurts them is that this strategy was time-dependent. The longer it takes for the new properties to become profitable (Aliante Station is an albatross. Aria OPENED selling rooms at a 60% discount.), the heavier the debt burden becomes. It's like a boat trying to reach shore before it sinks from a hole in the bottom, and suddenly a headwind comes up.

Of course, the casinos blame the recession for their failures, not the shortsightedness and greed that drove them to extend themselves so far over the brink.