Can Vegas recover?

They've recognized it. The casino executives are playing with assets. Its not just a leveraged buy out of the casino, its a leveraged buy out of the casino's customer base.

Quote: OneAngryDwarf

The next logical question then...why haven't the casinos recognized this yet? Say what you will about Harrah's and MGM, but they didn't become the largest casino operators in the world by making bad management decisions. So why would they continue to stick with policies that don't work...or are they actually waiting for things to get even WORSE?

Any praise of Harrah's would have to be tempered by the realization that their savvy business practices have gotten them into a $31 billion (the last time I checked) debt hole, and driven the company to the verge of bankruptcy/hostile takeover. I view this as a DIRECT result of their tighten-everything-until-it-squeaks policies. Why haven't they realized this? Because the bright young bushy-tailed MBAs fresh out of grad school are blaming the company's nosedive on the recession. Anything rather than admit that drastically raising the price of all your products might not be the best way to react to a diminishing customer base. A guy running a hot dog cart knows this, but the hot dogs running Harrah's apparently don't.

Their IPO was cancelled at the last minute as well. That was supposed to raise cash to pay off that debt. I have no idea what they're going to do now with that debt load.

Quote: OneAngryDwarf

The next logical question then...why haven't the casinos recognized this yet? Say what you will about Harrah's and MGM, but they didn't become the largest casino operators in the world by making bad management decisions. So why would they continue to stick with policies that don't work...or are they actually waiting for things to get even WORSE?

Perhaps because their own analyses of the situation indicate a different problem.

Of curse, you know the difference between an actuary and an accountant? When asked "How much is 2+2," the actuary says "four." The accountant says "How much do you want it to be?" The same goes on in management all the time.

And perhaps the problem is different.

Quote: mkl654321

Any praise of Harrah's would have to be tempered by the realization that their savvy business practices have gotten them into a $31 billion (the last time I checked) debt hole, and driven the company to the verge of bankruptcy/hostile takeover.

Is 31 Billion "Too Big To Fail"? Or can another iPO be scheduled and some corporate paper issued to whip debt into assets?
The casinos are making money. Its like a drug dealer raising his prices: what are his customers going to do but pay the new price?

Quote: OneAngryDwarf

The next logical question then...why haven't the casinos recognized this yet? Say what you will about Harrah's and MGM, but they didn't become the largest casino operators in the world by making bad management decisions. So why would they continue to stick with policies that don't work...or are they actually waiting for things to get even WORSE?

Perhaps it's the classic short term vs long term issue. Rejuvenating the gambling culture, making people come to win and bet more than spare change, creating new gamblers all take time, as does suppressing this culture. Offering more entertainment, increasing the hold percentage at tables and cutting down on comps brings in visible net profit this year, or outright this quarter.

Quote: FleaStiff

Is 31 Billion "Too Big To Fail"? Or can another iPO be scheduled and some corporate paper issued to whip debt into assets?
The casinos are making money. Its like a drug dealer raising his prices: what are his customers going to do but pay the new price?

The customers can go elsewhere. That's why an essential, but failed component of Harrah's strategy was to be the only pusher on the block. They did succeed in dominating the mid-Strip, and inserting their members into virtually every casino jurisdiction/orifice in the U.S., but that was done at the cost of paying too much (assuming too much debt) for many properties that weren't performing very well. They thought that all they had to do was put up a big "HARRAH'S" sign and people would come flocking in.

The "too big to fail" analogy is valid, though, because Harrah's creditors will be left holding a very empty bag if Harrah's goes under. Therefore, they have been concocting schemes for nigh unto two years now, trying to find some way to juggle the books and pretend that Harrah's could once again be a viable entity. A LOT of the dithering and prevarication has been in the hope that the economy would recover and that Harrah's could, as a result, at least service its debt. That appears to be sorta kinda happening right now, but not nearly fast enough or largely enough to satisfy Harrah's creditors.

I've read over and over that the people who went to Vegas 4 years ago and blew their BR and went to the ATM again and again, those people have changed their ways. They're worried about their jobs and bring half as much money to gamble with and when its gone, no trips to the ATM. They're behaving in a way casino owners never thought they would: Like responsible gamblers. Vegas wasn't built by gamblers on a budget.

Quote: Keyser

The big casinos that are losing high rollers and that are crashing fast are:
2. The MGM. The City is devouring the MGM. Add to the mix bad customer service and unfriendly dealers/pit and you've got a bad blend. Most of the table games are now closed during the week in an effort to slow the bleeding. The bright side, they have "KAW".

-Keyser

MGM Grand can't seem to stop bleeding. Even though gaming revenue has levelled off on the strip the MGM Grand sets a new low with every quarter. For 3rd quarter pf 2010 total revenue was $232 million, down from $266m the previous year.

Quote: Keyser

During the week, MGM will usually only have one pit open during the day. It's the pit just outside of the night club.
The place is in trouble, and the staff attitude definitely shows it.

You can't win if you don't play the game ... and the casino can't take its vig if its not offering the game. What is the Hold on a closed table? How many members of their Player's Club will be redeeming points that were never earned because the pit was closed to save money?