pacomartin
pacomartin
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June 2nd, 2010 at 4:11:36 AM permalink
Looking at the summary of Wynn (& Encore) Las Vegas properties only. The Las Vegas properties have been losing money for 9 quarters now.

My people realize that the profitable Macau operations have been subsidizing the LV properties recently. What surprises me is how much money the LV properties are losing.

25-Oct-2002 Wynn Resorts Limited formed
28-Apr-2005 Wynn Las Vegas opens
06-Sep-2006 Wynn Macau opens
22-Dec-2008 Encore Las Vegas opens
21-Apr-2010 Encore Macau opens

Consolidated Statement of Operations Data (Las Vegas): 2009 2008 2007 2006 2005 2004 2003 Total
Net revenues $1,230,120 $1,099,891 $1,295,851 $1,139,348 $722,292 $- $- $5,487,502
Pre-opening costs $346 $72,373 $6,457 $2,020 $67,454 $41,073 $16,437 $206,160
Operating income (loss) $(144,279) $(58,616) $200,621 $116,456 $13,056 $(46,431) $(18,981) $61,826
Net income (loss) $(309,870) $(129,794) $124,219 $9,808 $(45,274) $(160,502) $(7,180) $(518,593)


Even though revenue is about the same for 2007 and 2009 the difference is that 2009 is revenue on two properties, while 2007 is on a single property. Costs and expenses are much higher.
ruascott
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June 4th, 2010 at 9:40:08 AM permalink
Its more important from an investor and managerial perspective to look at EBITDA. Wynn/Encore Las Vegas had positive EBITDA of over $60M in the 1st Quarter 2010 alone. So Wynn Macau is not subsidizing Wynn LV. Wynn LV and Macau are both producing postive operating cash flow to cover the debt of Wynn Resorts. I agree that Wynn Macau is doing much better than LV operations regarding growth, but Wynn LV is currently producing an annualized rate of $250M/yr in cash for the company...certainly A LOT better than many LV properties.
FleaStiff
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June 4th, 2010 at 10:33:36 AM permalink
Quote: pacomartin

Looking at the summary of Wynn (& Encore) Las Vegas properties only. The Las Vegas properties have been losing money for 9 quarters now.

I note that you have segregated Wynn and Encore. For most purposes that is clearly proper. I however wish to propose that the Wynn and the Encore share a certain facade of aloofness. Wynn and Encore wish to remain aloof from the actions of the hoi-paloi. This is in the same spirit as The Venetian wishes to avoid having a monorail stop and forces the arriving airport shuttle to stop at a remote and rather undignified entrance, since the desired perception is that patrons of The Venetian arrive in limousines at the prestigious main entrance.

Wynn uttered some mouthings quite some time ago about "in tough times, you tighten your belt a bit but do not fire your waiters and dealers in an unwise short-term effort to lower your costs so much that you impair service levels". Oh, I'm sure you can look up the actual statement he made but that is about the gist of it.

The trouble is that in all actuality, there beats a constant tattoo that the Wynn actually made cuts in their staffing that were deep. Too deep. The lines at their buffet are now said to be the shortest in town and lets face it, that means the people eating there are tourists reacting to pre-recession hype rather than those au-courant enough to react to present conditions. The Wynn buffet seems to have taken a very steep nose dive. I've heard from a variety of sources that the Wynn is now blemished. Sure much of this is unreliable and some of it is unverifiable but I suggest that the Wynn simply started from a very high point and therefore has not slunk to such a level that the bean counters are as concerned as they perhaps should be.

It is not that the Encore is dragging the net figures downward. Its that the Encore is responsible for most of the drag and that the Wynn is riding largely on its laurels but may not be able to sustain the wounds of the actual deep cuts that were made when Wynn announced a mere belt tightening.
Nareed
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June 4th, 2010 at 11:47:30 AM permalink
I went to the Wynn casino for a little while and everyone was frinedly and attentive. As to the buffet, keep in mind the 800 lb gorilla sitting on the Strip right now: the Harrah's promo for all 7 buffets at their properties. That has to be syphoning people off all other hotels.

But come to think of it, how much does it hurt the Wynncore not to have a neighbor to the north? I mean, the Strip pretty much ends at the Wynn/Encore right now.
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DeMango
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June 4th, 2010 at 4:42:55 PM permalink
Well I just got a comp offer in the mail from Wynn. Three nights, available between June 28 and July 1. Bright people.
When a rock is thrown into a pack of dogs, the one that yells the loudest is the one who got hit.
FleaStiff
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June 4th, 2010 at 5:19:25 PM permalink
Congratulations on the Comp and if you decide to utilize it, good luck to you. I'm sure they will consult a calendar more carefully next time but will honor the obviously required included date. Perhaps there were heavy personnel cuts in that department and the remaining individuals are over-worked and therefore offering poor service which will eventually reflect on their bottom line in an increased fashion. Perhaps not.

As to the 800 lb. gorilla, my information on the Wynn buffet's decline was from sources that predated the Harrah's AllBuffets offer.

As to being at the de-facto "end" of the strip, yes perhaps that has an effect that I hadn't even thought of.
pacomartin
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June 4th, 2010 at 5:20:08 PM permalink
Quote: Nareed

I went to the Wynn casino for a little while and everyone was frinedly and attentive. As to the buffet, keep in mind the 800 lb gorilla sitting on the Strip right now: the Harrah's promo for all 7 buffets at their properties. That has to be syphoning people off all other hotels.

But come to think of it, how much does it hurt the Wynncore not to have a neighbor to the north? I mean, the Strip pretty much ends at the Wynn/Encore right now.



I seriously doubt that someone staying at the Wynn or Encore is going to buy the city-wide buffet from Harrah's. The dinner buffet at Wynn is $34-38, which as much or more than the all day city wide buffet at Harrah's.

By my calculation there are 4500 rooms at hotels and motels (some with small casinos) that are within walking distance of a Harrah's buffet. These hotels are not the kind of places where you would normally spend much of your day at anyway. They include the Westin Causarina, Super 8, the Travel Lodge, Econo Lodge, etc. The buffet will be a powerful pull on these guests since they don't even have to get on a bus.

Then the second level is places that are within a short bus ride. That includes motels like Motel 6 and America's Best Motel, but also casinos like Terribles, Circus Circus, Riviera, etc.

But I doubt that Harrah's buffet will attract a lot of people out of the 4-5 diamond resorts (TI, MIRAGE, BELLAGGIO or VENETIAN/PALAZZO, and WYNN/ENCORE). The Excalibur and Luxor have their own all you day buffets.

Circus Circus and Stratosphere also have all day buffets, but despite the lower cost, they limit your flexibility to walk around.

I think that Steve Wynn wanted to see the Plaza go up across the LV Boulevard. I get the feeling that he was not afraid of the competition, but he wanted the neighborhood to look better.

pacomartin
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June 4th, 2010 at 6:27:22 PM permalink
Quote: ruascott

Its more important from an investor and managerial perspective to look at EBITDA. Wynn/Encore Las Vegas had positive EBITDA of over $60M in the 1st Quarter 2010 alone. So Wynn Macau is not subsidizing Wynn LV. Wynn LV and Macau are both producing postive operating cash flow to cover the debt of Wynn Resorts. I agree that Wynn Macau is doing much better than LV operations regarding growth, but Wynn LV is currently producing an annualized rate of $250M/yr in cash for the company...certainly A LOT better than many LV properties.



It is pretty difficult to have a negative EBITDA. Even Circus Circus has a positive EBITDA. Wynn also makes the very clear point that they don't want EBITDA to be considered synonymous with cash flow.

But you are correct, the $60M EBITDA is almost as good as the Bellagio.
bluefire
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June 4th, 2010 at 11:15:31 PM permalink
Quote: ruascott

Its more important from an investor and managerial perspective to look at EBITDA. Wynn/Encore Las Vegas had positive EBITDA of over $60M in the 1st Quarter 2010 alone. So Wynn Macau is not subsidizing Wynn LV. Wynn LV and Macau are both producing postive operating cash flow to cover the debt of Wynn Resorts. I agree that Wynn Macau is doing much better than LV operations regarding growth, but Wynn LV is currently producing an annualized rate of $250M/yr in cash for the company...certainly A LOT better than many LV properties.



I think we should judge Steve Wynn on the measures he doesn't hate.
pacomartin
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June 5th, 2010 at 1:42:58 AM permalink
I suppose it does look a lot better from this table.
        2010                 2009        
Net Revenues
Wynn Las Vegas, including Encore $318,271 $291,276
Wynn Macau $590,647 $448,679
Total Net Revenues $908,918 $739,955
Adjusted Property EBITDA (1)
Wynn Las Vegas, including Encore $60,305 $43,851
Wynn Macau $181,590 $114,643
Total $241,895 $158,494
Other operating costs and expenses
Pre-opening costs $2,311 —  
Depreciation and amortization $104,565 $101,468
Property charges and other $1,881 $16,485
Corporate expenses and other $17,899 $13,397
Equity in income (loss) from unconsolidated affiliates $391 $(5)
Total $127,047 $131,345
Operating income $114,848 $27,149
Non-operating costs and expenses
Interest income $288 $314
Interest expense, net of amounts capitalized $(49,261) $(57,032)
Increase (decrease) in swap fair value $(3,602) $1,095
Gain on extinguishment of debt —   $10,635
Equity in income (loss) from unconsolidated affiliates $391 $(5)
Other $264 $(76)
Total $(51,920) $(45,069)
Income (loss) before income taxes $62,928 $(17,920)
Provision for income taxes $(5,069) $(15,894)
Net income (loss) $57,859 $(33,814)


It looks better than this summary.

Net Income 2010 (first quarter)
$139,551 Macau
$(81,692) Las Vegas
$ 57,859 Total

Net Loss 2009 (first quarter)
$ 61,650 Macau
$(95,464) Las Vegas
$(33,814) Total
Nareed
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June 5th, 2010 at 3:37:40 AM permalink
Quote: pacomartin

I seriously doubt that someone staying at the Wynn or Encore is going to buy the city-wide buffet from Harrah's. The dinner buffet at Wynn is $34-38, which as much or more than the all day city wide buffet at Harrah's.



The rich love a great deal as much as the middle class. Sometimes even more. I wouldn't underestimate the attractiveness of the Harrah's buffet offer.

Quote:

But I doubt that Harrah's buffet will attract a lot of people out of the 4-5 diamond resorts (TI, MIRAGE, BELLAGGIO or VENETIAN/PALAZZO, and WYNN/ENCORE). The Excalibur and Luxor have their own all you day buffets.



I know of two people who stay at places like that. They both drooled when I described the Harrah's offer. I know what anecdotal evidence is worth, but it's all I have.
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odiousgambit
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June 5th, 2010 at 5:54:03 AM permalink
Quote: Nareed

The rich love a great deal as much as the middle class.



I'm always astonished how much this can be true, but one thing for sure is that sheltering a person's assets from taxes often means less or no income from those assets. Thus even wealthy people have some sort of budget if they don't want to be cashing out those assets.
the next time Dame Fortune toys with your heart, your soul and your wallet, raise your glass and praise her thus: “Thanks for nothing, you cold-hearted, evil, damnable, nefarious, low-life, malicious monster from Hell!”   She is, after all, stone deaf. ... Arnold Snyder
ruascott
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June 5th, 2010 at 8:59:59 AM permalink
Quote: pacomartin

It is pretty difficult to have a negative EBITDA. Even Circus Circus has a positive EBITDA. Wynn also makes the very clear point that they don't want EBITDA to be considered synonymous with cash flow.

But you are correct, the $60M EBITDA is almost as good as the Bellagio.



I totally agree, long-term, you have to get to a positive operating income number. I watched Wynn's interview discussing EBITDA, and I agree that you depreciation is a REAL expense...the IRS wouldn't let you write it off if it wasn't. However, its a strecth to think that $100M a QUARTER of wear and tear is actually being done to their hotels. That's where the accelerated depreciation schedules (MACRS) come into play.

He mentioned in his intereview that they do room renovations every 5 years, at a cost of around $100M. Fine, so that tells me that Wynn LV has actual depreciation -wear and tear on just the rooms - of around $5M/quarter...seems like a reasonable number.

EBITDA goes back to the economic principle of sunk cost. The debt for these resorts is already there and the parent companies have to pay it now regardless of if a property is open or closed. EBITDA tells us whether the parent company would be better off with an open or closed property. For Wynn LV its obviously not even close. For CC or a few others, its really borderline whether they should remain open.
AZDuffman
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June 5th, 2010 at 9:10:26 AM permalink
Quote: odiousgambit

I'm always astonished how much this can be true, but one thing for sure is that sheltering a person's assets from taxes often means less or no income from those assets. Thus even wealthy people have some sort of budget if they don't want to be cashing out those assets.



Why would this be a suprise? People don't change when they "get rich" but rather still like a good deal. Now, at a certain point a wealthy person will not wait in line for an hour to get gasoline at $.25/gal because some radio station is having a contest. But if you have a better deal at another buffet, hotel, or BJ table the "rich guy" will be just as likely to take it over the other as much as before he made his money.

I know people who earn in the top 1-2% percentile of income. They might have nice things, they don't waste money.

I would think you mostly shelter assets from taxes if those assets were ill-gotten. Though you want to minimize taxes to maximize return, no one keeps the money in the mattress. Other than some emergency traveling money for those who have IRS problems.
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FleaStiff
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June 5th, 2010 at 9:53:01 AM permalink
Quote: ruascott

For CC or a few others, its really borderline whether they should remain open.

There is a difference between the "line" at which a Green-Eye-Shade type would say close the place, the owner of a nearby casino would say close the place and the line at which an employee just hanging onto his job as it is would say close the place.

People have been mumbling about the decline of Circus Circus for quite a while but actual closure will generate headlines and headlines have industry-wide costs associated with them.

Do I have some fond memories of Circus Circus? Sure! Did I enjoy my trips there long long ago? Sure. (Mostly). Would I ever go back there. Not a chance! Do I want it to close? No.
odiousgambit
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June 5th, 2010 at 9:58:52 AM permalink
Quote: AZDuffman

I would think you mostly shelter assets from taxes if those assets were ill-gotten.



Just to illustrate, you might buy Sotheby's level art. Those assets appreciate in value, but you pay no taxes till you sell. Even switching to stocks from bonds is a sort of tax shelter. So I think you are getting the wrong impression from the word "shelter".
the next time Dame Fortune toys with your heart, your soul and your wallet, raise your glass and praise her thus: “Thanks for nothing, you cold-hearted, evil, damnable, nefarious, low-life, malicious monster from Hell!”   She is, after all, stone deaf. ... Arnold Snyder
pacomartin
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June 5th, 2010 at 12:53:18 PM permalink
Quote: FleaStiff

There is a difference between the "line" at which a Green-Eye-Shade type would say close the place, the owner of a nearby casino would say close the place and the line at which an employee just hanging onto his job as it is would say close the place.

People have been mumbling about the decline of Circus Circus for quite a while but actual closure will generate headlines and headlines have industry-wide costs associated with them.

Do I have some fond memories of Circus Circus? Sure! Did I enjoy my trips there long long ago? Sure. (Mostly). Would I ever go back there. Not a chance! Do I want it to close? No.





Year Air Psgrs Visitors Delegates Rooms Occup
2000 36,865,866 35,849,691 10.75% 124,270 89.10%
2001 35,179,960 35,017,317 14.32% 126,610 84.70%
2002 35,009,011 35,071,504 14.56% 126,787 84.00%
2003 36,265,932 35,540,126 15.92% 130,482 85.00%
2004 41,441,531 37,388,781 15.31% 131,503 88.60%
2005 44,267,370 38,566,717 15.99% 133,186 89.20%
2006 46,304,376 38,914,889 16.21% 132,605 89.70%
2007 47,729,527 39,196,761 15.84% 132,947 90.40%
2008 44,074,642 37,481,552 15.74% 140,529 86.00%
2009 40,469,012 36,351,469 12.36% 148,941 81.50%

The USAirways loss was the bulk of the lost passengers into McCarran. Visitors are back at the 2003-2004 level and the drop in convention business is profound. Massive room discounts to even get this many visitors.

You make an interesting comment about the desirability of closing some places.

The table really illustrates the massive oversupply of rooms in the Vegas region. The planes are not coming back anytime soon. The train is still five years away, at best.

There are really no healthy companies at all. Steve Wynn opening the Encore and combined complex making less revenue with two buildings than with a single building is pretty shocking.

If you look at the table it seems that if room closings in the tens of thousands are necessary so that recovery won't take more than a decade. Circus Circus and Riviera don't add to the energy level of the strip at all anymore. The Plaza and Vegas Club with 1500 rooms for downtown going for as little as $20 a night makes it difficult for the other properties to stay profitable.

Station Casinos is auctioning 4 casinos plus 7 slot clubs for a minimum outlay of over $800 million. Three of these casinos are on one four mile stretch of Rancho Blvd. Talk about overcapacity.

Green-Eye-Shade type is a reference you don't hear very often.
People may have been complaining about Circus Circus for a long time but revenue from 2008 to 2009 dropped from $250 million to $200 million which means that they are now running at an operational loss no matter how much cost cutting they can do. They still have a positive EBITDA however.
FleaStiff
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June 5th, 2010 at 2:25:00 PM permalink
Massive oversupply of rooms ...
I trust you mean in relation to visitors, but then ofcourse locals would be happy to have rooms too for such things as StayCations or DUI-avoidance.

So I wonder if you have any numbers as to what a visitor is and what a hotel room is?

Do you think a MicroTell would be a good idea in Vegas? The rooms are about the size of a spacious jail cell.
Do you think a hotel that did not have to replace furniture all the time would do well? Such as ruggedized plastic that gets steam cleaned as if it were an outdoor stadium?
What about a hotel that offered spacious rooms and a nice plasma TV but no marble?
You mention the plaza's 1500 rooms, but not one of those is any threat to the Venetian.

What do visitors really want?
Four young frat rats just want a crash pad with cold beer and hot strippers.
A family of four may have gamblers but it may also have a gawker or some teenagers that want something more than a motel room. Some women want a restaurant when they go to Vegas with their husbands and a bar or club when they go to Vegas with "The Girls". Some people go to Vegas and NEVER gamble.

What can hotels do with existing rooms?
Well how about a liquor industry trade show ... that offers DUI-avoidance rooms with admission to the sampling floor of the trade show?
Some casinos try to offer a Romantic Couples weekend: Emphasis on Two: Two mints, two simultaneous spa treatments, two breakfasts sent to the room, etc.
Some casinos offer Sports Rooms or atleast market their rooms to sports enthusiasts.

I don't know if terms such as hotel rooms or visitors are precisely defined enough. In Primm, I think midweek hotel rooms were either closed or given away free because the casinos were so desperate for gamblers. Its getting people with money into the room and then getting that money into the casino that is the goal.

Online gaming, Indian casinos, ... air travel indignities and delays: maybe those hotels are truly white elephants already. Or maybe the hotel owners just have to really market those rooms well. Look at all the people who complain about stingy comps? Why are casinos so reluctant to say Comp All The Rooms and be done with it.

I've heard that golf courses in Primm are great bargains and have bargain prices for casino employees, but I've never heard of a Golfer's Shuttle Bus that leaves from the Strip taking players to Primm. Each member of a foursome must drive separately. Would a casino in Primm be better off to rent a bus to get golfers? Look at all those low budget Pole Party Pits? Those one dollar and five dollar tables are always full. Why not give the room away and hope that five dollar player stays longer than otherwise. The room is not bringing in any revenue when its empty!
ruascott
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June 5th, 2010 at 5:12:23 PM permalink
Quote: pacomartin


You make an interesting comment about the desirability of closing some places.

The table really illustrates the massive oversupply of rooms in the Vegas region. The planes are not coming back anytime soon. The train is still five years away, at best.



I think the numbers that we see for this year will determine how massive the oversupply is. We're at levels in entire economy, whether thats LV or any where else, that this country hasn't seen since the late 70s-early 80s. From your chart, I see that occupency rates were down to 84% in 2001, following the dot.com colapse (and then 9/11.) Of course, even then unemployement was nowhere near the levels of today. I don't live in LV, so you may well know better than I, but the antecdotal reports I've seen indicate that numbers have been improving since last year.

Now, I'll say this as a farily low-roller consumer. I think LV in the past few years really lost its "value vacation" identity for a lot of middle class folks. Instead it was all about bottle service at the infinite number of strip night-clubs, rediculously high-priced restaurants, and continued gouging of customers with things like "resort fees".
Sure, you can stay at a low-priced strip hotel like the Riv or CC, but if you go out wandering elsewhere, you need to dip into your pocket. $8+ cocktails are the norm at many of the strip resorts (if you aren't playing of course), and those prices are equitable with any other upper-scale vacaction destination in the country. Problem is, what made LV so popular for so many decades was its image of a great value destination. I can get price gouged in a lot prettier/more interesting places in this country - Tahoe, Colorado Rockies, Miami, NYC. When I come to Vegas, I want good value on EVERYTHING (food, gaming odds, drinks, etc...) and a clean place to lay my head. I'll give props to downtown, as Freemont St is sticking to this model.
pacomartin
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June 5th, 2010 at 7:52:06 PM permalink
Quote: ruascott


I don't live in LV, so you may well know better than I, but the antecdotal reports I've seen indicate that numbers have been improving since last year.




Anecdotally the reports are that things are improving, but if you look at hard number the improvement is fairly fragile. Much of the recovery in gaming has been solely in baccarat. In 2-4 days time the report for April will be released. What is significant about April is that in the last ten days of april, the Macau Encore and the Sands Singapore casinos opened. If the majority of baccarat players are global high rollers, and mostly Asian, then we may hear a massive sucking sound as these two new resorts pull away the big players.


In particular Singapore does not have the huge tax percentage of Macau. The biggest savings grace of Vegas has been the low tax rate which allowed Steve Wynn and Sheldon Adelson to take the time to fly the highest rollers to Vegas where they could gamble at a lower tax rate than Macau. Now they can take them to Singapore at much lower cost. In addition the casino at Singapore blows most of the buildings in Vegas out of the water for WOW factor, making it the most desirable place to go.

pacomartin
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June 5th, 2010 at 11:28:51 PM permalink
Quote: FleaStiff

Or maybe the hotel owners just have to really market those rooms well. Look at all the people who complain about stingy comps? Why are casinos so reluctant to say Comp All The Rooms and be done with it.



While it is true that hotel rooms take second place to gaming as a revenue source, it is a mistake to think that it is not important to the business. Since the 1950's hotels in Nevada have built a massive oversupply of rooms relative to other states.

Nevada has by far the largest average size hotel, and the most number of rooms per person of any state (13.9 people per room). Quick review of the major vacation states:

State Hotels Avg. Rooms Capita/Rooms
Nevada 584 320.7 13.9
District of Columbia 115 237.9 21.6
Hawaii 279 202.9 22.8
Vermont 291 56.7 37.6
South Carolina 1,086 95.5 43.2
Florida 3,538 114.3 45.3
Maine 507 55.7 46.6
Colorado 1,151 87.7 49.0



The economics of cheap rooms in order to provide heads in beds and people to play slot machines has long ago been surpassed. There are as many slot machines as hotel rooms now in Nevada. The casinos can't afford to provide rooms for any cheaper. They are now down to the point where they are critical to financial survivability.

If you give away rooms for free you are likely to fill them with people who are running from their family for the night, or people who show up with a cooler full of sandwiches and beer. If you are in Vegas, they are just as likely to go to a strip club as to gamble in your casino.
FleaStiff
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June 6th, 2010 at 4:19:30 AM permalink
Quote: pacomartin

If you give away rooms for free you are likely to fill them with people who are running from their family for the night, or people who show up with a cooler full of sandwiches and beer. If you are in Vegas, they are just as likely to go to a strip club as to gamble in your casino.

Doesn't someone running from their family for a night want to go to the casino? Its not "heads in beds" its supposed to be "gambler's heads in beds". So what should the hotel do? Make it better marketing to gamblers rather than gawkers or clubbers? Guys go to a strip club for a variety of reasons but usually just get clipped. Is it that the strip club is viewed as a better deal than the casino? If so, that is the fault OF THE CASINO.
Nareed
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June 6th, 2010 at 4:32:48 AM permalink
Is there any reason why casinos can't own strip clubs?

I wouldn't favor putting strip clubs in the same building as the hotel and casino. But if Wynn bought some strip clubs and offered free shuttles/limos to his properties, well, he pretty much licks that problem, doesn't he?
Donald Trump is a fucking criminal
ahiromu
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June 6th, 2010 at 5:48:38 AM permalink
I'm not sure if anyone here watches how I met your mother... but I want Wynn to add a fire breathing dinosaur head to Wynn and a strip club in the latter end. That would be fucking awesome.
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pacomartin
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June 9th, 2010 at 12:53:58 PM permalink
Quote: Nareed

Is there any reason why casinos can't own strip clubs?

I wouldn't favor putting strip clubs in the same building as the hotel and casino. But if Wynn bought some strip clubs and offered free shuttles/limos to his properties, well, he pretty much licks that problem, doesn't he?



Casinos are very afraid of getting caught up in prostitution charges or illegal drugs. Whatever money that the strip club makes would not offset shutting the casino down for even a day.

Because there are a number of strip clubs within walking distance of the Rio casino, Harrah's experimented with integrating the two activities. They invited paid topless women into the adult pool, and began co-marketing with Saphire's strip club. They shut down the operation after only a few months because of hints of prostitution.

Many people did not see any conflict. Gambling is an adult activity that appeals largely to men, as do topless women. They seem like a natural connection. It would help an off-strip casino stand out from the crowd of casinos. Prostitutes are attracted to money, and are available in the vicinity of most casinos.

There is a small strip club on Fremont Street called Glitter Gulch. The owner of the business also owns two nearby slot clubs (Mermaids and La Bayou). I imagine several of the women hawking beads outside of the slot clubs probably work as strippers as well. He petitioned the NGCB to add slots to the strip club, but testimony as to prostitution that may occur inside the club killed the proposal.

Once again, you can find prostitutes working the Fremont Street Experience every night of the week (especially after midnight). So it does seem kind of stupid to single out the business. Nobody accused the strip club owner of being a pimp. But there is a strong urge to get casino owners to police every aspect of their establishments.
Nareed
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June 9th, 2010 at 2:42:13 PM permalink
Quote: pacomartin

Casinos are very afraid of getting caught up in prostitution charges or illegal drugs. Whatever money that the strip club makes would not offset shutting the casino down for even a day.



Ok. Then why not set up some form of partnership with the strip clubs? Something like giving kickbacks to the hotels for sending them business, only legally codified in a contract. The hotels could run shuttles to and from their partners.
Donald Trump is a fucking criminal
pacomartin
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June 9th, 2010 at 3:54:39 PM permalink
Quote: Nareed

Ok. Then why not set up some form of partnership with the strip clubs? Something like giving kickbacks to the hotels for sending them business, only legally codified in a contract. The hotels could run shuttles to and from their partners.



Nareed , there are at least a dozen shows on the strip that include some kind of nudity on stage. Nudity has always been a big draw in many places (including Vegas). I am not sure that mixing it into the gaming places will work. Now Circus Circus may find that it is hopelessly in trouble and close their Adventuredome family amusement park. They have trapeze artists that work above the gaming areas. It is possible to find skilled acrobats that will work topless.

But strip clubs are a lot of single mothers who do lap dances and cater to drunks who want to be close to naked women. I am not sure that this would be salvation of a casino.

Major international companies do not need that kind of publicity. One of the real growth divisions for MGM MIRAGE is managing high end hotels around the world. In that business they are competing directly with Ritz-Carlton. I don't think a press announcement that MGM MIRAGE has teemed with the Sapphire strip club will help their business.

Erotic, suggestive and glamorous stage images are one thing. They are far more commonplace in European shows than in the United States. I just don't think the companies are going to become profitable by dabbling in schlock.


Even mayor Goodman's suggestion to set up a legal red-light district inside the city limits of Vegas was aimed at neighborhoods that already have large numbers of working prostitutes. He was simply trying to legalize it, control the spread of disease, eliminate the pimps, and tax the business.
Nareed
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June 9th, 2010 at 4:07:57 PM permalink
Quote: pacomartin

But strip clubs are a lot of single mothers who do lap dances and cater to drunks who want to be close to naked women. I am not sure that this would be salvation of a casino.



I know that. For the record I've never been to a strip club and have no particular desire to visit one, either.

But if casinos cmplain they're losing money to strip clubs, then they can do one of three things: 1) run the strip clubs out of town (impossible, and highly unethical), 2) join with the strip clubs in some way, 3) stop whining about it.
Donald Trump is a fucking criminal
likeplayingcrapsandbj
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June 9th, 2010 at 5:01:21 PM permalink
"There is a small strip club on Fremont Street called Glitter Gulch. The owner of the business also owns two nearby slot clubs (Mermaids and La Bayou). I imagine several of the women hawking beads outside of the slot clubs probably work as strippers as well. He petitioned the NGCB to add slots to the strip club, but testimony as to prostitution that may occur inside the club killed the proposal."
You are right. The girls hawking beads also work accross the street. The strip club is more much more profitable than the slot business.

"Once again, you can find prostitutes working the Fremont Street Experience." Yep. I have been proped many times on Fremont street. Usually very straight forward on Fremont street. At CR the girls usually want help making bets and need cash to round off the bet. At MB I usually get asked if I want a date or the very pretty young ladies want to talk and are more subtle without saying anything.
Last Man at the Table
pacomartin
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June 9th, 2010 at 6:24:18 PM permalink
Quote: Nareed

But if casinos complain they're losing money to strip clubs.



It's not so much that casinos are losing money to strip clubs, a casino can't afford to be renting rooms. A Motel 6 can survive with 50%-60% occupancy rates, and people can rent a room and the motel will still make a profit. The motel doesn't care where you go.

Even a place like Circus circus needs to make $170 per room per night. If they rent a room out for $35 they are hoping that the customers will spend money on gambling, food, or the Adventuredome. If the customer uses them as a cheap and convenient motel and patronizes the strip club then Circus Circus has to make up the money somewhere else or go bankrupt.

As casino rooms get cheaper and cheaper there is more and more danger of them being used as rooms of convenience. The discounting only works so far.

I mention Circus circus only because it is the only major casino within easy walking distance of the strip clubs.

The casino can't afford to rent rooms to people who need privacy and quiet to study for their law exams either, but there are a lot more people looking to rent rooms to go to strip clubs than to study for their law exams.
likeplayingcrapsandbj
likeplayingcrapsandbj
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June 9th, 2010 at 6:38:15 PM permalink
A couple of weeks ago we stayed at thehotel attached to MB. It is a high end place, $400 a night, better then Aria in my opinion. Well that particular weekend was the give away weekend to get people in to the hotel. It looked like the the third scene from Happy Gilmore when the cooler crowd showed up at Agusta and Pebble to support Happy. I came from nothing so I felt at home. My wife though. She has a fit when everything is not just right and especially the people. We came from the same place though. It was fun to see coolers, t-shirts, and a ton of kids being hauled in to theHotel. I felt at home.
Last Man at the Table
pacomartin
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June 9th, 2010 at 6:50:28 PM permalink
Sensibilities aside, TheHotel is supposed to be a huge moneymaker for MGM-MIRAGE. But with the loss of convention business it is becoming a place for party people.

In first quarter of 2009 Mandalay Bay had an operating income of $18.6 million which was probably incredibly low compared to the peak of 2007. Excalibur made $10.7 million. They want the family crowd to stay at Excalibur.

In the first quarter of 2010 Mandalay Bay had an operating income of $1.87 million while Excalibur made $8.2 million. MGM-MIRAGE's second problem behind ARIA is the complete loss of Mandalay Bay as a profit making resort. A distant third is the real money losers like Circus Circus.
JohnnyQ
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June 9th, 2010 at 6:57:21 PM permalink
I would have thought CC would be making some money, aren't
all their buildings paid off by now ? So if you don't have
a huge mortgage payment, then it seems like your biggest
expense is behind you.
There's emptiness behind their eyes There's dust in all their hearts They just want to steal us all and take us all apart
pacomartin
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June 10th, 2010 at 1:26:39 AM permalink
Quote: JohnnyQ

I would have thought CC would be making some money, aren't
all their buildings paid off by now ? So if you don't have
a huge mortgage payment, then it seems like your biggest
expense is behind you.



If Circus Circus were a company that owed only a single casino that would probably be true. But businesses usually borrow against equity. In the case of Circus Circus they used the equity in the property to borrow against it to get money for ARIA casino.

There are several methods of assessing the earnings of a company. The highest is EBITDA or "Earnings Before Income Taxes Deductibles and Amortization". This number is almost impossible to be negative. It would be difficult to stay in business. The EBITDA for CC was only $1.7 million last quarter. The next level is operational income (or loss). The operational loss for CC was $3.6 million last quarter. It is the only MGM-MIRAGE property on the strip that has an operational loss.

The minor properties around Nevada in Jean, Railroad Pass, Circus Circus in Reno, and their 50% share in the Silver Legacy (also in Reno) are collectively running at an operational loss.

The level that you are talking about where you include interest (i.e. mortgage payment) and taxes is assessed at the company as a whole. That is of course a hugely negative number since they borrowed so much to finish City Center. It is not calculated for individual properties.

---------------
From the perspective of MGM as a whole, they may not talk about Circus Circus very much. Just because it is losing money it is not the major problem of the company. They may feel that closing the casino won't help much because the cost of knocking it down, and the taxes they would owe on the empty land might be worse than running it at a loss. Selling it is an unlikely option since it is so big that few companies could operate it. They may think the land is valuable at some point.

MGM has really big problems. City Center is bleeding money. ARIA is doing terribly. They had an amazing couple of weeks when they opened, but now it is just awful. All of the properties are down, but Mandalay Bay is barely breaking even. Mandalay Bay is dragging Luxor down with it. Monte Carlo is performing poorly (which is a surprise since it was assumed that ARIA would drag Monte Carlo up). The smaller properties like Excalibur and NY/NY are performing at the highest percentage of income over revenue. MGM Grand is doing reasonably well. Steve Wynn's old properties Mirage and Bellagio have weathered the years very well, and exceptional performers.
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Judging by the number Steve Wynn may not build in Las Vegas again. It could take years until Wynn/Encore is profitable in Vegas. The growth rate now in Macau is phenomenal. When they opened it up to foreign investment in 2002 it was a reasonable guess that it would eventually surpass Vegas (which it did in 2006). I don't think anyone would have predicted that it would be this successful. The gaming revenue in first quarter 2010 was greater than Vegas for the whole year 2009.

Singapore is supposed to be off to a great start. Most people are predicting it will easily be the largest grossing single casino in the world by it's first year.
FleaStiff
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July 5th, 2010 at 10:43:33 AM permalink
Circus Circus has two assets: the license and the real estate. Neither one will bring in enough income right now to pay off the City Center Loans or pay the lawyers for the Harmon Building litigation over who was more blind to what was going on because he wiped his eyes with his greased palm.

Things will just struggle along with continued hype about City Center and continued moaning about Circus Circus until the eventual recovery in 2015 or something.
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