Two Way Hard Three | Las Vegas Casino & Design Blog

I keep hearing about how the Fontainbleau is just about topped off. It may just be the angle at which I am looking at it, but that building is supposed to be around 725-735 feet tall. If it's just about done, then that doesn't really pass the eyeball test from the southwest part of town. Maybe it's not as close to done as I have heard. Encore is something like 630 or so, isn't it?

CNBC is reporting that Sheldon, has just loaned LVS almost a half a Billion dollars. More as soon as I hear.

Brian, more on the Half Billion Dollar Man:
http://www.lvrj.com/business/29991254.html

Mike T, Skyscrapercity.com has Encore at 631 feet and Fontainebleau at 735 feet. Vegas Today & Tomorrow has numbers close to these.

Richard Abowitz and Norm Clarke both have good interviews with Steve Wynn regarding the credit crisis. I'm sorry, but I don't know how to link. The sites are - normclarke.com and vegasblog.latimes.com/vegas/

Jeff, very interesting. Thanks. Here are the links:
http://www.lvrj.com/columnists/normclarke
http://vegasblog.latimes.com/vegas/

Tighter slots during downturn?
http://www.lasvegassun.com/news/2008/oct/03/slots-get-tighter-so-do-vegas-retirees/

The Palazzo downgraded all of their video poker paytables that weren't crap already back in April or May, and the Venetian did the same in a series of downgrades through the summer. I'd say it's a pretty safe bet they tightened the slots too, especially since I saw some slot machines open on the same night that a bunch of VP was trashed at the Venetian.

Tightening slots in a tough economy wouldn't really seem like a smart move, but I don't suppose slot managers at locals joints are any brighter than the ones at LVS.

Anyone got any thoughts about the gay focused Hotel/Casino Steve Friess is writing about at vegashappenshere.com? (I'm attempting to cover up for my inability to link, again. I'll see if Lisa can show me how to do that this weekend, so I'll stop embarassing myself).
http://thestrippodcast.blogspot.com/2008/10/this-weeks-lvw-column-flower-tower.html

I think the likelihood of a gay resort becoming reality is very remote. In my opinion, most visitors to Las Vegas, regardless of sexual orientation, are looking for the same things: casinos, restaurants, shows and maybe shopping. Why limit oneself to one property just because it markets itself to gay tourists? I don't believe most gay visitors want to self-segregate themselves. The proposed developer may be underestimating the power of multiple property players' cards at MGM and Harrah's properties. It's tough enough for a stand-alone property appealing to everyone to make a success of it. How could a business that limits its audience to one segment be profitable with a 1,000 room hotel?
Harrah's, MGM Mirage, and probably all the others, market to gay customers(Harrah's more aggressively at Paris). I don't see the point of it, but maybe that's one reason I'm not a Steve Wynn or Jay Sarno.

I thought Caesar's Palace was trying for the gay theme already. What with the stone-chiseled statues, nightly Bette Middler shows, and the phallic columns. I'll Et your Brute big boy!

Will Las Vegas be changed forever by the ongoing economic problems? This is not a normal downturn any more. Harrah's is cutting more jobs on top of the 1,500 Vegas jobs already eliminated this year. MGM has also already cut 1,500 jobs.
The decline in share price of the public companies has been breathtaking. Who would have believed LVS would fall to $23 or MGM to $21.
How will CityCenter be affected? The real crisis will occur when it opens late next year if the condos don't close. The rest of the financing still hasn't been finalized, has it? Same with Fontainebleau. Will it and CityCenter need more foreign money? Will privately held Harrah's make it?
"Bill Lerner, a Las Vegas-based gaming analyst for Deutsche Bank, said some properties have been closing off gaming table pits for extended hours, cutting restaurant hours and even closing rooms in hotel towers.
"All of those carry employment," Lerner said. "Over the last two to three weeks, the behavior of visitors to Las Vegas has changed noticeably. They're spending very differently, and less, than they were prior to that."
http://www.lvrj.com/business/30462154.html

Add Macau's challenges to the mix, and it looks even tougher going forward.
http://www.lvrj.com/business/30462164.html

This storm isn't a sudden shock to the system like 9-11 was with a fairly quick rebound. Is Las Vegas in a situation which will alter the city and region for a generation? What can be done about it? I don't have answers, so input is welcome.

No doubt this is a serious situation - every other week when doing Vegas Gang prep, it seems all the stories are about fail this and problem that (again this time too).

Mike P, it's got to be tough for casino operators to know where to set their video poker paytables. A friend who lives in Las Vegas is an advantage player. When LVS had the best paytables, he and his friends would dominate the machines almost 24/7. When the vp machines were tightened, they left and haven't gone back. LVS may be better off with less play but by tourists who aren't skilled players.

"I think this recession wil be longer and deeper than most others are saying" Warren Buffett

Well, the master has spoken, and the master seems to have been right, when he said this many months ago. MGM and LVS have seen their stock prices fall faster than a gamblers bank roll in Vegas. LVS down a staggering 82%, as some of you might recall, I stated a year ago, this was the single most overvalued gaming company in the world, so I expected to see it fall, but not by this much I'll admit. MGM has seen its stock fall by 77%. And while Wynn too, has taken a beating, its only fallen by a bit over 50%. I think we can say, that cash is king here. The balance sheet of these companies has played a very important roll in what we are seeing here. If Buffett is right, and he usually is, these companies are going to need a lot of cash to help carry them through this long and deep recession. Just last week, Sheldon, was forced to give his company a personal loan of almost a half a billion dollars, in order to maintain their credit ratings, and cash to debt ratios.

Free Cash on Hand...

Wynn - $1.33 Billion
LVS - $800 Million
MGM - $280 Million

I am sure all of these companies will come through this, but there is no question that some will substain much more damage than others when this is all said and done.

As you can see above, Wynn Resorts not only has the most cash on hand to help carry them through this very difficult climate, they also have the least amount of debt by far of any of the major casino companies. And obviously the less debt one carries, the longer their cash will last them. I cannot fathom what the interest payments alone must be for some of the high debt burden companies. In the end, these economic downturns are part of a healthy business cycle. The strong will survive, and the weak may not. When the economy is growing and thriving, it seems like almost anyone can own a casino and make money. But as Steve Wynn has stated so many times on his conference calls...

"You pay me to run hotels in good times, and in not so good times." Steve Wynn

These are interesting times in Las Vegas and the gambling industury, no question. But Vegas will come through this, perhaps battered and bruised a bit, and maybe with less hotels than it started with before the recession. But this too shall pass, Vegas will once again thrive and grown again. But the next 12-18 months might prove to be very, very difficut for many.

Brian, Wynn just does things right. Almost all the offers and emails I get from casinos are generic form letters targeted to players at my level. Not Wynn. Even though it's two years since I've been there, I still get personal emails, written directly to me, as well as calls from my Host. When I got one the other day, announcing several invitational weekends and the New Year's Eve party, I was almost tempted to go because of her personal approach, but I'll wait until next spring. She was hired away from The Mirage a year before Wynn opened. There's another excellent Host I've known for years who originally was at the LV Hilton and then was hired to Wynn from Caesars. I've been very happy with my Host at Bellagio, but no company does as good a job as Wynn in making customers feel welcome. It's got to be the Steve Wynn touch.

detroit -

The LVS players' club had a triple points promotion one day a week this summer, which made their best video poker at the time a positive expectation game. Local "advantage" players picked up on that right away, and management figured it out a few days later.

But there's something more going on than that, and I think it's another small bit of evidence that LVS is really hurting: I've been getting a couple mailings a week from them with offers for slot tournaments and comped rooms since at least this spring. As far as I can tell they are running them just about every week -- the usual deal is you check in and sign up for the tournament on Sunday, play on Monday and Tuesday, and if you're lucky collect your meager reward Tuesday PM.

So what are they trying to accomplish, and why? First, I have to think their convention business is seriously suffering, so they are putting people into comped rooms early every week just to be able to report their usual 97%+ occupancy.

Second, they're obviously trying to make up their lost hotel revenue on the casino floor by tightening their VP (and I'm guessing slots as well) and hoping their slot tournament invitees won't notice.

Well -- I'm a tourist, but I'm not a complete fool and I did notice what they've done. If I actually played their video poker at my usual level it would cost me an additional $30-50 per hour compared to what I would have lost a few months ago. At that rate I'd be paying for my room in 3-4 hours.

No thanks! If I really want to stay at the Venetian or Palazzo I'll just pay for the room and find something else to do with my gambling budget.

Posted by mike_ch

It's a good time for bad times. A shakedown like this can lead the breaking of the near duopoly that has persisted the last few years.

Honestly, if Kirkorian does not use this to increase his shares soon, or make a SERIOUS offer to personally take some of the resorts like he suggested with Bellagio and CityCenter last year, then what? This is pretty much his life's work, so I can't see him abandoning it.

If this road continues, I would not be totally shocked if Kirkorian offered to take MGM Grand, NYNY, and the three Mandalay resorts. He would just have to wait for Columbia-Sussex to reach a breaking point that seems almost inevitable to control one of the Strip's big three intersections (the other two being Flamingo and Sahara.)

Then again, I suppose if I could predict the kind of things Kirk will and won't do, I'd be a millionaire myself by now.

I don't know what will happen. I think Kirk is about out of free cash. And as great as he is at investing, his last several investments have not panned out thus far. He's lost a fortune on MGM-Mirage, and a ton on Ford this year also. I don't know that I see him buying more stock, if he has no free cash to do so. MGM hit $17.01 today, and I thought $50 was a buy! :)

Well, as of today, Wynn Resorts in the largest single publicly held gaming company by market cap. My how the tables have changed. But with Wynn stock down about 50% in just the last 45 days, there are clearly no winners in this group. I think there are great buys, if someone has the time to wait this out, but after the beating MGM, WYNN, and LVS have taken, nobody has much to brag about at this point. I am as optimistic as anyone, but I think we should at least consider, the chance that not every company will make it through all of this. I know that sounds extreme, but take a MGM which is down a shocking 83%, and we have to face the facts here. The gaming industry is a very very expensive to be in, and most of these are high debt burdened companies. I don't know that Kirk can even come to the rescue at this point, as most of his wealth was tied up in MGM stock, and other stocks as well, like Ford, which have done equally as bad if not worse. I was in a hurry, but if my math is right, Kirk Kirkorian has lost approx. $12 Billion dollars, or 66% of his net worth in the last year on MGM stock alone. This does not even take in to account any other major holdings he has from other companies that have declined. Will City Center cause the fall of MGM, will the massive over construction of the Cotai Strip, cause LVS to close their doors. I don't know, these are scary times. Stay tuned, the sequel comes out in the next 3-5 years.

One last thing...

I think the Forbes 500 list will look very different next year.

Steve Wynn on Encore:
http://www.lasvegassun.com/blogs/gaming/2008/oct/09/wynn-encore-will-take-hit-despite-position-strengt/

Video showing a few renderings of Encore. Catch it before it's pulled off YouTube:

http://www.youtube.com/watch?v=PGpO1Zlchis

Mike, thanks for the only good news I'm seeing this morning. The video gives a great preview of Encore's use of light in public areas. It looks contemporary yet European with the vaulted cathedral-like glass ceilings. Encore looks like a real winner so far.

Jeff Simpson, a friend said you were on a Vegas Business show Friday evening and said it is very likely HET will file bankruptcy. Do you mind sharing your thoughts here for us? Thanks.

I was a guest on the Las Vegas TV news show "Nevada Week in Review" Friday evening. I did predict that Harrah's could declare bankruptcy, with the possibility pegged at some place between possible and likely.

I said that barring a cash infusion from Apollo or Texas Pacific, a bankruptcy certainly has to be considered a possible option.

Apollo and Texas Pacific may be unwilling to throw more money into the highly leveraged company.

I've talked to several knowledgeable folks in the casino business who feel that bankruptcy and reorganization may be the best course of action for Harrah's.