Vegas Casinos Crapping Out on Recession
The crapped-out economy has hit Las Vegas hard. With the city’s industry crashing like casinos were Chryslers, everyone from CEOs to chambermaids is muttering that “It’s never been this bad.” And, well, it hasn’t. Gambling revenues tumbled, with the take on the Strip’s tables dropping 15% in January (compared to January 2008). Moody’s Investors Service has repeatedly downgraded virtually every casino company — MGM Mirage twice in a week! — citing “aggressive and substantial debt-financed development activity and earnings pressure from slowing consumer spending trends that began in fiscal 2008.” In short: Casinos went into massive hock to expand extravagantly. Then everyone got The Fear, and blowing five grand on blackjack and bottle service became less appealing. Well, not less appealing, but more difficult to get away with on a regular basis.
MGM Mirage (MGM Grand, Mirage, Bellagio, Mandalay Bay, etc.) is struggling to complete its sprawling City Center project. The company was forced to sell the Treasure Island casino to a Kansas billionaire when banks refused further construction loans. The complex’s centerpiece was to be the Harmon Hotel, a shimmering boutique tower designed by celebrated architect Lord Norman Foster — which was chopped in half in mid-build, reportedly due to construction problems and evaporating condo sales. Even with cutbacks and postponements, MGM Mirage is scrambling to restructure debt and float this thing until it opens in the fall.
The Fontainebleau — a sister property to the Miami Beach hotel — is believed to have enough cash to complete construction and open in October. But both Moody’s and Standard & Poor’s are going negative, and some wonder whether the high-tech, high-style resort will sell enough of the all-important condo units to survive.
Another project in limbo is Echelon Place, which was to have contained Vegas’ very own Mondrian and Delano Hotels. Boyd Gaming (Sam’s Town, Orleans, Gold Coast, Main Street, etc.) had to suspend the project when a chunk of financing fell through. Man, they better not have torn down the Stardust for nothing.
The Sands Corporation (Venetian, Palazzo) has been ousting executives and cutting costs — but it’s also opening casinos in Singapore and, erm, Pennsylvania. CEO Sheldon Adelson (Forbes’ third-richest man in America — last year) has expressed confidence in thundering tones, but he’s already had to pour a billion dollars of his own money into the company to meet loan requirements, and may be looking to offload some of his interests in Macau.
Station Casinos (Green Valley Ranch, Red Rock, Aliante, Boulder Station, etc.) is scrambling to renegotiate with bondholders as the clock ticks toward an April 15 bankruptcy filing deadline. Boyd Gaming offered to buy most of Station’s properties, but Station’s Fertitta family rejected them. Boyd persists, meaning we may have a good, old-fashioned casino family war between the Boyds and the Feritttas. Station’s plans for a luxe Strip property — Viva — have died quietly.
So, who isn’t putting a poker face on panic? Well, Boyd Gaming has enough cash to buy other casinos, even if they have halted new ones. Hilton announced that it will take over the foreclosed-upon Cosmopolitan Towers project as one of the launching pads for its new Denizen hotels brand. Wynn Corporation seemed to be weathering the tsunami, but Steve Wynn’s just-announced divorce from wife (and longtime boardmember) Elaine Wynn could cause chaos. Both have lawyered up — Elaine with Don Schiller, who got one of the biggest divorce settlements is history for Juanita (Mrs. Michael) Jordan. Nothing like watching billionaires divorce to take everyone’s mind off of their own bottom line.