We're back with another installment of 'Simpson on Vegas' and this time around, Jeff examines the situation in Downtown Las Vegas.
This is part one of a two part series. Continue after the jump for the article.
The present and future of Downtown Las Vegas isn't looking good and I don't like that, as some of my favorite Las Vegas memories took place in Glitter Gulch. In the early '80s the Golden Nugget was my favorite hotel; I loved walking from one Downtown casino to the next, the Nugget cafe's late-night steak special and driving on Fremont Street at night.
Unfortunately, the evolution of the city makes it increasingly clear that it will be difficult for Downtown to survive as a robust casino market. In this column I'm going to take a look at what's gone wrong Downtown and then in a following column I'll discuss some ideas that might help the market prevent eventual irrelevance.
The last two decades-plus have been hard on Downtown, as the modern megaresort boom that started with the 1989 opening of the Mirage has sucked much of the life out of the Fremont Street-centered market.
The competition with the Strip has been one-sided, as all of the new properties and almost all of the renovation, remodeling and expansion dollars have poured into Strip resorts.
The numbers are grim. Comparing the state Gaming Control Board statistics from fiscal 1990 (July 1, 1989 - June 30, 1990) and 2009 (July 1, 2008 - June 30, 2009) it is clear how Downtown has deteriorated. In FY '90, Downtown had 21 casinos generating $1 million or more in gaming win (the amount won from gamblers); that number dropped to 16 in FY '09. In FY '90, Downtown casinos won $642 million, a number that dropped to $548.2, a number that would obviously be much smaller if it were adjusted for inflation. Room revenue increased by 41 percent, from $107.5 million to $151.6 million; average room rates increased from $37.84 to $51.63. During the same fiscal years the number of Downtown casino employees dropped from 17,835 to 10,384.
Many of the Strip's increases during the same two decades have been meteoric. The number of casinos dropped slightly (from 41 to 38) but gaming win more than doubled, from $2.28 billion to $5.33 billion. Room revenue skyrocketed from $662.3 million to $3.37 billion; average room rates jumped from $56.05 to $124.75. The number of Strip resort employees increased from 68,375 to 98,711.
Strip casinos haven't been the only competition for Downtown. As Las Vegas population grew during the past two decades and people settled farther and farther from the historic center of town, smart casino owners built locals casinos closer to where folks lived. Of course locals casinos existed before 1990, as the Showboat, Sam's Town, Bingo Palace (later Palace Station) attracted a lot of business from Las Vegas residents, but many Las Vegans played and partied Downtown when they lived only a few miles away. But as people moved farther away and developers built dozens of local casinos, locals gravitated toward nearby casinos, a trend that still continues, as proximity continues to be the strongest factor determining which casinos locals will visit. Downtown's ability to compete with suburban casinos was hampered by crime concerns (because of Downtown's higher crime rate and its homeless population) and cultural considerations (Downtown is bracketed by neighborhoods with the Las Vegas Valley's largest concentrations of blacks and Hispanics, a factor that may play into some residents' bigotry or fear).
While competition from the Strip and locals casinos have hurt Downtown, the market's weak, undercapitalized casino owners have been unable to respond. The market's big players who controlled the market's two big money-making properties, Steve Wynn at the Golden Nugget and Jack Binion at Binion's Horseshoe, are long gone. The Nugget has changed hands three times (from Mirage Resorts to MGM Mirage, then to Tim Poster and Tom Breitling and finally to Landry's Restaurants). Landry's CEO Tilman Fertitta built a new hotel tower and freshened the hotel's restaurants and look, but the changes stand out as the only major improvements made to a Downtown hotel in well over a decade.
The Horseshoe's ride has been sharply downhill, as Jack Binion relinquished the property to his sister Becky Behnen, who promptly ran it into the ground. Harrah's stripped away the World Series of Poker and the Horseshoe brand then left the carcass of the renamed Binion's to West Virginia-based MTR, which left with its tail between its legs after a few years of Las Vegas losses. Slot bar and Four Queens owner Terry Caudill bought Binion's but was not capitalized well enough to withstand the recent recession and had to close the property's hotel.
Aside from the Golden Nugget there are few bright spots in the Downtown casino market. Boyd Gaming owns Main Street Station, the California and the Fremont, but the three casinos are obviously far down the company's priority list. No significant renovations or major reinvestments have been made at those Boyd properties in many years. The El Cortez had a successful, low budget renovation but has really just carved out a niche as a very small, decent retro joint. Caudill spent some money renovating the Four Queens when he first bought it, but improvements have slowed as the economy and Binion's squeezed finances.
The rest of the downtown market is in horrible shape. Fitzgeralds is owned by Don Barden, another undercapitalized owner who has allowed the property to languish for the better part of the last decade. Three hotels formerly owned by Downtown casino legend Jackie Gaughan occupy the bottom of downtown's barrel. Now owned by the Tamares Group, an owner obviously more interested in the real estate under the casinos than the hotels themselves, the Plaza, Las Vegas Club and Western have become more and more dilapidated, with the Western also having closed its hotel. Finally, the Lady Luck, owned by real estate developer the CIM Group, has been closed for more than four years as Las Vegas city officials have allowed reopening deadlines to pass as the owner whines about the challenges of redeveloping the property in a tough economic climate.
Tough competition from the Strip and locals casinos and a bunch of undercapitalized and/or disinterested owners have sucked a lot of the life out of Downtown's once proud casino market. Can it regain its primacy? No, but it can be revitalized, and I look forward to sharing some of my ideas for keeping Downtown casinos relevant.
-- Jeff Simpson, July 2010