Two Way Hard Three | Las Vegas Casino & Design Blog

October 12, 2008

The Long Weekend Is Over

Posted by Hunter

Las Vegas' long weekend is over... But that's not the end of the line for an industry that has bright days ahead.

Perhaps never more than now, Las Vegas gaming is run by people that are extremely competent and can weather the storm. These companies are mostly well capitalized with good banking relationships, even if they may have to adjust projections that were made in better times.

They are often diversified - granted some more than others - but even if we were to see something like a major Chapter 11 bankruptcy, the great midway that is the Las Vegas Strip is going nowhere.

People always need a place to forget their troubles and relax, in good times and bad. No one is better at that than Las Vegas. The electricity that draws me and so many others to come again and again cannot be shut off - it's part of the American psyche. Yes, we'll see a 'correction'. The seemingly endless acceleration of quality, luxury and prices will slow even more or even be put on pause. That's okay and consumers will welcome the chance at a bargain. They'll see rates and rooms that could have been priced much higher only months before and when things swing back the other way, they'll have tasted the best Vegas has to offer and want more.

Those that believe in Las Vegas will not stop investing in it. That investment might not be a new multi-billion dollar golf course redevelopment project in the near term but you better believe all that remaining Strip land will be built out in the future - it's inevitable.

Right now, you can get some of the best deals we've ever seen on casino industry equity - yes, the companies are not all in the same spot financially and some are probably better investments than others but I think you can count on nearly all of them to head north of their current trading prices.

Personally, I'm sick of the doom and gloom stories. Let's work on fixing the problems and move on instead of harping on disaster.

This long weekend may be over - and there may be a hangover - but the weekend will come again.

I'm betting on Las Vegas.


Read archived comments (22 so far)
October 12, 2008 11:41 PM Posted by chuckmonster

Odds for the shooter.

October 13, 2008 12:14 AM Posted by mike_ch


I mean, really, there's still 6:5 blackjack, $150 show tickets, and all the other little things that have crept up over the years. There's two options, they either begin to stop focusing on the bottom line so much and the "every division must maintain it's own profits" model is replaced with the old loss leader model again, or the circumstances cause them to get even more tight-fisted and deliver less for more. The past year has been more of that latter one.

"I keep raising my prices and spending less, why aren't I making any money?"

What I'd expect to see in the next few years is a renewed look at Atlantic City, the southern resorts like Biloxi, and so on. Every city that falls on hard times puts casinos on the table as an option anymore, and so chances are we'll see some interesting projects come forth in places we haven't expected yet.

Here in the valley, though, no. Other than some Stations, I mean. You heard Jim Murren's line about no new resorts for a decade. Unless somebody who is actively beating the market like Warren Buffet gets involved, we're pretty much going to probably make do with the skyline we have until at least 2012. That's fine with me, with a few exceptions most of our hotels are pretty nice places anyway and I'd rather push off imploding a few of the older ones. And let's not forget that in happier times there were a lot of challenges for the future to keep up with the expected demand. "Worse than it used to be" doesn't mean bad, especially if "back in the day" refers to a time when hotels were pushing the limits of what the market can bear, or if visitor count was pushing the limits of what the region's infrastructure (roads, water use, etc) could bear.

We're a year off from any kind of final judgement. Whether or not the next resorts do well or simply cannibalize the traffic of the neighbourhood is the question. If people really will pay even more than they already are for Aria, then good times. If everyone at the Bellagio just picks up their things and moves next door, causing that hotel to become the next Mirage and Mirage the next Tropicana (under better management), then lowered expectations will simply become the new standard. Either way, the bad news will go away even if it's just because once bad numbers are the new norm.

To me, what's really going to be interesting is when things start getting really scary around here, and the economy of the city can't support the population or amount of resources it consumes. Roadway expansion projects or even the Ivanpah airport might not be necessary anymore.

October 13, 2008 8:14 AM Posted by Hunter

I was expecting you to disagree with me based on the start of your comment but it sounds like you're saying much of what I'm saying.

Of course I'm aware of Murren's prediction. I personally think it's too dire by half, though him being more freaked out would not surprising given his background on Wall Street. Even if nothing new starts for 5 years - so what? The doors will remain open and unlocked at Bellagio.

Today, MGM Mirage's market cap is under $6 billion. Their physical assets alone are worth way more than that, it's crazy.

"Worse than it used to be doesn't mean bad" - that's a big part of what I'm saying.

As for the bad 21 odds and expensive amenities, I see those as a lagging indicator and I expect them to start to drop away. The number of free room night emails I've gotten in the past two weeks is insane. Basically every place on The Strip is sending them out, trying to fill their rooms. These are good deals for people that want to try Palazzo, Bellagio, and Wynn Las Vegas that previously could not.

Of course, some operators will play this wrong and try to simply deliver less, as you said. Those operators will not be rewarded, it's a bad play.

Those that continue to invest in keeping their places up and service levels high will be fine.

October 13, 2008 9:43 AM Posted by detroit1051

From a newsletter regarding August on the Strip:
"Strip slot win dropped a mighty 15.58 percent, but casinos clearly loosened machines as win percentage declined 11.92 percent, from 6.72 to 5.92 percent."

October 13, 2008 11:51 AM Posted by Jeff in OKC

I agree completely, Hunter. Things may change a little along the way, but the Strip will continue to be the most exciting place on Earth, and we'll still love to follow it.

October 13, 2008 12:07 PM Posted by Mark D

Oil prices are dropping fast, so there might be a partial turn-around, at least with the tourists who were effected by high transportation costs.

October 13, 2008 1:40 PM Posted by Brian Fey

Ok, i'll give my 2-cents. I think the opening of Encore, FB and CC, could spark another wave of new visitors. If you look at the wave of 1993, and the wave of 1998-2000, people flocked to Vegas to see the new properties that were build during each wave. Why will this be any different? The market was up 940 points today, the world is not ending here. I've been saying this for months, I guess it occured to Hunter this weekend also. Vegas is not done, not by a long shot. Things may cool down, and that's not all bad. Maybe that could be a good thing. Will we lose some weaker players, maybe, but may the best man win. Here is to you Steve Wynn, keep playing it cool, and play the game for the long run. Laugh, but my biggest fear for Las Vegas's long term viability is actually its fresh water supply.

October 13, 2008 3:43 PM Posted by mike_ch

"Why will this be any different?"

Different business tactics (see above, loss leader versus profits in all divisions). Different travel trends and a different image for the destination targeting a different market.

Remember how hard it was to shake the image of Family Vegas? It's going to take as much time to shake the image of exclusive, bottle service, "you're only as good as your bank account" Vegas. Maybe even more, since people tend to swear off a place on a bad experience faster than embrace it on a good one.

I don't invest, but if I did invest on this industry I'd say Wynn, manufacturing, and Boyd are probably good long term bets. I said that before things really hit the skids, too. I was concerned about Boyd after Echelon was halted, and that project is still in trouble if they don't refocus, but going ahead and leaving it like it is for a while looks to be a good move.

If you want a bit more risk, try LVS. You're taking a bit more of a chance, but you know who they're marketing to and if it pays off it'll pay off big.

All these companies are diverse in their holdings, either nationally or with a fairly substantial presence in Macao. Hunter talks about MGM's assets but the perceived value of those assets isn't worth much if nobody is interested in buying it, and they're much more anchored to Vegas than the companies I listed above.

The product is popular. But I think people will prefer to enjoy the product in their preferred setting, culture, climate, and so on whether that's Macau or AC or what have you, than run out to the desert. The exception is the SoCal market, which will continue to come because it's both different enough from the local casinos and not too far away. The foreign markets may also come and see what's going on as the dollar continues to become worthless, though Vegas will obviously have to fight with the likes of Dubai and Disney especially for European travellers, so we'll probably just get some of them.

At least a slight return to family entertainment seems somewhat inevitable if we're too look abroad for visitors, since the fact is people aren't going to leave their children out of globetrotting vacation aside from the very young. So I guess we'll come full circle when PURE and Sirens of TI are replaced with family attractions.

October 13, 2008 6:29 PM Posted by Dave

Try staying a couple of nights at Palazzo and tell me if you see an "endless acceleration of quality" It was mediocre at best.

October 13, 2008 6:33 PM Posted by Hunter

Heh, I think my thoughts on quality when it comes to Las Vegas Sands Station (Palazzo) are pretty well known.

Still, despite that, it's not all bad. I'd rather be there than Harrah's, Paris, or Bally's.

October 13, 2008 6:48 PM Posted by mike_ch

I was just there on Saturday and it seems nice enough.

I hate to say this kind of thing because I know with my luck someone from LVS is reading this and going to take it negatively, but Palazzo has this "Bellagio For Less" kind of vibe. That may come across as insulting, but it's not meant to be because I know there's a lot of people who want that but can't afford it. It's fairly well compressed with everything in a smaller footprint than the sprawling hotels, and so far it's being kept up. I even noticed seasonal decorations around the Venetian connection. It's not as elaborate as the Bellagio conservatory of course, but it's there.

This board seems to attract a high limit, big earner kind of crowd, or at worst a middle-class crowd that isn't afraid to spend the money to go the whole nine years when they come to town. To people like me, and I've checked in the most often at Treasure Island, Luxor, and Mandalay, well Palazzo looks pretty nice.

Venetian's layout, especially with the Venezia, is quite a mess; but I walked all over it about two weeks ago and enjoyed myself because it's still one of the most thoroughly themed hotels left. There's still a guy playing an accordion in the lobby, performers in the mall, and so on. I know I was one of the few people who liked themes for a while, but from reactions to my last StripWalk and posts on VegasTripping it seems more people miss them.

October 13, 2008 6:55 PM Posted by Hunter

I make jokes like 'Las Vegas Sands Station' but what I really mean by that isn't that it isn't a 'nice enough' place, just that it's devoid of things to make it special.

I totally get what you mean by 'Bellagio for less'. I totally see that. To put a cherry on top, the jewelry store right there in the Venetian connector's logo is *exactly the same* as Bellagio's logo. Always cracks me up when I walk through.

The rooms at Palazzo are nice and they are large. I've only stayed there twice and while it's not my first choice, it's not a bad choice.

I had a good meal at Carnevino and a so-so meal at Dos Caminos the last time around.

October 13, 2008 9:44 PM Posted by mike_ch

The other thing I thought I'd mention, since I forgot to mention it, is I think there's a subtle Asian motif under the obvious European one. Espressamente illy has this sort of central Tokyo deli thing going for it. Mainland, aside from the checkerboard floor that appeared to escape from Johnny Rockets, finally eschews the popular bamboo and papyrus paper look of so many Asian restaurants and gives you a sort of modern-day far east look with the clean, almost spartan kind of look.

I realize LVS is going after the Asian high rollers big time but I appreciated that someone finally built establishments that look like actual places you might see on a trip to a major Asian city, instead of the typical forced "this is an Asian restaurant" interior with all the traditional symbols.

October 14, 2008 12:28 PM Posted by Andy S

I think if the US economy is still struggling when CC opens it will be interesting to see how it does. Does anyone know how there condo sales have been doing recently? Even if I had the cash to buy one I would rather go and stay at the Wynn.

Encore looks amazing though and I am sure that will do well.

Re Palazzo, I think it is quite nice, not up to Wynn standards though.


October 14, 2008 1:30 PM Posted by CasinoResortFun

The biggest issue I've seen with Las Vegas Casino Hotels in the last few months is a hodge podge of deals and specials. There is no doubt that some of the places I've looked at are starting to respond to the downshift in the economy and that's good. Yet, I like to live it up a little in Las Vegas when I head there. More than just a hotel room with a coupon to a $2.99 buffet and a parody show of Elvis. Can some one point me in the right direction of a deal with the Mirage, the MGM Casino or some place like that, in which a decent offer comes through?

I'm here and willing to listen.

October 14, 2008 1:35 PM Posted by Hunter

In the past two weeks I've gotten free room offers from The Mirage, MGM Grand, Luxor, Mandalay Bay and NYNY. Is that what you mean?

October 14, 2008 5:25 PM Posted by mike_ch

Wowza. I've only gotten MGM Grand for the middle of the dead period, and South Point for a few weeks from now. But those arrived some time last month.

I wonder if the local address is doing me in?

October 14, 2008 5:27 PM Posted by mike_ch

Just checked, I get stuff from MGM and Mirage for like $72 a night. I believe these come from the email marketing lists that you don't even have to come to town to sign up for.

October 14, 2008 6:35 PM Posted by Hunter

Just got another, from Wynn Las Vegas.

I do think the SoCal zip code helps sometimes.

October 15, 2008 3:43 PM Posted by motoman

Well, that and the fact you're there so often, Hunter. And while I know nothing about your level of play, no doubt that makes a huge difference in offers as well.

When I called about a summer offer, Wynn's folks told me they had 30 different offers going at that time for various levels of customer (no idea if the agent made that number up or was just guessing, or what....). Mike E's Fairway Apartment had Chinese snacks for a reason.... (I, OTOH, *never* qualify for free room offers.)

October 15, 2008 8:18 PM Posted by Mike P.

I guess I resemble mike_ch's remark on another thread, since we just got back from a stay at Bellagio for a meeting at Wynn. We walk everywhere though, so we did venture outside Bellagio/Wynn and I strolled through most of the mid-strip casinos several times.

Maybe it was just me in a not so cheerful mood, but the highest end joints seemed decidedly somber last weekend. You could fire the proverbial cannon in Wynn the mornings I was there without hitting anyone except maybe a lonely dealer, and Bellagio wasn't much livelier. Caesars casino on the other hand was packed on Friday or Saturday evening, as were Harrah's and Bill's.

If the world's economy really goes into the toilet I could see the higher end properties suffering more than a lot of people have predicted. Watching 40% of your 401k's value disappear like my wife's undoubtedly did last week (I'm afraid to look) isn't exactly going to encourage frivolous spending on pointless luxuries and crappy slot machines.

October 16, 2008 3:02 PM Posted by mike_ch

Could Excalibur's weekend occupancy be sagging?

I mentioned this on my Twitter, but MGM sent out a mass mailing advertising Thursdays for $1, in the same vein as Harrahs $.02 Tuesdays. But here's the thing, both require a three day stay, and Tuesday is dead centre in the off-week. You can book as far back as Sunday night, or as far ahead as Thursday night. Those crucial Friday and Saturday night bookings that are the biggest profit makers for them are unmolested.

But with Excalibur's deal, you can book Friday and Saturday and get Thursday for just an extra buck. It's like it's daring you to take a day off work and have a three day vacation. It potentially adds a bit of value to what is originally a Friday/Saturday booking.

I leave it to the audience to decide if this is simply just a happening, or whether it's a sign of low weekend occupancy. All I know is that these companies are known for numbers crunching, and when Harrah's started this thing they certainly didn't pick Tuesday and a 3 day stay out of thin air.