Two Way Hard Three | Las Vegas Casino & Design Blog

October 27, 2010

Let The Bummer Years Begin

Posted by Hunter

The Fontainebleau is about to open.

A re-invigorated Plaza project has broken ground and Boyd is halfway through putting up a gorgeous red-gold glass curtain wall on Echelon Place. Jim Murren is a semi-successful investment banker in Connecticut, the Marnell's own the recently joined Rio/Palms complex and Nevada's recently elected junior senator is attending the groundbreaking of a monorail extension that will bridge McCarran Airport, The Strip and Fremont Street.

Can we fast forward to 2017? I'm sure that's what some Las Vegas casino operators would wish for. It's hard to blame them.

Things look a bit sour for Las Vegas - August numbers notwithstanding, let's be honest - some of the city's best boom-time customers don't have any more money to spend on bottle service and $500 dinners at SW. Sure, the biggest players haven't lost enough to kill their gambling habit but that mid-tier backbone - successful young people, boomers and a smaller segment of folks truly blowing the rent on a weekend in Vegas - they're still pretty fucked up from this recession.

Well, at least it's not as bad as it is in Atlantic City where the top operator doesn't even want to own the other half of their property. In my mind, AC is toast.

As someone that has spent the last ten years as mostly excited about Las Vegas and now sells a product that is inexorably linked to the city, I have to say that things look very tough for the next few years.

A CB Richard Ellis study publicized today really laid out the bad news. The market won't be able to handle the massive increase in supply for some time. Thanks a lot CityCenter. At least we don't have any more rooms coming online anytime soon... Oh, crap... Thanks a lot Cosmo.

The Cosmopolitan will be the last property for awhile, and that's almost certainly a good thing. In a way, they may end up with an advantage - they can be the 'newest property on The Strip' for five years or more. That title worked great for The Aladdin. Oh well, whatever, nevermind.

Some of the issues mentioned in the report are structural - air traffic is more difficult than ever in the era of shoe-bombers and naked body scanners. Asian baccarat is slated to increase but that alone is not a market savior. The formerly solid underbelly of Las Vegas tourism - that combination of California drive-ins along with southern and midwestern vacationers... well, they're hurting... and that's not going to change anytime soon (damn that Obama-Reid-Pelosi-Boehner-Palin-McCain cabal!)

It's easy for Wynn to charge $200+/night for a weekend night when the town is half full but when Luxor, Excalibur, Monte Carlo and Treasure Island are all offering rooms in the sub-$50 range (sans the ridiculous resort fees), those rates are harder to justify... and how anyone could feel good about a $150/night room at Aria or Vdara mystifies me. Just say no.

But it's not the Wynns of the world I'm worried about. Aside from maybe Las Vegas Sands, they're probably best positioned to ride this turbulence out. As a lover of the history of Las Vegas, it makes me a little sad to see how little of their revenue now comes from the 'Gambling Capital of the World'. In quarterly earnings today, LVS reported that barely 15% of their revenue comes from their two Strip casinos. With Singapore on the rise, LVS is again a gaming company to watch, even if their numbers don't yet match Chairman Adelson's bluster.

Why am I writing this? I dunno. For whatever reason, a few stories today sucked me in and I felt compelled.

See you Saturday.


Read archived comments (4 so far)
October 28, 2010 7:22 AM Posted by hail2skins

Nice write up Hunter. The golden years of Vegas were really the 90s, and at the end of that decade after Bellagio, MB, Venetian, and Paris opened, I started to wonder: How much nicer can they really make these places?

I think whenever the economy gets back on track and construction starts up again, Vegas needs to go back to the themed hotels or at least come up with a new mousetrap to enhance the appeal of the Strip again. I'm getting a little weary at seeing the same-old glass towers. The only operator that would probably still command my attention with a project would be Wynn, and I think even he would have to come up with a hook if and when he decides to develop another Vegas project.

October 28, 2010 10:26 AM Posted by AxeATL

Yep, it looks like a long road back for Vegas. Great article Hunter.

Just for fun, I will take issue with one point in there. I stayed at Vdara for $150 a night(Sat., Sun, Monday) and thought it was a great value. We enjoyed the location, easy access to Bellagio/Aria and the room was beautiful. Plus, I know we all talk about sub $50 rooms at the likes of TI, Monte Carlo, etc. but when I was booking those rooms Ti, Monte Carlo, NYNY, etc. were $79, $89 a night for basic rooms. Even the new rooms at the Trop were $60/$70. I felt that the $150 for a room at Vdara was well worth it. If I'm spending the time and money to fly to Las Vegas, It really doesn't matter whether the room is $89 or $150, I want it to be nice. $60 bucks a night is not a big deal for most people going to Vegas.

For the record, I'm a person that used to only go to Vegas on business but was so impressed with the architecture at City Center that I decided to take my wife out for a long weekend. She had no interest in Vegas before but loved Vdara. I got so interested in the business of Vegas that I started visiting this site regularly and began listening to your podcast all the time.

October 28, 2010 12:02 PM Posted by Chris77

The only thing I might disagree with in this article is that the description of Vegas in 2017 may be skewed. When I first read it, it felt like what Vegas would have/could have/should have been TODAY. The idea that Vegas will eventually go "back" to the way it was is, unfortunately, probably not the most likely outcome.

Hopefully something will eventually be done with the half-constructions of Fontainebleau, Harmon, Echelon Place, Caesars' Octavius Tower, and the St. Regis condos at Palazzo - but the promises of places that never even broke ground, like the Plaza, W Las Vegas, Las Ramblas, the Conrad/Waldorf-Astoria, and Wynn's lakeside resort district, are essentially gone for foreseeable future.

If you look at the Vegas boom from 1997-2007, I don't think we will see a decade like that again in our generation. Certainly 2007-2017 is not starting out on the same trajectory. We may be lucky just to prevent Vegas from becoming another Atlantic City or Detroit over the next 7 years.

I moved here in 2005, and while I am generally optimistic and plan to stick around long enough to see if the Vegas dream of the past decade can be reinvented if not recovered, I agree the "bummer years" are definitely here. I sometimes find myself feeling like Steve Friess did when he suggested in July 2009 that, for locals at least, "Vegas isn't fun any more."

November 1, 2010 7:39 PM Posted by ooo000

While the added room inventory may be a headache in the short term, I think the "new" places like Aria and Cosmo will help salvage Vegas' image and marketability in the short and long term as well. Tourism is trendy, and Vegas is already coming off it's peak, so the last thing the town needs is for its rooms, convention centers, and public spaces to be seen as stale relics of the 90s. At this rate, Vegas will not only have an economic disaster to deal with, but in turn, a PR disaster in fighting the bad press and maintaining the image that the town in still worth going to. "Shiny" new places will help fight that stigma. I for one like the idea that I can go stay at a brand new Vegas resort that was designed for $200+ room rates for $150 or less in many cases. It might be hard to stomach for the operators, but I think that's going to be the saving grace for Vegas in the coming years: Discounted luxury that probably was never intended to be doled at the prices you are paying, and certainly for less than you would pay in any other major city. With the hype gone, you're just going to have to give people a reason to come again, and its still hard to beat Vegas for a leisure/party weekend when it comes to price, logistics, and general simplicity of finding great places to eat, drink, etc. Those "new" places will help keep the town competitive with modern options in other cities.