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Posted At : January 15, 2009 09:49 AM | Posted By : D McKee
Related Categories:
Illinois,Steve Wynn,MGM Mirage,Architecture,Cloverfield monster,Fontainebleau,Phil Ruffin,Current,Stanley Ho,The Strip,Detroit,Mississippi,Harrah's,Macau
Yesterday saw an unusual -- but altogether pleasant -- change in the Vegas Gang routine, as we taped "on location" from a seventh-floor room in Encore, overlooking Echelon and the increasingly ominous Fontainebleau (so disproportionately massive it looms over its neighbors like Godzilla or Gammera over mere mortals). Both David G. Schwartz and Jeff Simpson joined us by speakerphone, giving the conversation a certain Charlie's Angels vibe.
It's Fontainebleau ... coming to stomp us all! Run for your lives!
Spoilers ahead ...
I'm clearly very much in the minority on the likelihood of a Mirage or Bellagio sale. Cash cows they may well be, but there seems to be a strong consensus that their tires are being kicked and serious talks are underway, as well as that The Mirage has become a stodgy property.
Also that MGM Mirage is a Vegas-Vegas-Vegas-obsessed company and would be willing to sacrifice the Gulf Coast and Detroit markets -- the latter of which it utterly dominates -- to keep the CityCenter bucks a-flowin'. (And why would MGM bail on Detroit and not on the sickly Illinois market instead? Or Tunica? Or ... ? If Alex Yemenidjian would pay $435 million for an Illinois license, what might he put down on actual, operational asset?)
Such a strategy would fly in the face, if not of sense, at least of recent casino industry thinking, whereby you try to maintain strong footholds in the second-tier markets and not put all your chips on Vegas (unless you're Steve Wynn and even he tried it once). It would be like Harrah's Entertainment evacuating Atlantic City to raise money for its stalled Octavius Tower.
And you could knock me over with a feather if MGM sells its Macao demi-concession to partner Pansy Ho or back to her father Stanley, especially after all the hoops MGM had to jump through to get into Macao. Bailing on the world's #1 casino town would be an indicator of extreme desperation bordering on insanity.
Unfortunately, we weren't able to get into the provenance of the urban legend that Phil Ruffin's Treasure Island purchase was just a big-ass/short-term loan to MGM, with "T.I." serving as collateral -- and at 55% interest, no less.
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It's why I think MGM are overall good operators, but I'd be wary of an investment if I was an investing type. The company has come too close to betting it all on Vegas. I think our fair city is going to be the largest casualty of post-war planning mentality once the price of long-distance travel returns to the reality of last year. I'm not even talking about the sprawl, but that we're in the middle of nowhere and all we have for rail is memories of a defunct Amtrak line. Just getting people here we have to ask people to suffer the fares or pump prices that were restricting the range of what was considered acceptable travel.
Basically, our remote location means this city is SO screwed if people decide to conserve oil, unless politicians wise up and help us get ready for that.