New Yorker economic columnist James Surowiecki puts current consumer-spending strends in perspective -- and what he finds should gladden the hearts of casino owners. Basically, he finds historical evidence the current tendency toward thriftiness will soon pass. Of course, when Americans' savings rate (now 6%) dipped below 0%, that should have been a canary-in-the-coal-mine moment for heedlessly expansionist gaming moguls. But they'd probably laid off the canary in order to "maximize shareholder value."
If wishing made it so ...
... Chicago would have had a casino a long time ago. Some city parents think they've found the perfect site, but it's still a long shot. Just keep it out of the Loop, OK? Seriously, downtown Chicago is looking livelier than it has in a while and doesn't need a big-ass casino plunked in its midst. The likelihood that it would be Windy City version of, say, a classy anomaly like MGM Grand Detroit is pretty remote.
So much for speculation that Australian casino magnate James Packer would get into the running for Fontainebleau. Seems that Packer is buying upCrown Ltd. stock instead. (Indeed, why would Packer write off his F'bleau investment, then double down on the failing development?) Packer has raised at least $772 million by disposing of non-gaming assets and appears on course to make a takeover bid for Crown, of which he owns 40% at present.
That's the latest; namely, that Penn National Gaming will put down less than $300 million as a "stalking horse" bid on Fontainebleau. Penn would also be on the hook for the costs of the project's bankruptcy proceedings. Potentially getting a Strip resort for less than 10% of its cost sounds like a good deal for Penn ... until you think about the hundreds of millions of dollars (possibly as much as $2 billion) that stand between F'bleau and the finish line.
Sue Lowden evidently didn't get the memo that Mike Ensign is no longer writing fat campaign checks at Mandalay Resort Group. How else to explain the Archon Corp. treasurer's loud and frequent fealty to Ensign fils, the ethically challenged junior senator from Nevada? Lowden's proclamations provided an irresistible temptation for Democratic Senatorial Campaign Committee spokesman Ed Schultz, who sniped, "Sue Lowden's support of John Ensign may have fundraising value to her, but it is a reflection of her own character and fitness for office. She has shown more fidelity to him, than he has shown to his own wife." (Lowden is gunning for Sen. Harry Reid's seat.)
In her capacity at Archon, Lowden could line the younger Ensign up with a dandy post-senatorial job as a casino greeter at her Pioneer Gambling Hall in Laughlin. (As for Lowden, at least she's off Jon Ralston's "Chicken List," after gracing the Face to Face set. Your turn, Sheldon Adelson. Does Sue Lowden have more huevos than you?)
The perils of Packer. Reeling from a $1 billion loss on his overseas casino misadventures, James Packer and his Crown Ltd. are putting some of their Melbourne land on the block.
Not buying it. Although MGM Mirage CEO Jim Murren may have predicted that CityCenter's premiere would increase Vegas visitation by 10%, but gaming analysts aren't having any of it, especially when all the new room capacity is at the high end. Also, it's remembering that the 1998-2000 roll of megaresort openings and the 2005 debut of Wynn Las Vegas coincided with robust U.S. economies. Andrew Zarnett advises casino bosses to look at current numbers as the new baseline -- which sure beats pining for the vertiginous and unsustainable levels of two years ago.
Macanese machinations. Conventional wisdom on the advisability of floating IPOs in Hong Kong continues to seesaw. The Wall Street Journalruns the numbers and finds gaming stocks defying the market's downward trend. Which is good news for Steve Wynn and possibly even Las Vegas Sands' public offering, which is taking forever to reach the launch pad.
A flurry of good news to end the week, starting in Macao:
September, the first month affected by a relaxation of severe visa restrictions imposed on the mainland, saw a 53% jump in Macanese gambling revenues. In terms of market share, Stanley Ho opened a big lead on Sheldon Adelson, 30% to 20%, with Melco Crown Entertainment close behind with 16%. The remainder of the market was divvied between Wynn Resorts (14%), MGM Mirage (10%) and Galaxy Entertainment (8%).
Is Melco's City of Dreams (above) eating into nearby Venetian Macao's business? On the surface, it certainly looks plausible. Given the immensity of the facilities he's building on the Cotai Strip™, Adelson ought to be getting more bang for his pataca.
Vegas hearts gays. Earlier today, I was asked to reflect on my nearly 11 years in Las Vegas. It's been full of surprising twists of fate -- who ever thought Steve Wynn would be forced out of the Mirage brand he'd created, just for starters?
But I sure as heck never imagined I'd open my e-mail box at work and find the following casino promotions, all keyed to National Coming Out Day (Oct. 3):
"Two Queens Beat a Straight" (New York-New York)
... or the slightly more innocuous ...
"COME OUT and Celebrate at Luxor"
(Luxor was smart and didn't offer Criss F. Angel tickets as part of the, uh, package)
In the Vegas of even a few years ago, "Boys' Night Out Package at Excalibur" would have had more of a frat-party connotation. MGM Grand plays it safe with a "His or Her Getaway" which sounds like a generic singles-oriented deal. Even so, we're actually seeing progress from the days when Vegas marketed itself as a synonym for a very debauched and jaundiced vision of male heterosexuality.
There's nothing like a depression to make this a party town of equal-opportunity decadence. After all, LGBT dollars spend just as fast as straight ones.
$545 a night. That's what Mandarin Oriental is asking. If you read the fine print, you'll note that (through March 31), if you buy a room night at that rate, you'll get a comped night, too. Which makes the effective rate $272 and change. By current standards, that's still steep ... but maybe staying in a 392-room hotel instead of a 4,000-room behemoth is an intangible added value. What do you think?
Still snowed under with non-S&G commitments, but here's a brief dispatch. First, with apologies to Woody Allen ...
"The federal stimulus package is so bad"
"Yes, and such small portions."
That's the sum and substance of this diatribe, penned by the old biddies over at the Las Vegas Review-Journal. The federal stimulus dollars which the R-J opposed (as did its man-crush, Gov. Jim Gibbons) aren't trickling down in sufficient numbers for the editorialists' liking.
Ergo, 13% unemployment and a housing market that's "years away" from recovery are things from which Uncle Sam is meant to rescue us. Yes, and never mind that the real culprit is the overreliance of Nevada on a service economy, plus insane overexuberance in the real estate sector -- two phenomena for which the R-J has never had a discouraging word.
Mistaking one owl for a winter, R-J Publisher Sherm Frederick goes into full doom-and-gloom mode. His can't-miss economic barometer? A half-full flight into Las Vegas. (From Austin. On a Tuesday.) I've been flying into and out of this city for nigh upon 12 years and many's the half-full flight I've taken into McCarran International Airport. It's a side effect of Las Vegas being so liberally serviced by the major airlines.
Also, Frederick's half-baked "analysis" reeks of that local entitlement mentality whereby Americans are obligated to spend their money here -- during a recession, no less. (Maybe more of them would do so if we didn't continue to shift our tax burden onto their shoulders.)
We've got to take our lumps with the rest of the country and, as I've pointed out several times before, Southern Nevada would be weathering the current doldrums much better had it not been for an insanely euphoric attitude in our business community, with its pie-in-the-sky economic models. Harrah's Entertainment claims that, in the course of its mega-optimistic LBO, it projected a worst-case scenario in which revenue fell 30% and Harrah's came through just fine.
I don't believe it. Either that or Gary Loveman needs to sack his number-crunchers and find some ones who use real math.
Trouble at Cannery. Who knew? Things seemed to be going pretty well for them. But President Tom Letterohas been demoted from chief operating officer to CFO. His vacated portfolio will be taken up by Xavier Walsh, from Crown Ltd. Is minority shareholder James Packer flexing some muscle? Or has Cannery Casino Resorts decided that what works for Crown in Australia might be worth trying in Nevada and Pennsylvania?
Harrah's attempt to play hardball with its dealer unions has caromed off the company's noggin. The American Federation of Teachers is pulling its convention business from Harrah's-owned properties until contract negotiations with the dealers at Bally's Atlantic City and Caesars A.C. You might say that Caesar's fine Roman nose has been cut off to spite his face,
A provocative question is posed by Dr. David G. Schwartz. If there are fewer slots and table games on Nevada's casino floors, does this bode an ongoing decrease in casino revenue? Prof. Schwartz is far better educated than am I in these matters ... yet it seems that the proposition boils down to More gaming positions = More revenue.
But how many casinos are running at 100% game usage even a small part of the time? Also, with penny slots yielding higher hold percentages than their nickel and quarter brethren, denominations are trumping sheer numbers. Lord knows, people are drawn to those penny machines as though to a spider web because the (perceived) value overrides the (documented) less-favorable pay tables. In any event, Dr. Schwartz's in-progress study promises to be one of the most interesting casino-related documents emerging this year.
Remember how gambling revenues in Macao during July were up 3% from last year (the first positive comparison this year)? That was soon followed by the news that numbers for the first half of August are even more encouraging still (+20%). Though Macanese casinos are on track for a $1.5 billion August, analysts urge caution, noting that the first half of August '08 was exceptionally weak.
Still: Wherefore this sudden resurgence?
Perhaps it's the delayed effect of a February loophole that allowed Guangdong Province residents to circumvent a ban on travel to Macao on Hong Kong visas. Whatever the case, business should get better still on Sept. 1 when, the Macau Tourism Council says, restrictions on Guangdong Province will be loosened even further. That's music to the ears of every casino boss in Macao, needless to say.
Sheldon Adelson, in particular, has fallen in clover. This revelation comes just as he's putting the finishing touches on a planned IPO on the Hong Kong stock exchange (with Steve Wynn following suit). The stock offering, it is hoped, will generate sufficient liquidity to finish a quartet of stalled hotels on the Cotai Strip™ (with five more to come). Right now, the area looks like an outsize version of Miss Havisham's wedding, "leaving swaths of the nascent Cotai Strip covered by steel and concrete skeletons," in the words of Bloomberg News. Macao doesn't need more rooms right now. However, Adelson sure could use the lucre from the casinos onto which the hotels are piggybacked.
But what of Stanley Ho? While the casino baron ails, Bloomberg has unpacked Dr. Ho's June address to G2E Asia, in which he laid into his U.S.-based rivals. “The success of one market model cannot be migrated to another ... Ignoring Macao’s special characteristics and duplicating a Las Vegas or an Atlantic Citywould not be a successful strategy.” (The article also minces few words about the elder Ho's triad associations.)
Those of us who scoffed at Ho's antediluvian casinos are finding that the comparably ancient oligarch is having the last laugh, even if it may be from his deathbed. “The Macao audience is less focused on the ancillary things around gambling. Stanley, with his wealth of experience, understood that better," says Thornburg Investment Management analyst Alex Motola.
Meanwhile, various Ho clan members may be at daggers drawn. Favorite wife Angela Leong is the perceived successor, but daughters Pansy, Daisy and Maisy Ho (no, I didn't make that up) aren't going to step aside quietly, from the looks of things ... especially since Leong is only two years Pansy's senior. SJM CEO Ambrose So is also being tipped as a potential dark-horse heir to King Stanley's throne.
Business as usual at Hotel Lisboa.
But how would the Macanese government cotton to the notion of Pansy Ho controlling both the SJM concession and half of the MGM one? A third concession could be up for grabs if City of Dreams fails to perform, thereby becoming what Melco Crown Entertainment CEO Lawrence Ho calls his "endgame."
His father's death could also set off a philosophical war between the tried-and-true Stanley Ho business model, time-worn though it may be (and likely to be championed by Leong and So), and the Vegas Lite approach in which Lawrence and Pansy have dabbled. But with the Ho family having its fingers in three casino pies (MGM, Melco, SJM) simultaneously, they'll come out winners no matter which way the pie is sliced.
Stanley Ho's newest and oldest progeny: Grand Lisboa and HotelLisboa.
From Malaysia to Monticello. Do you recall those stock sales by Genting Bhd insiders a while back? At the time, it looked as though the money would go toward an acquisition of MGM Grand Macau. However, it now appears the lucre will purchase a stake in struggling Empire Resorts. That's the company whose executives were luxuriating in the low-tax suburbs of Las Vegas -- even though Empire's sole gaming asset was a racetrack in Monticello, N.Y., a full continent away.
J.P. Morgan has raised its 2010-11 cash flow estimates for Melco Crown Entertainment's $2.4 billion City of Dreams megaresort, bringing projected return on investment into the 11%-11.5% range. That comes in the wake of good news that gambling revenue in Macao was $1.2 billion in July, up 3% from last year. That's the first positive comparison of 2009.
What's still more stunning is July's sudden parity between Macanese operators. Stanley Ho commanded 23% of market share but Las Vegas Sands was nipping at his heels with 22%, followed by Melco Crown (18%), Wynn Resorts (15%) and MGM Mirage, leapfrogging past Galaxy (10%) into fifth place with 12%.
Adelson wins one. Sands CEO Sheldon Adelson has vanquished at least one litigant. A federal district court judge scotched former Adelson flunky Moshe Hananel's claim on a share of Sands' Chinese revenues. The former Interface Partners International exec sought credit for having the Sands-in-Macao idea first and laying the groundwork for Adelson's Chinese overture. Adelson recently paid off one trio of claimants and is still battling former associate Richard Suen after losing badly in court.
Why should Nevada have only one former casino executive in the U.S. Senate when it could have two? Sen. John Ensign (R-Nevada Landing) might soon be keeping company with Sen. Sue Lowden (R-Santa Fe Gaming Corp.), if a poll commissioned by Lowden supporters is in any way indicative. Lowden, an ex-legislator who was drop-kicked by her constituents in '96, was co-owner of the Santa Fe Hotel until it was sold to Station Casinos in 2000. Station then did to the pro-union workforce what the Lowdens could not: sacked every last one of them. Business suffered afterward (customers didn't appreciate the disappearance of familiar faces) but Station has always liked to live dangerously.
Lowden currently sits on the board of Archon Corp., proud owner of the Pioneer Hotel in Laughlin, as well as of the Wet 'n Wild remnants that almost became the site of James Packer's Crown Las Vegas. Archon has a habit of turning up in the newspapers every now and again, sometimes when investors get riled up about dubious, insider-friendlystock moves. Sen. Harry Reid (D-NV) may not even have to unpack his heavy artillery; the Culinary Union will be only too happy to unleash its attack dogs on Lowden ... again.
After frequent demurrals, the Victoria government has 'fessed up that it was on the receiving end of ham-fisted lobbying by Crown Casino owner James Packer. A delicate quid pro quo (higher taxes in return for more table games) was being negotiated. But, not wanting to leave anything to chance, Packer personally besieged both Victoria's premier and treasurer in re Crown.
The state comes out of this looking worse than Packer, though, as witnessed by this weaselly attempt at damage control: "The Government is adamant that any expansion of Crown's gaming tables was under discussion for a long time and that poker was a less addictive form of gambling than poker machines." [Emphasis added] So I guess that makes it all copacetic, right?
Lawrence Ho & James Packer: less to smile about these days
Hammered in Macao. Packer's new City of Dreamsis getting stomped by nearby Venetian Macao. VIP baccarat play for Melco Crown Entertainment properties was off 19% -- which is even worse than its sounds when you count on it for 60% of your total gambling revenues. Mass-market baccarat play was 12% up, so there's some consolidation. (Meanwhile, in some parallel universe, the Wall Street Journal is nattering on about a "brighter outlook" for Macao, even as revenue continues to decline and City of Dreams flops. Visitation was -16% in June and the Mainland China subset of that was -22%.)
A good thing for Sheldon Adelson that Venetian Macao's play is so strong. Bloomberg News reports that 85% of Las Vegas Sands' Macanese revenue is casino-derived ... which ought to raise serious questions about Adelson's hotel-, retail- and convention-premised Cotai Strip™ business model.
Congratulations to South Point owner Michael Gaughan, the 2009 inductee to the American Gaming Association Hall of Fame. An industry "lifer" who worked his way up from the Royal Inn to the CEO's chair at Coast Casinos, Gaughan has been one of the most consistently successful operators in the business. After 9/11, when other operators were slashing jobs, Gaughan actually added employees. That practically qualified him for on-the-spot sainthood.
He briefly succumbed to the siren song of consolidation and merged Coast with Boyd Gaming. It was a rocky marriage and Gaughan soon decided that the world of publicly traded casino corporations was not his bag. But the "divorce settlement" gave him South Point free and clear, and he maintains a lucrative ancillary revenue stream through 1,308 slots (give or take) at McCarran International Airport.
Gaughan is a man of few words -- but many deeds -- so we hope he's not forced to make a speech. But S&G applauds the AGA's excellent selection of its '09 inductee.
(And there we thought they were going to give it to James Packer.)
Print | 
Send to Friend | 
del.icio.us | 
Digg It! | 
Linking Blogs | 
