David Mckee's Stiffs & Georges - North Las Vegas

Blimps on the radar

Thu, 10 Sep 2009 14:03:00 -0700

Dipping into the dispatch box, S&G finds the following tidbits, courtesy of the nice people at J.P. Morgan:

Alex Yemenidjian is serious about revamping the Tropicana Las Vegas. He's just inked a contract with Bally Technologies for a player-tracking system and other BYI goodies ...

... fading interest in MGM Grand Detroit has caused MGM Mirage to take it off the market. Also, with the company looking at price concessions to its CityCenter condo buyers (i.e., forfeiting money it was counting on to finance CityCenter), it may need to borrow against its Detroit palace, one of the few MGM properties still unencumbered ...

... Atlantic City, like Macao, is and will probably always be essentially a daytripper market. So there's symmetry in the fact that China State Construction Engineering Corp. has been signed to finish the stalled Revel project on the Boardwalk, to the tune of $1.7 billion. A July 11 opening is predicted. This is the best news to emerge from Atlantic City in quite a long while.

Speaking of good news, gaming revenues for Nevada's July are in and, basically, they don't suck. Yes, the Silver State was down 8% and the Strip was 11%. But June's year/year comparisons were far suckier (-15% on the Strip), so there's some consolation to be had. In fact, compared to a series of truly craptacular year/year comparisons -- all in double digits, except for last May -- it's darn near cause for celebration.

Table game drop was down overall but the casinos played lucky, particularly at baccarat. (Watch the first-season Mission Impossible episode "Odds on Evil," if you need a quick primer on this game. You'll get scintillating performances by Martin Landau and Barbara Bain in the bargain.)

Slot play is way down (-17.5% win on -15% handle) and North Las Vegas, bouyed by Aliante Station, was the only part of Clark County to have a positive month. Laughlin got hammered pretty badly (-19%) and neither Reno (-21%) nor South Lake Tahoe (-33%) seems likely to ever fully recover from tribal competition across the border, Tahoe especially. If there was a moment for some "unbundling" by overexposed companies, this is it.

Didn't get the memo. Would somebody break into the R&R Partners biosphere and let oxygen into the office of Billy Vassiliadis? "Billy V" was the author of this boneheaded pensée, which he shared with the Los Angeles Times:

"You've got to drop your rates, but you don't want to create a sense that this is a discount experience or that the experience itself has been diminished."

What the ... ? Las Vegas' recent success was built on the perception (and actuality) of a "discount experience," and lower prices are unlikely to "diminish" a tourist destination that is now synonymous with exclusivity and unaffordability. Vassiliadis, like Sheldon Adelson and the Las Vegas Convention & Visitors Authority, seems convinced that the current doldrums are -- to use my favorite Internet-board gaffe -- "a blimp [sic] on the radar."

They need to wrap their heads around the reality that 2004-like levels of business were damned good at the time (superb, in fact) and that Vegas needs to get back to the value-based messages that fueled the preceding 15 years of growth. Or, as David G. Schwartz writes in a particularly trenchant DieIsCast.com entry: "Of course, unpredictable events can make a hash of any predictions, so it’s possible that five years from now the casino industry will be employing 100,000 more people than it does today. That would be after the federal government offers Americans a $10,000 annual tax credit against travel to Las Vegas, and Las Vegas alone."

Seems like some folks in the marketing bidness should be taking Dr. Schwartz's classes.

Reality check

Tue, 18 Aug 2009 20:10:00 -0700

It's sackcloth-and-ashes time at the Las Vegas Review-Journal, which ran another "The end is nigh" story about falling gambling revenues. (The Aliante Station Effect appears to have petered out in North Las Vegas.)

Yes, we're all the way down, down, down ... to 2004 levels. If we take the Wayback Machine five years into the past, we find the Nevada Gaming Control Board reporting a 6% increase in revenue from June 2003. And June '04 was an "off" month for a year that was distinguished by double-digit growth in casino revenue.

Aliante Station: played out?

That same August, the cost of the MGM Mirage takeover of Mandalay Resort Group inched past the $8 billion mark. "[B]ut Wall Street analysts ... said the merger still makes sense for investors and the combined company," wrote the R-J's Rod Smith. Weeks earlier, regulators signed off on the $1.3 billion Boyd Gaming/Coast Casinos merger; Station Casinos, Las Vegas Sands and MGM were all recording record-setting financial performances, and Harrah's Entertainment was girding itself for the conquest of Caesars Entertainment. Heck, the industry was feeling sufficiently bullish to absorb a 0.5% hike in the privilege tax. Read one headline, "State gaming revenue on a roll."

Had the industry lived within its means, today's narrative would be quite different. The Las Vegas Sun helpfully charts the inflation and collapse of the casino bubble, which lasted a good three years, peaking in October '07.

Unfortunately, when what went up eventually had to come down, some companies discovered themselves overexposed and with no margin for error. The likeliest victims, though, are the marginal, standalone properties which might find themselves squeezed out of existence as aggressive discounting by MGM and Harrah's brings quality Strip hotel rooms into the "affordable" realm (Or, as Phil Satre puts it, when the A-level product is priced below the B-level product.)

Valuable perspective is to be had by reading (or watching) this roundtable discussion with three men who dominated much of the gaming industry in the Nineties and early into the new century. Ex-Harrah's CEO Satre has earned the right to be a Monday morning QB. After all, he never did anything so stupid as strapping $30 billion in debt onto his company's back.

Former Station CFO Glenn Christenson seems deeply in denial at many points, though even he concedes, "It wasn’t so long ago that we hated conventions as an industry and now it’s critical to our operations. We’re severely damaged by that loss." But ex-Boyd prexy Don Snyder nails it when he describes "a false sense of security" pervading the industry, adding "I think we all got caught up in that."

2004, meet 2009, where "up" is the new "down."

The Trop heist that wasn't

Fri, 26 Jun 2009 14:49:00 -0700

"An improvident indictment." That's what New Jersey officials are calling a case that was quietly quashed in May. Sacked Borgata veep John Conklin and two other men had been charged with plundering the Tropicana Atlantic City's database when they were in the Trop's employ (and when the Trop was still owned by Aztar Corp.).

Closer examination revealed that nothing had been purloined and the data in question was not particularly sensitive, either. All three indictees have been exonerated ... but where does John Conklin go to get his career back?

Phantom redux: Defying the odds, the Venetian's production of Phantom of the Opera celebrated its third anniversary Wednesday night. I jotted down a few observations for CityLife. (Tina Walsh fans, take note.) Having seen the Broadway production -- albeit many years ago -- I'll be the first to allow that it actually improves on the original in a respect or two. Oh, and my CityBlog entry misspells choreographer Gillian Lynne's last name. My apologies.

Two titans of American popular music "played Vegas" last weekend. Actually, Loretta Lynn was in North Las Vegas and Aretha Franklin all the way out in Primm ... not remotely near the Strip. What's wrong with this picture? Or this one ...

Midnight Jim: taking down Big Oil

It's summer and gas prices are -- like, duh! -- on the increase. Gov. Jim Gibbons doth suspect that dark, foul, untoward schemes are afoot. But Midnight Jim assures us he is on the case. I feel safer already.

Gay cowboys. They're queer, they're here and they're at The Rio specifically. A straight-gay coalition turned out in force last night to celebrate its victory over Midnight Jim's benighted opposition to domestic partnerships. (Because that's not how he rolls, y'see.) Speakers included Harrah's Entertainment Vice President Jan Jones, who led the charge on Carson City.

For all the failings of CEO Gary Loveman's stewardship of Harrah's, on his watch the company has expanded its already-enlightened attitude on social issues. It's not just a question of being gay-friendly; it's good business.

Worth -$23 million?

Isle of Blight. Is the woebegone Greek Isles casino-hotel worth less than nothing? In a sense, yes, since it owes $67 million on a book value of $44 million. Even a resale price at book value seems wishful thinking, considering the Isles' chequered history.

Asserts the Las Vegas Sun, "With its strategic location near the Las Vegas Strip and the Las Vegas Convention Center, the Greek Isles and its associated real estate are seen as having long-term value after the recession ends."

Yeah, but it's had that "strategic location" for as long as it's been in existence and the Isles' progress has been a steady one from Bad to Worse. I wouldn't give a plug nickel for the place -- not with Strip land prices in freefall and vast acreage there lying fallow.

Miracles are possible. Work on Marina Bay Sands is, believe or night, a fortnight ahead of schedule. Next step: Hold the line on that (already swollen) $5.4 billion budget.

The waiting continues in the great state of Kansas. Its lottery commission wants another two months to review applications for the Wichita and Kansas City markets. Considering the recent flurry of dropouts (including Vegas' own Golden Gaming), you'd think this would expedite the process. Instead, the coronation is six months away.

Squeeze play. No time is being wasted as Pennsylvania rushes toward expanding into Class III casinos. Two rival proposals to add table games are presently on the table. Casino lobbyist Steve Rittvo is forwarding a plan that would tax new games at 12%. This is projected to generate $165 million for the Keystone State (assuming that slot play concurrently increases sufficiently to generate a $61 million impost).

House Whip William DeWeese (D) counters with a 21% tax, combined with a one-time $10 million/casino fee, for a potential Year One windfall in excess of $300 million. I wish Rittvo luck but fear that solons will -- as they so often do -- gravitate toward the bigger dollar sign. It's an institutional failing.

Neil Bluhm, Philadelphia's Sugar[House] daddy

On a happier note, Neil Bluhm's revised design for his Sugarhouse Casino, on the Philadelphia waterfront, has received the green light from the City of Brotherly Love. Barring further legal mischief by sore loser Donald Trump, this means the project can finally move ahead, with a temporary, 1,700-slot casino slated for a Spring 2010 opening. Hallelujah!