Vegas: Is recovery finally for real?

So says the Brookings Institute, which raised Las Vegas to 194th from 245th in GDP (now at $47K/year) and job growth over the last year, behind such feeder markets as Bakersfield, California and Monterrey, Mexico. That’s the first year of Sin City GDP growth in the last five. Domestically, Vegas was 46th among 76 United States cities. It left cities like Chicago eating its dust, even we were far outpaced by the likes of Detroit, and of Boston and Worcester, Massachusetts (good news for the casino industries in those areas). According to Brookings’ Emilia Istrate, standards of living in the Vegas Valley are improving. If you say so, ma’am.

Brookings’ data tracks with that collected by the University of Nevada-Las Vegas‘ much-abused Center for Business & Economic Research (abused for not saying what the Chamber of Commerce wants to hear, that is). Istrate identified two key drivers to continued Vegas improvement: better schools and economic diversification. Pardon me while I fall over laughing, but only because we’ve been hearing that refrain for over 10 years and the bidness community pays little beyond lip service to the concept. State government is coming around on the economic-diversity front, as have the Oscar & Carolyn Goodman mayorships. But Sheldon Adelson front group NPRI recently went up against Henderson‘s library system. The libraries lost. Tell me what that says about our willingness to invest in the future.

A recent visitor to Las Vegas who liked what he saw and heard was Deutsche Bank analyst Carlo Santarelli. Although he characterized 4Q12 business as “underwhelming” and producing flat room revenues, he liked what he saw in terms of 2013 convention bookings, particularly for MGM Resorts International properties. He’s downright bullish (his word) on Wynn Resorts and Las Vegas Sands, and pooh-poohs concerns about the Affordable Healthcare Act. He describes higher costs as “not a meaningful” factor, due to a prevalence of union labor — remember, the Culinary Union has its own health plan — and “the interplay between the premium and the relatively inexpensive monetary ‘penalty.'” Just don’t share that sentiment with Steve Wynn, OK, Carlo? He gets quite intemperate when the subject is raised and we’d hate to lose you.

As for the much-ballyhooed Penn National Gaming split into a REIT and a casino-management company, some of us are skeptical that Penn can flourish as the owner of supermarkets, amusement parks and commercial real estate in general. Santarelli, however, is keeping his powder dry, respecting the dearth of information as to how the REIT  spinoff would be executed, although he expects Nevada regulators to approve it. Robert LaFleur, analyst at Cantor Fitzgerald, sees no likelihood of REITmania infecting the Big Three (Las Vegas Sands, Wynn, MGM), citing the special dividends paid by Wynn and Adelson to burn off cash before year’s end. Essentially agreeing, Santarelli opines that Penn’s cloning experiment “is unlikely to work for the bulk of regional gaming operators.” We can rule it out for Caesars Entertainment, too. As LaFleur says, the object of REIT-ization is to put capital back in the hands of shareholders. But first you have to have capital, not just a giant sucking sound where your balance sheet ought to be. Besides, splitting Caesars in twain might look an awful lot like a way to sequester physical assets from an all-but-inevitable (as in 99.9% probability) bankruptcy filing.

Structural concerns about prospective Caesars Drai’s have been allayed, even if the company’s ledgers fail to inspire similar confidence. Michael Gaughan assures reporters that the building, originally meant to be several stories taller, can support the additional tonnage of a pool and nightclub. And there will be jobs elsewhere in the Caesars empire for the 600 workers displaced when Bill’s Gamblin’ Hall & Saloon ceases business on Feb. 4 — provided they’re willing to move out of state. Don’t tell any of them that Vegas is on the comeback trail. They can hardly be expected to believe it as they pack their bags for Council Bluffs, Iowa or some comparably cosmopolitan job opportunity.