In the wake of last weekend’s Grand Capitulation on the banks of Foggy Bottom (I’ll let you decide who capitulated to whom), the incipient Las Vegas recovery that was materializing in late 2011 is probably as good as dead. Even before Congress and the administration decided to do a rerun of 1937, consumer confidence was beginning to ebb. And if consumer spending continues to slump, the inevitable reaction in Washington, D.C., will be to impose still further austerity measures, reinforcing the downward spiral. An industry that used to look askance at conventioneers and corporate meetings (seen as poor sources of gaming revenue) will be clinging to them as a drowning man would a lifeline. They’re now our last bastion of refuge.
For those who oppose federal budget deficits per se, I will simply note that our biggest ones (by far) coincided with a slight unpleasantness called World War II. Had there been an ironclad constitutional requirement to balance the budget in place on Dec. 7, 1941, most of the Pacific Ocean would now be under Japanese rule … and God only knows what would have become of Europe.
In the grand scheme of things, government is the last “whale” at the table in times of economic woe. D.C.’s austerity craze means an important pocketbook has just snapped shut. Consumer demand being weak, if not absent, private businesses have little incentive to invest, regardless of government policy. One need only look at the casino industry, where a gluttonous appetite for risk in 2005-08 left it holding an oversized bag. Even the Chamber of Commerce‘s chief economist foresees stunted growth in the aftermath of what will forever be known as a “Satan sandwich,” a supersized meal that act as an emetic for the national economy.
Yet all we hear is that plutocrats like Steve Wynn need more money in their wallets — and to hell with the people whose spending keeps the slots spinning, the beds filled, the buffet eaten and who are seeing precious little “trickle down” from the private sector, despite the latter’s being awash in cash. Not only are they not hiring, they’re further squeezing their employees, as those notorious bolshies at Bloomberg point out.
In gaming, much of that wealth is derived from overseas, where markets like Macao are going gangbusters. (The save-more/spend-less dynamic at home is another throwback to 1937, incidentally.) With all this newfound wealth being hoarded at the top, not only is the rising tide going to lift but a few yachts, it will perpetuate anemic demand currently plaguing the marketplace. Wall Street analysts constantly brandish the shibboleth of “pent-up demand.” It’s supposed to materialize any minute now … like, around the corner … I mean, imminently … oh, just hurry up and materialize, damn you!
Is there a solution?
In the midst of this, Steve Wynn, the tycoon who claimed he could create 10,000 Strip jobs were it not for being oppressed by The Evil Black Man In The White House, evidently still thinks he needs to confiscate from his nightclub employees to pay large dividends make ends meet. Unfortunately for them, the nightlife worker bees made a very bad deal for themselves, resulting in a Wynn-win situation, as it were.
Sheldon Adelson, still petty. If you thought unimaginable levels of financial success for the Las Vegas Sands CEO would help him mellow with age, think again. As a “fuck you” to five members of his highly expensive private army who’d had to temerity to sue for overtime, Adelson reassigned them to Paul Blarth duty at Sands Expo Center. Fortunately, a federal judge thwarted Adelson’s revenge, at least temporarily.
In a lovely, karmic coincidence, Adelson’s Macanese casinos have been afflicted with terrible hold at the tables this month. As punters clean Adelson’s clock, Venetian Macao and its brethren have fallen to fifth place in market share (13%), according to a J.P. Morgan analyst report. Among those leaving Adelson in their wake is Galaxy Entertainment, buoyed by the novelty factor of its new, $2 billion Galaxy Cotai, on pace to generate a 17% ROI. Karma’s a bitch, isn’t it, Sheldon?
Your comments about our ignorant representatives are right on target. Only the most ignorant among us would keep calling for tax cuts so that jobs can be created when the record of the past ten years shows that those who received the tax cuts put the money in their pockets or used them to buy out competition. New jobs can’t be created unless there is consumer demand, and our representative are creating the worst environment for demand imaginable. Keep up the good work…
Now that you mention it, Augie, if MGM had redeveloped its existing, post-Mirage real estate instead of buying out Mandalay Resort Group or Harrah’s had simply concentrated on monetizing its Park Place Entertainment takeover, they’d be sitting pretty today instead of hanging on by their fingertips. Gaming’s consolidation/LBO mania in the “Aughts” — goaded relentlessly, recklessly by Wall Street — left it high and dry when the tide started going out in ’08.
Dave, if you remember, when the Venetian first opened, after Shel stiffed all his contractors, and made them sue to get their money (at a small fraction on the dollar IIRC), they couldn’t beat anybody. Whales would win wire to wire, or get buried and get out.
By comparison, when Bellagio opened in 1998, Steve ran like God over everyone, and still sold to Krekorian when it was all over.
Which kind of reminds me…There are only a handful of operators who knew their shit in this business…Jack Binion, Steve, the Perlmans, the dearly departed Terry Lanni, Bill Harrah, a couple of others. So, it troubles me to see Steve make all these appearances on TV these days and just plain embarrass himself. The lack of coherency on his part is just astounding. I think he’s reached that age where his brain has become vulnerable to the mass mind control experiment that Fox News is.
Speaking of incoherent, I can only tell you the outrage I’m hearing from the Harrahs rank and file of Loveman’s $18M pay package. Between him and Jim Murren, The Industry has gotten completely, unequvocally Kafkaesque.
Wynn suddenly seems older and tetchier than Adelson. He gave an extremely lucid and persuasive explanation of why he shied away from Singapore, but get him on the subject of You Know Who and he suddenly starts sounding like a man in the grip of persecution mania. It’s disconcerting to see the best mind in the casino industry blowing fuses like that.
I’m impressed with this post bcause I know David shies away from political comments. Sometimes the subject just becomes to close to politics to seperate. I completely agree that this debt-ceiling hostage fiasco is just another stunt designed to make the very wealthy very wealthier. Las Vegas truly needs the middle class, and the Republicans are out to destroy it. People are waking up to this charade, I hope. Just imagine if they got a Balanced Budget Amendment passed that capped spending at 18% of GDP like they proposed. The last time we were spending at that rate was 1967, before Medicare blew up the budget. Medicare and Veterans behefits would be gone, literally! People would have zero money to spend in your dark joint, Mr. Wynn!
Dunno if I succeeded but I’m trying to reframe the discussion around Keynesian economics vs. supply-side ones. Conservative consumer-spending patterns might bode comparatively well for regional and tribal casinos, as well as for Internet gambling. But it would weaken Las Vegas and possibly prove fatal in Atlantic City.
I enjoyed this post and the comments posted thus far. Thanks for sharing.
As A Grant mentions above, we have some representatives that are ignorant and because of this much of American policy and politics are controlled by money, and so much of that money is hostile to rational leadership.