CityCenter

Vegas: Frugality is the new liquidity

I’m sure I speak for some of colleagues in the biz when I say that, on certain subjects, we feel like we’re writing the same story over and over again. (Which is provides yet another reason for our collective fascination with Steve Wynn: his unpredictability.) Case in point: the turbulent economic dynamics of the Las Vegas Strip.

Some casino potentates continue to push what I’d call the Volcano Insurance Theory, i.e., things are bad — ergo, they will surely soon improve. There’s no arguing with numbers, however, and the math says that “recovery” is a glass half-full/half-empty proposition. The prevalent dynamic is — and continues to be — a Nevada in which visitation continues to wax (up 4% in June and +2% for the year to date) and gambling revenue wanes (-7% in June). We can take the visitation uptick and a few other positive auguries (read on) and declare victory or keep chasing the chimera that was the mid-decade wealth bubble, in which case the data is bound to cause frustration.

We might also ponder whether the growing number of competing profit centers within any

Wasted … and the 77% solution

Not even the cachet of Carey Hart and occasional appearances by Pink were enough to keep Wasted Space going. The Hard Rock Hotel is calling it quits on the club, bumping it in favor of a race and sports book. Not coincidentally, the HRH had just inked a pact with Cantor Gaming to bring the latter’s mobile-gambling application to the Hard Rock for sports-wagering purposes. Even less coincidentally, CEO Joseph Magliarditi came to the Hard Rock from M Resort, which was Cantor’s second client in Las Vegas (the first being Las Vegas Sands). Incidentally, the Palms was tinkering with a rival application made by a small company but it never seems to have gotten off the ground.

Although handheld gambling has been a dud, when it comes to supplanting slot and table-game play, it’s been a home run with sports bettors. I’m sure Morgans Hotel Group and its co-owners will also be able to “own” more of the sports book revenue, even after Cantor takes it cut, than they were hosting Wasted Space. Combine this with a rumor that the Hard Rock’s poker room is downsizing and we could be looking at a fundamental restructuring of the Hard Rock’s business model. Given the property’s struggles in the post-Peter Morton era, it’s an idea that’s past due.

And I’m Santa Claus. What a bunch of cutups they are at Harrah’s Entertainment. We’re asked to believe that a $52 million writeoff of real estate underlying the abortive Foxwoods Philadelphia project is simply an “accounting determination” that reduces the value of the land to $15 million (a 77% depreciation). Since the sine qua non of any Harrah’s involvement with the revival of Foxwoods Philly was a land-for-equity swap and a “term sheet” for a new development deal is overdue, it’s difficult to believe Harrah’s protestations that nothing is in the works … unless CEO Gary Loveman thinks the whole Ed Snider-led deal is FUBAR, and is getting ready to try and unload the land at — pardon the pun — dirt-cheap prices.

Don’t tell Sharron Angle but not only has CityCenter failed to move the needle on Las Vegas visitation even remotely close to MGM Resorts International CEO Jim Murren‘s downsized prediction of 7%,

Gone baby, gone

“[T]he confidence that ­property prices and stock markets would permanently defy gravity” is a phrase that perfectly encapsulates how the casino industry got itself into its present pickle. In what other mindset could an industry convince itself that it could dump CityCenter, Cosmopolitan, a grotesquely enlarged (and now deficit-ridden) Hard Rock Hotel and failsinos like Fontainebleau, Echelon, the Plaza, the short-lived Maxim project, Viva (above) and sundry other crack-pipe dreams into the Strip market more or less one atop the other? Executives at Harrah’s Entertainment and Station Casinos would have you believe that the Great Recession was the only thing that put them in the ditch.

That’s a load of bull manure. Those LBOs were predicated on expectations and projections of continued revenue growth … in short, upon a gravity-defying economy. Had things merely continued at 2006-07 those companies would still be strangulating on their debt-to-cash-flow ratios.

“Just around the corner/There’s a rainbow in the sky./So let’s have another cup of coffee/And let’s have another piece of pie.”

Those are the lyrics from a rather annoying and smug Depression-era song and there’s some of that self-deluding talk going through the casino industry these days. While the fallacies that gambling is “recession-proof” or even merely “recession-resistant” have been slain, one still hears happy talk of “pent-up demand.” Sterne Agee analyst David Hargreaves describes this as “an overused buzz phrase that only applies when people feel comfortably well off” or the “We’re expecting sunshine today because it rained yesterday” mentality.

Perhaps it can be best demonstrated as follows:

It’s a good thing for the industry that high-end play never went away en masse and that most of the major operators were sufficiently diverse, geographically, to capture the “convenience” gambler … especially when going to Vegas became

Quote of the Day

“It’s a risky story. We weren’t overly impressed with the results.” — Stern, Agee & Leach‘s David Bain on MGM Resorts International‘s 2Q10 revenues. CityCenter (left) lost $128 million in the quarter.

Bad quarters for MGM, Boyd

Undershooting Wall Street‘s expectations for 2Q10, MGM Resorts International missed analyst projections and also took a big-ass writedown on CityCenter (above) consigning $1.2 billion to the dustbin. Hotel occupancy was up from 85% to 93% overall (although RevPAR slipped a wee bit) and CityCenter revenues were 39% better than the first quarter. The latter can be partly attributed to more amenities coming online or  (more likely) room pricing that better reflected market realities and MGM’s oversupply of rooms.

It could be worse but a source familiar with CityCenter says MGM’s been playing some serious handball with subcontractors on the project. “MGM’s not stupid,” the source said, explaining that when the real estate bubble imploded the company renegotiated contracts 20% downward, putting pressure on subcontractors’ operating margins. Now, the source says, “They’ve been grinding those people

CityCenter: Can’t stop the bashing

Won’t someone please give Sharron Angle a hammer so she can go over to Aria and start smashing windows or something? (If it lets more light into that damnably dank casino floor, she’s got my vote.) The woman’s carrying a hate-on for CityCenter the size of Vdara. Like a dog with a juicy new bone, she won’t let go of her simple-minded and wholly misguided notion that every line-employee job created at CityCenter was equaled by the subtraction of a job somewhere else on the Strip. (Yes, and unicorns prance along the banks of the Truckee River.)

In the latest and whiniest permutation of her CityCenter obsession, Angle has sent a spokeswoman forth to impute that there was something untoward, nay, downright nefarious in Sen. Harry Reid‘s ringing up banks to loosen the purse strings. (Reid’s GOP colleague Sen. John Ensign did the same thing … but Angle has never let intellectual consistency stand in the way of a talking point.) By doing so, Angle is conceding

Must-see TV

Now that The Greatest TV Show of All Time (sorry, Star Trek) is back for Season Four, here’s Christina Hendricks, who portrays my favorite Mad Men character, Joan Holloway. In this interview, she has a Joan Holloway-like effect on the anchorman, who’s reduced to inchoate babbling:

For those of you whose despair at the absence of the kind of Vegas seen in old movies, the notion of a Mad Men fashion trend should be appealing. Arrow shirts and Bermuda shorts would be a far preferable sight on the Strip to the douchebagerie with their Ed Hardy apparel and aluminum bottles of Bud Lite seemingly glued to their right hands — even in the Monte Carlo swimming pool. What a pity that

The great Hilton showroom massacre (and other light news)

In true Colony Capital fashion, the Las Vegas Hilton continues to shed parts like a rattletrap car. Our LVA research team reports that Shimmer Cabaret fixtures Voices (“Starring the beautiful and talented Lani Misalucha“) and Sin City Bad Girls have been pink-slipped. Bad Girls, the best topless show on the Strip, runs through Sunday. Misfortune-beset Elvis Presley impersonator Trent Carlini has also been shown the door. This means that except for magician Steve Dacri, the LVH has no regular shows — just intermittent appearances by comedians Mark Curry and Andrew Dice Clay. I had the misfortune to experience the latter during his brief Riviera stint, the most egregiously phoned-in performance I’ve seen in Vegas.

Wayne Brady returns: The multifaceted entertainer has shaken up the format of his Making %@it Up at Venelazzo, dropping the song-and-dance elements as well as anything else of a scripted nature. His band has been reduced to two players, as well, and the set has been stripped down to a minimum. Audience-participation shtick is all front-loaded onto the first half of the show with the remainder given over to rapid-fire interactions between Brady and sidekick Jonathan Mangum. The piece de résistance is a set of celebrity-impersonation improvisations based on audience requests. On the night we attended, these included Creed grimacing through a ballad entitled “Goodbye, Gay Boys” and Tina Turner shaking it to “All Men Are Liars.” Vegas entertainers like to invoke the Rat Pack but Wayne Brady is one of the very, very few who could actually run with that crowd.

Watch out, Strip! “Legit” theatre is camping out on your back porch. Just ’round the corner from Trump International and Fashion Show Mall lies the Erotic Heritage Museum, which is sponsoring a series of full-length plays. First up is A Midsummer Night’s Dream, which prompted this passionately ambivalent response — from Yr. Humble Blogger. Another local critic complained of insufficient nudity, although I counted

Recovery? Not in the cards

Month after month of discouraging data from around the country makes it clear that any recovery in the casino industry is a long way off, perhaps years. Heck, just getting back to 2007 levels of prosperity doesn’t take into account the expansion that occurred in the intervening years. (And if you think Cosmopolitan is going to lift all boats, I’ll have whatever you’re drinking.)

Month after month, two disparate trends mark Las Vegas tourism and gambling data. More people are coming back but they’re spending quite a bit less. The CEOs of MGM Resorts International and Las Vegas Sands tell us that convention traffic on the way back up, with recovery projected for 2011. Since they’ve got access to data we don’t, let’s take them at their word. The bread-and-butter gambler, however,

Veer-ing toward completion

With completion of Harmon Hotels having vanished into the mists of Time, the opening of Veer Towers effectively represents the end of CityCenter‘s rollout. (If and when the Harmon opens as something other than an office tower — one mooted use — it will be a sotto voce coda to what was meant to have been a grand urban symphony.) Closing on 17% of your units doesn’t sound all that impressive, until you consider how much more sluggishly other condo towers have been selling.

Now-MGM Resorts International expects to close on two-thirds of Veer’s inventory. Perhaps more interesting is that, despite talk in the real estate community of the Strip being a magnet for overseas condo customers, 65% of those buying into Veer are from Nevada or California. Chalk it — the foreign phantom, that is — up as one more truckload of the B.S. that fueled the condo bubble. The place looks great but, given the history of other CityCenter components, the jury is still out on functionality.

If it seems as though both Penn National Gaming and SL Green designed their Aqueduct Race Track bids to fail, there’s at least one reason why they may felt brinkmanship was in order. Some of you have probably been following the emerging saga of the Shinnecock tribe. The band isn’t

CityCenter: Stop the madness!

Just when I thought I was out of the Sharron Angle vs. CityCenter insanity, they pull me back in. As I feared, the mythical “CityCenter bailout” has become a meme in that echo chamber of misinformation and urban mythology, cable news. On a previous occasion, Neil Cavuto got schooled by Anthony Curtis when he tried to make a bunch of half-assed gambling analogies involving the economy. This time, he’s done his homework … although the result is more like Dr. Cavuto, Therapist, trying to “talk down” a delusional patient for whom a “bailout” is whatever she chooses it to mean at any given moment.

The tragic irony (for Angle, anyway) is that she could marshal some serious arguments — if she actually knew what she was talking about. For instance, why does one intervene on behalf of CityCenter but not

Quote of the Day


Via Sharron Angle, the gift who keeps on giving. She may be conflating (mangling?) the distressed-debt-buyback provision that Sen. Harry Reid (D-NV) whisked through Congress — much to the relief of several big casino companies — with his cold-calling on behalf of CityCenter … but who knows?

Riviera: Non-story of the year

In what was 2010’s biggest foregone conclusion, Riviera Holdings filed bankruptcy yesterday. This has been coming a long time although the scanty news coverage leaves it unclear whether what’s taking place is the pre-packaged bankruptcy that would see the Riv go to Barry Sternlicht (who might or might not be leading the unspecified “senior secured debtors”) or if the company’s trio of CEOs — 1.5 per casino — will continue to attempt eking out a starvation existence under creditor ownership. Debtors are going to take 19 cents on the dollar, which suggests either great lenience or considerable pessimism about the Riviera’s future.

Not having read the full 18-page ruling from Nevada Labor Commissioner Michael Tanchek, I’m holding my fire on the merits of why he slammed the door on Wynn Resorts dealers. However, the implications for tip-dependent employees in Nevada are far-reaching and dire. “Retail,” the state’s #1 revenue sources includes many small, customer-service-driven businesses — of which I have seen a high attrition rate firsthand. Since a lack of discretionary income is one of the factors depressing Nevada’s economy, widespread raiding of tip income by management would worsen this situation and perhaps even spark the dreaded “double-dip recession.”


Since Sheldon Adelson keeps pinning his investors’ hopes on raising capital through sales of Venetian Macao‘s Grand Canal Shoppes and the nearby Shoppes at Four Seasons, he might do well to put a sock in it. Asia Times reports that Macao is maxed-out on high-end retail. That’s not deterring developers like Pansy Ho, whose joint venture One Central ties into MGM Grand Macau and an adjacent Mandarin Oriental.

“Spending and traffic are not as closely aligned as you might expect,” says another developer (words that could, in an inverse sense be applied to the Las Vegas Strip). They better not, as reporter Muhammad Cohen finds Adelson’s malls to be ones where “staff [is] vastly outnumbering customers” for whom retail is “mainly a climate-controlled space for residents and tourists to pass time.” You can just feel the asking price on those “shoppes” falling, can’t you?

Who likes gambling? That’s basically the question posed by Marc Dunbar, who’s running down Bible State political races and their implications on the casino industry.

S&G hither & yon

Last weekend’s usual barrage of errands, veterinary appointments, etc., was interrupted long enough for Yr. Humble Blogger to guest-host another edition of The Strip Podcast. In it, I reveal my shameful ignorance of televised poker (something I literally tuned out years ago) and the new restaurant at Circus Circus. However, I do weigh in — and “weigh” is the operative word, I fear — on some new carb-friendly restaurants on the Strip. We also discuss the Harmon fiasco, Sheldon Adelson‘s recent success and whether (and why) Global Cash Access kiosks should displace the traditional casino cage, among sundry other topics.

Even without loss limits on table games and with new casino attractions at River City, June in Missouri was pretty much a wash. Revenues were up 6% statewide but once you allow for River City (left), everybody else was -4% from last year. All casinos not named “River City” were -10% in table game play, in fact. Also, the new Pinnacle Entertainment fun spot was cannibalizing Harrah’s Maryland Heights and Ameristar St. Charles -12% and -2%, respectively. Ameristar SC’s $23 million still makes it the top-grossing riverboat in the state.

Ameristar could, however, rejoice in an 11% surge in its Kansas City business, even as its Penn National, Harrah’s and Isle of Capri rivals

It’s Sheldon’s world, we just live in it

Oh, how I envy Sheldon Adelson. My own hair grows thinner and grayer while his becomes thicker and darker. (The photo at left, shows Classic Sheldon, circa 1999.) But I digress …

Adelson is one of the stars of an eleven-part (!) report on the gambling industry in The Economist. However, the Las Vegas Sands CEO tries to have it both ways, being somehow of and above the casino industry simultaneously. As he and $2 Million Man Michael A. Leven sniffily put it, they’re not in the lowly punter’s occupation of “gambling” but something loftier called “gaming.” Or, in a characteristic bit of Leven B.S., it’s “the difference between having a cocktail and going out drinking.” So how much do I have to lay down on the felt if I merely want to “game,” not “gamble”?

In fact, Adelson is ubiquitous at the moment, riding high on the strong early returns from $5.7 billion Marina Bay Sands. Miraculously, the project’s gone $2.2 billion over budget and still looks like the smash success its progenitor predicted, boosted by the appeal of its signature “Sky Deck” attraction. As “Wow!” factors go, this one

When her head stops spinning …

… where will Sharron Angle stand vis-a-vis the casino industry? She’s already raised the bogeyman of “undue [casino] pressure” — as opposed to “due pressure”? — in her now-scrubbed original Web site, which keeps coming back from the cyber-grave.

The full context of her slam on CityCenter is available, including a wacky parenthetical remark that Nevada needs “real jobs” (i.e., not casino-resort jobs, which Ms. Angle seems to think exist in a finite quantity). Seriously, this notion that adding 10,000 positions at CityCenter cost 10,000 other Strip employees their jobs is Flake City, unsupported by credible evidence.

However, she issues a broad call for deregulation of industry. Uhhhh … would that include the casino industry, ma’am? If so, Ms. Angle just locked up the all-important Black Book voting bloc, although it’s sadly too late for her to collect an endorsement from Lefty Rosenthal. (And she thinks that present-day casino money is icky-poo? Go figure.)

(Platform 1.0 says “Businesses should be liberated from

“I’m not dead yet!”

Taking its cue from Monty Python‘s interpretation of the death of Mary, Queen of Scots, management of the Riviera refuses to roll over and die. Its latest enhancement is somewhat out of the box as far as Strip watering holes go: a quasi-British pub promising “pints, footy and bangers.” The brainchild of a chef (Mark McGarry), a tattoo designer (Nick Elliot) and a butcher (Nick Jones), Queen Victoria’s British Pub opened late last month and has no doubt been resounding with the sound of the vuvuzela, as a full slate of World Cup games was promised.

(I recently heard an audio clip of two vuvuzelas attempting Maurice Ravel‘s Bolero. Too funny … but not half as hilarious as page of music paper purporting to be the opening of a vuvuzela concerto: bar after bar of whole notes on the same pitch, with a crescendo here and a luftpause there to mix it up.)

Hall of Fame redux? A quiet casualty of Aztar Corp.’s benign neglect of the Tropicana Las Vegas was the Casino Legends Hall of Fame. However, it may be down but not out. Owner Steven Cutler has published

Sharron Angle, casino analyst

Reckless rhetoric. Last week, S&G called B.S. on senatorial aspirant Sharron Angle‘s faux solicitude for the unfinished casinos along the Strip. Turns out, if she had her way, there’d be at least one more: Aria, plus all the other components of $8.8 billion CityCenter. Taking up a meme from Religious Right dirty tricksters Floyd Brown and Gary Kreep (who seem to have “krept” out of town after then-MGM Mirage sicced its lawyers upon them), Angle says it was wrong for Sen. Harry Reid — and, by extension, GOP counterpart Sen. John Ensign — to pick up the phone on CityCenter’s behalf and jawbone the banking industry. Better to let it fail, she posits.

You can’t argue with Angle’s contention that CityCenter diluted hotel occupancy and rates along the Strip. Everybody knows that. As for her assertion that the opening of CityCenter depressed the local job market …

Around the horn

Iowa‘s casino revenues last month were nearly the textbook definition of “flat”: up a tenth of a percent, the first revenue-positive month since February 2009. (Hey, growth is growth. We’ll take it.) The drag anchor on revs was Harrah’s Entertainment, whose Council Bluffs casino suffered a 15% plunge. Without going heavily into detail, Isle of Capri Casinos eked out a 1% increase across its four Hawkeye State properties. The really good news came from Ameristar Casinos, which took a chunk out of Harrah’s butt in Council Bluffs, its revenues up 7%. Likewise, Penn National Gaming had a 4% increase in Sioux City. For sheer dollar volume, however, the Harrah’s Horsehoe racino is still tops at nearly $16 million (albeit with rival Prairie Meadows nipping at its heels).

Ameristar didn’t do quite so well in Indiana, where its revenues continue to be attenuated by a bridge closure in the East Chicago area. Boyd Gaming‘s Blue Chip riverboat (-7%) continues to feel the effect of new tribal competition in Michigan. The two Majestic Star boats notched gains in the 3%-4% range but nobody managed more than a very, very distant second-place finish to Harrah’s Horseshoe Hammond, a real category killer that pulled in a gargantuan $43 million (+8%).

Penn’s Hollywood Casino Lawrenceburg doesn’t dominate southern Indiana quite as much but its $36 million — a 24% gain — still makes it a big man on campus. The rival Horseshoe boat (formerly Caesars Indiana) slipped 10.5%  and Grand Victoria faded 22%. French Lick is, well,

Cosmo: Blueprint for failure?

Geez, I’ve not been feeling pessimistic about the Dec. 15 debut of the Cosmopolitan … until somebody forwarded me a copy of a Bill Lerner analysis of the property. Now I’m worried.

After walking the place, Lerner found it to be “very nice, typical of new gaming development globally these days from a fit-out perspective. The narrow 8+-acre parcel results in a vertical build, compacting the resort with a different feel given shorter distances between points. The re-engineered plan that moved gaming square footage to street level and retail to mezzanine level is sensible and will be relatively helpful for not-overly-relevant walk-in business. The room product is quite nice with boutique feel and unique with functional balconies.”

However, the Cosmo’s pricing strategy — i.e., in the Wynncore range — seems totally counterintuitive, given both

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