{"id":10844,"date":"2013-05-16T12:04:00","date_gmt":"2013-05-16T20:04:00","guid":{"rendered":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/?p=10844"},"modified":"2013-05-16T12:04:00","modified_gmt":"2013-05-16T20:04:00","slug":"profit-vs-investment-on-the-strip","status":"publish","type":"post","link":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/profit-vs-investment-on-the-strip\/","title":{"rendered":"Profit vs. investment on the Strip"},"content":{"rendered":"

\"\"Even if you’re making money on a daily basis, sometimes a casino-resort can be a bad investment. Take Cosmopolitan of Las Vegas<\/strong>, which finally posted a profitable quarter. However, at $3.9 billion in construction costs (now at or very near the $4 billion mark with expansions and revisions of the property), it’s doubtful that Deutsche Bank<\/strong> made a good investment when it took the project over. Casino revenue constitutes 22% of revenue — well below Strip average — and ROI remains in the low single digits. In other words, the Cosmo won’t pay for itself for decades<\/em>. Even a recent improvement in room revenues was basically manufactured by imposing new resort fee<\/a>s.<\/p>\n

So much of the action happens, literally and figuratively, at the skyway level or higher that the Cosmo’s casino might as well not exist. Bill Lerner<\/strong> can spin this any way he likes, but the only way for a developer to get less bang for their buck on the Strip is to finish Fontainebleau<\/strong>, a project that would make the Cosmo look like a bargain.<\/p>\n

Speaking of bang per buck<\/strong>, how’s MGM Resorts Internationa<\/strong>l doing next door at \"\"CityCenter<\/strong>? Better than ever<\/a>, it seems. All things being relative, like the Cosmo, CityCenter never had anyplace to go but up and S&G<\/em> has always hewn to the published construction cost of $8.5 billion, which was a lowball number. ($8.7 billion would be closer to the mark, according to the Las Vegas Sun<\/em>.) However, tripling one’s cash flow is genuinely impressive and first-quarter condo sales provided a nice revenue bump, up 32%. Partner Dubai World<\/strong> is hinting that it wants to cash out and there’s an overhang of $1.5 billion in long-term debt. Plus, even with dramatically improved EBITDA, CityCenter is eking out a 4% return on investment, though Aria<\/strong> is probably well outperforming those numbers, carrying the freight for its CityCenter siblings.<\/p>\n

Still …<\/strong> when revenue in that profit center of all profit centers, the casino floor has fallen to a Strip average, one must question when the multi-billion-dollar resort becomes an anachronism. \"\"If we’ve not reached that point, we’re getting close. One can go to Detroit<\/strong> and stay at an MGM property that’s as nice as nearly anything in Vegas and better than most. Other cities will soon experience the same phenomenon. Genting Group<\/strong>‘s $2 billion Resorts World Las Vegas<\/strong> can, at that cost, probably make worthwhile returns … but it is also probably the last such behemoth we will see. I could be wrong, but Caesars Entertainment<\/strong>‘s reinvention of existing properties and the massive facelift (the first of many, I suspect) of some of MGM’s Strip real estate is the new paradigm: Squeeze more money out of your existing boxes rather than reflexively keep building new ones.<\/p>\n

When you hear a casino executive say his property “has good bones,” it means that it’s going to be around for a good long while. And, considering that how long it takes to recoup the cost of a casino now, it darn well better. Isn’t it ironic that the next hotel destined for implosion is one so new that it never opened … The Harmon Hotel<\/strong>? The dormers and lintels may change but dramatic alterations to the Strip seem unlikelier than ever.<\/p>\n","protected":false},"excerpt":{"rendered":"

Even if you’re making money on a daily basis, sometimes a casino-resort can be a bad investment. Take Cosmopolitan of Las Vegas, which finally posted a profitable quarter. However, at $3.9 billion in construction costs (now at or very near … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[56,66,44,134,14,4,59,120,7,11],"tags":[],"_links":{"self":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/10844"}],"collection":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/comments?post=10844"}],"version-history":[{"count":1,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/10844\/revisions"}],"predecessor-version":[{"id":10845,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/10844\/revisions\/10845"}],"wp:attachment":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/media?parent=10844"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/categories?post=10844"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/tags?post=10844"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}