{"id":4267,"date":"2010-08-05T12:44:01","date_gmt":"2010-08-05T20:44:01","guid":{"rendered":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/?p=4267"},"modified":"2023-07-19T08:56:07","modified_gmt":"2023-07-19T16:56:07","slug":"reality-check-3","status":"publish","type":"post","link":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/reality-check-3\/","title":{"rendered":"Gone baby, gone"},"content":{"rendered":"

\"\"“[T]he confidence that \u00adproperty prices and stock markets would permanently defy gravity<\/em>” 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<\/strong>, Cosmopolitan<\/strong>, a grotesquely enlarged (and now deficit-ridden) Hard Rock Hotel<\/strong> and failsinos like Fontainebleau<\/strong>, Echelon<\/strong>, the Plaza<\/strong>, the short-lived Maxim<\/strong> project, Viva<\/strong> (above<\/em>) and sundry other crack-pipe dreams into the Strip market more or less one atop the other? Executives at Harrah’s Entertainment<\/strong> and Station Casinos<\/strong> would have you believe that the Great Recession<\/strong> was the only thing that put them in the ditch.<\/p>\n

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.<\/p>\n

“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<\/em>.”<\/p>\n

Those are the lyrics from a rather annoying and smug Depression<\/strong>-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<\/strong> analyst David Hargreaves<\/strong> describes this as “an overused buzz phrase that only applies when people feel comfortably well off<\/em>” or the “We’re expecting sunshine today because it rained yesterday<\/em>” mentality.<\/p>\n

Perhaps it can be best demonstrated as follows:<\/p>\n

It’s a good thing<\/strong> for the industry that high-end play never went away en masse<\/em> and that most of the major operators were sufficiently diverse, geographically, to capture the “convenience” gambler … especially when going to Vegas became a serious inconvenience for John Q. Public<\/strong>. Nor can one blame Big Gaming for putting its chips on the luxury market. Whether there’s enough of it to go around as multi-billion-dollar megaresorts lumber into position is a proposition still in the testing stage. When MGM Resorts International<\/strong>‘s top performer, Bellagio<\/strong>, has to advertise its affordability, one suspects that — having pushed the envelope of high-end demand — the envelope is now pushing back.<\/p>\n

To the extent that they keep playing, value-oriented gamblers are likelier to stay close to home, especially as economic hard times and public-service budgets conspire to create a self-propelled downward spiral<\/a>, a phenomenon readily observable right here in Nevada<\/strong>, where homeless men sleep alongside the mega-McDonalds<\/strong> that is the one completed vestige of Echelon<\/strong>. In other states, that vicious circle is dead certain to generate political demand for more and more gambling venues, regardless of how diluted the marketplace has become. States like Massachusetts<\/strong> waited until the cash cow had been milked near to dry before they grabbed their buckets and queued up at the udders.<\/p>\n

\"\"But if executives believe<\/strong> that mid-market and bargain-niche play is coming back to the extent that room rates and restaurant prices can be ratcheted up again, they might want to think again. A growing disparity in wealth, wage stagnation and what the Financial Times<\/em> calls “declining income mobility” are going to put a serious squeeze on the casino industry as Baby Boomers<\/strong> contemplate a bleak future<\/a>. The clueless pronouncements of Archon Corp<\/strong>. CEO Sue Lowden<\/strong> during her recent, disastrous foray in electoral politics (recently dubbed “penicillin for poultry”) are indicative of the “reality gap” between CEOs and the man on the street. Ditto Steve Wynn<\/strong>‘s surprise to learn that being reduced to 32-hour weeks had inflicted serious financial hardship<\/a> on his workers. To Wynn’s eternal credit, he moved swiftly to alleviate the situation. Many of his coevals seem locked into an ivory-tower mindset.<\/p>\n

Somewhat in the same vein<\/strong>, MGM and Boyd Gaming<\/strong> retired a big note on Borgata<\/strong>, praise be — but also took a manufactured “dividend” by borrowing yet more moolah. (That “dividend” is going to have to be made up out of earnings per share somewhere down the road.) I have to agree with New Jersey Division of Gaming Enforcement<\/strong> attorney James C. Fogarty<\/strong>, who asked, \u201cIsn\u2019t there a better use of the money than that?<\/em>\u201d<\/p>\n

Too much of a buzz-kill?<\/strong> Sorry. But too many people — especially on Wall Street<\/strong> and in the trade press — write what the industry wants to hear. The go-go days are gone and they ain’t comin’ back … at least not in the foreseeable future<\/a>.<\/p>\n

Speaking of which …<\/strong> judging by the prevailing fragrance (stale cigarette) of Eastside Cannery<\/strong>, owners William Paulos<\/strong> and William Wortman<\/strong> must have bottled up many cylinders’ worth of the old Nevada Palace<\/strong> air, which was roughly 50% tar, 45% nicotine and 5% oxygen. Y’know, just in case people feel nostalgic for the ashen old Palace. (The latter has the rare distinction of inspiring a play, Ernie Curcio<\/strong><\/a>‘s hilarious Rambis<\/em><\/a>.)<\/p>\n

That caveat aside, ECan — as Anthony Curtis<\/strong> calls it — is far cleaner than any Harrah’s property I’ve visited of late. It’s also well-staffed and the service ethic is great. Slot play was alarmingly thin at the time of our visit but The Dollar Bills<\/strong> provide a more hospitable experience than one can find in most Vegas casinos these days.<\/p>\n","protected":false},"excerpt":{"rendered":"

“[T]he confidence that \u00adproperty 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 … 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":[46,23,60,73,56,3,66,28,18,14,105,4,117,59,7,140,53,11,25,57,32,31,9,19,38],"tags":[],"_links":{"self":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/4267"}],"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=4267"}],"version-history":[{"count":6,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/4267\/revisions"}],"predecessor-version":[{"id":32764,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/4267\/revisions\/32764"}],"wp:attachment":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/media?parent=4267"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/categories?post=4267"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/tags?post=4267"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}