walking around in Las Vegas last week

My wife and I went to San Francisco to see the Giants play two weeks ago.  Then we drove down the coast to Los Angeles to visit relatives.  And we stopped in Las Vegas for a day on the way home, just to see how the city looked compared with our last trip early in the year.

Over the years, I’ve learned that you have to be careful in drawing any firm conclusions about the hustle and bustle you see.  As I’ve already mentioned a long while ago in this blog, I once was in Caesars in Atlantic City at a time when the casino was packed to the gills.   (By the way, I’m not a big casino gambler myself.  I find it too much like work.  But the stocks are simple to analyze and usually generate huge amounts of cash flow.)

I called the company the next day and found out that their profits in Atlantic City were weaker than usual, not stronger.  A main set of doors had broken and no one could get in or out easily.  Few people were actually gambling; most were just stuck, and preventing fresh money from getting in.

Nevertheless, for what it’s worth:

–the city seemed to have far more foreign visitors than in January

–WYNN had a lot more casino patrons

–the Fashion Mall across the street was bustling

–the Bellagio seemed quieter; the visibly worn carpeting in retail areas hasn’t been replaced

–CityCenter appeared a lot quieter than in January

–I didn’t detect much difference with LVS

–every retail complex I saw had at least one vacancy, even WYNN;  CityCenter, understandably had the most empty space.

 

One of the odder aspects of my trip was the controversy that flared up last week over the yet-to-be-completed Harmon hotel in the CityCenter.  MGM is proposing to blow the structure up. (VegasInc has a comprehensive account).  It says the building is a potential hazard in an earthquake, because of construction defects.  Contractor Perini Building Co., which says MGM owes it $200 million+ for its work on the building, asserts any problems are design defects caused by MGM.   Just another day in the desert.

walking around Las Vegas last week

I was in Las Vegas with my family last week for the first time in about a year.

The naked girders of a planned addition to LVS’s Palazzo are still rusting away as they were a year ago.  And the metal bones of a couple of other casino projects decorate lots across the street from the WYNN resort.

The Trump hotel has opened, with the C-A-S-I-N-O letters removed from the sign on the front that marks the (long) drive from the Strip to the hotel door.  The absence of lights in the rooms after dark indicate that either everyone is wearing night-vision goggles or there aren’t many tenants.

I went into the Cosmopolitan, which is very trendy and has a strange, narrow rectangular casino floor.  And I saw the CityCenter for the first time–hotels, condos, casino and mall.  Very impressive, pretty empty–and an odd-looking casino here, too.

For a while, it looked as if snow would prevent us from flying back to the east coast.  A quick check of travel websites showed plenty of $50 and under rooms around, including at the Mirage.

A number of retail stores have gone out of business but the survivors aren’t sporting the profusion of SALE! banners they were in early 2010. Lots more people in restaurants.  A bunch of new restaurants, as well.

my thoughts

There were many more people around the Strip and in the casinos than I saw a year ago, even though the time we were there was a non-convention week, just after the CES.

Of course, it’s dangerous to generalize from just walking around.  I remember once, when Caesar’s was a public company, going to Atlantic City and seeing the Caesar’s there packed to the gills.  I called the company the following day and commented that they must be happy with the business they were doing.  They weren’t!  A main door was broken in the shut position, so gamblers who had lost all the money they intended to couldn’t get out–and were blocking the way to the slot machines.

Having said that, I’m willing to believe that Las Vegas is on the mend.

My walk brought home, however, just how extensive the hotel overcapacity in Las Vegas is.  Occupancies and room rates will remain low for a long time, I think.  That’s important, since the casinos themselves only account for about half a company’s profits in the good times.  The rest is the hotel.

I also suspect that the two new casinos at Cosmopolitan and CityCenter will end up being more or less overflow capacity that will be filled only when others are packed.  If so, the casino overcapacity isn’t so bad.  The real issue for this part of the business is whether American entrepreneurs (the prime casino patrons) will feel like gambling again.  My impression is that they already are.

The upcoming round of quarterly earnings reports for Las Vegas companies will be interesting.  My guess is that the second-line hotel casinos will suffer the most.  WYNN (I own it) is, I think, the only front-line firm with the financial wherewithal to keep refurbishing its rooms to keep its hotels in tip-top shape.  I wonder if that will make any difference.