Why I'm Worried Gary Loveman and CEC Are Getting It Wrong

There is a lot at stake in Las Vegas. The economy is rebounding, the visitation numbers are way up, and new projects are springing up on the Strip and beyond.

It hasn't been that long ago that unfinished condos and casinos littered one of the most famous and expensive stretches of land in the world. Cranes stood still and girders gathered dust and rust. Hotels and casinos that didn't close had to reconsider their strategies. Americans didn't have money to pay the rent, much less to spend in Sin City.

Slowly, that has started to change. The tables have turned in Las Vegas, which has invested in very, very upscale spaces. Famous chefs, in-residence DJs, retail stores, and boutique hotels are all the rage. From the outside looking in, Las Vegas looks like it's in its prime again.

Except that this trend really doesn't make sense. Visitation is up, but gaming numbers are down. Entertainment is everywhere, but profits are nowhere. So many of the hotels are owned either by huge corporations, like MGM Resorts International and Caesars Entertainment Corporation (CEC). When they succeed, everyone wins. If one of their properties isn't doing well, they have the money to fix it. They can buy up other properties that are ailing and make them new again. 

Most of these companies have investments overseas, especially in Macau, China, where casinos are soaring, which means that they can afford to lose money in Las Vegas. But they don't want to lose money, of course, and Las Vegans can't afford for them to lose money. The last recession hit residents hard. When the tourists stopped coming and the good times stopped rolling, some went into foreclosure, Some even trashed what was left of their homes.

Las Vegas has always meant risk, and not just for the folks playing slots and table games. To run a successful casino, it takes guts, luck, money, and foresight. I'm worried that the major players in Las Vegas, like CEC, have too much of the first two items in that list, and not enough of the last two.

I'm a worrier by nature, but I'm staying positive. I think there is still plenty of time to see whether the current experiments work. Hopefully, the powers that be will recognize how to turn things around if the focus on crazy-expensive entertainment fails. Another possibility is that someone else may change the game. It looks like Resorts World has everyone on the Strip, from Steve Wynn to Gary Loveman, concerned. And that's a good thing. Some healthy competition may just create more of a balance. At least, that's what I'm betting on.

Viva,

Mike

Is Las Vegas a Market Leader or Playing Follow the Leader?

There are easily defined patterns in Las Vegas' storied history. To recap a few of the more modern trends:

• Themed hotels to attract families (Mirage 1989 ~ Paris 1999) 
• Free shows at hotels (volcanoes, indoor rain, street performers, lions)
• High end hotels and condos (these projects started popping up behind properties on the Strip)
• Frozen drink stands (they are everywhere these days)
• Party pits in the casino (scantily-clad go-go dancers, complete with poles, right behind pit bosses)

And the list goes on. Once one casino opens a door to these trends, every one of them on the Strip and downtown follow suit. In a way it is easy to get a sense of "the next big thing" in Las Vegas because there is a copycat effect.

Las Vegas was in serious trouble after the economic collapse of 2008. But it bounced back, and now it is on the verge of hosting 40 million people this year. The current trend is to market to millennials, those young folks (mostly from California, in this case) with a lot of money and a penchant for looking for a good time.

This strategy seems to be working… sort of. People see the posh, luxurious hotels, clubs and restaurants and think "wow, Vegas is hopping!" And it is, if you look at raw numbers of visitors. But at the same time, many of the hotel/casino entities in Las Vegas are having a hard time turning those numbers in to stellar profits.

Caesars Entertainment Corp (CEC) is famously and publicly having financial problems, and while some of those problems are due to the fact that they are a HUGE company with about a million initiatives, part of the investment strategy is following entertainment trends in Las Vegas. For evidence, all you have to do is look at the giant High Roller wheel and the corresponding LINQ shopping venues behind Flamingo.

As another example that things may not be so good, SLS is starting to lay off its workforce. How could the hippest, newest casino in Las Vegas be in trouble already?

I wonder how many top Vegas properties are doing serious market research and finding out what sticks. These trends make the short-term money, much like a fad (think Personal Digital Assistants, or PDAs, of the 1980s) instead of the long-term ideas that have lasting effects (think smart phones).

The focus on trends is one of the reasons many Las Vegas hotels have put gaming on the back burner, a secondary "oh by the way" feature, and are spending their time and money on entertainment. Experts will argue that, regardless of the reasons for this (and there are many), that this is a good strategy for Las Vegas proprietors. I wonder… other than visitation numbers and the "if you build it they will come" mantra, where is the proof that this is a good long-term strategy? It's not in the numbers. What happens in a few years when the millennials start getting older and don't want to party at clubs and topless pools anymore? Las Vegas will have to reinvent itself again.

And I'm not saying that's necessarily a bad thing. Change is good. Be nimble to adapt to an ever-changing market and you have a better chance of being successful. I get that. But there are certainly long-term marketing strategies that hotels and casinos can also implement that will lead to financial stability. After all, I'm sure they get tired of chasing down the next big thing.

Viva,
Mike