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
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