Las Vegas Hedging Their Bets for 2009
LAS VEGAS (Reuters) - Long-term bets are always risky in Las Vegas -- a city that prides itself on invention, reinvention and almost constant change.
As the Nevada gambling and vacation mecca places its bets on 2009, more change is promised even as casino operators see a dreary outlook for consumer and discretionary spending this year.
The city will not miss 2008. Las Vegas Strip gambling revenue fell 9.3 percent in the first 11 months of last year, while room rates dipped 9.5 percent.
"The true test for this town will be January, February and March. A lot of things are going on then," said taxi driver David Matusky.
Casinos are gearing up now for the Chinese New Year holiday, followed closely by Super Bowl weekend. February will see the long President's Day weekend, while college basketball's March Madness is another big draw for gamblers.
"I think all of those are going to show declines," said Majestic Research analyst Matthew Jacob.
Most casino operators are laying off workers and finding other ways to cut costs. Faced with the combination of slowing business and tight credit markets, they are also scaling back on plans to add new hotel rooms.
Harrah's Entertainment, the world's largest casino operator, said last week it would hold off on opening a 660-room expansion at Caesars Palace, citing weakened demand for hotel rooms in Vegas.
The slowdown has also hit some properties with more immediate needs. Boyd Gaming Corp's Echelon resort sits partially built at the Strip's northern end, adjacent to the vacant lot where Israel's Elad plans to build a resort based on the company's famed New York Plaza Hotel.
Sands, meanwhile, has halted construction on a St. Regis-branded condominium tower adjacent to Palazzo.
VACANT LOT
But not all building has come to a halt -- Harrah's plans to finish the exterior of Caesars tower.
Nearby neighbor Steve Wynn last month had his workers tear down the sign heralding the site's former occupant, the now-demolished New Frontier, and trees have been lined up behind the sidewalk that fronts the vacant land.
Wynn Resorts Ltd has moved full steam ahead with the opening of its $2.3 billion, 2,000-room Encore resort -- the butterfly- and rosette-themed "younger, hipper sister" of the adjacent Wynn Las Vegas.
The December opening of the new Wynn resort followed the year-earlier debut of Las Vegas Sands Corp's Palazzo -- high-end projects that added to the oversupply of luxury rooms, further pressuring Las Vegas hotel rates.
Casino mogul Wynn has said he has no plans to lay off employees and will adjust room rates as needed to keep his two luxury resorts close to full occupancy.
But still more capacity is coming with the expected opening later this year of MGM Mirage's multitower CityCenter project as well as Fontainebleau Las Vegas.
PICKING SPOTS
Many of the new projects that are moving ahead are doing so on a smaller scale.
MGM said recently it would eliminate 200 residential units planned for the Harmon Hotel & Spa at CityCenter, and defer the opening of the 400-room project by a year to late 2010. The decision solved construction problems, cut costs and reduced the volume of unsold residential real estate on the Strip.
Cash-strapped MGM has also agreed to sell its Treasure Island casino for $775 million to Phil Ruffin -- the real estate mogul who sold the aging New Frontier in 2007 for a record $1.2 billion.
But Vegas is not a city for gloom and doom, and not everyone sees the coming year as a bad one.
"Vegas still provides great value for customers," said Howard Lefkowitz, president of seven-year-old ticket and hotel vendor Vegas.com.
Relative newcomers like SushiSamba -- a Peruvian/Brazilian/Japanese restaurant located on the Palazzo's relatively subdued retail mall -- are also hopping.
"We have a happy hour -- half-priced drinks -- and the bar packs up. When people walk by and see the bar full they come in," said general manager Hayes Swope.
"A lot of the salespeople have been coming over here and thanking me."
