Leaving Las Vegas

Probably no industry besides housing dove into the cheap money orgy with more reckless abandon than Las Vegas casino conglomerates. The Strip has many cranes in the air helping build hotels that will total about 10,000 rooms, or would have since one project is idle. The music stopped and Boyd Gaming’s Echelon had nowhere to sit down. We’ll soon see if other chairs are removed from the game. There is no need for the cranes elsewhere in the world so they’ll just stay put, abandoned but lit up so aircraft won’t crash like Boyd’s stock.

The major players on the strip are hung over after relentless expansion with MGM now falling about $1.2B short of funds on the estimated $10B City Center. Harrah’s went $15B in debt going private, gobbling up casinos nationwide building their family to over 50 properties. Wynn and Las Vegas Sands made ill-fated investments in Macau. Station Casinos which owns seven properties catering mostly to locals is flirting with bankruptcy. Most of these stocks are trading at less than 5% of their peaks last year.

The troubles these companies face are of their own making and none will get a government bailout. Unfortunately for them and their employees they’re getting the opposite from Washington, a huge kick when they’re down. President Obama has stated that he doesn’t want any company who receives federal funds to spend money in Las Vegas. People jump when this President says to so there have been 340 event cancellations in the past 90 days; 111,800 people who won’t be spending money in Sin City. Many of the 46,000 people who are directly employed through these meetings will presumably sit idle. Mayor Oscar Goodman has asked for an apology for driving this stake through the Las Vegas economy. Good luck with that.

A few years ago when these projects were on the drawing board it looked like Las Vegas needed the extra capacity. The nearly a million people who were visiting each week tested the airport's capabilities, formed lines outside the restaurants and clubs and paid top dollar for rooms. The city that once gave away rooms, food and drink to make it up at the blackjack tables was getting $1000 and up for a bottle of Cristal. The population in the Las Vegas Valley was growing at 60,000 per year.

The boom brought riches but the crash is worse. Las Vegas has unemployment approaching 10%, leads the country in foreclosures and has another distinction: Forbes’ wrote about Vegas being the most abandoned city by home vacancy in the country. People are looking for greener pastures, which aren’t difficult to find since they live in a desert. The people who remain employed are seeing their hours and benefits slashed, home equity vaporized and their communities destabilized. There will be no end in sight until the demonization of Las Vegas business trips is lifted, or in other words there is no end in sight.

There is a message Nevada will send to President Obama but sadly will have to wait until the 2012 election.