Tuesday, May 6, 2008

The Tank is On!

"It's on!" is one of the favorite expressions I hear from young people today.

Well, folks it's really on in the casino industry and the thing that's on is financial losses.

Here's a peek at more woes from Las Vegas...http://www.newsweek.com/id/135638

By Steve Friess Newsweek Web Exclusive
May 5, 2008 Updated: 4:29 p.m. ET May 5, 2008

"This recession is really hurting everyone."
It's even hurting the city of Las Vegas, the economy of which was once thought to be impervious to the economic swings suffered by the rest of the country. Not anymore.


According to the Las Vegas Convention and Visitors Authority (LVCVA), Las Vegas has seen gambling revenues fall only once since 1970: in the aftermath of the Sept. 11 terror attacks they dropped 1 percent in 2002 from 2001. So far this year they've fallen 4 percent, the number of conventions held has dropped 10.4 percent, and average daily room rates were off 3.8 percent in the first two in recent weeks the company eliminated 440 middle management jobs to save $75 million annually. "We made a structural change in our company to become more efficient and provide the same level of service, but we did have to advance that effort because we were also seeing a softening in the marketplace," says MGM Mirage spokesman Alan Feldman.
What's leaving Las Vegas more susceptible to this economic crisis than to previous ones? Diversification. Roughly 60 percent of the Las Vegas Strip's revenues now come from nongaming activities. By contrast, in 1991 and 1992, when the last comparable slowdown occurred, nongaming activities provided just 42 percent of overall revenue.
"This is different from prior downturns," says Bill Lerner, a Deutsche Bank
gaming-sector analyst. "Now that there are a lot more nongaming amenities, the
visitation mix is leaning toward nongamblers, and the consumer coming to Vegas
is different now than it was."
So, family-style gambling halls/resorts tank. It's always been about making money off gamblers and it always will be. The disney stuff was fluff.

Several annual conventions have seen fewer attendees show up and have seen those who do come stay for shorter periods. For example, last week's National Association of Broadcasters confab attracted 105,000 registrants, down from 111,000 in 2007, according to NAB executive vice president Chris Brown. Those figures could have been worse, Brown says, but advance registrations were so far down that several hotel-casinos voluntarily offered to cut room rates by $10 or more to encourage attendance. Says Brown, "That's never happened before."

Nearly 7 percent fewer cars crossed the Nevada-California border along
Interstate 15 through February, reflecting in part that record-high gasoline prices are curtailing drive-in visitors from the largest neighboring state.

Note to Governor Patrick - Destination resort casinos are tanking.

Making matters worse, three airlines with substantial service to Las Vegas—Aloha, ATA and Champion—are going out of business.

Even the mortgage mess and the subsequent credit crunch have taken a toll on Vegas. Several major construction projects on the Strip are delayed due to financing problems, including a second tower for Donald Trump's new condo-hotel. Also delayed is a plan to build a $6 billion version of New York City's famed Plaza Hotel. And while construction continues on the half-built $3 billion Cosmopolitan Resort and Casino next to the Bellagio, the project may be in jeopardy after developer Bruce Eichner's company defaulted on a $760 million loan from Deutsche Bank.

Note to Unions - diversify your mind. Get excited about the Green Construction plans of the Administration, it's the future...casinos are the past!

March's figures will likely put the year-to-date numbers in negative territory. The stock price of MGM Mirage, owner of Bellagio, Mirage and eight other Strip resorts, has halved, from $100.50 in October to about $49 on Friday. In recent weeks the company eliminated 440 middle management jobs to save $75 million annually.

Not a good investment.

Thursday, May 1, 2008

Teachers Unions and Casinos Make Poor Bedfellows

Here's a look at what Massachusett's future could look like if the MTA and the ATF get what their leadership seem to think is a good idea.....expanded gambling in Massachusetts. It certainly ensures that leadership will have plenty of "make work" to report to their membership.


MGM-Mirage CEO Speaks Out on Gaming Tax Hike Proposal

"The head of the biggest gaming company on the Strip says he's in a fight to the finish with the teachers union. MGM-Mirage chairman and CEO Terry Lanni came out swinging Tuesday against the teachers proposal to boost the gaming tax, in order to pump more money into education.
Lanni sat down Las Vegas One's Jeff Gillan. What has Terry Lanni and the rest of the gaming establishment seething is the teachers union proposal to boost the tax from 6.75, to 9.75-percent. That amounts to a 44-percent tax hike.
Lanni isn't pleading poverty. But he does say the hike would cost MGM-Mirage around $90 million a year. Lanni calls it a "tax grab" and says that's money that could go to hire more workers.
"We don't make billions of dollars as a company. In 2006, we had a $648 million after-tax profit. In '07, it was much higher because we had a significant profit from the 50-percent sale of CityCenter. If you go back to comparative figures, it was about $700 million, if you exclude the profit in '07 from that," he said.
"If you raise that tax $90 million, you're going to have a lot less income. It's a significant factor on the overall income of our company. And $90 million at $38,000 per person, the average salary equates to about 2,000 plus positions in value," said Lanni.
The teachers union says the extra money would boost teacher salaries and be used to improve student performance. Lanni says the initiative comes with little accountability, but the teachers union says that's not true. It says the measure requires school districts to account for every dollar.
Asked if there's any room for compromise with the teachers union, Lanni said his focus right now is defeating the proposed initiative.
That initiative is facing two hurdles -- teachers have to gather more than 58,000 signatures by May 20 to get it on the ballot, and they have to prevail at the Nevada Supreme Court, which is hearing an appeal by gaming on July 1. "

What a mess!