EDITOR'S LETTER: The long road ahead
by Marian Green
December 2, 2008
It's easy right now to talk about yet-another doom-and-gloom scenario, but here's one example of how a casino-resort can serve as a hub for a growing area
In today’s trying economy, it’s almost too easy to come up with
yet-another doom-and-gloom example within the casino
industry.
No one doubts for a minute that it is hurting,
but, as casino companies face bankruptcy and projects all over are being
shelved or scrapped, it is also worth sounding a positive note when the
occasion warrants.
One such occasion came like a breath of fresh air Nov. 11– the opening
of Station Casinos’ newest resort, Aliante Station.
The
$662 million property in North Las
Vegas, Nev., is the
18th casino owned or operated by the company. The 202-room hotel-casino, a
joint venture with Greenspun Corp., is an example of how a casino-resort can
serve as a hub for a growing area, such as the sprawling Aliante master-planned
community.
The
property, featuring a contemporary Scottsdale-like desert vibe, has the
requisite slots (2,554 of them), table games (40), a high-limit area, a
state-of-the-art sports book, a poker room, meeting space, six restaurants and
a high-tech entertainment venue.
It
also offers something much more important in today’s struggling economy –1,400
new jobs – and stands as a testament that this downturn, however long it lasts,
will give way eventually to better times.
Station Casinos Chairman
and CEO Frank Fertitta III underscored this point in a recent interview with
the Las Vegas Review-Journal. “The Las
Vegas economy will turn around,” he told the
newspaper. “It’s not a forever thing. We just have to work our way through
these challenges and these difficult times. In the short run, it’s very
painful.”
Very painful
The gaming industry, indeed, has been a
poster child for the effects of the economy’s meltdown. The foreclosure crisis,
uncertainty about jobs (In October, the nation’s unemployment rate reached its
highest point in 14 years, 6.5 percent, in 14 years.), falling home values, and
higher food and gas prices have people gripping their wallets more tightly and
making fewer trips to casinos, and when they do come, they’re spending
less.
Nowhere in the casino industry are these
effects more apparent than with the Las Vegas Sands, which warned investors in
early November that there is “substantial doubt about the company’s ability to
continue as a going concern” because of its failure to maintain a ratio of debt
to earnings required by its lenders.
If the company defaults on the bank loans,
that could trigger defaults on other loans, potentially sending the company
down the slippery slope of bankruptcy. Las Vegas Sands has been one of the
casino companies hit hardest by the credit crunch because of its high debt load
and aggressive growth pipeline, and in September, billionaire Sheldon Adelson, who
is chairman of the Las Vegas Sands Corp., put $475 million of his own money
into the company in an attempt to prevent the current situation. The company
also has hired an advisor to look at options, including seeking out new capital
or putting a hold on projects under construction in Macau
and Las Vegas.
Las Vegas Sands is clearly not alone. Many
companies, large and small, are facing their own challenges, and a climate of
uncertainty hangs in the air. Some industry analysts believe the current crisis
may herald longer-term implications for the gaming
industry.
“Post the era of using
homes as ‘piggy banks’ and overspending as a nation at every level, we believe
a new era of national thrift is before us,” Andrew Zarnett, a Deutsche Bank bond
analyst, wrote in a recent research report. The tanking of the stock market has
traumatized the general public. “We believe Americans will be forced, if not at
their own volition, to reduce household debt.”
Value has always resonated with gaming
customers. And the casinos that will survive this economic situation the best
will be the ones that tailor their offerings to a thriftier, more discerning
audience, in much the same fashion as Station Casinos has been doing at its
properties for years and is continuing at Aliante.
Marian Green
greenm@bnpmedia.com
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