EDITOR'S LETTER: The long road ahead
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 painfulThe 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.