Economy taking a toll on Las Vegas casinos
Story and photos by Max Olson NewsNetNebraska
The Sahara was once a gem, a vintage casino-hotel that anchored the northern end of the Las Vegas strip and was home to the original “Ocean’s Eleven.”
But on May 16, its owners closed the doors for good after 59 years of business. It wasn’t economically viable anymore, and more than 1,600 employees lost their jobs.
The Sahara is now surrounded by skeletons of casinos past and a handful of unfinished masterpieces. In this city of more than 1,700 licensed gambling halls, few casinos are actually thriving. The new name of the game during these confusing economic times is survival.
What’s wrong with Las Vegas? Nick Christenson thinks he knows the answer.
Sahara closed its doors on May 16.
It isn’t a complicated one: Today’s Vegas simply wasn’t built for today’s gamblers.
“The Las Vegas built between 1997 and 2007 cannot afford to have people come as budget gamblers anymore,” he said.
Christenson has covered Sin City’s casinos since 1996. The information technology consultant moved there permanently eight years ago and runs the “Las Vegas Casino Death Watch,” a not-for-profit blog that compiles and analyzes casino financial reports.
He can’t see the privately owned companies’ books, but by now he’s confident he has figured out what’s really ailing Las Vegas’ economy.
The gambling Mecca used to be recession-proof, he said. But those days are over, and the bar for success is staying in business and avoiding refinancing.
But the Sahara’s closing was a surprise. Most casinos have struggled in the past few years but don’t show signs of shutting down. They close towers and cut staff to get by.
“Actually shutting the doors makes it expensive to re-open them,” Christenson said. “It’s unclear to me what the thinking was for the Sahara, but it’s entirely possible they were losing so much money or that they simply ran out of money and this was their only option.”
Now the north side of the strip is down to three casinos, and it’s also saddled by several aborted projects. When the recession hit, Christenson said, several companies realized they just couldn’t afford to finish gigantic new casino/hotels like Echelon Place and Fontainebleau.
And while such a move makes sound financial sense, the citizens of Las Vegas aren’t happy.
“They did what they had to do, but it sucks,” Christenson said. “It sucks to see all these eyesores sitting there.”
The mindset of Las Vegas’ gamblers has changed, too. Attendance is down slightly, he said, but spending per capita is way down.
Tourists are taking fewer vacations, and when they do, don’t travel as far or spend as much. The housing crisis also caused problems – gamblers just don’t feel as wealthy, and fewer of them are coming to Las Vegas for the full high-roller experience.
“That’s the thing that’s really hurt Las Vegas the most,” Christenson said.
Jeff Kreifels co-owns Action Heating and Plumbing in Lincoln and has flown to Vegas to get his blackjack fix at least once a year for more than 20 years.
He doesn’t come for the shows or attractions, just the gambling. His belt hasn’t tightened much when he’s come, but Kreifels has noticed changes in his favorite vacation place.
“You really can’t get anything comp’d here anymore, no matter how much you gamble,” he said. “This town used to be really good to guys like me, but that hasn’t been the case as much anymore.”
Back in its heyday, Las Vegas actually had a great deal of turnover in its casinos. Owners and companies frequently closed less-successful properties and opened new ones. That constant reshuffling is missing today.
“Implosions happen when economic times are good,” Christenson said. “They do it when they want to replace a casino with something that will make them more money and can get the investment together to make that happen.”
Instead, today there are a number of failed projects like Fountainbleau, a 63-floor casino/hotel property that was supposed to open across the street from the Sahara in October of 2009. It’s currently 70 percent done and needs at least another $1 billion to reach completion.
But its developer, Fontainebleau Las Vegas LLC, filed for bankruptcy in June 2009, and the financier who bought control of the property during bankruptcy court auctioned off Fountainbleau’s furnishings last October. There are currently no plans to resume construction any time soon.
Half a mile south of Sahara and Fountainbleau sits what was supposed to be Echelon Place. It hasn’t seen any progress since August of 2008. In 2009, Boyd Gaming Corporation announced its latest masterpiece wouldn’t see any more construction for up to five years until the economy improves.
The Cosmopolitan is Vegas’ newest casino, a $3.9 billion project that opened last December. Its lack of success is a telling indicator of the current status of the Vegas casino economy.
It’s actually an operational success, Christenson said, with a fun atmosphere and nice food offerings. But it’s also now owned by Deutsch Bank and hasn’t exactly been a financial powerhouse.
“It’s been a dismal failure,” he said. “After the crash of 2007, though, what could you expect? It’s a relative success and better than expected, but it couldn’t possibly be a financial success.”
What’s the future, then, in a time of great economic uncertainty?
In the short term, it’s survival. After that, the stalled casinos need to open up and gamblers need to bring the city back to its pre-recession status.
“The hope of Las Vegas is that if the economy improves, eventually people will starting coming back and spending more – that the Las Vegas demand will grow into its current capacity and things will be better,” Christenson said. “Nobody is really thinking beyond that.”