Thread: Recession Brings 'Las Vegas Dream' To An End

Recession brings 'Las Vegas dream' to an end

The gambling resort's lavish CityCenter complex is nearing completion but its timing could hardly be worse

Andrew Clark in Las Vegas
guardian.co.uk,
Friday 26 June 2009 13.55 BST


Aerial views of Las Vegas CityCenter complex Photograph: Ethan Miller/Getty Images

Bursting skywards in the middle of America's gambling capital, seven glittering towers are nearing completion. The lavish $11bn (£6.7bn) CityCenter complex will boast a casino, four hotels, luxury apartments, a fire station and even an on-site power station. But its timing could hardly be worse.

A joint venture between the casino operator MGM Mirage and Dubai World, the vast CityCenter development in Las Vegas is the biggest privately funded construction project in the US. It is billed as "a city within a city" and it will sit between the Bellagio's dancing fountains and the fake Manhattan skyline of New York New York.

The doors of the first tower will open in October. But critics wonder who will fill CityCenter's 7,000 hotel rooms and apartments. Las Vegas is mired in a recession of epic proportions and Â*CityCenter's parent company, MGM, is toiling under $14bn of debt.

Donald "D" Taylor, head of Las Vegas's Culinary Union, which represents 60,000 hotel workers, says: "We, basically, have had a boom here for 20 plus years. Nobody has ever experienced a downturn before. We've been hit hard."

Taylor, an influential Vegas power-broker, adds: "It's enormously challenging. There's a lot of steel sticking out of the ground in this valley that's just sitting there."

After a quarter of a century of phenomenal growth, Las Vegas has come to a shuddering halt. The seemingly endless supply of gamblers has dried up. So has the conference trade, hardly helped by a warning from President Barack Obama that bailed-out Wall Street banks should avoid "taking junkets to Las Vegas" on the taxpayers' dime.

Always good value, Vegas hotels have had to slash their room rates by 30% to fill beds. Downtown casinos are offering rates of barely $20 a night, while the four-star Las Vegas Hilton, where Barry Manilow is a resident performer, is offering rooms for as little as $39.

Unemployment in Vegas has reached 11.1%, compared with a national average of 9.4%. And a spectacular collapse in the local housing market has left seven out of 10 homeowners nursing negative equity.

On the city's world-famous Strip, two huge building sites are eerily quiet. Fontainebleau, a half-finished $3.9bn casino which intended to offer perks such as an Apple iMac computer in every room, went bust this month. Echelon, a $4.8bn resort bankrolled by Boyd Gaming, ceased construction last year.

The much-vaunted CityCenter complex is far bigger. But MGM almost had to pull the plug in March when its partner in the United Arab Emirates declined to stump up towards a $200m equity payment. The project was within hours of bankruptcy when MGM's bankers agreed to a stay of execution.

Gordon Absher, MGM's vice-president of public affairs, says shutting down was not an option: "For us to stop CityCenter would have been devastating for the company and for the community."

He points out that 8,000 construction workers would have been laid off and the promise of 11,000 permanent jobs would have been lost. He admits: "We're experiencing something that is quite foreign to us. I've been in Las Vegas for 20 years and it's always been a boom town."

Just as Detroit depends on the health of the motor industry, Las Vegas relies on gaming for its lifeblood. Some 37 million tourists annually are lured by a heady mixture of gambling, sunshine, star-studded shows and nightlife. The city's permanent population has soared from 700,000 in the mid-1980s to 1.9m as people arrive from all corners of the US in search of steady jobs and cheap housing. But economic migrants are now trickling away from Vegas.

For years, the city offered a so-called "Las Vegas dream" where housekeepers or kitchen workers could buy their own homes, afford annual holidays and send their children to college. But expansion spun out of control.

The city was at the centre of the sub-prime mortgage crisis as lenders handed out unsustainable home loans. Some 35,000 houses and flats now stand empty. Keith Schwer, an economist at the University of Nevada in Las Vegas, says: "The housing industry basically got into the casino business."

Schwer says a myth abounded that people would escape to a gambling resort in good times or bad: "We had some people out there arguing that the Las Vegas economy was immune from an economic downturn and a few others saying we were, at least, resistant to recession. It's very clear now that we are not."

Eager to move away from its historical association with adult entertainment and organised crime, Las Vegas was heading upscale when the economy plunged. The 1990s era of themed kitsch, which gave birth to the pyramid-shaped Luxor resort and Excalibur's King Arthur-style castle, morphed into a 21st-century fad for luxury.

Newer casinos, such as Steve Wynn's Wynn Las Vegas, boast restaurants inspired by top-name celebrity chefs, designer boutiques, spa treatments and extravagant suites with floor-to-ceiling windows. But top-class accommodation is a cyclical game.

Brian McGill, a gaming analyst at stockbroker Janney Montgomery Scott, says: "What they missed, the city and the operators, is that yes, it's gambling that Vegas was built on originally but it became so much more than gambling. It wasn't any more about cheap rooms, cheap drinks, cheap shows. It became an ultra-expensive weekend for anyone going there."

That, he says, is fine in the good times. But when the economy turns downwards, even ardent poker players are reluctant to splash out on wild lime botanical spa treatments or $70 Kobe steaks.

McGill believes the city's expansion bodes ill. As many as 15,172 new rooms will shortly open on the Las Vegas strip, requiring an extra $3.2bn of annual tourist spending to make any money.

"There's too much supply, particularly at the high end," says McGill, who struggles to see a quick return to profit for casinos. "They believed the good times were going to continue to roll for ever in Las Vegas. They believed there would be no significant downturn and even in a downturn, they didn't believe a recession would affect the higher end."

More than 2,000 hopeful jobseekers queued for as long as three hours this week to apply for 200 lowly housekeeping positions at the Hard Rock Casino, which is opening two new towers. A seemingly endless line stretched past the casino's sparsely populated poker lounge, sports betting room, Pink Taco restaurant and rock memorabilia shop.

"Things are very bad," said Liya Abraham, one applicant who gave up after waiting two hours for an interview. "I'm thinking I might move to another state. This situation has been very tough on me."

Abraham, 30, tells a familiar story. A former card dealer, she was laid off six months ago by Las Vegas's Poker Palace casino. With three children to support, she badly needs a way to pay the bills and would be happy to clean tourists' rooms: "I can do housekeeping work. It's just really hard to find a job."

The brasher visitors attracted to Vegas mean that the jobs themselves are far from easy labour, according to workers' representatives. Members of the Culinary Union typically earn about $15 an hour. But Taylor bristles at the suggestion that cleaning rooms is unskilled.

"You try making up 16 rooms in a day," he says. "It's not like working in a business hotel in New York or Chicago. People come here and party. They trash rooms here."

http://www.guardian.co.uk/business/2009 ... -recession

I live in CA. and trying to find a job here is impossible. A friend of ours is a Dentist and he had an office position to fill and he had over 2,500 applicants...
And our brilliant President wants to grant AMNESTY to illegal aliens who compete in hard to find jobs.

Well this was bound to happen sooner or later. Vegas has always been over expanding. I was there to witness the demolition of the Stardust and I knew back the city couldn't support such a huge expansion. I stayed at Excaliubur for $65 a night and those rooms are now going for $25 a night.

If Obama doesn't support the American workers, they won't support him and his trillion dollars Stimulus Fiasco Bill.

No2Illegals, I live in a "Santuary City" on the opposite coast, so I really understand your anger, fear and frustration.

Your point is well-taken No2Illegals. It is stupid that Obama wants to give all the illegals Amnesty. The illegals will continue to work under the table and pay no taxes and get a truck load of goods and services via our tax dollars.

Meanwhile, he is taxing us on anything that doesn't move. As more Americans lose their jobs and homes, where does Obama think the tax money is going to come from?

The Inland Empire,CA is at some 19% unemployment. Arnie wants more cuts from state workers' pay instead of rescinding million dollar retirements to former county executives. The cuts are hitting low , instead of high where it needs to be hit. From what I understand, A former county exec of San Bernardino just took a million dollar retirement for five years of service . Developer's friend, Dennis Hansburger.

The city was at the centre of the sub-prime mortgage crisis as lenders handed out unsustainable home loans.

Sub primes loans demanded by ACORN etc. and mandated by Harry Reid etc.

Harry Reid's fingerprints are all over this. And now he wants to give amnesty to 20 million illegal aliens who are taking jobs from Americans!!

I don't see how he will get re-elected.