Vegas Implosion by Former Gambling Execs
The Las Vegas Sun, which prints some of the most interesting and innovative gaming journalism, recently invited three retired gambling executives to a roundtable discussion on Las Vegas' recession climate. The three: Phil Satre, former chief executive of Harrah's Entertainment; Don Snyder, former president of Boyd Gaming; and Glenn Christenson, former chief financial officer of Station Casinos, all weighed in on what created the current crisis on the Strip.
Snyder: Before the recession, each new building cycle in Las Vegas would create more demand. Most industries don't work that way. That reinforced future decisions. As we moved into this latest building cycle and reinvention phase for Las Vegas, we said, "Of course we can create new demand and fill all these rooms, no matter what happens." Now we're dealing with a backlash that we've never felt before.The three discussed the relatively recent luxury market that boomed during the last 10 years and how now that segment may need another 10 years to rebound. New reports say the Strip lost about 15 percent from last year and tourism fell around 6.3 percent. Room rates are down at least 25 percent from early this year.Christenson: It's a Catch-22 because what drove that demand is the quality of these products. We've all looked at projections for average room rates of $250 to $300 and that's not happening right now. The debt that went along with this growth is very difficult to service now. And I'm not sure anyone could build what I'd describe as a B product today and be successful.
Satre: Not when the A product is now priced below the B product. Not when you look at quality rooms going for $100 to $150 a night plus coupons and everything else.
Snyder: One of our greatest challenges is that we're moving back to a value-oriented proposition, which is great for the consumer but doesn't leave a lot of value for shareholders.
The three are savvy enough to understand that what bankrolled Vegas were the average customers looking lured by decadent free booze and $5.99 prime rib -- because didn't they make all that money back on gambling? Now the shift seems to be on expensive rooms, shows and amenities -- all things that were attractive in the boom time, when average people had access to skyrocketting home equity and were heady with the possibilities.
Now, many of those people are waking up from the economic hangover, and luxury may have no place in Las Vegas beyond a niche market.