Will the LV Sands Go Into Bankruptcy?

[ricoba]

Here is the link from Bloomberg regarding Las Vegas Sands, (which is the parent company of The Venetian Hotel), & the financial crisis they are facing.

Perhaps the dire predictions of Vegas being overbuilt are going to become true.

 

[MTB12]

Yes - I'd say many of these gaming companies are in big trouble. LV Sands bankruptcy seems likely. The CEO, Sheldon Adelson, was worth over $30 Billion last year when the stock was $140/share. Now, at $6, he has lost 95% of that. That has to be the biggest one year loss of personal wealth in the history of the world.

I'm seeing hotel room deals now that I haven't seen in 10 years. And it's only going to get worse for Las Vegas. There are currently over 30,000 additional rooms under construction that will be completed over the next few years - pushing hotel and timeshare rental rates down even further.

Vegas is indeed vastly overbuilt.

There is a detailed list of projects available at this site:

http://www.vegastodayandtomorrow.com/inventory.htm

 

[UWSurfer]

Yes - I'd say many of these gaming companies are in big trouble. LV Sands bankruptcy seems likely. The CEO, Sheldon Adelson, was worth over $30 Billion last year when the stock was $140/share. Now, at $6, he has lost 95% of that. That has to be the biggest one year loss of personal wealth in the history of the world.

I'm seeing hotel room deals now that I haven't seen in 10 years. And it's only going to get worse for Las Vegas. There are currently over 30,000 additional rooms under construction that will be completed over the next few years - pushing hotel and timeshare rental rates down even further.

Vegas is indeed vastly overbuilt.

There is a detailed list of projects available at this site:

http://www.vegastodayandtomorrow.com/inventory.htm

I suspect what you will see happening over the next couple of years are the remaining older hotels on or near the strip which have been toying with closure doing so. Rumored demolition of Harrah's, Imperial Palace and the near closing last year of Tropicana would all seem like likely candidates, thus reducing room inventories.

Alternately, they may keep these operating as loss leaders offering cheaper rooms to re-attract the lower end gamblers until the economy strengthens and the financing can be had to pickup these projects. I'm not one to have a good crystal ball, but after nearly 20 years of building new resorts, high rise condo's and a handful or so of half finished projects in the works, it seems we have arrived at a pause.

 

[JeffW]

I agree with your second thought. There are a lot of older casinos that, without events of the last ~year, would have been candidates for tear down and rebuild. However, in the current economy, I can't see that happening, especially since the replacement would be a multi-billion dollar new resort.

I also can't see a casino either just being shut down, or worse, torn down to an empty lot (how long was the Desert Inn and El Dorado closed before they were torn down?). As mentioned, I think these casinos will just offer a lower price point for those looking to go to Vegas.

I doubt this is the first 'bust' cycle Las Vegas has been through. On average, Vegas does pretty well, buy experienced people should have realized that the 'boom' they've gone thru the past ~decade would likelly be offset by some downturn later on.

 

[Karen G]

Vegas is indeed vastly overbuilt.

I keep hearing that and keep reading all the doom and gloom, but everywhere I go near the Strip, it seems as crowded as usual.

Tuesday night we had dinner at Gallagher's Steakhouse inside New York New York and the place was packed. Tonight we had dinner at Capo's, an obscure little Italian place on W. Tropicana a few miles west of the Strip and it, too, was packed.

 

[ricoba]

I keep hearing that and keep reading all the doom and gloom, but everywhere I go near the Strip, it seems as crowded as usual.

Tuesday night we had dinner at Gallagher's Steakhouse inside New York New York and the place was packed. Tonight we had dinner at Capo's, an obscure little Italian place on W. Tropicana a few miles west of the Strip and it, too, was packed.

Up till this point, I have always agreed with your sentiment. But, I am beginning to wonder if the nay sayers may have it right this time. While the crowds are still there, the numbers seem to indicate that the Vegas economy has taken a pretty hard hit. I guess only time will tell.

 

[dougp26364]

I don't believe Vegas is overbuilt so much as it's been overdone these last few years. The coporate honcho's forgot their bread and butter market, middle income America, in favor of the international whales and the silver spoon bottle service dot com millionaires. The problem was, all that money was on paper and the paper's burnt up in the market fall out.

But, middle America keeps on working and, if Vegas hadn't screwed them over for the party goers who lit cigars with hundred dollar bills, paid hundred for a bottle of vodka that retailed for $30 and tipped door men C-notes just to get in the door, Vegas would still have a crowd shelling out money.

Vegas use to draw in mom and pop with an inexpensive room, cheesy but fun atmosphere, cheap eats and a shot at paying for your trip with your winnings. They use to comp you a lousy buffet or meal at the coffee shop for a little play. Lately, Vegas has been all about give us your money and get out. They've built monuments to themselves in the form of overbuilt luxury palace's built for those that can afford to blow a few G's over a weekend.

They forgot how to draw a crowd in with a loss leader like prime rib dinners for $5.95 and then get you to toss another $40 or $50 in the quarter slot machines over a couple of hours. They forgot the drink services while you're losing your money. Heck, they even forgot that people enjoyed the FEEL and SOUND of those coins hitting the metal pay out pan. WHY did they think those pans were made of metal and not something softer or lined with cloth? They actaully WANTED other people to hear someone winning much like a restaurant wants you to smell what they're cooking. It was to wet the gamblers appitite.

The powers the be in Vegas overbuilt in the direction of one particular crowd. Vegas gambled and....pardon the pun......lost. They gambled that there would always be whales and that there would always be idiots tossing C-notes around like they were small bills. They forgot that they were based on service and, they forgot people, while not always smart, will figure out that they're not winning anything anymore.

Vegas isn't necessarily overbuilt so much as it's overdone. From our point of view, we use to go to Vegas 2 to 4 times per year. Next year we won't go at all and, I'm really thinking we'll skip Vegas again in 2010. Vegas forgot about us in the stampede for the big spenders. Now we've forgotten about Vegas.

 

[Dori]

I couldn't have said it better! Their lack of foresight with regards to small stakes gamblers was, IMHO, a huge mistake.

Dori

 

[Pat H]

The Sands is building a new casino in Bethlehem, PA. It's on the old Bethlehem Steel property. There were also supposed to be shops and a hotel. Last week they announced they would not be building the shops at this time. Can't remember what they said about the hotel.

 

[GregGH]

I keep hearing that and keep reading all the doom and gloom, but everywhere I go near the Strip, it seems as crowded as usual.

Tuesday night we had dinner at Gallagher's Steakhouse inside New York New York and the place was packed. Tonight we had dinner at Capo's, an obscure little Italian place on W. Tropicana a few miles west of the Strip and it, too, was packed.

Hello Karen

This last week ( including Nov 7th ) was part of 'industry week for the auto aftermarket -- so an extra BUNCH people are in town.

We where in town for it as well.

Lake Vas Vegas was very quiet

Greg

 

[dougp26364]

The Sands is building a new casino in Bethlehem, PA. It's on the old Bethlehem Steel property. There were also supposed to be shops and a hotel. Last week they announced they would not be building the shops at this time. Can't remember what they said about the hotel.

HET has apparently backed out of a new build in KS as well.

 

[Fern Modena]

Doug,
I agree with you that Las Vegas has lost its way. It forgot who its core visitor was. Las Vegas has priced itself out of the market with high priced rooms (they've torn down the majority of the reasonably priced ones), high food prices, and shows at $100. up a ticket, to say nothing of the "ultra lounges" which replaced the old cabaret lounges. That doesn't even mention the high minimums at the tables!

Fern

 

[Fern Modena]

Is the economy affecting Las Vegas' Tourist Sector? You betcha. This is a slow time of year generally, but this year it is worse. Generally this time of year locals can get 2 for 1's for Tournament of Kings at Excalibur and free dinner with show tickets for Mystere. This year, in addition to the 2 for 1's for Tournament of Kings, locals can get 2 for 1's for Mystere, Ka, and Zumanity, as well as Lance Burton. The first three have never done this before, and Lance Burton hasn't in four or five years. Stomp is also offerring 2 for 1 until it closes (Januar 4, I think).

Theatres have gotten too big, some of them seating 1500 or so. Stomp, which was here almost two years, could not fill such a theater. They generally perform in theaters of 400-500 seats. They may reopen here in a smaller theater. Phantom is also having problems filling seats. Word is that its average is one third full. Le Reve redid their theater to make it smaller.

We went to South Point on Sunday for a show. The showroom is perhaps 400 people. ShaNaNa was playing, and tickets were $25-$45. It mainly attracted locals, some of whom were on 2 for 1's. We went to the buffet first, at dinnertime, and it was maybe half full.

We still eat out some, and we're seeing a lot less crowded places. I guess we don't eat the same places Karen does. I'm afraid that many of the places we love will not survive, even with local support. Many locals won't consider going out to eat somewhere these days without a coupon...

Fern

 

[zazz]

Las Vegas is overbuilt and will be to an even greater extent by the end of next year. The market hasn't been able to sustain the type of growth that these casino developers were projecting. There is a lot of arrogance that goes into being a developer and I think that the Vegas guys have plenty of that as well.

I was just there about two-three weeks ago. The casinos seemed to have a good amount of traffic at the machines, but thats the low-stakes stuff that everyone seems to revere. These are fickle customers whose only real value is in keeping the lights on day-to-day. They can gamble in Philadelphia, Temecula or Indiana if they don't go to Vegas. And when flights are $400 from the eash coast, they stay home.

I saw some of the damage at the tables and the buffets. Casinos aren't giving away the comps they used to (A.C. is admitting as much anyway). Folks probably aren't splurging for the pricer buffets either. Probably taking their 2-1 coupons to the Gold Coast for dinner (blech!).

Its going to take some time to absorb all of the new supply. I doubt anyone is going to close. If a casino owner is over extended on his debt, that has nothing to do with operations which are still profitable. Casinos that are having some trouble with recapitalize with partners at a discount to help generate some cash. If they file BK, they renegotiate all of the debt, give some equity to creditors and move on. Its the banks that will take it in the chin.

Low end casinos could have a tough time too. When the Venetian offers Paris rates, Harrah's customers often move up. That means Paris starts having to offer Trop or Excalibur rates and those customers move up. They guys at the bottom get beat up, because there is a limit to how low you can go short of paying people to stay.

 

[roadtriper]

Hello Karen

This last week ( including Nov 7th ) was part of 'industry week for the auto aftermarket -- so an extra BUNCH people are in town.

We where in town for it as well.

Lake Vas Vegas was very quiet

Greg

I was in town for Industry week as well, have been coming out to vegas a couple times a year for the past dozen or so years. I noticed the town was a lot quieter than in years past, but by no means dead. the trade show was not as busy either. there were fewer people walking around the tradeshow, and there were noticably fewer exibitors. there were quite a few empty booths scattered around the show. and there were a bunch of the international companies that are usualy housed downstairs at the sands, that had their booths moved to the upper level. I suspect as filler. some of the major companies that usually put on a serious dog and pony show. were pretty laid back. and some others were just as lavish as years past. I think the next year or two will be an adjustment in the Vegas economy. I uasually purchase show tickets for some of the folks I travel with. this year there were no real deals to be found.
we like to hang out at Bally's. the Deli downstiars by the sportsbook was closed. their Buffet was shut down. and the Asian Restaurant was scheduled to close by years end. we usualy take the monorail a couple of times while in town. there were no good deals there either. $5 per ride! so we didn't use the monorail at all. we have always headed down to Hooters for lunch one day during our trip. last year their prices were so High we didn't venture down there in June or this trip. I suspect that there are a lot of folks like myself who aren't afraid to spend $$$ but are not "High Rollers" who will be voting with their wallets. Vegas will adjust! they will go after the money where it is, they always have! RT

 

[MTB12]

I don't think that Vegas has to be "dead" in terms of traffic in order to be considered "overbuilt".

Many of these hotels and timeshares were built on the premise that they would bring in a certain amount of room revenue. These hotel rooms may only get half of the rates that they were projected to get originally.

The casinos will lower room rates until they get the high occupancy rates they need. That's the way it has always been. An empty room does them no good. Better to give it away for free and hope that the guests will gamble or spend money on dining and shopping.

So, even though Vegas may seem "busy", it doesn't mean that the casinos are getting the revenue that they used to. In some cases, that will mean bankruptcy if the income isn't enough to sustain operations and debt service. Remember how quickly the new Aladdin went bankrupt after it opened? Or the Stratosphere? They both continued operating, but under new ownership.

That's all that's likely to happen. Some of the existing casino companies will go under, and the hotels will be under new ownership, while the room rates revert back to a reasonable level.

People will still go to Vegas. It will luckily be a lot cheaper over the next decade or so than it has been in recent years.

Personally, I see it as a good thing.

 

[ricoba]

I agree fully with Doug about Vegas seeming to forget the low roller, like me. Thankfully, I like to play and stay in Downtown Vegas, which still caters to the low roller.

The pleasant benefit for us has been we have been getting quite a few nice offers for free or almost free hotel rooms.

 

[Fern Modena]

To my knowledge the Stratosphere has never gone bankrupt. The casino you are probably thinking of was Bob Stupak's Vegas World, which was in the same location. Vegas World was thought of as a strange, quirky casino/hotel, "with that huge thing sticking out of the top." When built, it was off the beaten path for a tourist place. They had strange packages, where you bought certificates ahead of time for several hundred dollars (at a discount) and got a package which included gaming chips and your room.

Fern

Remember how quickly the new Aladdin went bankrupt after it opened? Or the Stratosphere? They both continued operating, but under new ownership.

 

[mas]

...The casino you are probably thinking of was Bob Stupak's Vegas World, which was in the same location. Vegas World was thought of as a strange, quirky casino/hotel, "with that huge thing sticking out of the top." ...

Fern

I remember staying at Stupek's casino about twenty years ago. He was one strange dude and it was reflected in his hotel.

I'll be at the Grand Chateau Dec. 7th. I haven't been back to Vegas for a couple of years so it will be interesting to see all that's changed and whether the current economic situation is noticeable in the traffic etc. I would think this would affect the city center construction across the strip from the Polo Towers, but I guess anyone who can afford those housing prices are somewhat immune to the current downturn??

 

[ricoba]

Here is a follow up article regarding the Sands & its current financial whoa.

I don't some of the financial mumbo jumbo, but one comment made it clear that LV Sands is in a do or die situation.

 

[ecwinch]

According to Wikipedia, he did own the Stratosphere, and it went bankrupt.

http://en.wikipedia.org/wiki/Bob_Stupak

http://en.wikipedia.org/wiki/Stratosphere_Las_Vegas

 

[mshatty]

According to news report in the Houston Chronicle this morning (11/12/08), Sheldon Adelson has come up with a plan to infuse $2.1 billion in new capital into the company. He has agreed to invest $525 million himself. The report indicated that the company will not seek shareholder approval for the emergency plan even though it more than doubles the number of outstanding shares, citing an exception in NYSE rules.

 

[MTB12]

According to news report in the Houston Chronicle this morning (11/12/08), Sheldon Adelson has come up with a plan to infuse $2.1 billion in new capital into the company. He has agreed to invest $525 million himself. The report indicated that the company will not seek shareholder approval for the emergency plan even though it more than doubles the number of outstanding shares, citing an exception in NYSE rules.

Given that the stock was trading at $8/share before that announcement, and is now (at posting time) $5/share, I don't think the above statement is necessarily good news for Las Vegas Sands.

The extra $525 million of Sheldon's money, I am told, is a secured collateral loan anyways. He's not going to lose that money. So, it's really not a "vote of confidence" in his own company, even though it reads that way.

 

[mas]

It looks like Vegas is really hurting for business. There was a blurb on the news tonight that they are seeking to lower the legal gambling age from 21 to 18 and that this would bring a potential 12 million new gamblers to the tables.

 

[Fern Modena]

When I first heard about this, I was put off too. Then I found out that neighboring states of California and Arizona allow gambling at 18. So it isn't as revolutionary as we thought it was.

Fern

It looks like Vegas is really hurting for business. There was a blurb on the news tonight that they are seeking to lower the legal gambling age from 21 to 18 and that this would bring a potential 12 million new gamblers to the tables.