Boyd to delay Echelon Place development

[ricoba]

Here is an interesting article from the Las Vegas Sun, about Boyd Gaming's plan to delay construction on the Echelon resort on the Strip.

I just wonder if Echelon was too big a project for Boyd or if the economic slow down is the real culprit?

We have heard for years that Vegas is overbuilt. I have always been one to think that isn't true. But maybe times and circumstances have changed enough recently to make it true?

 

[kjd]

Is LV overbuilt with timeshares?

The question of whether Las Vegas has too many timeshares can be answered both yes and no. Yes, there are certainly a lot of them. No, because certain brands like Marriott and Hilton have built in memberships that as a rule, won't seek a trade outside of their brand. Therefore, while some LV timeshares are unoccupied, unsold and almost worthless there are others like Marriott that announce the building of two additional towers at their Grand Chateau property.

The Marriott Vacation Club has about 400,000 members. Many of them want to visit Las Vegas. It's not hard to imagine that you can fill 1,500 rooms in a given week. If they don't, they still have the Marriott hotel reservation system to fall back on. Hilton is probably similar. It just gets back to the fact that the timeshare market is a jungle and you have to watch what you buy.

 

[Fern Modena]

It made me sad to hear this, too. I felt so bad for all the construction workers who will lose jobs with the delay. Boyd said that the current economic times make it very difficult for them to obtain loans at a rate that makes sense for the project. Echelon isn't just a resort, but an integrated development with many shops, etc. It will be built eventually (in fact, parts of several buildings are up already), but later. They expect to begin again in one or two years.

So many of the large projects (and smaller ones too) are having difficulties. Even Project City Center is having financial problems again. Lake Las Vegas is back in bankruptcy. Donald Trump has laid off 400 workers, is having trouble selling his condos, and has postponed his second tower.

Vegas was a boom town for so many years. But the current economy has changed things here, just like everywhere else. Just took a bit longer to happen here.

Fern

Here is an interesting article from the Las Vegas Sun, about Boyd Gaming's plan to delay construction on the Echelon resort on the Strip.

I just wonder if Echelon was too big a project for Boyd or if the economic slow down is the real culprit?

We have heard for years that Vegas is overbuilt. I have always been one to think that isn't true. But maybe times and circumstances have changed enough recently to make it true?

 

[ricoba]

Thanks for weighing in Fern.

Over the past decade or so, I too have been a believer that Vegas can handle the ongoing building bonanza. But with the recent set back in the economy, it appears that even the once mighty Vegas tourism industry is in for a rocky road.

It's my understanding as well that the meat and potato's of Vegas tourism, the California visitor, is even down.

While this slow down may provide some very good deals for room rates etc., in the end, as you pointed out, it ends up hurting all sorts of everyday working people. I read somewhere recently that one of the local casino's, (I think it was a Station property that was referred to), had seen a big drop in their check cashing business. The guys coming in with the big $10,000 construction job checks, were now not coming in at all or were coming in with checks in the $2000 to $3000 range.

Some folks will point out that America is now on sale for foreign visitors, which is true. There was a recent article on the local news about the new influx of foreign tourists to Los Angeles with the dollar being low. While this may be a good thing for general business, it's not really a good thing for the average worker in the tourism business. So many Vegas jobs are "tipping" dependent to make a good living. Unfortunately, many foreign visitors are not accustomed to tipping, so it ends up hurting the valets, the waitress, the bell hops etc, all of whom depend on tips to live a decent lifestyle.

 

[zazz]

Unfortunately the capital markets are tough for real estate deals, even high quality trophy deals. There are two bad words in the office right now: hotel and development. Deals go across my desk every day and head right into the bin.

Banks are racheting down assumptions of future growth pretty sharply. And even then, the loan proceeds they are willing to offer are a lot less than before. Construction costs are outrageous and going up. So developers need to look at pretty high cost mezzanine debt and preferred equity.

Ultimately, the numbers aren't pencilling out and deals are getting scrapped.

There are deals moving forward in this market, but they aren't nearly this ambitious. Even once things stabilize, I don't know if Echelon will be all that it was envisioned. The cost of this project was predicated on the availability of 'stupid money' and there won't be much of that for a while.

 

[roadtriper]

Critical Mass?

I've been traveling to LV a couple of times a year for the past 15 or so years, each trip it seems there have been new Mega hotels Mega Condos etc. being constructed. I've often wondered and asked the question, how long before they hit Critical Mass ? 10 years ago I predicted they couldn't handle much more! then each trip I realized how wrong I was, the mega projects etc. kept on coming. are we finaly reaching that critical mass, or is this just a Hicup in the economy and the building boom will continue soon? RT

 

[ricoba]

... are we finaly reaching that critical mass, or is this just a Hicup in the economy and the building boom will continue soon? RT

I think that is the "$64,000" question!

 

[dougp26364]

I really feel that, with Vegas, it's more than just the economic times and banking issues that are giving them problems. For so many years Vegas was a great bargin and a great place to gamble. Gamblers were treated like kings and queens, odds were reasonable and price were like loss leaders to get a gambler in the door. Lose your shirt at the tables? No problem, you'd get a comp for the coffee shop, your room was inexpensive and you could always make up some of the loss at the all you can choke down buffet for $5.99.

In the last 5 years Vegas has gone from cheap and cheezy to high class and expensive. Gambling odds have gone so far south you might as well just hand them your wallet. Who wants to play when no one is winning? I could stand losing over a period of time and feel better about it so long as I could see other people winning and having a good time. Gone are those inexpensive rooms with all the amenities. No more $25 to $70/night rooms for low roller gamblers and free rooms for "high" rollers. Now they want $150/night. Gone are the gamblers specials where you could get a decent prime rib dinnner at any casino's coffee shop for $5.99. Now it's high class burger joints like what's replaced the white tiger exhibit at the Mirage. Nothing like drowning your tears with a $15 hamburger. How about those shows? Gone are the inexpensive but really good shows. They've been replaced with half a dozen Cirque shows or Cirque wanna be's or even brodway shows that are $100 tickets (and up). Gone also are many of the really great lounge acts that had a two drink cover charge to enjoy. Now it's grease the doormans palm and bottle service that cost a few hundred dollars for a bottle of liquor that should be priced around $50.

Vegas hasn't out built itself IMO, it's outpriced itself. They've run off the mid level gamblers with 6/5 black jack, double zero roulette wheels, short pay table video pocker, and double odds craps tables that used to be 100 X odds. They've lost the confidence of the average tourist by going heavy after the whales and the younger crowd that had money to burn. The moderate gambler and low rollers are still out there but they've been treated like dirt and have have for other vacation spots. The whales and yuppies with money to burn have had to pull back because of the economic times. Vegas played it's hand wrong and could be coming out on the losing end. If they haven't killed the goose that layed the golden egg with their greed, they've certainly put it on life support.

 

[ricoba]

Doug, that was an excellent post, and I think you may have really nailed a serious problem.

I agree that many Vegas joints have abandoned the low to medium roller. Instead some places have decided to go Hollywood and cater to the young hip and up and coming crowd, that jets over from LA for the weekend.

The only problem is that they forget that while the Hollywood crowd can attract a large crowd of tourists, there are millions more folks who are just your average working middle income Joe or Jane. I don't begrudge a joint if they want to pay Paris Hilton $50,000 just for showing up at a club, but I do begrudge the joint if they want me to pay for it!

Thank goodness I can still find some good deals and good fun downtown and at the locals places off the strip.

 

[mishugana]

Is this where Stardust and Frontier were?

 

[ricoba]

Is this where Stardust and Frontier were?

It was the former Stardust site, not the Frontier.

 

[Kola]

Vegas hasn't out built itself IMO, it's outpriced itself. ..... The whales and yuppies with money to burn have had to pull back because of the economic times. Vegas played it's hand wrong and could be coming out on the losing end. If they haven't killed the goose that layed the golden egg with their greed, they've certainly put it on life support.

Apparently Steve Wynn has a different view as reported in today's NYT article by Julie Creswell "The Chips are down in Vegas...." Very well written article, worth reading twice !
http://www.nytimes.com/2008/08/03/b...=th&adxnnlx=1217786566-Amdzj3DiMU2E0Wg1lbdErw

K.

 

[ricoba]

Apparently Steve Wynn has a different view as reported in today's NYT article by Julie Creswell "The Chips are down in Vegas...." Very well written article, worth reading twice !
http://www.nytimes.com/2008/08/03/b...=th&adxnnlx=1217786566-Amdzj3DiMU2E0Wg1lbdErw

K.

The article is good, but it's never hard to get Steve Wynn to be a cheerleader for himself or his company.

I think he's done some great things for Vegas and himself, but you have to remember it was his bad management that ended up making him lose the Mirage/Bellagio etc.

 

[mishugana]

I really feel that, with Vegas, it's more than just the economic times and banking issues that are giving them problems. For so many years Vegas was a great bargin and a great place to gamble. Gamblers were treated like kings and queens, odds were reasonable and price were like loss leaders to get a gambler in the door. Lose your shirt at the tables? No problem, you'd get a comp for the coffee shop, your room was inexpensive and you could always make up some of the loss at the all you can choke down buffet for $5.99.

In the last 5 years Vegas has gone from cheap and cheezy to high class and expensive. Gambling odds have gone so far south you might as well just hand them your wallet. Who wants to play when no one is winning? I could stand losing over a period of time and feel better about it so long as I could see other people winning and having a good time. Gone are those inexpensive rooms with all the amenities. No more $25 to $70/night rooms for low roller gamblers and free rooms for "high" rollers. Now they want $150/night. Gone are the gamblers specials where you could get a decent prime rib dinnner at any casino's coffee shop for $5.99. Now it's high class burger joints like what's replaced the white tiger exhibit at the Mirage. Nothing like drowning your tears with a $15 hamburger. How about those shows? Gone are the inexpensive but really good shows. They've been replaced with half a dozen Cirque shows or Cirque wanna be's or even brodway shows that are $100 tickets (and up). Gone also are many of the really great lounge acts that had a two drink cover charge to enjoy. Now it's grease the doormans palm and bottle service that cost a few hundred dollars for a bottle of liquor that should be priced around $50.

Vegas hasn't out built itself IMO, it's outpriced itself. They've run off the mid level gamblers with 6/5 black jack, double zero roulette wheels, short pay table video pocker, and double odds craps tables that used to be 100 X odds. They've lost the confidence of the average tourist by going heavy after the whales and the younger crowd that had money to burn. The moderate gambler and low rollers are still out there but they've been treated like dirt and have have for other vacation spots. The whales and yuppies with money to burn have had to pull back because of the economic times. Vegas played it's hand wrong and could be coming out on the losing end. If they haven't killed the goose that layed the golden egg with their greed, they've certainly put it on life support.

And standing on all 17's in bj

 

[zazz]

Doug, that was an excellent post, and I think you may have really nailed a serious problem.

I agree that many Vegas joints have abandoned the low to medium roller. Instead some places have decided to go Hollywood and cater to the young hip and up and coming crowd, that jets over from LA for the weekend.

The only problem is that they forget that while the Hollywood crowd can attract a large crowd of tourists, there are millions more folks who are just your average working middle income Joe or Jane. I don't begrudge a joint if they want to pay Paris Hilton $50,000 just for showing up at a club, but I do begrudge the joint if they want me to pay for it!

Thank goodness I can still find some good deals and good fun downtown and at the locals places off the strip.

Welcome to to real estate. Its all about the principle of highest and best use. Land on the Strip is simply too valuable to buy a casino like the Stardust and leave it there as is.

Same as if you found a house on the Jersey Shore sitting on a half acre of land. The price you pay isn't the value of the house and resulting cash flows from renting it. The price you pay has already baked in the potential value of tearing down the old house and building three new townhouses on the site. All of which could sell for more than a half million.

Development restrictions probably wouldn't help you very much. If I owned a property like the Tropicana and Vegas banned any new casino construction, then I wouldn't have to build a new casino. I could continue to offer the same crap product but at absurd prices. Try buying a cruddy 1BR condo on the edge of the Tenderloin in SF and you would see what I mean.

All this means is that as time goes on, Joe Six Pack isn't going to be gambling on the strip any more than he is going to live in Downtown SF or midtown Manhattan. Average Joe lives on Staten Island and takes the ferry to work in Manhattan. And in time, he will be staying at the Gold Coast and taking the shuttle to gamble at the Bellagio.

And there are still people who will pay up for the Vegas/Hollywood experience. If you want to gamble, why not go to the Indian casino an hour away? Why pay thousands of dollars for a vacation at Disney to see a freaking mouse who hasn't been in a movie since Truman was president when there are great amusement parks all over the place? Because you are buying the experience.

 

[ricoba]

Great Post and right on the money!

The following is hilarious....and true! :hysterical:

Why pay thousands of dollars for a vacation at Disney to see a freaking mouse who hasn't been in a movie since Truman was president when there are great amusement parks all over the place? Because you are buying the experience.

 

[dougp26364]

Apparently Steve Wynn has a different view as reported in today's NYT article by Julie Creswell "The Chips are down in Vegas...." Very well written article, worth reading twice !
http://www.nytimes.com/2008/08/03/b...=th&adxnnlx=1217786566-Amdzj3DiMU2E0Wg1lbdErw

K.

Mr. Wynn, the man who lost his empire to MGM, has little choice but to be bullish on Vegas. He has to much invested. What would anyone expect him to do? Wring his hands and say he made a mistake?

Vegas use to be almost recesion proof because it offered value even when value was hard to find. Yes it was cheesy and yes middle America seems to like cheap and cheesy. The thing about middle America is there is a vast market to exploit where as the well heeled aren't nearly as numerous.

Vegas could handle a few high end properties and, according to Mr. Wynn the only two of those that exist are his former property Bellagio and his current properties Wynn and Encore.

Mr. Wynn will survive in that market. He knows that market and his stock is down 45% compared to the others who are down 60%. Those properties which should have concentrated on the market they served, middle America, should have stuck with that market rather than try to become something they are not, high end properties.

So, Mr. Wynn might be doing all right but the rest are not. Vegas has outpriced itself. There are only so many in the high end market. Mr. Wynn's done a good job with that market. Maybe the others should rethink the market they're going after. Boyd apparently has done just that.

 

[Kola]

Mr. Wynn will survive in that market. He knows that market and his stock is down 45% compared to the others who are down 60%. Those properties which should have concentrated on the market they served, middle America, should have stuck with that market rather than try to become something they are not, high end properties.

So, Mr. Wynn might be doing all right but the rest are not. Vegas has outpriced itself. There are only so many in the high end market. Mr. Wynn's done a good job with that market. Maybe the others should rethink the market they're going after. Boyd apparently has done just that.

For reason that remains a mystery to me Mr. Wynn has failed to invite ME to participate in his latest $2.3 billion Encore resort, set to open later this year. That's an undisputable error in judgement even though I have never met this guy. In an environment where conventioneers spend less and less on food, entertainment and gambling every visitor counts. I am determined to see Mr. Wynn on my next Las Vegas visit this fall. I hope his new Encore resort will remain open at least a few months...

K.

 

[ricoba]

Maybe even the wealthy are feeling a bit pinched.

Here is an article discussing how even some of the rich folks are feeling the pinch of a downturn in the economy.

So if Vegas is having trouble with the great unwashed masses, maybe some of the big whales are even curtailing their gaming $$$'s

 

[ricoba]

For reason that remains a mystery to me Mr. Wynn has failed to invite ME

For some reason, I too didn't get my invite!

 

[Kola]

For some reason, I too didn't get my invite!

That's too bad... but you may stil have a chance to join Sheldon Adelson in his latest $3.6 billion Marina Bay Sands Singapore gaming venture on 50 acre site overlooking the city ! Don't miss it ! :whoopie:

K.

 

[ricoba]

A new Article

Here's the latest update on Boyd from the LV Sun.

 

[ricoba]

That's too bad... but you may stil have a chance to join Sheldon Adelson in his latest $3.6 billion Marina Bay Sands Singapore gaming venture on 50 acre site overlooking the city ! Don't miss it ! :whoopie:

K.

Here's what I am taking over to the grand opening...You want to join me! :whoopie: