What Does This All Mean?

As of 21 June, 2009

by

Paul S. Felix

 

The LV soap opera continues. Among the more recent rumors:

 

Harrah’s has moved the “Legends in Concert” show from Imperial Palace to the main property, supposedly in preparation for closing down IP. This proposed closure is not supposed to be the end of IP, but a cost saving measure in harsh economic times -- putting IP into mothballs until things improve. Will IP ever reopen? A “recent” example of well intended failure is the Lady Luck, which closed for a remodel and has never reopened. Harrah’s bought up all the properties on the east side of the strip from the main property all the way down to the former Barbary Coast. The intent at the time was to raze the block and commit another mega-resort. That idea, if not completely dead, is at least on extended hold, but closing the IP might still be the leading step into bringing that about once the economy improves enough. Once one is down, the others can easily follow until they’re all boarded up and ready for demolition.

 

The Riviera (now officially in default) will eventually file for bankruptcy. The announced closure of Frank Marino’s “La Cage” might have been a tip-off. In these ratings, the Riviera has been a poorly performing property for some time (at least since April, 2004 when this column began) and has rarely shown inclination towards improvement. I’ve had them on a personal “Death Watch” at least since the completion of the Wynn. If this rumor is true, Riviera might actually beat Circus to the casino graveyard, which I find kind of sad.

 

Hooters has missed enough debt payments they’re on the verge of bankruptcy.

 

Greek Isles has filed bankruptcy. Binion’s is apparently in financial trouble and is being sued for missing payments and rumor says the Four Queens may be following the same path.

 

Herbst Gaming, most notable for their “Terrible’s” casino (but who have fingers in a lot of casino related pies across the nation), filed for Chap-11 on March 23^rd. They will apparently keep their Nevada slot machine connections, but will lose control or interest in over a dozen other properties around the country.

 

The Station Casino group filed for bankruptcy on June 1st, a prepackaged affair they first contemplated as far back as mid-February.

 

MGM, with the noted exception of their new Connecticut property (just now a year old) next to Foxwoods, is apparently selling off almost all non-Nevada assets, most especially their Biloxi and Detroit holdings. Carl Icahn apparently feels that bondholders will get a better shake form a court appointed receiver than from any other deals that might be otherwise floating about. This sign of further belt tightening underscores financial woes that continue to worsen.

 

What a tangled web we weave… Information on most of these issues can best be found with the Las Vegas Review-Journal. Just do a site search for up-to-date info. Other interesting information can also be found at Las Vegas Casino Death Watch.

 

As mentioned in last quarter’s report, legalized casino gambling was a big item in Texas’ latest legislative session. I mentioned that this could cause havoc with LV, usurping a large share of the NV gambling revenue. This is not the first time the issue has come up in Texas, and apparently it will not be the last as the session ended without passage… again. Various lobbies, particularly the religious, managed to keep it bottled up long enough to prevent a vote before adjournment. So, LV specifically and NV in general are in no immediate danger of losing that slice of the gambling revenue pie.

 

Also, mention must be made of the death of Danny Ganz. The complete surprise shocked everyone. Ganz’s show was a good one and LV will be poorer without him.

 

Though improved somewhat from last quarter, we continue to see depressed tourism. The last two quarter’s numbers are some of the smallest I’ve seen since I began this column. This continued slip further underscores how bad the national economic outlook is, and how bleak LV’s financial future is looking. I’ve expanded last quarter’s charts which show updated quarterly review numbers since 2007 (Figure 1) and year totals visually compared (Figure 2).  At the current rate the 2009 numbers will fall even further than last year’s. According to the LV Visitor’s Bureau, LV saw a drop in tourism in the final quarter of 2008, plunging an alarming 14.4% (that’s about 1/7^th). According to the USA Today the numbers at McCarran Airport are the worst they’ve been since the early 80’s, and are projected to continue at double-digit declines throughout 2009. As I’ve explained in many previous pieces, each review here represents a certain number of actual people. A decline in posted reviews demonstrates poignantly, if not in direct proportion, how strong those declines might be. In Figure 2, we see the rating numbers dropping to about 1/3rd of 2006 and 2009 is projected to be about half of that. Though it’s certain that LV will not see a decline from the annual 40-million visitors to only 6.5-million, there’s still information out of LV that revenues there have declined some 23% (~1/4^th) in a February-to-February comparison from 2008 to 2009. The prudent consumer will probably be pleased with the continuing “deals” being offered as enticements, but the serious LV fan has to be concerned.

 

Figure 1.

Figure 2.

 

One disturbing bit of information must also be noted – Las Vegas is suffering heavily in the home foreclosure area. All those high-priced properties are falling apart as the real estate market follows the rest of the economy into the tank. But, real estate prices are not depressing at a commensurate rate, primarily because the banks foreclosing on all those homes are not putting them all back on the market for resale; they’re holding a significant percentage of them aside, maintaining an artificial scarcity to keep prices as elevated as possible. With the long-term economic outlook still rather bleak, one can only wonder how long this can be maintained and how bad the additional fallout will be when these banks are forced to finally put these pieces out for sale – to help support their own flagging bottom lines – and the LV real estate market really dumps. If it seems bad now, it could get very ugly as the domino effect goes nuclear. A lot of people are going to get badly hurt, financially at least. Once the smoke clears, property values, at least for homes, will be “dirt cheap” compared to the peak prices of just months ago. Anyone considering moving to LV now might be well advised to hold off for a while, then jump in as things bottom out and grab up a real steal. Sound rather mercenary? Perhaps, but that’s reality and just the way the Big Boys play the game.

 

All that said, this quarter (27) new reviews and ratings were received on the 33 properties examined.

 

Legend:

Biggest Winner

Biggest Loser

Most Average

Largest score change, up or down

 

RATE: How many visitors have they had this month? How popular are they? Average 70

	Winner					Average					Losers
1	Flamingo	144	1		12	TI	78	2		23	Sahara	57
2	Luxor	125	1		13	Harrah's	73	1		24	Venetian	57
3	Orleans	118	2		14	Tropicana	73	1		25	Circus Circus	56
4	Imperial Palace	117	1		15	Stratosphere	70	1		26	Riviera	49
5	Planet Hollywood	105			16	Bellagio	66			27	Caesars	47
6	Bally's	94	1		17	NYNY	66			28	Gold Coast	42	1
7	Golden Nugget	94	2		18	Rio	65	1		29	LV Hilton	37
8	MGM Grand	94	3		19	Mirage	62	3		30	Four Queens	33	1
9	Excalibur	87			20	Mandalay Bay	61	1		31	Palms	28
10	Monte Carlo	87			21	Fitzgerald's	58			32	G.V.R.	21
11	Paris	78	4		22	Wynn LV	58			33	Hard Rock	17

WINNERS: When Aladdin’s was in the process of transitioning to Planet Hollywood, I commented that only time would show us if the new ownership and management could maintain the level of performance established by Aladdin’s and the dignity and class with which employees at every level were comporting themselves during the transition. To their credit they have maintained essentially the same performance levels since the changeover and therefore everyone at the property can be given kudos for actually caring. Thanks to all of them; owners, management, staff… all the way down to the “lowliest” for their professionalism. It is appreciated. Paris’s increase can be attributed to some increases in both Service and Value. Both have been “weak points” in their operational scheme. Coupled with a small improvement in their Room score, Paris gathered in an increased Revisit (customer loyalty) score as well.

 

AVERAGE: Average properties are just that, average; not outstanding for either good or bad performance. Depending on the category this can be a property asset or liability. For most, though, it makes them seem a bit boring. Truth to tell they come across like psychic null points; if one is considering a particular category in relation to deciding where to stay/play when visiting LV, these places just aren’t part of the mix as often as the winners are.

 

LOSERS: Losing a popularity contest is never fun. Though every one of these joints is theoretically still profitable enough to keep going, some of them are on the borderline and the current rough economic climate could play the role of straw to their camel. Increasing profitability is their number one challenge and finding a way to bump their popularity could go a long way towards achieving that goal. How does one increase popularity?... let me count the ways. To be frank, they’re too numerous to address here in any depth; marketing pros could write books on the subject (and probably have).

 

Further down (with the exception of Trust), I’ve placed a red asterisk (*) next to the properties that sit in the Winners column here. I’m hoping this will help highlight how some of these properties achieved their current popularity level.

 

*   *   *   *   *   *   *

 

OVERALL: Who’s the best of the best? Average = 6.98

	Winner					Average					Losers
1	Orleans*	7.91			12	Gold Coast	7.34	-0.02		23	Luxor*	6.90	-0.02
2	Mandalay Bay	7.64			13	Golden Nugget*	7.23	0.05		24	Imperial Palace*	6.83
3	MGM Grand*	7.61	0.01		14	Fitzgerald's	7.21			25	LV Hilton	6.82
4	Mirage	7.59	0.04		15	Harrah's	7.18			26	Excalibur*	6.53
5	Bellagio	7.57			16	Rio	7.16			27	Palms	6.51
6	Bally's*	7.51	0.01		17	Venetian	7.15			28	Stratosphere	6.38
7	Wynn LV	7.48			18	Monte Carlo*	7.14			29	G.V.R.	6.29
8	NYNY	7.44			19	Flamingo*	7.05	0.01		30	Sahara	6.17
9	Paris*	7.42			20	TI	7.02	0.03		31	Riviera	5.79	0.01
10	Planet Hollywood*	7.40	0.07		21	Caesars	7.00			32	Circus Circus	5.56
11	Four Queens	7.39	0.03		22	Tropicana	6.95	0.02		33	Hard Rock	5.28

WINNERS: Mirage’s jump over Bellagio to take the #4 slot is only a small surprise. As tightly packed as these places are from #2 to #6, it doesn’t take much in the way of a numbers change to cause a shift in position. Staying in the top 5 is the real key. As long as that happens anything else is gravy. PH’s change in status is a rare anomaly. They didn’t get any reviews this last quarter, so how could their numbers change? The answer is correction of previous numbers; most likely one or more reviews got posted multiple times and once the error is spotted and fixed, the numbers shifted to show what they really should have shown previously.

 

AVERAGE: Only two properties had declining overall scores this quarter and only one of them outside of Losers. Golden Nugget’s slow climb towards Winners continues. It’s been an on-again/off-again thing with them for some time, but the general trend – long term – is still there. With Gold Coast on a seeming decline trend, GN’s job is just that much easier.

 

LOSERS: The Riviera’s miniscule bump would be farcical if it weren’t so pathetic. Of every property from Strat on down, general public appellation is so poor as to amount to censure. With the Riviera’s financial troubles I would have to say this tiny little hitch in their score is either totally meaningless, or… the tourist-sharks smell blood in the water and are already beginning to circle in preparation for saying goodbye to another LV icon.

 

*   *   *   *   *   *   *

 

ROOM: Size, comfort, amenities, quality, etc.  Average=7.18

	Winner					Average					Losers
1	Mandalay Bay	8.69	0.02		12	NYNY	7.58			23	Harrah's	6.74
2	Wynn LV	8.56			13	Mirage	7.50	-0.01		24	Flamingo*	6.72	0.01
3	Venetian	8.34			14	Paris*	7.50	0.03		25	Four Queens	6.52	0.01
4	Orleans*	8.30	-0.01		15	LV Hilton	7.40			26	Stratosphere	6.43	0.02
5	Bellagio	8.27			16	Luxor*	7.37	0.01		27	Hard Rock	6.35
6	Rio	8.14	-0.01		17	Bally's*	7.31	-0.01		28	Excalibur*	6.20
7	Palms	7.89			18	G.V.R.	7.28			29	Tropicana	6.20	0.01
8	MGM Grand*	7.77	0.04		19	Caesars	7.06			30	Sahara	5.94
9	Golden Nugget*	7.65	0.01		20	Gold Coast	7.02			31	Circus Circus	5.91
10	Planet Hollywood*	7.60			21	Monte Carlo*	7.02			32	Riviera	5.87
11	TI	7.60			22	Fitzgerald's	6.76			33	Imperial Palace*	5.52	-0.02

WINNERS: Many people believe that the summer is Vegas’ most active period. Not true. The summer season is actually one of Vegas’ slower times because of the heat. This usually makes spring a more active time, more often the period between “spring break” and Memorial Day comprising the lion’s share of that action. With economic troubles everywhere, the suppressed trade is evident here.

 

AVERAGE: No action of any note or concern. Average is as average does.

 

LOSERS: The real surprise here is that most changes are to the good. The shifts were small but definite, concentrated mostly in the “better” of these places. IP’s dip only adds additional insult to the terminally injured. If Harrah’s does actually close IP’s doors, I am convinced we’ll never see it reopen, at least not without a gross remodel, a complete change of management, a shiny new ad campaign and business focus, etc. In other words, as whole new property – which amounts to the same thing as a permanent closure. Maybe I’m barking up the wrong tree, but IP is seriously flawed (read old and nasty) and needs serious changes to keep it going. As mentioned above, Riviera has been on my personal death watch list with Circus. Well, IP is also on that list – how they have stayed open this long is, to me, nearly miraculous. Continuous bitter customer commentary about room quality, horrible food, lousy service, etc., has left my head spinning trying to figure out what’s been keeping them afloat. They have a good Location, to be sure, and low costs help with Value – but can that really be all it takes?

 

This category is not one of the “critical” ones; identified as vitally important to business operation. Not everyone who interacts with a property gets a room, so this category is a little specialized, and not as seminally important to operations as the others (highlighted in blue below). The red asterisks above say something to me about what kind of impression visitors get concerning the way these properties use their rooms to affect tourist impression of their enterprise; how much emphasis they put in keeping a nice, clean, comfortable house.

 

*   *   *   *   *   *   *

 

SERVICE: How were you treated? Average=6.92

	Winner					Average					Losers
1	Orleans*	8.17	0.01		12	Golden Nugget*	7.29	0.05		23	LV Hilton	6.83
2	Mandalay Bay	7.88	0.03		13	Bellagio	7.27			24	Flamingo*	6.63	-0.02
3	Wynn LV	7.86			14	Venetian	7.21			25	Palms	6.58
4	MGM Grand*	7.79	0.04		15	Monte Carlo*	7.04			26	Stratosphere	6.54	0.05
5	Rio	7.76	0.01		16	Caesars	7.02			27	Imperial Palace*	6.20	-0.02
6	Mirage	7.53	-0.01		17	Bally's*	6.98	0.01		28	Excalibur*	6.17
7	NYNY	7.50			18	Fitzgerald's	6.96			29	G.V.R.	6.09
8	Gold Coast	7.48	-0.04		19	Harrah's	6.93			30	Sahara	5.91
9	Four Queens	7.38	-0.01		20	TI	6.90	0.02		31	Hard Rock	5.47
10	Paris*	7.30	0.07		21	Luxor*	6.88	0.02		32	Riviera	5.46
11	Planet Hollywood*	7.30			22	Tropicana	6.86			33	Circus Circus	5.20

WINNERS: We begin seeing some of the true tale of what’s been going on for the last three months. These properties have been concentrating on drumming up business among their financially strapped bread and butter tourists. To entice people back for another round of money dropping, they’ve gone and done what I predicted they would have to do well over a year ago… they’re reverting to older, proven methods and treating people well. Wow… what innovation. The size of the number changes show how strongly the properties are emphasizing and executing this strategy, or at least how much notice their customers are taking of those efforts.

 

AVERAGE: The Nugget hovers on the edge of “Winnerness”. With only a small slip of concentration, Paris and/or PH (tied score) could fall back to the middle column and catapult GN into the rarified ground. Or… GN can earn it all by themselves and pass the other two. Everyone else in this column continues struggling with Intermittent Success Syndrome, too well planned and executed for spectacular failure, but unable to maintain a winning behavior long enough to really cash in.

 

LOSERS: I’m not even going to bother. Loser Service chases people off and makes them not want to come back. Casinos, like any business, are essentially predators, with people being their prey and money their food. They can’t track and hunt their prey; it has to come to them. Treating that prey badly enough to drive it off is a fast track to the bone yard.

 

*   *   *   *   *   *   *

 

CASINO: Atmosphere, selection, odds, comps, etc. Average=6.49

	Winner					Average					Losers
1	Orleans*	7.54			12	Luxor*	6.59	-0.05		23	Sahara	6.25
2	Wynn LV	7.45			13	Rio	6.58			24	Fitzgerald's	6.20
3	Mandalay Bay	7.40			14	Paris*	6.57			25	Palms	6.13	-0.02
4	MGM Grand*	7.26	-0.05		15	Caesars	6.43			26	Venetian	6.09	-0.01
5	Mirage	7.24	0.01		16	Golden Nugget*	6.43	-0.07		27	Flamingo*	6.06
6	NYNY	7.04			17	Bally's*	6.39	0.01		28	Imperial Palace*	6.06	-0.01
7	Bellagio	6.97			18	Monte Carlo*	6.39			29	TI	6.03	0.04
8	Four Queens	6.94	0.02		19	Tropicana	6.37	0.03		30	Hard Rock	5.88	0.07
9	Gold Coast	6.76			20	Harrah's	6.36			31	Excalibur*	5.87
10	G.V.R.	6.71	0.04		21	Planet Hollywood*	6.34	0.10		32	Riviera	5.77	0.01
11	LV Hilton	6.62			22	Stratosphere	6.32			33	Circus Circus	5.27

WINNERS: According to a lot of other people, these are all good places to gamble. The rules are good, game variety appealing, ambiance and atmosphere pleasant, etc. Though heavily weighted towards the upper-middle to upper scale properties the inclusion of bits like 4Q, Gold Coast and Orleans gives consumers some cost choices. All in all it’s a good list for gamblers.

 

AVERAGE: Those who frequent the Winners column usually have more money than the rest of us. This central column, though considered “Average” or mundane, provides a much more broad selection of cost and quality. There are six Rate Winners here. The more amenable casino interaction of these places makes them a more frequent selection.

 

LOSERS: Oddly enough three properties on this list are also Rate Winners. IP, Excalibur and Flamingo have varied reasons for their popularity, certainly, but a “good” casino obviously isn’t one of them.

 

This begs the question of how important the gambling atmosphere really is to customer selection. If places like IP and Excalibur, with such poorly rated casinos, can still score high in a popularity contest it makes one wonder if the gambling is all that important. It certainly is, but perhaps in a way most might not consider at first. Yes, the casino is the primary income generator for any property but apparently it doesn’t have to be all glittery and super-spiffy to get people in. Exactly what these might be I’ll not attempt to explore here, but it might be an interesting exercise in some future piece.

 

*   *   *   *   *   *   *

 

VALUE: Was it worth what you paid? Average=7.01

	Winner					Average					Losers
1	Orleans*	8.85			12	Tropicana	7.27			23	Paris*	6.84	0.08
2	Gold Coast	8.27	-0.01		13	NYNY	7.26			24	TI	6.70	0.02
3	Four Queens	7.97	0.04		14	Monte Carlo*	7.22			25	Palms	6.37
4	Fitzgerald's	7.93			15	Imperial Palace*	7.21	-0.01		26	Circus Circus	6.36
5	Bally's*	7.67	0.01		16	Luxor*	7.16	-0.01		27	Wynn LV	6.31
6	Stratosphere	7.51	0.04		17	Harrah's	7.08	-0.02		28	Riviera	6.30
7	Mandalay Bay	7.40	0.04		18	LV Hilton	7.08			29	Bellagio	6.26
8	MGM Grand*	7.35	0.07		19	Excalibur*	7.06			30	Venetian	6.24
9	Rio	7.34	0.01		20	Sahara	7.01			31	Caesars	6.10
10	Golden Nugget*	7.32	0.05		21	Flamingo*	6.95	0.02		32	G.V.R.	6.00
11	Planet Hollywood*	7.28			22	Mirage	6.92	-0.03		33	Hard Rock	4.76

WINNERS: Who would go to a property if they felt they were getting ripped off? These places provide good enough “bang for the buck” that visitors are very satisfied. The consistent upward trend in the category, especially in this column, shows which properties are making the extra effort to keep customers feeling good about their expenses during strapped economic times.

 

AVERAGE: All but one of these places are above the Average split line. Count in the Winners, that makes nine out of the eleven most popular properties on our list are judged above average in Value. That cannot be coincidence. Glancing back at Casino, we see that Excalibur and and IP both sit above this average Value split and Flamingo is below it, just barely; only 6/100ths of a percentile point away from a tie. There is a big clue as to why people go to those properties. Despite less than optimum conditions otherwise, they feel very good about what they’re spending.

 

LOSERS: Paris sits in a forlorn spot as the only Rate Winner considered a Loser for Value. Visitors are saying that Paris is too overpriced to feel good about their visit. Though Paris’ numbers increased (the biggest change of the quarter), and sitting at the junction to Average (Mirage is on a downward trend), the place still has a long way to go to redeem itself in patron eyes. Obviously Paris has a great deal going for it outside the Value arena which continues to draw visitors. They’re already a Rate Winner (despite poor Value) but image how much more popular they would be if they became more money friendly to the tourists?

 

Heavily weighted towards good Value, we see how important this category is to tourist selection. Above all other considerations this category is probably the most important one.

 

*   *   *   *   *   *   *

 

LOCATION: Is it close to other attractions you want to experience? Average=7.31

	Winner					Average					Losers
1	Bally's*	9.20	0.01		12	Tropicana	8.06	0.01		23	Orleans*	6.68
2	Imperial Palace*	9.15			13	Monte Carlo*	8.02			24	Luxor*	6.49	-0.03
3	Bellagio	9.07			14	MGM Grand*	7.88	0.03		25	LV Hilton	6.18
4	Flamingo*	8.88	0.01		15	TI	7.85	0.03		26	Rio	5.97	0.02
5	Paris*	8.88	0.05		16	Venetian	7.85			27	Sahara	5.75
6	Harrah's	8.80	0.01		17	NYNY	7.80