Friday, August 01, 2008

Work Halted on $4.8 Billion Vegas Casino Project

[Above: The Echelon casino resort complex on the Las Vegas Strip as it will look if and when completed, and bottom, as it looked at the end of June.]

In the most dire sign yet of the economic slowdown affecting Las Vegas, Boyd Gaming Corp. said today it was stopping work on the huge $4.8 billion 5,000-room Echelon casino resort complex now rising in the middle of the Las Vegas Strip. Work may not resume for as long as a year if the economic malaise and tight credit conditions don't improve, the company said.

Las Vegas has about 125,000 hotel rooms, with another 35,000 in the development pipeline.

Huge problems loom even beyond the general economic slump and the credit crunch. Vegas depends heavily on affordable leisure air travel. It had about 36.7 million visitors last year, most of whom arrived by air.

But airlines have been slashing capacity at Las Vegas. In September, airline capacity in Vegas (defined as the number of available seats) will be down about 11 percent compared with September of 2007.

About 25 percent of visitors to Vegas drive from Southern California. That market, too, is shrinking as gas prices remain at all-time highs.

Vegas hotel casinos and other local interests are scrambling to come up with ways to bolster business. Among ideas under study are subsidizing charter flights or even subsidizing a new leisure-travel airline flying limited schedules to and from key major customer markets.

There's some precedent, incidentally. In 1999, two casinos, Harrah's and Rio, started up low-fare National Airlines to entice more visitors from the East Coast. National, which had a fleet of 19 Boeing 757s, went out of business in 2002.


1 comment: said...

As a 15 year resident (most of them involving tourism promotion), I'm surprised the Las Vegas boom lasted as long as it did.

Stepping away from tourism for a moment, the growth of the area was basically a ponzi scheme that had to come crashing down sooner or later. Growth (construction on both homes and resorts) was driving the economy.

No area can grow forever at that kind of rapid pace. Home construction is all but dead, the people who build homes (the labor) have left town, and that is leaving no one to live in all the homes that got built!

Side Note: This also means less hair to cut, pizzas to sell, taxes to prepare and other mini-mall type businesses which has resulted in a 17% vacancy rate in the commercial sector.

Back to Echelon: This project was doomed from the start. (I'm on record as even making fun of the name). I'm not typically a naysayer. Those who read my newsletter on a regular basis know I like to cheer the city on.

However, even a blind man could see that the Las Vegas Strip wouldn't be able to absort MGM CityCenter, Echelon, and new Plaza.

Las Vegas built its reputation on value. Even those who can afford to stay at a top hotel will often choose a less expensive room and save the cash for $150 show tickets and dinner at celebrity restaurants.

This isn't a beach destination where you may spend your evening having cocktials on your hotel balcony while watching the waves. People don't come to Las Vegas to sleep.

A further blow no one has mentioned was the loss of The Frontier (future Plaza) and Stardust (Echelon). These value-conscious hotels provided decent rooms to middle class customers who have been the core of the Las Vegas tourism market for decades.

Let's not even get started on the condo-tels. Who is going to pay $500,000 and up for what is basically a hotel room on the Las Vegas Strip when a room at Wynn Las Vegas goes for $300 a night in good times?

PS How has so much of the press missed how badly Trump Las Vegas has bombed? If you want to have fun, dig in and find out how many (or I should say... how few) of those condos have actually had the sale close.

Las Vegas tourism couldn't support CityCenter, Echelon, and the new Plaza in good times. Today's news came to me as no surprise at all.

Ted Newkirk
Managing Editor
Access Vegas