Thursday, April 16, 2009

Admitting Mistakes

I wonder. Yesterday, billionaire Sam Zell, who bought the Tribune Company in 2007 and has since gutted the Chicago Tribune and L.A. Times into near-oblivion while still not solving their problems, admitted he shouldn't have bought the company. Zell told Bloomberg TV:

"By definition, if you bought something and it's now worth a great deal less, you made a mistake and I'm more than willing to say I made a mistake. I was too optimistic in terms of the newspaper's ability to preserve its position."

The same could be said for virtually every major deal in Vegas and Vegas' "ability to preserve its position" in the past few years: Las Vegas Sands' bizarrely aggressive approach to Macau, Station Casinos and Harrah's going private, the major mid-decade mergers, MGM Mirage building CityCenter and so on.

Who in Vegas, I wonder, will be first to stand up and admit that they made an error in judgment? Who will be first to acknowledge that the misery visited upon this city and these companies right now is not merely the helpless result of an unexpected economic disaster? Who will say, "We screwed up, we should have had a contingency plan because these are uncertain times and anything could have happened?"

Just asking.


R-J Guy said...

HAHAHAHAHAHA. You've met Murren and Adelson. How likely do YOU think it is that they'll every acknowledge mistakes of this magnitude? That's a good one.

David F. said...

To Some Extent Didn't Steve Wynn say as much last week about opening Encore, OK it was more they should not have opened it at this time as opposed to opening it at all, but it was an admission "we got it wrong"

Anonymous said...

I think it'll be a couple of years, after the lawsuits and bankruptcies have cleared, before anyone big will admit to screwing up.

Jeff in OKC

Michael said...

Hahaha was my first thought as well. The funny thing is, while the expansion is blamed as the biggest culprit right now, nice to see a reminder that the consolidations were likely not the best thing for Vegas either.

Perhaps Vegas lost it's recession proofness not from diversifying revenue, but from consolidation and reduced competition. Having only two major players on the strip essentially removed any need for fiscal responsibility for MGM and HET and I'd dare say made all of the companies feel like they had a license to print money.

Anonymous said...

Wynn was correct that one of the biggest mistakes was starting giant construction projects without having the financing completed in advance. That applies most significantly to both LVS and MGM. The second biggest mistake and it applies to all them was not issuing equity when they could have at ridiculous stock prices. MGM was actually buying back stock and borrowing to do so. Wynn did several buy backs (to his credit he also did one issuance at the super high prices). At LVS,Adelson sold some stock for personal reasons as opposed to putting more money into the company. As for the economy, that really wasn't fully forseeable. Plenty of bears never expected this level of severity.

As for opening during a recession, there really isn't any choice for a largely completed or fully completed project. Sitting on it and paying interest on the construction financing without generating any revenue isn't going to improve things except for competitors. If Wynn hadn't opened Encore and left it dark, the biggest winners would be LVS and the Bellagio while Wynn would have been stuck with a lot of costs and no offsetting revenues.