Thursday, April 9, 2009

This week's LVW col: Building Block

Here's this week's Las Vegas Weekly piece, to some extent a continuation of the thoughts from last week. Cheers!

Building block
More than a few did see this mess coming, and acted accordingly

The competition was trying to be dignified, generous, sympathetic.

“Yes, I think it would be devastating to Las Vegas for MGM to fail,” said Jan Laverty Jones, senior vice president at Harrah’s and former Vegas mayor, to my question from last week’s column about whether MGM Mirage and CityCenter were the Nevada equivalent of an entity “too big to fail.” “But,” she added, “the question becomes, did MGM really get too big, or did the precipitous fall in the economy and consumer confidence cause the size of the project to be too big? Could anyone ever have expected this?”

That last question perked my ears up, because it was nearly verbatim something Phil Ruffin, the Kansas billionaire taking the Treasure Island off of MGM Mirage’s hands for $775 million, had said an hour earlier.

“This economy is so bad,” Ruffin said. “Who would have predicted any of this would happen?”

Well, here’s the thing: They did. Both of them and/or their corporations.

Okay, they didn’t anticipate the historic international implosion of the housing and credit markets. They didn’t know that Wall Street and Main Street would be brought to their knees by bizarre, unsustainable and falsely valued financial instruments or that, for the first time in anyone’s memory, a major economic disruption would turn once-impervious Las Vegas into a tourist ghost town and conventioneers’ national pariah.

So, no. Foreseeing this precise event coming to pass? Terry Lanni, Jim Murren, Kirk Kerkorian, Sheldon Adelson and the rest of the MGM Mirage and Las Vegas Sands leaderships are absolved of that.

But how about simply a serious slowdown? A saturation of the marketplace? A pause that refreshes?

Read the rest at this Las Vegas Weekly link.


Anonymous said...

A very well written, and well reasoned column, as usual. I do have one question, however. I have trouble thinking Harrah's is any better off, or more responsible. Hopefully someone can help me understand this item I'm wondering about. The last day Harrah's was a publicly traded company their debt was around $17 billion: as soon as they went private their debt went up to about $27 billion because the ownership group borrowed the additional amount and, I assume, took the money out of the company. This has always made me think that Harrah's is struggling under the highest amount of debt that could be borrowed against all the company's assets, leaving them little room to properly maintain their properties, and zero room to expand. It seems like when Harrah's went private they wound up owing an extra CityCenter sized debt (depending on who's counting today) with nothing to show for it. Am I missing something?

Jeff in OKC