Michael Hart

For Las Vegas, It’s Not Just the Heat
July 1, 2008

If these are the dog days in Las Vegas, they’re the big-dog days for the city’s tradeshow and convention business. Sure, our editors in Las Vegas are still scurrying around to shows all the time, but this is not the season for the blockbuster. Organizers of shows like Intl. CES, MAGIC Marketplace and NAB are somewhere else, far away and far cooler.

So, if you look at the light crowds right now around the Strip, you might be tempted to say it’s the usual summer lull.

And yet Gary Loveman, chief executive of global gambling for Harrah’s Entertainment, told the Wall Street Journal “This is the toughest environment we’ve ever faced,” referring to economic challenges facing the global gaming market that have far more implications than just warm summer temperatures in Las Vegas.

I know, I know: the leisure and business travel segments are supposedly two different segments – except when they’re not.

Tropicana Entertainment filed for bankruptcy protection in May, defaulting on nearly $2.7 billion of debt. Credit rating agency Moody’s Investment Service has downgraded 17 gaming companies this year and is looking at 11 more for possible downgrades.

As of July 1, Boyd Gaming stock is trading at $11.20 a share, down from $54 a year ago. MGM Mirage is at $30.79, down from more than $100 a share last October, and Las Vegas Sands stock is at $43.09, down from almost $150 a share eight months ago.

Whether you like the sound of it or not, the bad economic news – fueled by a drop in consumer spending, a rise in gasoline prices, the housing crisis and the credit crunch – has reached Las Vegas.

Local boosters would no doubt tell us to never mind what we see at the moment and remind us of the soon-to-be record-breaking shows and conventions they have booked for many years to come. This too, they would probably say, will pass.

They are counting on Boyd, which reported a $32 million loss last quarter, completing its Echelon Place; the Las Vegas Convention Center upgrades starting and finishing on schedule; the Las Vegas Sands expansion, for which show managers have been told to adjust their schedules to accommodate; and whatever it is exactly Steve Wynn means when he says he’s building a new convention center.

Even if all that new exhibit space and accompanying hotel rooms won’t be needed by the exhibitors and attendees who might not be coming to town after all, show managers and convention planners had to be hoping their mere existence would be enough to make Las Vegas affordable for their customers, who already have enough inflation in their lives.

Given defaults of $2.7 billion and stock prices dropping as much as 75 percent in less than a year, some of these massive projects Las Vegas is counting on to move it to the next level are going to be pretty hard to finance.

Posted by Michael Hart on July 1, 2008 | Comments (1)