Down
and out in Las Vegas
The good-time capital of the US has hit a losing streak. Guy
Adams reports on an epidemic of bankruptcies, foreclosures and
mass lay-offs
ALAMY
The
bright lights of Las Vegas and its slot machines are less alluring
for Americans caught in an economic slowdown and a property
slump Since the day Las Vegas was created in the shimmering
Nevada desert, visitors have been drawn by one simple promise:
"What happens in Vegas stays in Vegas". The motto
adorns the city's road signs, and has inspired everything from
its souvenir T-shirts to the local tourist board's seductive
advertising campaigns.
These days, that motto is
imbued with a worrying sense of irony. Because America's most
outrageous city is facing a growing multitude of problems, and
they all boil down to a single, unavoidable point: right now,
far too little happens in Vegas, because not enough people are
actually staying there.
The onset of global slowdown,
high petrol prices, and a nation-wide housing slump is spelling
disaster for a town that owes every aspect of its wealth from
that gaudy replica of the Eiffel Tower to those scale models
of Venetian canals and the Pyramids of Egypt to its ability
to inspire free-spending hedonism.
With Americans cutting back
on luxuries, and the price of transport rocketing, the so-called
"Vegas vacation" is facing the axe. This week, as
the nation celebrated Independence Day, major hotels were taking
stock of a fall in all-important room occupancy rates from their
usually impressive 95 per cent levels to nearer 80 per cent.
More worryingly, new figures
showed gambling revenue has also dropped a further 3 per cent
this month ˆ starting a price war between worried firms
anxious to lure punters back. Hotel rooms, which last year averaged
$130 each, now go for less than $100 (£50).
At the vast Planet Hollywood
resort, the clatter of fruit machines and poker chips was this
week replaced by an uneasy and, for Vegas, very unusual calm.
A large if slightly tatty double room could be found for less
than $80.
No tourist resort can afford
to lose its buzz. Yet the slump now runs so deep it's starting
to hurt even the town's Elvis impersonators, wedding chapels,
and sex industry. When money's tight, the prospect of stuffing
another $20 bill into a lap-dancer's gyrating stocking-top somehow
doesn't seem quite so enticing.
"This year already
we've seen the Minx closing, the Mensa club closing, and the
Crazy Horse closing," says Dolores Eliades, owner of the
OG, the second biggest "adult cabaret" venue in the
world. "By another 12 months from now, I expect another
two or three major venues will have gone.
"We've seen a drop
in custom here too: maybe 180 people coming in when before we
got 200. It's a difficult business, but the girls still have
to make a living. We will survive because we own our own premises,
we have a good name and location, we don't buy on credit, and
we've been around for a long time. But we're very lucky in that
respect."
To quantify the Vegas slump,
look to the stock market. Shares in casino operators, the engine
room of an economy reliant on its liberal attitude to public
morality, have been haemmoraging value like a down-on-his-luck
gambler.
Las Vegas Sands, which controls
the Venetian and Palazzo resorts on the famous neon-lit Strip
that runs through a "miracle mile," has dropped below
$50 a share, a third of its value last September. MGM is at
$28, from over $100 a year ago. Wynn resorts, owned by the ebullient
billionaire Steve Wynn ˆ a Texan version of Donald Trump
ˆ neared $70, from almost $180 last year.
This week, in an attempt
to prevent financial meltdown, Nevada's Tourism Alliance convened
an "Air Crisis Briefing" in an effort to prevent airline
plans to halve the number of flights to the resort. The city's
gut-busting "eat all you can" buffets are also being
scaled back to account for the US's 4 per cent food inflation.
Where a long queue of obesity once trailed across The Bellagio
hotel restaurant's ornate carpets, demand for its famous (but
now pricey) lunch buffet had on Thursday slowed to a trickle.
In what sounds suspiciously like a panic measure, the Golden
Gate Hotel this month even said it was doubling the price of
its signature 99 cent shrimp cocktail.
For the inhabitants of the
desert resort, which was founded in 1905 and became prosperous
after gambling was legalised in 1931, it's no joking matter.
The growing unemployment crisis (MGM just axed another 400 middle-managers),
plus a downturn in the tips that form a significant portion
of the Vegas economy, has a human cost, too.
Local bankruptcies have
quadrupled. The property market, which rode the wave of a boom
for most of the past decade is now below its peak by anything
from a quarter to a third (depending on whose figures you believe),
while Nevada now boasts, if that is the right word, the nation's
highest foreclosure rate.
The number of empty homes
has caused a health scare after it emerged that mosquitoes possibly
carrying the killer West Nile virus are breeding in abandoned
swimming pools. "We've had crews pumping out pools every
day this week," Devin Smith, who manages the city's Neighborhood
Response Division, told the Las Vegas Review Journal. "Two
years ago, we may have pumped six pools in a season. Now we're
probably pumping that a week."
Other sectors of Las Vegas
aren't looking too healthy, either. Attendance at conventions,
which account for roughly a quarter of the city's income, dropped
by 7 per cent this year as impoverished firms cut back on their
delegations to recession-hit events such as the Homebuilders
Convention.
"The current rate of
overall unemployment in this state is 6.2 per cent, the highest
since May 1994," said Jered McDonald, an economist with
the Nevada Employment, Training and Rehabilitation Department.
"Las Vegas seems to be getting the worst of it. Other parts
[of the state] aren't so bad; in fact the gold-mining industry
is booming, so the drop in employment in big metropolitan areas
is actually bigger than that figure suggests.
"With the high oil
prices, people don't have much disposable income to spend on
gaming and entertainment. So we are looking at a short-term
slump, certainly. In the longer term, everything depends on
what's going to happen to oil prices."
But the biggest threat of
all is that Las Vegas might somehow be perceived to have lost
its buzz. Like any tourist economy, the city's fortunes depend
squarely on being seen as a "hot" destination, a tag
that becomes difficult to justify if potential visitors hear
reports that the place is struggling.
As a result, no major strip
operators are publicly advertising their new low room rates.
None would be interviewed for this article, regardless of the
concerns shareholders might have for their fortunes. A spokesman
for Wynn Las Vegas, for example, said "Respectfully, we
must decline" the opportunity to discuss trading conditions.
And on the horizon is further
strife. As a hangover from the frenzied growth of two years
ago, Las Vegas is also in the grip of a speculative building
boom, with dozens of cranes towering over the Strip.
Wynn Resorts is building
a $2.2bn hotel, and Encore and MGM are spending $9.2bn on a
76-acre project called CityCenter. More than 40,000 new rooms
will exist in four years, in a city that has 7 per cent of America'shotel
beds. The prevailing emotion among business leaders is a mixture
of optimism and denial. The Association of Greater Las Vegas
Realtors, for example, claims the housing market is finally
turning the corner after a "correction" to the long-running
bull market that had made Vegas America's hottest location for
almost a decade. Rick Shelton, the association's vice- president,
insists that the long-term future is rosy and, to illustrate
his point, draws a diagram on a napkin in a local cocktail bar.
It consists of a circle with the initials "BLM" written
outside it.
"This is the map of
Vegas," he said. "Inside that circle is the city.
Outside it, everything is owned by the Bureau of Land Management.
So there's really nowhere else for the city to expand. And yet,
the census bureau has forecast that the population of Vegas
will grow from two million now to three million by 2016. There's
nowhere for those people to go. So this town is another Tokyo,
with land as a commodity. You fly in here and you see desert
and you think, 'Building, building, building'. But it can't
be built on, so prices must go up. And all those Harvard economists
are missing that key component when doing their prognosis of
our market. The way I see it, we have been in check, and are
now aligned for the next spurt, and I'm talking a power arc
that's got between seven and 10 years to run."
Dolores Eliades says the
history of Las Vegas shows it will find a way to adapt and survive.
"Historically, Las Vegas is able to withstand the problems
of the rest of the country. When people face hard economic times,
they come here to get away from their problems. In the US, people
are escape artists, and they deal with problems a little differently
from the rest of the world. I believe the history of this town
proves I'm right, I really do."