U.S. economic slump spurs casino cost-cutting

Jan 22, 2009 12:50 AM
Staff & Wire Reports |

In response to a 3.6 percent drop in gambling revenue nationwide for the first 11 months of 2008, U.S. casino companies cut costs in various ways, they dropped room rates and offered other enticements to keep consumers coming and they're now working on broader strategic changes.

Here's how three of the four major Las Vegas-based casino companies -- the world's four largest -- are scaling back construction and staffing at home and around the world.

Las Vegas Sands, the first U.S. company to open a casino in Macau when the market opened there, has suspended construction at two sites in the Chinese island enclave while it pursues roughly $881 million in financing. A public company run by billionaire Sheldon Adelson, Sands said it needed to raise $1.9 billion and had $5.4 billion left to spend across five projects in Macau, Las Vegas, Pennsylvania and Singapore that cost a total of $9.5 billion. Sands also has indefinitely suspended construction on a $600 million condominium tower between its Venetian and Palazzo hotel-casinos on the Strip.

MGM Mirage Inc. said it has saved about $400 million in material and labor at its $8.6 billion CityCenter development and deferred $200 million in costs to next year by delaying a boutique hotel. It also saved $200 million by canceling 200 condominiums at the Harmon Hotel & Spa, topping the tower at 25 stories instead of its planned 47 stories. The company has laid off at least 3,200 workers since October 2007 but expects to hire or rehire 12,000 for CityCenter.

Harrah's Entertainment Inc. indefinitely suspended plans for a 660-room tower at Caesars Palace on the Strip, and it laid off roughly 1,800 union and nonunion casino workers in 2008 in Las Vegas alone. Harrah's has been restructuring debt, and in November withdrew a proposal with partners to manage a $535 million state-owned casino in Kansas.

Wynn Resorts Ltd. chief executive Steve Wynn has said he has never had a layoff and sees them as a last resort. The company has taken a relatively conservative approach to expansion and has not announced any plans beyond the opening later this year of its $700 million Encore casino in Macau. Instead, Wynn cut room rates significantly at its Las Vegas casinos to keep occupancy each night at least 90 percent.

The average Las Vegas hotel room fetched just $108 per night in November, down 8.1 percent from a year earlier. Rooms on the Las Vegas Strip can be rented online for as little as $25 as part of packages that include airfare and multiple-night stays.

Now, the city's convention authority is putting $2.5 million behind a new ad campaign to fill Las Vegas-bound flights and revive traffic from California on Interstate 15, which last year carried some 400,000 fewer cars to the Nevada state line than in 2007.

Related Articles:
Gaming stocks now on the rebound?
Las Vegas billionaires: riches to rags?
Las Vegas Sands gets OK on apartment-hotel sales
Las Vegas billionaire loses billions this year