Bursting skyward in the middle of the US’ gambling capital, seven glittering towers are nearing completion. The lavish US$11 billion CityCenter complex will boast a casino, four hotels, luxury apartments, a fire station and even an on-site power station. But its timing could hardly be worse.
A joint venture between the casino operator MGM Mirage and Dubai World, the vast development in Las Vegas is the biggest privately funded construction project in the US. It is billed as “a city within a city” and will sit between the Bellagio’s dancing fountains and the fake Manhattan skyline of New York New York.
The doors of the first tower will open in October. But critics wonder who will fill CityCenter’s 7,000 hotel rooms and apartments. Las Vegas is mired in a recession of epic proportions and CityCenter’s parent company, MGM, is toiling under US$14 billion of debt.
Donald “D” Taylor, head of Las Vegas’s Culinary Union, which represents 60,000 hotel workers, says: “We’ve had a boom here for 20-plus years. Nobody has ever experienced a downturn before. We’ve been hit hard.”
Taylor, an influential Vegas power-broker, adds: “It’s enormously challenging. There’s a lot of steel sticking out of the ground in this valley that’s just sitting there.”
After a quarter of a century of phenomenal growth, Las Vegas has come to a shuddering halt. The seemingly endless supply of gamblers has dried up. So has the conference trade, hardly helped by a warning from US President Barack Obama that bailed-out Wall Street banks should avoid “taking junkets to Las Vegas” on the taxpayers’ dime.
Always good value, Vegas hotels have had to slash room rates by 30 percent to fill beds. Downtown casinos are offering rates of barely US$20 a night. The four-star Las Vegas Hilton, where Barry Manilow is a resident performer, is offering rooms for as little as US$39.
Local unemployment has reached 11.1 percent, compared with a national average of 9.4 percent. And a spectacular collapse in the local housing market has left seven out of 10 homeowners nursing negative equity.
On the city’s world-famous Strip, two huge building sites are eerily quiet. Fontainebleau, a half-finished US$3.9 billion casino that intended to offer perks such as an Apple iMac computer in every room, went bust this month. Echelon, a US$4.8 billion resort that was bankrolled by Boyd Gaming, ceased construction last year.
The much-vaunted CityCenter complex is far bigger. But MGM almost had to pull the plug in March when its partner in the United Arab Emirates declined to stump up toward a US$200 million equity payment. The project was within hours of bankruptcy when MGM’s bankers agreed to a stay of execution.
Gordon Absher, MGM’s vice-president of public affairs, says shutting down was not an option: “For us to stop CityCenter would have been devastating for the company and the community.”
He points out that 8,000 construction workers would have been laid off and the promise of 11,000 permanent jobs would have been lost.
He admits: “We’re experiencing something that is quite foreign to us. I’ve been in Las Vegas for 20 years and it’s always been a boom town.”
Just as Detroit depends on the health of the motor industry, Las Vegas relies on gaming for its lifeblood. Some 37 million tourists a year are lured by a heady mixture of gambling, sunshine, star-studded shows and nightlife. The city’s permanent population has soared from 700,000 in the mid-1980s to 1.9 million as people arrived from all corners of the US in search of steady jobs and cheap housing. But economic migrants are now trickling away.
For years, the city offered a so-called “Las Vegas dream” where housekeepers or kitchen workers could buy their own homes, afford annual holidays and send their children to college. But expansion had spun out of control.
The city was at the center of the sub-prime mortgage crisis after lenders handed out unsustainable home loans. Some 35,000 houses and flats now stand empty. Keith Schwer, an economist at the University of Nevada in Las Vegas, says: “The housing industry basically got into the casino business.”
Schwer says a myth abounded that people would want to escape to a gambling resort in good times or bad: “We had some people out there arguing that the Las Vegas economy was immune from an economic downturn and a few others saying we were, at least, resistant to recession. It’s very clear now that we are not.”
Eager to move away from its historical association with adult entertainment and organized crime, Las Vegas was heading upscale when the economy plunged. The 1990s era of themed kitsch, which gave birth to the pyramid-shaped Luxor resort and Excalibur’s King Arthur-style castle, morphed into a 21st-century fad for luxury.
Newer casinos, such as Steve Wynn’s Wynn Las Vegas, boast restaurants inspired by leading celebrity chefs, designer boutiques, spa treatments and extravagant hotel suites with floor-to-ceiling windows. But top-class accommodation is a cyclical game.
Brian McGill, a gaming analyst at stockbroker Janney Montgomery Scott, says: “What they missed, the city and the operators, is that yes, it’s gambling that Vegas was built on originally, but it became so much more than gambling. It wasn’t any more about cheap rooms, cheap drinks, cheap shows. It became an ultra-expensive weekend for anyone going there.”
That, he says, is fine in the good times. But when the economy plunges, even ardent poker players are reluctant to splash out on wild lime botanical spa treatments or US$70 Kobe steaks.
McGill believes the city’s expansion bodes ill. As many as 15,172 new rooms will shortly open on the Las Vegas strip, requiring an extra US$3.2 billion of annual tourist spending to make any money.
“There’s too much supply, particularly at the high end,” says McGill, who struggles to see a quick return to profit for casinos. “They believed the good times were going to roll forever in Las Vegas. They believed there would be no significant downturn and even in a downturn, they didn’t believe a recession would affect the higher end.”
More than 2,000 hopeful jobseekers queued for as long as three hours this week to apply for 200 lowly housekeeping positions at the Hard Rock Casino, which is opening two new towers.
A seemingly endless line stretched past the sparsely populated poker lounge, sports betting room, Pink Taco restaurant and rock memorabilia shop.
“Things are very bad,” said Liya Abraham, one applicant who gave up after waiting two hours. “I’m thinking I might move to another state. This situation has been very tough on me.”
Abraham, 30, tells a familiar story. A former card dealer, she was laid off six months ago by Las Vegas’s Poker Palace casino.
With three children to support, she would be happy to clean tourists’ rooms: “I can do housekeeping work. It’s just really hard to find a job.”
The brasher visitors attracted to Vegas mean that the jobs themselves are far from easy labor, workers’ representatives say. Members of the Culinary Union typically earn about US$15 an hour, but Taylor bristles at the suggestion that cleaning rooms is unskilled.
“You try making up 16 rooms in a day,” he says. “It’s not like working in a business hotel in New York or Chicago. People come here and party. They trash rooms here.”
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