What Used to Stay in Vegas Isn't Going to Vegas

The economic rough patch is hitting everybody, including the Vegas casinos:

It's even hurting the city of Las Vegas, the economy of which was once thought to be impervious to the economic swings suffered by the rest of the country. Not anymore. According to the Las Vegas Convention and Visitors Authority (LVCVA), Las Vegas has seen gambling revenues fall only once since 1970: in the aftermath of the Sept. 11 terror attacks they dropped 1 percent in 2002 from 2001. So far this year they've fallen 4 percent, the number of conventions held has dropped 10.4 percent, and average daily room rates were off 3.8 percent in the first two months of 2008, according to the most recent data available. Visitor volume was up 1.2 percent through February, but market analysts say that's because of the extra day provided by this being a leap year; March's figures will likely put the year-to-date numbers in negative territory. The stock price of MGM Mirage, owner of Bellagio, Mirage and eight other Strip resorts, has halved, from $100.50 in October to about $49 on Friday. In recent weeks the company eliminated 440 middle management jobs to save $75 million annually. "We made a structural change in our company to become more efficient and provide the same level of service, but we did have to advance that effort because we were also seeing a softening in the marketplace," says MGM Mirage spokesman Alan Feldman.

What's leaving Las Vegas more susceptible to this economic crisis than to previous ones? Diversification. Roughly 60 percent of the Las Vegas Strip's revenues now come from nongaming activities. By contrast, in 1991 and 1992, when the last comparable slowdown occurred, nongaming activities provided just 42 percent of overall revenue. "This is different from prior downturns," says Bill Lerner, a Deutsche Bank gaming-sector analyst. "Now that there are a lot more nongaming amenities, the visitation mix is leaning toward nongamblers, and the consumer coming to Vegas is different now than it was."

It doesn't help that the city's convention business is slipping. Several annual conventions have seen fewer attendees show up and have seen those who do come stay for shorter periods. For example, last week's National Association of Broadcasters confab attracted 105,000 registrants, down from 111,000 in 2007, according to NAB executive vice president Chris Brown. Those figures could have been worse, Brown says, but advance registrations were so far down that several hotel-casinos voluntarily offered to cut room rates by $10 or more to encourage attendance. Says Brown, "That's never happened before."

I've noticed an increase in good deals for Vegas hotels lately. That may really pick up as summer comes on because that's often the cheapest time of the year to go over there, mainly because it's like 800 degrees.

One hotel-casino may not make it much longer:

Struggling casino operator Tropicana Entertainment LLC is expected to file for bankruptcy protection as early as today, said two people familiar with the matter. It would be the largest corporate bankruptcy of the year, and the latest blow to Las Vegas, which has seen gambling revenues decline and major building projects canceled or delayed in the last few months.

Kentucky-based Tropicana has a small casino empire which includes the famed Tropicana Resort & Casino in Las Vegas and a host of small regional casinos from Mississippi to Baton Rouge.

The Tropicana has always seemed like the ugly stepsister at the south end of the Strip. It sits by itself on the southeast corner of Tropicana and Las Vegas Blvd, with the MGM Grand, New York, New York, and the Excalibur on the other corners. Just down the street is Luxor and Mandalay Bay. Tropicana just looks like an old beat-up hotel compared to those other properties. I think I've only been in there maybe once or twice and I wasn't impressed.