It has started! Things in Las Vegas have been hard for nearly 24 months now. The strategy was always doubtful. How many high rollers were there in reality? The chase for the higher premium players the massive increase in the cost of visiting "Sin City", and the reality of ageing demographics was certain the result in one outcome: failure and bankruptcy
Las Vegas is a microcosm of the rest of America, a bet made on borrowed monies. In the past 7 years the debt burden of the average casino has doubled, but more seriously the cost of debt service has grown exponentially, based on unrealistic assumptions. Bottom line the cost of financing Las Vegas has risen from 1.1% per annum to 6.5% now, and virtually 30% of Las Vegas casino properties are heading for chapter 11 or maybe even chapter 7 (liquidation).
An extreme example is the dome, that costed nearly $2.3 billion, and requires that 95% of its seats be sold at a premium rate to meet its interest obligations…
I wrote about Las Vegas and the massive increase in the cost of going to Las Vegas. Whereas a decade ago a room could be had for $50 a night, now with all the service fees and taxes it's usually around $250 a night. The assumption by Wall Street analysts was that there was an unending supply of "whales" ready to lose millions at the casino, when the real bread and butter of the Casinos was the average American. That too has died, and finally, as if Las Vegas needed that, the behavior of The US government vis-a-vis foreign tourists. Canadian Tourists, America's largest contingent of tourists, have reduced trips to the US by 30%, and that has hit Las Vegas too.
Now, Las Vegas is not the last,it is the first at facing the excess of capitalism, and of the reorganisation of the world trading order, but also a fundamental change in the patterns of tourists.
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