One thing I’ve learned from a year or so of reading the WSJ…it’s debt that makes it hard in business, not just sales. One of the worst-hit sectors of our buckling economy is the casino business. In Vegas and Atlantic City, debt is taking down Donald Trump and now, Kirk Kirkorian.
Today I read about MGM Mirage hotel being sold off in pieces. I remember staying once in a cheap Vegas hotel across the street from the gargantuan MGM Grand, with more than 5000 rooms. You could see this giant green collosus light up the strip. She is about to be sold, along with the elegant Bellagio since the owners are desperately trying to shed debt.
One thing that stuck out in the story was how casinos now, on average, owe $7 for every dollar they project to earn. The biggest casino company, Harrah’s Entertainment, has $65 billion in debt! They owe $9 for every buck that comes in from the slot machines and baccarat tables.
In the city of Las Vegas, things are going to get worse. More than 17,000 new hotel rooms will be added over the next two years, when City Center and Planet Hollywood Towers are finished. This number will exceed the maximum capacity of planes that could come in to McCarran airport. “In other words you’d need a whole new airport to fill the demand of new rooms,” the article said.
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I believe with the WSJ and – especially – with casinos, it’s important to look behind the readily available statistics.Who, exactly, is on the hook for this debt?Remember when Marriott broke their company into 2 pieces: One piece was owned by family members and it had no debt, the other was owned by stockholders and it got ALL the debt.I guarantee the owners and principles of these casinos will do just fine.