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|Recession brings 'Las Vegas dream' to an end
| Andrew Clark in
Bursting skywards in the middle of America's
gambling capital, seven glittering towers are nearing completion. The lavish
$11bn (£6.7bn) 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.
joint venture between the casino operator MGM Mirage and Dubai World, the vast
CityCenter development in Las Vegas is the biggest privately funded
construction project in the US. It is billed as "a city within a city" and it
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 $14bn of debt.
Donald "D" Taylor, head of Las Vegas's
Culinary Union, which represents 60,000 hotel workers, says: "We, basically,
have 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 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
their room rates by 30% to fill beds. Downtown casinos are offering rates of
barely $20 a night, while the four-star Las Vegas Hilton, where Barry Manilow
is a resident performer, is offering rooms for as little as $39.
Unemployment in Vegas has reached 11.1%, compared with a national
average of 9.4%. 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 $3.9bn casino which intended to offer perks such as an Apple iMac
computer in every room, went bust this month. Echelon, a $4.8bn resort
bankrolled by Boyd Gaming, ceased construction last year.
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
towards a $200m 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 for the
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."
Detroit depends on the health of the motor industry, Las Vegas relies on gaming
for its lifeblood. Some 37 million tourists annually 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 1.9m as people
arrive from all corners of the US in search of steady jobs and cheap housing.
But economic migrants are now trickling away from Vegas.
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 spun out of control.
The city was
at the centre of the sub-prime mortgage crisis as 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."
a myth abounded that people would 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."
move away from its historical association with adult entertainment and
organised 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
Newer casinos, such as Steve Wynn's Wynn Las Vegas, boast
restaurants inspired by top-name celebrity chefs, designer boutiques, spa
treatments and extravagant 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
That, he says, is fine in the good times. But when the economy
turns downwards, even ardent poker players are reluctant to splash out on wild
lime botanical spa treatments or $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 $3.2bn 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 continue to roll for ever 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 casino's 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 for an
interview. "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 badly needs a way to pay the bills and
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 labour, according to workers'
representatives. Members of the Culinary Union typically earn about $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."