I was in Las Vegas for Thanksgiving week when I heard the news that Dubai World, the investment company owned by the emirate of Dubai, had asked its creditors for a freeze on its debt repayments. I found myself pondering casinos, banks, and casino banks. Sin City and the Sheikhs’ playground on the creek have many similarities, but the differences are worth considering and may indicate how each may weather and shape the continuing global economic peril. Las Vegas, despite its vulnerability to the recession, is well placed to adapt and recover from the crisis, due its open economy and market processes. Dubai, in whatever state it emerges from the debt crisis, will likely continue having problems while its political power is centralized in the ruling elite and shielded from media and market scrutiny.
Walking on the Vegas Strip, I was struck by the smell of sewage wafting between two of the fabulously opulent hotels, and I wondered whether this might be taken figuratively as a kind of miasma for a city going the way of Ozymandias. For 20-plus years, Vegas had seen incredible expansion. Had its winning run come to an end as abruptly as that of a cocksure Craps player who has rolled the dice once too often? Anecdotally, this seemed far from the case. The casinos and hotels I visited were packed and hummed with gamblers’ energy. Yet Las Vegas’ revenues have been inevitably hurt by the national decline in disposable wealth. Its conference business has been decimated by corporate reluctance to be seen partying in an age of taxpayer bailouts. It has been one the worst centers of the real estate foolishness with the highest foreclosure rate in the country. Experts fear that Las Vegas may be a bellwether for the feared corporate real estate crash that could trigger a “double dip” recession.
It’s not hard to spot the large aborted projects in Sin City. Fontainebleau, a $3 billion hotel and casino, sits unfinished, its shining “coming soon!” sign misleading and depressing. Boyd Gaming’s $4.8 billion Echelon is suspended. Several gleaming condo towers are currently housing only squatters. Almost 40 major projects lack firm completion dates. “Too Big to Fail” is a tag unlikely to be bestowed on a casino project by the Washington politicians who have bailed out Detroit and Wall Street, but that is exactly how parent MGM Mirage views its latest mega project, CityCenter, set to open before the new year. How CityCenter fares, with its 6,000 rooms, casino, and shopping centers will be key to Las Vegas’ immediate fortunes. Intriguingly, the construction, involving more than 8,000 workers, was jointly financed by Dubai World.
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