Inside Asian Gaming

INSIDE ASIAN GAMING | June 2013 24 2014 at the new SLS Las Vegas, where the old Sahara used to be. Macquarie Securities’ Chad Beynon told the Las Vegas Review- Journal the city will need 800,000 more visitors when Resorts World opens in 2016 just to maintain current occupancy levels. Fortunately, he said, that’s three years away, otherwise it “would effectively wipe out the effect of the visitation growth we saw in a year like 2012”. Peggy Holliday at Moody’s says the increases in room supply post-2007 “will continue to depress growth.” She notes that “Even with visitation at a record, hotel occupancy has been essentially flat, and room rates have seen onlymodest increases.” This year, a new Nobu Hotel, a rebranding of the Centurion Tower at Caesars Palace, has brought 181 additional rooms to the market, the Tropicana has added 127, the new Downtown Grand at the site of the old Lady Luck another 650. When Genting breaks ground next year, there will be 2,133 more. Not that Mr Thay is worried. Not with a company flush with upwards of US$7 billion in cash and interests in five publicly traded entities with a combined market capitalization of $46 billion and a portfolio of gaming, leisure and hospitality assets stretching from Singapore to the UK to the Bahamas, including perhaps the most lucrative slot floor in the US right now at Resorts World New York City. And it’s not like no one else in Las Vegas is building, although Resorts World is the only greenfield project on the drawing board, and the last one, the $3.9 billion, 2,995-room Cosmopolitan, struggled to get open in December 2010 and has struggled to make money in the casino. Gaming revenue on the Strip was up 2.2% last year to $6.21 billion, which is a positive sign. But that’s almost all high- end baccarat play. The mass market is stagnant. Win as a whole is $600 million off its 2007 peak. Moody’s take is for gaming to inch up at 1.5-2.5% this year and 2% in 2014, together with room rates, in line with US GDP growth forecasts. Visitation and convention attendance could be flat or could grow up to 2%. What has changed is all that liquidity the Fed is pumping into Wall Street. It has made money delectably cheap again. Five years ago, no one would lend to Las Vegas, or it took plenty of collateral, and interest Las Vegas laid down a pipeline of expansions and major new resort development beginning in the second half of the last decade that resulted in almost 20,000 new hotel rooms opening into the teeth of an economic whirlwind. Five years ago, no one would lend to Las Vegas, or it took plenty of collateral, and interest rates were prohibitive. Now, equity requirements and interest rates are down, making it easier for the big operators to refinance their considerable debt loads and free up funds to renovate and remodel and invest in new non-gaming attractions, about $1 billion of which is on tap in the next few years. IN FOCUS