Travel Agent - September 15, 2008 - (Page 28)

DESTINATIONS LAS VEGAS SIN CITY Slowdown New construction plans face mounting struggles BY GLENN HAUSSMAN Las Vegas is feeling the pinch of a softening economy THE LAS VEGAS CONSTRUCTION BOOM HAS HIT A BRICK WALL, creating omnipresent worry in a town that isn’t used to the jitters. After 20 years of boom, Sin City casino executives didn’t gamble on a softening economy evaporating business or tightening financial markets that would make it difficult to get the cash needed to build resorts. Unfortunately, the expansion side of the business has gone bust. Several notable projects have been cancelled, others are getting pushed back and some investors are finding that they need to scramble for dollars if they plan to finish uncompleted ventures. Most notably, Boyd Gaming has delayed its $4.8 billion Echelon for at least nine months. It was a surprise blow to a company that has been in a transformative stage from locals market player to Las Vegas Strip contender. But it’s also a major blow to Morgans Hotel Group, which has a 50/50 joint venture with Boyd to develop a Mondrian and Delano within Boyd’s Echelon 28 | TravelAgent September 15, 2008 development. Now that relationship is in question as Morgans executives do “not intend to further extend the joint venture agreement on its current terms,” said a statement. They do hope to evaluate future proposals relating to the project with Boyd. Interestingly, Boyd Gaming is getting some short-term gain from its decision to delay the project. Investors are rewarding the decision and its stock immediately jumped. The company has now diverted cash into a $100 million buyback program. “You’re seeing projects [that are] supposed to open in 2009 and beyond slowing down,” said Bruce Ford, SVP sales with Lodging Econometrics, a firm that tracks all hotel and casino projects globally. “[Projects] are clearly slowing down. Most projects are not in a hurry to complete right now because of the soft demand time right now and declining revenues.” Ford explained that many construction loans have some wiggle room built into them for the start of payback—meaning a project can open six to nine months later than scheduled with no adverse affect on the status of the loan. Trouble on the Strip More telling are the problems affecting businesses farther down the Strip. Take MGM Mirage’s CityCenter, for example. Known as the largest privately funded construction project in U.S. history, there is little surprise that the developers are having trouble completing financing for this mega project, which was originally estimated to cost $7.5 billion. Now reports have pegged the final cost at between $9 and $10 billion. Before the credit markets turned sour, it had already sold half the property to Dubai World, which is now a 50/50 partner in the venture, but the company needs cash to complete construction and meet its late 2009 open date. During the second quarter of 2008, MGM Mirage and Dubai World each funded $300 CONTINUED ON PAGE 30

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Travel Agent - September 15, 2008 Online Now Contents Agent Insider From the Editor Hawaii Europe Pacific/Asia Las Vegas US Airways Vacations - Atlantis, Paradise Island Specialist Central & South America Mexico Caribbean Cruises Cover Story: Merge Mania France by Rail Weddings & Honeymoons Gay & Lesbian Travel Tours Agent Profile Triptailor Vacations Agenda: Fam Trips, Deals & Incentives, Calendar Vegas Week Insights on Singapore Travel Leaders Builds New Alliances The Latest from the Caribbean A Sneak Peek at a New Ship Classified Marketplace In the Spotlight Editorial Index Advertising Index Trendwatch Special Supplement: Thailand Travel Planner

Travel Agent - September 15, 2008

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