Highlight of Tonopah
Tonopah used to be the most prosperous town in Nevada. Now with the mines played out and the gambling mostly gone it's just a stop on the road between Vegas and Reno. The statue outside the Tonopah Station (the casino still has a few slot machines and a bar, restaurant and hotel) was the town's highlight for my daughters.
Las Vegas and Reno aren't in any danger of becoming ghost towns, but the gaming industry isn't out of the deep water yet. And, it's mostly their own fault. The properties that expanded slowly while keeping most of their debt in check and building with revenue are doing well. Others, well, they are in trouble still.
Moody's Investor Service paints a bleak picture of Nevada's minor recovery in gaming revenues this past quarter. Not so much about the uptick, but about the fact that just a minor hiccup with our equally weak national economy could causing major financial problems for many Las Vegas casino companies. Sure, the Fed's Open Market Committee report of June 22 cited high unemployment and the housing recession as continuing problems, but hey, that's old news. And, the fact that Nevada's gaming industry has gone through bankruptcy filings and billions in debt restructuring plus the inherent job losses doesn't help.
On a larger scale, the two largest gaming corporations in the world have plenty of work to do as MGM's $12 billion debt and Caesars $18.5 billion debt translate to more than a boat-load of cash. In fact, that's a whole flotilla-load of cash. Moody's noted that the current ecconomic problems could prompt ratings downgrades for casino companies, which would in turn hamper their ability to borrow money. If only I could look at a low balance in my checkbook and just keep writing checks. Hmmmm.
When I was younger, I would write a check at my local Gemco store for cash on Friday afternoon, knowing it wouldn't hit the bank until Monday or Tuesday. I would play poker all weekend and get the cash to the bank on Monday. And, you all know how well that worked. Eventually I took a bad hit over a lost weekend and couldn't cover the float. My boat-load was small. I made it up the next week and stopped the borrowing cycle. Big businesses can't necessarily do that, but it is sad to see a company like Caesars riding out the storm.
On the other hand, don't feel bad if you happen to win big at your local Caesars or MGM property this week. They'll probably be fine.
Comments
i don’t get the idea of this article
The idea of this article is that the gaming industry has become decident. The idea of getting a loan in which you have no intention or capability of paying is purely indecent. The banks are “muy loco” to loan money to casino operators who are in over their head in debt. A CPA can play with money and creative financing just so long. The gaming industry will be the next Bear Sterns. Two years ago no one thought the largest bank in the nation, Washington Mutual would go under. The casino industry will be the next Enron if they do not get their spending under control.
Bring back the Vegas of the 60’s and 70’s. That is why I always stay downtown. MGM and Caesar’s are going the way of Greece and Ireland.
My spelling mistake in my post “decadent”. I must proof read better.
How I agree with comment above.
It used to be that we could gamble without having to worry about food and lodging. Now unless you are a rated player you will need $100-200 a day just for hotel and food. No chance to eat free or for .99 cents.
The veags Casions have to make up their mind. Either they are in the lodgiung, food and beberage busienss or casino business. By trying to make money in everything they have lost their core competency and not they cannot make money at anything.
Mainly becasue they have priced themselves out of the market.