Inside Asian Gaming

March 2009 | INSIDE ASIAN GAMING 43 in new projects. Our capital estimate includes 7,300 new rooms (Palazzo, Palms Place, Trump and Wynn Las Vegas). And that does not include the 18,000 rooms we estimate will come on line over the next two years”—a reference to the opening of CityCenter later this year, the planned Cosmopolitan and Fontainebleau openings, an expansionatHardRock,theopening this spring of M Resorts, an expansion at Planet Hollywood and the December 2008 opening of Wynn’s Encore. Managing compression In Las Vegas, the most obvious result of over-building, combined with a major downturn in consumer spending, has been drastically lowered room rates. Even Steve Wynn discounted rooms at Wynn Las Vegas and the new Encore to $149 and $159 a night, respectively, on certain days this winter. The compression downward on almost all properties has been swift: a room at Mandalay Bay for $115, MGM Grand at $75, Monte Carlo and New York-New York at $60, The Mirage at $94 (with a third night free), Luxor and Excalibur at $50 and $41. Free drinks, spa credits, two-for-one show tickets, discounted golf. Any $100-a- day gambler not asking for comps on the Strip this winter, it would appear, is being charitable to the house. “The days of the $300 room, the $200 meal and the $100 show tickets are probably behind us,” said LaFleur. “This came down pretty fast. Right now the scramble is to just get the room prices at a level to keep bringing people there.” The trend is plain to see with large companies like MGM Mirage, which break down the performance of each property— Bellagio is being booked at a discount, but holding its own, while Circus Circus is suffering. “What happens is, it really comes off the bottom line,” said Eadington. “Hotel rooms are predominantly fixed-cost assets. Price wars on rooms have a disproportionate effect on the bottom line.” Suppliers are feeling the pinch as well. Normally, in slow periods, operators can retrench and retool with new technology and other upgrades, waiting for the next up cycle. This time around, not so much. “You have to replace slot machines as they wear out or become obsolete, but Robert LaFleur, industry analyst with Susquehanna Financial Group: “I think it’s pretty safe to say that the old adage that gaming is recession-resistant has been blown out of the water”