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Who needs Las Vegas when you have these markets? Shares in the largest casino operators have lately been as heart-stoppingly unpredictable as an all-night session at the roulette table. Las Vegas Sands, down about 94 per cent this year, dropped another 30 per cent this week – and then tripled from the lows. MGM Mirage and Wynn Resorts have been on a somewhat less spectacular ride – the latter supported by its bulging balance sheet and top-notch hotels. But both rallied euphorically as the week concluded.
Concerns in the desert playground for MGM and Sands were that credit constraints would make fund-raising impossible for projects, such as the multiple towers of MGM’s CityCenter on a plot bigger than 1,000 tennis courts; or even that the companies could run out of cash before punters did. Those fears are, for now, fading. MGM offered reassurance on the financing for the $9bn development and successfully, if expensively, tapped high-yield markets. In addition, the sharp economic reversal has a perk. The demise of competing projects will enable MGM to hire the 9,000 workers it needs more easily. Plummeting costs of raw materials will also help to slice building costs by about $400m.
Traffic at tables and slots, though, is slowing. Gaming revenues on the Strip fell 7 per cent in the year to August, before the latest turmoil made casual gamblers sit out the next poker hand. There is the odd bright spot. An increase in third-quarter revenues per available room at MGM’s Bellagio suggests top-flight visitors are still splurging. After a spate of cancellations in September, next year’s convention schedules are apparently filling out. Valuations are beaten-down. But Wall Street’s woes and the economic slump will extinguish glimmers of recovery should the “stay at home” mentality become entrenched. Add in cutbacks on airline routes and Las Vegas’s new developments, and investors may as well stick their money on black.
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