Here's How Bad Vegas Is - Don't Let the 'Green Shoot' Crowd Bullshit You

[ByLoSellHi]

Who goes to Vegas? Everyone from coast to coast. I've been there for the ICSC Convention the last 6 years. I've never seen things so slow. This year, there were 25% of the attendees of three years ago. No one was spending money.

This is a perfect indicator of the where things are headed in the future, as things deteriorate and get far worse.

Vegas is the perfect litmus test of willingness to engage in discretionary spending, which is a huge portion of the two-thirds of the U.S. economy that is formed by consumer spending.

Also, businesses have cut WAY back, as much if not more so than even bargain-hunting consumers.

When the rah-rah bulls looking to sell you something, whether equities or a line of shit, do your own analysis, but be critical and don't let their empty words weigh on your conclusions - let the facts on the ground do that task.

For Las Vegas Chefs, the Odds Grow Longer

By GLENN COLLINS
Published: July 14, 2009

Last year, a fourth of the country's highest-grossing restaurants were in Las Vegas. But the feast has transitioned to famine. Fewer revelers are arriving, and they are spending less. Left, the 230-seat Bartolotta Ristorante di Mare in the Wynn.

IN the late, lamented boom, waiters at luxury restaurants here could make $150,000 a year and more thanks to the electrifying arrival of high rollers renowned as “the whales.”

Robert Martinez, a 33-year-old waiter at Rao’s in Caesars Palace, said these heavyweights “had wads of $100 bills and gave them to everyone on the staff, and tipped generously on $12,000 to $15,000 checks.”

But now, said Kevin Carter, a 49-year-old waiter at Craftsteak in the MGM Grand Hotel and Casino, “the whales have migrated.”

Last year, a fourth of the country’s highest-grossing restaurants were in Las Vegas. But the feast has transitioned to famine. Fewer revelers are arriving, and they are spending less. With the economy reeling, more than 5,000 food and restaurant workers are unemployed here.

“We look out and we see every jet coming and going,” said Michael N. Baker, 50, a waiter for eight years at the Top of the World restaurant in the Stratosphere Casino Hotel tower. “They used to be stacked up all day long,” he added. “Then there was nothing out there. That was scary.”

Many of the town’s 2,900 restaurants are beset by fabulousness fatigue.

“It was gold, and suddenly it became fool’s gold,” said Malcolm M. Knapp, who heads a restaurant consulting firm that bears his name.

Bill Lerner, a principal of Union Gaming, a research company, said that there were “too many five-star restaurants, shows, spas — too many celebrity chefs.”

On the Strip, near Circus Circus, is the yawning emptiness of the $4.8 billion, 87-acre Echelon project, halted last August along with its 12 to 15 new restaurants, including those of chefs such as David Chang of Momofuku Ko in Manhattan.

The unfinished, mirrored blue eyesore of the $2.9 billion 3,815-room Fontainebleau tower across from Circus Circus looms over the city like a prophecy. It went bankrupt and took 6,000 jobs with it.

But in the desert restaurant universe, a mirage has now arisen that could mean either salvation or doom: the $8.5 billion CityCenter project.

During the boom, waiters at luxury restaurants could make $150,000 a year and more. Left, Joseph Bastianich and Mario Batali's Carnevino Italian Steakhouse in the Palazzo at the Venetian Resort Hotel and Casino. "Being down 10 percent, that's the new flat," said Mr. Bastianich.

Bristling with construction cranes and gleaming in the 100-degree sun, the CityCenter casino, hotel, convention center, mall, residential and entertainment metropolis looks like a hallucinogenic 67-acre Red Grooms parody of the Las Vegas Strip. The development spans a quarter-mile, from the Bellagio to the Monte Carlo Resort and Casino, and is scheduled to open in December.

Some 30 restaurants are to inhabit the jumble of seven buildings — from tapered towers to crystalline shards — designed by eight celebrity architects, including Sir Norman Foster and Daniel Libeskind. On display, and on trial, will be the concepts of lionized chefs, among them Pierre Gagnaire, Michael Mina, Masayoshi Takayama, Wolfgang Puck and Jean-Georges Vongerichten.

For some, CityCenter, developed by MGM Mirage and Dubai World, will offer treasures that transcend buzz and hype: 4,000 food and restaurant jobs, a third of the complex’s 12,000 new jobs.

But if it cannibalizes existing restaurants it could further wound this once-sleepy railroad watering stop beset by a sere immensity of sand.

Already sin city has become a sandbox of incentives, discounts and promotions, where even luxury properties like the Bellagio are offering free hotel nights, plus gambling, food and drink coupons to their club-card customers.

Construction on the $4.8 billion, 87-acre Echelon hotel and casino halted last August, along with work on its 12 to 15 new restaurants, including those of chefs such as David Chang of Momofuku Ko in Manhattan.

Some economizing tourists are fleeing their casinos to dine off-Strip. But neighborhood restaurants are under growing pressure from the Strip, since residents are being courted as never before by casinos with “staycation packages” that include restaurant meals.

And so, amid the hawkers and escort-service card-flippers, a dizzying profusion of bargain-eats signs are competing. They include giant come-ons for the “$5.99 New York Steak N Eggs” at Bill’s Gamblin’ Hall & Saloon; the mammoth billboard at the Tropicana Casino & Resort vaunting its “Legendary Lobster Special $19.95,” and the ultimate deal, the Siegel Suites billboards proclaiming “Live Here Eat Free.”

On the high end, there is a desert fiesta of advertised “summer tasting menus” at the MGM Grand ($60 at Craftsteak, $59 at Shibuya, $45 at SeaBlue, $39 at Nobhill Tavern). At Aureole and Mix in the Mandalay Bay Resort and Casino, there are new prix fixe menus. Also offering deals are Mario Batali and David Burke in the Venetian, Wolfgang Puck at Spago in Caesars Palace and reduced-price “Taste of Wynn” promotions (including $36 menus at Society Café Encore and Daniel Boulud Brasserie).

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[ByLoSellHi]

-CONTINUED FROM ABOVE-

The unfinished $2.9 billion 3,815-room Fontainebleau tower, across from Circus Circus on the Las Vegas Strip, went bankrupt and took 6,000 jobs with it.

Steve Wynn, the chairman of Wynn Resorts, said that his customers “aren’t buying that bottle of Margaux, and they aren’t ordering as much — but they are here.” His Wynn and Encore, like several properties at the high end, have 90 percent occupancy.

Mr. Wynn said he is encouraged that “each month the booking window is getting longer — it used to be 90 days, then 30 last fall, now it’s coming back — and bookings are up as well.”

Last year, “the sky was falling, and people were terrified,” said Elizabeth Blau, a restaurant consultant. “Now things have stabilized.”

But for many Las Vegas restaurateurs, flat is still the new up, and for some, “being down 10 percent, that’s the new flat,” said Joseph Bastianich, Mario Batali’s partner in three restaurants at the Venetian Resort Hotel and Casino.

The CityCenter casino, hotel, convention center, mall, residential and entertainment metropolis is scheduled to open in December. Some 30 restaurants, from chefs like Pierre Gagnaire, Masayoshi Takayama, Wolfgang Puck and Jean-Georges Vongerichten, are to inhabit the complex, adding 4,000 food and restaurant jobs to the local economy. But it may further cannibalize business at existing restaurants.

Mr. Bastianich said his Carnevino Italian Steakhouse in the Palazzo at the Venetian was projecting $18 million in revenues this year but now “we expect to do $13 million to $14 million.”

Sirio Maccioni, a Las Vegas fine-dining pioneer with his restaurants Le Cirque and Osteria del Circo at the Bellagio, cautioned that “it will take a very long time for it to come back to the way it was.” He noted that recently revenues from his restaurants have been down 5 to 10 percent, and last year were off 25 percent.

Waiters at high-end properties have suffered a reduction in tips from 20 to 50 percent. “Our membership has declined 10 or 11 percent since last year,” said D. Taylor, the secretary treasurer of the Culinary Workers Union Local 226, which represents 50,000 food and beverage workers and other employees in hotels and casinos.

A dizzying profusion of bargain-eats signs are turning up everywhere, including this one advertising the Siegel Suites.

Mr. Martinez of Rao’s said the staff had agreed to a reduction in the workweek from 5 days to 4, and in the workday from 8 hours to 6, just to save all their jobs. He estimated the average check cost for his tables was down $30, to $50.

And a grim recession game of musical-chair seniority has commenced. Francisco Rufino, a 33-year-old fry cook at the Paris Las Vegas casino hotel for the last nine years, was bumped down to a cafe there because of cutbacks at a higher-end casino restaurant. “In turn, I displaced another cook — who was laid off,” he said.

Nevertheless, many still have hopes. Mr. Bastianich is planning a restaurant at the Venetian, tentatively titled Nancy’s Luncheonette, offering the food of Nancy Silverton, his Los Angeles partner in Osteria Mozza with Mr. Batali.

And high-end restaurants are responding, too. Though the 66-seat Joël Robuchon still offers a 16-course $385 menu dégustation, it now serves two courses for $89.

Mr. Maccioni, who said he is 75, has not been deterred from opening a Tuscan-themed restaurant in CityCenter — “with 175 seats and a beautiful bar,” he said — to be called Sirio.

The city’s restaurateurs have hardly stopped rising to astounding levels in offering luxury to refined palates. The 300-seat Carnevino offers source-verified grass-fed beef, dry-aged for seven weeks in its own Las Vegas aging facility where computer chips control air flow and humidity.

And the 230-seat Bartolotta Ristorante di Mare in the Wynn flies in a ton of seafood every week from the Mediterranean, including soft-shell crabs from Venice and imperial red shrimp from Morocco. Some of the fish is delivered live, and all of it is transported “on passenger airliners that would be flying whether my fish is on them or not,” said Paul Bartolotta, 48, who once trained at Taillevent in Paris and cooked at Spiaggia in Chicago.

The chef Rick Moonen's RM Seafood in the Mandalay Bay offers three kinds of East Coast oysters, as well as live Dungeness crabs and Maine lobsters. But luxury only goes so far these days. Volume is up, he said, but the check average, which used to be $65 to $70, is now "in the 40s."

Rick Moonen at RM Seafood in the Mandalay Bay offers three kinds of East Coast oysters, as well as live Dungeness crabs and Maine lobsters. “You have to be crazy to want to offer sustainable seafood in the middle of the desert,” said Mr. Moonen, who was awarded three stars from The New York Times in 2002 for his work at RM Seafood in Manhattan, and now, like Mr. Bartolotta, lives out here.

But Mr. Moonen and others are finding that luxury can only take them so far these days. At his sleek $6 million nautically themed restaurant, volume is up, he said, but the check average, which used to be $65 to $70, is now “in the 40s.” Three months ago, Mr. Moonen had to close his 80-seat fine-dining restaurant, RM Seafood Upstairs, where the average check was $120. “It was a terrible day,” he said, “but we’ll reopen in the fall.”

Alessandro Stratta said his casual restaurant at Wynn Las Vegas, Stratta, with its average check cost of $60, “is 30 percent busier this year than it was last year.” But his high-end restaurant, Alex, with an average $320 check per person, is down 15 percent in revenues, and is now open four days instead of five.

Three months ago, Mr. Moonen, left, had to close his 80-seat fine-dining restaurant, RM Seafood Upstairs, where the average check was $120. "It was a terrible day," he said, "but we'll reopen in the fall."

In this economy, said David McIntyre, vice president for food and beverage at the MGM Grand, “it’s not enough to just come out with a prix fixe menu, you have to redefine your product.”

So the casino’s Nobhill Tavern reconceived its menu boards and now “there is a 40 percent decline per check,” Mr. McIntyre said. “But now we’re up 60 percent in total volume.”

And though the 66-seat Joël Robuchon still offers a 16-course $385 menu dégustation, it now serves two courses for $89.

Therefore, the arrival of competing restaurants at CityCenter is not universally awaited.

“I don’t wish ill to anyone,” Mr. Bartolotta said, “but do we need 20 more restaurants? No. Now, everyone is vying for a part of a shrinking pie.”

But Bart Mahoney, vice president for food and beverage of the CityCenter partner MGM Mirage, said that “We hope to grow the market.”

Robert Goldstein, the 54-year-old president of a competitor, the Venetian, sounded sanguine about CityCenter as he sat in his second-floor office overlooking the casino’s signature 90-percent-scale replicas of the Campanile and the Bridge of Sighs. “It’s not going to be the end of the world, and it’s not going to restart tourism in Las Vegas,” he said. “It’s just another project opening in a tough time.”

He referred to a Life magazine cover article of June 20, 1955, that he had framed, depicting casino cancan dancers and proclaiming: “Las Vegas — Is Boom Overextended?”

He added: “Las Vegas is down a bit now, and right now the town is overbuilt. But do you really think all of this is going to fade away and go to black?”

 

[asiaprop]

maybe the true high rollers who are left have all migrated to Macao, ever thought about that? Most of them who frequented Vegas before, at least in recent times, were Asians.

I had to poke you with that, was too tempting ;-)

Back to reality: Are you again talking your book? Yes we are in a recession, welcome and I am happy you have also finally arrived in reality. You seemed to have concluded this about China in an earlier thread and now about Vegas. Funny, but could you not have seen this at least 12 months ago?

And the most important question to you: Why would this be the PERFECT indicator about the future? What facts can you bring forward that support your claim of cointegration? Dont get me wrong, I am not bullish about the general direction of global economics either but the way you argue AGAIN does not make sense.

Who goes to Vegas? Everyone from coast to coast. I've been there for the ICSC Convention the last 6 years. I've never seen things so slow. This year, there were 25% of the attendees of three years ago. No one was spending money.

This is a perfect indicator of the where things are headed in the future, as things deteriorate and get far worse.

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[maxitronixy]

it's pretty obvious that once a lot of high fliers, mid class jobs gone + fear of spending +credit bubble , business travelling and entertainment gone, las vegas would suffer.

Airlines here are suffering too, with higher oil prices and a huge drop in business travel.Not to mention h1n1 holiday spending is severly decreasing.

 

[makloda]

In 2005/2006 I noticed how many friends and acquaintances suddenly were running their own restaurant or became partners/investors in one. I always asked "What do you know about restaurants that makes you think you can compete in this business?" "Man it's such a growing market you don't have to know anything, it's a gold mine!"

It seemed like everyone was involved in restaurants and printing money. It was hip and cool to say "Yea dude and I run this cool new Thai restaurant downtown, it's amazing". Who needs to study medicine, law or economics when you can simply run a restaurant to get the same social approval factor?

Business wise, it sounded a little too good to be true. In fact I later learned that 65% of all restaurant and bar startups (in Europe) fail after 24 months (as most are started by complete amateurs) -- I doubt the numbers in the US are much better. Most of the ones surviving are not printing money either. A solid, established middle-class steak house maybe nets anywhere between 100-200k a year with ~60 seats, before taxes and interest. That's a whole lot of risk and 100 hour work weeks to net 75-100k. To make serious coin one probably needs to run a couple of these, four or five, with 100s of employees total, maybe across different cities and that probably brings a whole new slew of headaches.

Money making is hard, in any business. And if it's not, then things usually change quickly and competition emerges to take a piece of the pie.

Is Gordon Ramsay known in the US? I think he also has a TV show there. Came across this article the other day. This guy runs ~15 restaurants worldwide, has something like 18 Michelin stars and look at how his business is doing pre (!) Lehman: http://www.bloomberg.com/apps/news?pid=20601088&sid=aRyTe8Z__7qs

 

[NetTecture]

This is like anything. Seriously. Business fail, like tradesrs do. When Jon Doe gets into a business because it is good to make money there - it is time to get out. Point.

Restaurants are particularly tricky. Like trading. One needs to LOVE it.

 

[sellindexvol66]

without getting too detailed; through experience i see this recession as classically similar to the S& L crisis in every way despite your rants and pastes. as a trader and business owner i now see the pent up demand from the consumer starting to emerge. that savings rate is going to lead to a spending rate that will shock all the chicken littles.

as someone who is truly fascinated by buylo's fear and paranoia i am curious to know how you plan on coping through the coming depression? additionally can you briefly tell us how you will deal with the economy if we do emerge from recession and have a flat to positive cylce thereafter?

 

[Ticketwatcher]

Quote from sellindexvol66:


as someone who is truly fascinated by buylo's fear and paranoia i am curious to know how you plan on coping through the coming depression?

There is NO DEPRESSION if you are able to hold on to your capital and have sources of income.


Much of my childhood was spent in historical research on the effects of the Great Depression. Not that as kid I was doing research, but I heard the stories time and time again and everyone had a story. Some were devastated. Some were affected little. And some even prospered.

I will not try to characterize what the economic state of the nation is, or will be, by using Depression.

I do know unemployment is high and it is rising but I do not know where it turns and goes in the other direction.

I appreciate the BuyLloSellHi posts. Anecedotal information with REAL REPORTING is always of interest to me as opposed to stupid ass MSM talking heads with a political agenda and endless opinions based on their lack of education and low IQ's which have taken over the public discussion.

The anecedotal information that I collect in my daily routine, indicates to me that no one is speaking of JOB CREATION, when they speak of jobs it is out of hope that they can keep theirs.

As far as how to weather this economic state of affairs, that it is easy because I learned it from my "childhood research", the people who prospered from the last Great Depression were able to preserve capital and trusted NO ONE, they put all their trust in their own ability to apply their own Common Sense which was either inherent or learned from experience.

 

[ralph00]

Vegas was a bubble town and its imploded. This stuff is old news and has been factored into the markets months ago. Nothing to see here, move along.

Speaking of another destination ... we rented a house at the Jersey shore for the summer. On an anecdotal basis, after a bad June (rained nearly every day for about 3 weeks), business looks to be hopping. Restaurants are as jammed as usual. There doesn't seem to be a ton of inventory for rent either.

There are way fewer 'for sale" signs as compared to last summer.

The economy is no longer deteriorating. At worst, it has stabilized at a lower level. Where it goes from here, I don't know. However, this article about Vegas goes into the "descriptive, not predictive" bin.

 

[PragmaticIdeals]

Quote from Ticketwatcher:

Some were devastated. Some were affected little. And some even prospered.

Devastated: Home owners, small businesses, blue collar workers, baby boomer retirement funds, Madoff investors, discretionary spending business

Affected little: Very rich people (in terms of utility at least), hedge funds that made the right gambles, financial sector firms that received Fed support, China, Walmart

Prospered: Goldman Sachs, JP Morgan, McDonalds