Hard Times in the City of Sin

Germany's largest bank is seen as one of the three major players in the local construction industry and in the financing of casinos and hotel complexes worth billions. Indeed, the Frankfurt-based banking giant is mentioned as an investor in connection with many major projects in the city.

To almost everyone -- and especially the Germans -- Las Vegas seemed recession-proof. But now, since the summer of 2008, gambling revenues have dropped by more than 10 percent (see graphic) after having plunged to as much as 25 percent in the months immediately following the bankruptcy of Lehman Brothers.

The city's future is now uncertain. There are still plans on the table to add 40,000 new hotel rooms to the 140,000 ones that already exist by 2012. The pending development projects are valued at $20 billion (€13.6 billion). But now people are wondering who needs all the additional rooms anymore and who will provide the financing for them. Even the city's wealthiest residents, who have consistently topped the lists of America's richest people, must now keep a close eye on the assets they have left.

For example, Sheldon Adelson, the owner of the Las Vegas Sands Corporation, whose assets include the luxury Venetian Resort, has seen his company's stock value plummet from $149 to $1.38 a share. Kirk Kerkorian, who has been one of the most important investors in Las Vegas since 1955, has been forced to sell many of his holdings in industrial companies, such as the automaker Ford. MGM Mirage, the city's largest casino operator, is almost $14 billion in debt and has only staved off bankruptcy with difficulty.

The banks, which once fueled the city's growth with attractive loans, are now much less willing to part with their money. "Ownership structure on the Strip five years from now is going to look different from now," says Rich Moriarty, director of the Union Gaming Group, which advises financial investors, hedge funds and banks on investing in Las Vegas.

Re-Branding a City

At first glance, Vegas doesn't seem to be particularly hard-hit by the crisis. The casinos resonate with the incessant "ding-ding-ding" of thousands of betting machines. Gambling and alcohol go hand-in-hand, and some gamblers are already drinking at 11 a.m. The casinos are windowless in order to deliberately keep out daylight and, consequently, a sense of time.

Lured by drastically reduced hotel rates, the curious are returning to Vegas; but they are spending less. Double rooms in famous luxury hotels -- such as the Mirage, which was home to the entertainment duo Siegfried and Roy for many years -- can now be had for less than $100 a night. Many hotels are renting their rooms at prices below cost -- which is better than not renting them at all. The visitors who are coming to Las Vegas now don't go out to dinner in the casino, Moriarty says. "It is a lower quality customer. They go across the street to the mall to have dinner rather than stay on the property."

Ironically, over the last decade, the trend in Las Vegas has put an increased focus on luxury. In some restaurants, appetizers go for $30, while the hottest nightclubs regularly won't let people in who aren't willing to fork over $400 for a bottle of liquor.

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