The return of the Strip; Panic over Macao

Las Vegas‘ recovery from the Great Recession is all but official. To be truthful, a number of us — myself in particular — thought we were being played for suckers when Sam Nazarian closed the Sahara and promised to be back with something better. Now he’s just days from opening a new, $415 million casino and green shoots are sprouting up around that. No, I don’t count that buffoonish, debt-financed All-Net Resort that’s mooted for the old Wet ‘n Wild site. However, Nazarian’s site will be flanked by a new Walgreen‘s superstore (the third such on the Strip, all of recent vintage) and MGM Resorts International‘s music-festival plaza across the Strip.

True, Fontainebleau is still a hideous, rotting hulk and Genting Group hasn’t gotten going on Resorts World Las Vegas, but there’s some critical mass developing around SLS Las Vegas … if Nazarian can get the customers up there. It’s still a very isolated site. But, as Howard Stutz points out, it could even pick up traffic from Westgate Las Vegas, currently undergoing rejuvenation itself and closer than most other Strip properties.

* What does Union Gaming Group know that we don’t? The other big mover and shaker threatening to shake things up on the North Strip, James Packer, may have paid more for the New Frontier site than he’s letting on. Union thinks Crown Resorts put down a cool $15 million for the land. Considering that Genting got the Echelon site for $4 million, this mooted price tag suggests Packer may have been taken to the cleaners. (It wouldn’t be the first time.) But if land values are back to pre-fever levels of, say, 2005 maybe Carl Icahn can find someone who will pay him what he wants for F-blew … a sum known only to Icahn and God.

* “Let’s be clear the Macao business and gambling sector is not going away, the Chinese have been gambling for thousands of years,” said CLSA research analyst John Oh, reacting to a panic among stock-pickers about the situation in Macao. “If you look at mass market year to date, we’re talking about a sector that’s growing north of 32 percent. That’s a healthy number. Casino operators are going to have to think about how to shift resources from VIP into mass market because mass market is simply four times as profitable as VIP.”

Oh’s sanguine tone stood in stark contrast to the skittishness of other investment houses. “We’re recommending investors stay on the sidelines. There could be more downside,” said Union Gaming Group’s Grant Govertsen. “There is also a feeling that saturation may have been reached … Macao’s glitzy charms are being duplicated in casinos in Malaysia, the Philippines and Singapore in particular,” added Reorient Group chief strategist Uwe Parpart.

Mind you, mass-market play grew “only” 16% last month and a mere 24% in June. Even the under-pressure VIP market grew 13% from June to July. (Year-over-year comparisons are less robust but the Macanese market had been on an overheated pace that was due to cool sooner rather than later.) I don’t have any MBA and don’t pick stocks for a living, but if I held stock in Wynn Macau, MGM China, Sands China or Melco Crown Entertainment, I’d sleep easily at night.