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~ 1946 The Las Vegas Strip Begins
Humble Beginnings
• Strip only 3.8 miles long
• Consisted of only 2 resorts– El Rancho Hotel
– Flamingo Hotel
• Now consists of 20 plus
~ 1960’s The Rat Pack Era
Unforgettable Times
• Las Vegas picks up momentum and growth• Individual private owners
– Fueled by a cast of characters like:• Benny Binion• Howard Hughes• Meyer Lansky
• Entertainment started to Grow– Rat Pack– Elvis
~ Late 80’s Early 90’s ~ Evolution of the Strip
Evolution of The Strip
• Beginning of the Mega Resort– Steve Wynn Era
• Financed by Wall Street– Through junk bonds and Michael Milken
– At a cost of $630 million in 1989
– Had to generate $1 million daily to cover expenses
~ Consolidation~ 1995-2005
Consolidation• MGM purchases Mirage Resorts for $6.4b
– At the time, largest merger in gaming history
– Included Mirage, Bellagio, Treasure Island, and Golden Nugget
– After acquisition, MGM controls 26% of Strip’s hotel rooms and 50% of Las Vegas High Roller market
• Throughout the past 15 years Harrah’s has aquired multiple properties including Caesars Entertainment for $9.4b in 2005.– After acquisitions Harrah’s became the worlds largest
casino operator. Controlling 31% of strips hotel rooms
~ City Center~ 2006-2010
City Center
• Largest private construction project ever undertaken
• Original budget $4.5b
• Final price tag $8.5b
• Added an additional 5,895 rooms to the local market
~ 2010 - ?
Current
• MGM Mirage sells assets while building City Center• TI Purchased for $775M by Ruffin Acquisitions
– $500M paid in cash which helped MGMM’s cash flow• Icahn purchased Fountainebleau for $156M in cash
– $1- $1.5b to finish project. This adds 4,000 rooms to the Las Vegas Strip
• Echlon Place construction on hold until 2012• Rate war for Occupancy (Industry)• Visitors paying 50% less in rate than last year and
spending less money
Las Vegas Gaming and Resort Industry
•Industry Overview
•Evolution and Reinvention
•Revenue Streams
•Q&A
Industry Overview• Gaming Control Board (GCB) Regulation
– Collects Gaming taxes – which funds 33% of state’s budget
– Gaming tax rate 6.75%
– Compliance
• All Nevada Casinos must comply with the “Minimum Internal Control Standards” (MICS) enforced by the GCB
• 2 years audits conducted by the GCB
– Enforcement
• Resolves customer disputes
• Allows customers to disputes either W/L of $500 or more with a GCB agent
Industry Overview• Uniqueness to Industry• Complimentary Income (Phantom Revenue)
– Revenue/Expense– % of cash to comps
Comp 10%
Cash 90%
Industry Overview
• Promotions and Special Events– Designed to drive Business in casino and hotel
• Players Club (Loyalty Program)– Earn Freeplay
• Table Games Tournaments– Win Promotional Chips
• Slot Tournaments and Giveaways
• Major Sporting and Holiday Event Parties
– Customer incentives to high end players• As high as 20% discount
• Gifts
Evolution and Reinvention• Capital Investment
– Consistently putting cash flow back into property• Evolution creates synergies and competition• Competition drives properties to continually evolve
– Nightclubs– Tattoo shops– High end dinning– Retail– Entertainment attractions
• Competition in this industry is good for guests– Keeps Vegas fresh and unique– Constantly on the cutting edge
Evolution and Reinvention
Revenue Streams
• Gaming generates 44% of total revenue
• Non Gaming generates 56% of total revenue
Revenue Streams
Tables 28%Slots 69%Other 3%
• Casino Revenue– Table Games– Slots – Other (Race & Sports, Poker, and Keno)
Revenue Streams
Hotel 41%F&B 29%Retail 6%Entertainment 20%Other 4%
• Non Gaming Revenue– Hotel– Food and Beverage– Retail– Other (Spa & Salon, Wedding Chapel, Etc.)– Entertainment
Q & A