Miami – the next Las Vegas?

Artist's rendering
Courtesy of The Miami Herald

Finally a bit of good news, there is a new billion-dollar resort on the horizon.  Since the Great Recession started news of new major developments has been scarce,  particularly for casino industry.  The only projects that have been built were ones begun before the recession began. Revel in Atlantic City caught a break with a new governor; Governor Christie in his first year wanted some good news to match his grand plans for reinventing Atlantic City.  The Gov. went to Wall Street and found the financing necessary to restart the stalled project.  CityCenter in Las Vegas,  the most expensive casino project ever – it cost nearly $10 billion dollars – opened in December 2009.  But CityCenter was nearly completed when the disaster hit.  The Cosmopolitan was also completed, it opened in December 2010 – that nearly $4 billion project was begun in 2005.  The Cosmopolitan had the the help of Deutsche Bank or rather its money.  The bank had financed part of the project originally and bought it outright for a mere billion dollars when the developer ran out of money; the only way to protect its investment was to complete the project.  All of the other major projects just stopped dead.  Some new smaller project are now underway, primarily in Ohio, Pennsylvania, Mississippi and Louisiana.

In an interesting sidestep, there have been five major remodels in Downtown Las Vegas, four have been completed and the filth, the Golden Gate, has proposed a $12 million dollar expansion of its hotel.  Now $12 million is not a lot of money by Las Vegas standards.  In the days of the boom, 12 million would get you some paint and a bit of carpet or maybe a parking lot, but not much more.  In fact the number is so small it would not have even been reported in in the Vegas press in 2005 or 2006 or 2007.  But today news of a project is hard to come by for Vegas reporters and any project is likely to get some ink.  Another way to frame that amount, $12 million is a third of the purchase price of the two last casinos sold in Atlantic City.  In those terms, 12 million is not so small after all.   But the Golden Gate may be more significant than just the amount of money; since the recession began the Golden Nugget, El Cortez, Gold Spike and Plaza have also made big upgrades.  Things down downtown may not be all that bad, year-to-date, gaming revenue in Downtown Las Vegas is up.  Possibly this is what recovery for gaming in Las Vegas will look like – small increases in revenue and small improvements in the properties.

And now, back to the big news; a new mega project was proposed today in Florida.   Genting Group has proposed a $3 billion mega-resort in Miami.  The project has many components, one of which is a casino.  Given the timing of today’s announcement one would suspect the project is intended to stimulate the state legislature to take action and authorize a casino in Miami.  The company did not say it would not do the project without the casino – but by featuring a casino there is that implication. The company is not new to the resort or casino industry; it is not a little company or an unknown company in the world of resorts and casino gambling; its combined market capitalization is $46 billion.  It originated in Malaysia with one resort, but has spread and expanded to Singapore, Australia, the Philippines, the Americas, the United Kingdom and next month New York City – it is also the third largest cruise ship operator in the world.   Its New York property is Aqueduct Racetrack, which opened in Queens in 1894, but has struggled of late, Aqueduct is getting a new lease on life.  It will open with a couple of thousand slot machines, but Genting is expect to expand that number to four thousand; and add table games as soon as it can convince the New York legislature to authorize the games.  Miami would make a nice addition to the company’s portfolio.  It would also give the industry some much needed good economic news – a very rare commodity in the last four years.


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