As I write this, I’m sitting on a plane heading back from a much needed respite in Las Vegas. For the first time since starting Blue Frog Gaming I took a little time to totally unplug from the startup. The closest I came previously was my honeymoon, though even then I would sneak down to the main concourse daily, laptop in hand, to answer emails at the cruise ship internet access rate of $73 per minute.
But this time I ignored the inbox and, except for a brief conversation with a good friend who is also one of our investors, forcefully vanquished every thought about how to improve virality with better mini-feed messaging or increase conversions by delaying install buttons. I can’t say the thoughts didn’t keep popping up like plastic moles at an arcade, but I kept hammering them back down with my mental rubber mallet.
I had lots to keep me occupied out there anyway. From the moment we got to town we were assaulted by the city’s overwhelming despair in light of the new economy. Gambling is said to be recession-proof, but the casinos have spent the last 10 years moving away from their proverbial bread and butter and toward other sources of revenue like restaurants (literal bread and butter), real estate, and shopping. The combination of spring break and March Madness had occupancy rates at 2007 levels, but everybody knew it was temporary. You could see in their eyes that next week they’d be back on their couch watching daytime talk shows instead of collecting tips.
We rented a condo at The Signature, three new Turnberry-managed towers attached to the MGM, where I had once seriously considered purchasing a suite. When the owner let us into the room, I asked her all about the market and she told me the story with what I could only describe as quiet resignation. It truly made me sad to see it. This wasn’t a parasitic AIG executive sucking at the teat of society. She wasn’t a subprime borrower wanting to live in a much nicer place than her income afforded her. She was a real person who made an investment that, by many, would have been considered a good bet.
She’d bought a condo in the hottest real estate market in the US as an investment, hoping that occupancy rates would remain at least reasonable. Common wisdom at the time (which had been true since long before most of the town’s residents had left their snowy climates to deal blackjack at the Bellagio) was that no matter how many rooms the city built, tourists would fill them. She’d hoped that over the long term a combination of appreciation and rental revenues would provide her with a little something to help retire on. Now she’s frantically listing the place on sites like Craigslist, trying to recoup the mortgage (which from my estimates wouldn’t happen even with a 100% occupancy rate) or at least some portion thereof.
She’d taken the same sort of gamble “experts” have been saying was the best way to build wealth for decades, and now she’s in serious trouble because of it. Units that sold originally in the $600k-$750k range are now listed online at $175k, and I hear have been purchased for even less. These people are being crushed, having lost hundreds of thousands, and unsurprisingly many of them are filing bankruptcy, pushing the losses off to the banking system, whose lack of due diligence makes it hard to feel sorry for them. But as an entrepreneur, it really saddens me to see anyone who isn’t a competitor getting smacked upside the head for trying, so I felt bad enough for the owner that I tried to do a little extra room-cleaning before we left.
Meanwhile across the street at City Center, which is the most expensive non-governmentally financed construction project in history by a factor of three, there isn’t a worker to be seen. The lawsuits and other acts of general desperation have already begun to flow over that one, with pretty much everyone involved either scraping for the cash and/or credit needed to complete it or trying to back out entirely. MGM has begun selling off casinos just to keep construction moving, and nobody knows how far they’ll have to go to stay afloat. It’s a bet-the-farm project for a company who, like every gaming conglomerate, has a share price graph that looks like an inverted “V”, and the people with the chips are asking the dealer if surrenders are allowed.
The first condo-hotel opening there will be the ridiculously-named Vdara. My wife says they purposely made the title as close to that of female genitalia as they could get away with. If so, it’s ironic that they chose the body part they did since the whole project is a giant hole that’s threatening to sink their company faster than its namesake did Alex Rodriguez‘s reputation.
The guy at the sales center in MGM said its only 60% sold just a few months shy of opening. If memory serves me (and I’ll check my email records to confirm) The Signature was well over 90% this close to game time. They’re still asking half a million or more for units, which the sales rep admirably managed to tell me without laughing. Good luck with that one guys. I wouldn’t be surprised if some of the units sold are already in foreclosure. If the complex ever does get finished, which is not a foregone conclusion, unless something in the sales contract forbids it there will probably be units on the resale market competing against direct sale units three times as expensive.
In many ways, seeing what’s happening to the town brings me great sadness. It’s hard for a human to feel more kinship for a city than I do with Las Vegas. In a lot of ways, she and I grew up together. While I don’t expect it to be the defining period of my life, my time as a professional poker player will probably go down in my memoirs as my formative years, and a big chunk of it was spent on The Strip.
It’s looking like it will be recalled as her golden years as well. Residents a decade from now will talk about the days when easy credit and irrational exuberance brought tourists in faster than all the money in the world could be used to accommodate them. Buildings costing in the 9 figures (or more) sprung up faster than cacti after one of the two annual rainy days. There was an influx of job-seekers from the all around our country and the world probably unlike anything seen since the golden era of Detroit. Anyone with the manual dexterity needed to shuffle a deck was guaranteed a healthy middle class salary, executives were minted faster than poker chips, and the housing market exploded along with both. Even now, it’s hard to find anyone in Las Vegas who actually grew up there.
Watching the casinos cut staff, restaurants and clubs shutter, and buildings languish half-finished is sort of like seeing your college buddy get laid off, except at least you know your buddy will rebound eventually. Las Vegas probably won’t sink as far as Detroit, but it also probably won’t ever be what it was back when I was spending one week a month living out of the Bellagio. They can finish all of the condos named after reproductive organs, maybe even build the whole City Center project and a few more unnecessary casinos to boot, but they’ll never get back the optimism that was Las Vegas’s greatest natural resource for the last 50 years.
Nonetheless, much like the rest of the nation these days, though things seem to suck for everyone else they’re pretty damn good for those of us whose lives continue on unabated. I often feel guilty about just how much further my money goes now, or at least about enjoying it so much.
For less than half of what I used to pay at Bellagio, you can now rent a brand new suite, located just far enough from The Strip to avoid the annoyance of dopey tourists bouncing around aimlessly and stopping to look at every shiny object in a store window that they will never in their lives be able to afford, but still close enough to get there with a brief people mover-assisted walk. The cost of a rental car is more than recouped by the ability to buy food for breakfast and lunch at Whole Foods and bring it back to the kitchenette.
I was also able to get third-row tickets to “O”, a show I’ve wanted to see for over five years now but have previously never been able to due to my inability to plan anything more than three days in advance. This time three days was more than enough. The only other people in town were spring breakers, who couldn’t afford the ridiculous ticket prices (which would be unjustifiable for any show in the entire history of humanity but that one) and March Madness fans, who are too busy getting drunk on $2 Bud Lights at a sports book and rooting for their parlays.
“O” was, perhaps, the most fascinating thing I’ve ever seen, in fact, I’m still not sure it actually happened, let alone occurs twice nightly as billed. I think there’s just some hallucinogenic gas pumped into the theater, and then a guy with those swirly mesmerizing glasses comes on stage and tells you the story, because what I saw was simply an impossible sum of many only marginally-possible parts. It wasn’t even so much the acrobatics, which were impressive, but the logistics.
There’s a theater with a 25 foot deep pool holding 1.5 million gallons of water in the middle of the desert, the floor of which can be raised and lowered quickly, in sections, without causing a wake. There’s a wall of air separating it climatically from the audience. There are various contraptions in the ceiling that people swing from, all of which can be moved in multiple dimensions, a cast of 85 world-class athletes (many of whom are Olympians) wearing costumes that cost as much as $10,000 and have to be replaced every two weeks. The show, if it really exists, and I’m skeptical (note the lack of videographic evidence) cost $100 million to get running, which is about the same as Terminator 2 but without any hope of selling DVDs.
When you think about it all rationally, it just doesn’t add up. It’s not possible. But if it were possible, it would only be so in Las Vegas. Nowhere else could someone spend that kind of money on a theater with only 1,800 seats and one show, and have it end up one of the best gambles ever made. Walter Mathau once said about poker that it “exemplifies the worst aspects of capitalism that have made our country so great”. He was close, but Vegas, with its $11 billion casinos and shows that cost more than a skyscraper in most cities, beats it hands down.
