Slot machines await gamblers at Harrah's on Dec. 19. Texas Pacific Group and Apollo Management will acquire Harrah's Entertainment, the hotel's parent, in a $27.8 billion deal. Photo by Isaac Brekken. The Stardust, a hotel-casino with nearly 50 years of history on the Strip, was one of several properties demolished in '06. Photo by Craig L. Moran.

Private equity companies showed great confidence in Las Vegas' economy as the year wound down, even as much of the rest of the economy took a breather in 2006.

Private capital's interest in Las Vegas was demonstrated this month when Harrah's Entertainment accepted a $27.8 billion buyout offer from two out-of-state management firms. The deal will be the third-largest private-equity buyout in American history.

Meanwhile, many of the city's key economic indicators softened slightly in the past 12 months, following several years of breakneck expansion.

The double-digit appreciation rates that characterized Southern Nevada's residential real-estate market in 2004 and 2005 were out in 2006, as record housing inventories kept a lid on prices. Prices of existing homes were up just 3.5 percent. New homes fared better, with an overall appreciation rate of 10.6 percent, but that number doesn't reflect the massive concessions that builders were making on standing inventory.

Even gaming win faltered briefly in 2006. In June, casinos' statewide take fell for the first time in two years, dropping about 3.5 percent when compared with June 2005. The decline was more dramatic in Clark County, where gaming win was off almost 5 percent in June. By October, though, overall win had recovered, and was up 3.29 percent statewide and 4.29 percent in Clark County.

Las Vegas also had plenty of successes in 2006.

Passenger counts at McCarran International Airport and visitor volume citywide were both up. And though the Strip didn't welcome any new projects, the city's locals market received a boost in April, when Station Casinos opened its $925 million Red Rock Resort in Summerlin.

Private-capital firms weren't the only entities registering their confidence in the future of Las Vegas.

Gaming operators launched or continued construction on several billion dollars' worth of projects on and around the resort corridor. King of those developments is MGM Mirage's Project CityCenter, a $7 billion, mixed-use resort under construction on the Strip at Harmon Avenue. Project CityCenter will soon be joined by Boyd Gaming Corp.'s $4 billion Echelon Place.

But several pieces of Las Vegas history had to perish to make way for the new developments. The 48-year-old Stardust closed in preparation for Echelon Place. The Boardwalk was demolished to make way for Project CityCenter. The projects' fates renewed concerns about whether Las Vegas could continue to attract the budget-sensitive tourists who helped build the city in its early years.

Las Vegas gambling companies also invested heavily in international markets in 2006. Macau in particular surged, as Wynn Resorts Ltd. opened its $1.2 billion outpost there in September, and Las Vegas Sands Corp. continued construction of its $3 billion Venetian Macau. The property will join corporate sister Sands Macau, which opened in 2004.

Here is a closer look at the top 10 local business stories of 2006:

1. GOING PRIVATE

Over the past few decades, the gaming industry's largest casino operators and equipment manufacturers became partners with the public markets on Wall Street to raise the capital necessary for its nationwide expansion and financing for its general growth opportunities.

By late 2006, the trend was reversing.

On Dec. 19, two private equity groups struck a deal to buy casino giant Harrah's Entertainment for $27.8 billion. When the groups' initial bid for the Las Vegas-based company was announced in October, speculation began that other publicly traded casino operators would become privately held once again.

The move toward private equity financing began in 2004 when Colony Capital, a private equity fund controlled by Los Angeles real estate investor Tom Barrick, bought the Las Vegas Hilton for $280 million. Colony initially entered the gaming fray with its purchase of Resorts in Atlantic City for $140 million in 2003.

In 2005, as Harrah's was buying out Caesars Entertainment for $9 billion, Colony entered the picture and spent $1.2 billion to buy four casinos that had federal antitrust implications in the merger and needed to be sold by the companies.

Earlier this year, Nevada gaming regulators approved a 33 percent ownership purchase of Cannery Casino Resorts by Oaktree Capital Management, a Los Angeles-based private investment firm that oversees $31 billion.

Gaming analysts speculated that other casino companies would catch the private equity bug.

"All casino operators remain in play," CIBC World Markets gaming analyst David Katz said in a note to investors this month. "With shares continuing to trade on private market speculation, we recommend to investors (to) continue to own the (gaming sector) group."

The Harrah's deal, in which New York-base Apollo Management and Texas Pacific Group of Fort Worth, Texas, initially bid $81 a share for the company, reverberated throughout the industry. About 10 days after the initial offer, the two groups kicked up the bid to $83.50 a share.

After nearly 10 weeks of deliberating by the nonmanagement members of Harrah's board of directors, a $90 a share deal was struck, along with the assumption of $10.7 billion in Harrah's debt.

Another sign of the future for the industry might have surfaced in early December. A management-led buyout of Station Casinos, valued at $4.7 billion, had stock speculators humming.

The Fertitta family, founders of Station Casinos who took the company public in 1993, said they were willing to pay $82 a share for the 16-casino company to take it private again. Colony Capital is a partner in the transaction.

Station Casinos' nonmanagement board members are evaluating the offer.

2. BUBBLE TROUBLE?

Las Vegas' housing market defied the economic fundamentals of supply and demand in 2006, again avoiding a bursting of the much-ballyhooed housing "bubble."

Wall Street analysts and think-tank experts have been predicting a 30 percent to 40 percent drop in home prices for years. The National Association of Realtors reported that the median price of an existing home fell 3.5 percent in October from a year earlier, but the opposite happened in Las Vegas.

Even as inventory of homes for sale climbed above 20,000 and year-over-year sales declined, median prices in Las Vegas inched upward throughout most of the year.

The median price of a new home in Las Vegas was $326,502 in October, the latest data available from Home Builders Research show. That's up 10.6 percent from the same month a year ago.

Price appreciation for existing homes was a scant 3.5 percent, up $10,000 to $290,000, following a couple years of 40 percent to 50 percent appreciation.

New-home sales dropped 3.7 percent through October to 25,053, while resales slid 27 percent to 36,461.

"Resale real estate started the year slow and stayed slow until the bottom dropped out in July," real estate analyst Jim Donohue said. "It's been a dismal fall and winter. The good news was stable prices for sellers and rapidly dropping inventory in the fourth quarter. There is some hope for spring."

The new year should bring an uptick in sales, Home Builders Research President Dennis Smith said. "Not a boom like some have suggested, but a slight rise," he said.

Average weekly sales at new subdivisions should get back to one or two a week, he said. Prices will be buoyed by the increasing number of mid-rise and high-rise luxury condos closing escrow.

3. ASIAN GAMBLE

Macau is starting to resemble Las Vegas.

Wynn Resorts Ltd. joined rival casino operator Las Vegas Sands Corp. in September with the opening of the $1.2 billion Wynn Macau in the Chinese enclave and one-time Portuguese colony. The 600-room hotel-casino looks like a miniature version of Wynn Las Vegas.

But the results haven't been minuscule. With a 100,000-square-foot casino with 212 gaming tables, primarily baccarat, and 375 slot machines, Wynn Macau churned out gaming revenues of $45 million in its first 25 days of operation.

The casino's opening had all the mixture of a Las Vegas-style extravaganza, with an elaborate VIP party and fireworks display. Visitors waiting to enter the large casino watched the water show at the Wynn Macau's dancing fountains.

Meanwhile, Las Vegas Sands, which opened its Sands Macau in 2004, expanded the casino, but the company has its eyes on 2007 with the planned opening of the $3 billion Venetian Macau on the Cotai Strip. Las Vegas Sands is developing 147 acres on Cotai, which covers seven hotel-casino sites.

By the time Las Vegas Sands investment on Cotai is completed by the end of the decade, the area will have more than 20,000 hotel rooms, 2,900 table games and 16,000 slot machines.

Not to be outdone, Wynn Resorts announced plans this year to develop its own 54-acre site on Cotai.

MGM Mirage will join the fray in 2008 with the opening of the $1 billion MGM Grand Macau.

What does Macau mean to Las Vegas? Money by the pile.

Las Vegas Sands Chairman Sheldon Adelson said Macau and Cotai will become the Las Vegas of the Far East.

"To me, it's a broadening of the market so that Asians will want to come to the real Las Vegas," Adelson said in an interview last spring.

Through October, Strip casinos had generated $5.4 billion in gaming revenues for 2006. In Macau, Sands, Wynn and several Chinese-operated casinos had generated $5.3 billion in gaming revenue through October.

"Given Macau's $690 million in revenues in (the month of) October, we think Macau may overtake the Strip in November," Bear Stearns gaming analyst Joe Greff said.

4. BOOM ON THE STRIP

The Strip was rife with development in 2006, a trend that is expected to continue.

The 2005 opening of Wynn Las Vegas triggered a spate of new projects that began appearing in 2006.

Las Vegas Sands Corp., expects to open the $1.8 billion Palazzo late next year. The hotel-casino is rising above the Strip next to The Venetian and across from Treasure Island.

That project should be followed up by Encore, a $1.74 billion hotel-casino addition that Wynn Resorts is building next to Wynn Las Vegas.

Meanwhile, construction continues on the Cosmopolitan, a $1.8 billion hotel-casino-condominium project that is headed by New York developer Bruce Eichner. The Cosmopolitan is under construction next to the Bellagio and is expected to open in 2008.

The $500 million Trump International condominium-hotel tower, behind The New Frontier, is nearing its eventual height of 64 stories. The project is expected to open in 2008.

However, the biggest change to the Strip landscape broke ground in the summer.

MGM Mirage has begun construction on its 66-acre, $7 billion Project CityCenter -- described by company executives as an "urban metropolis" with a 4,000-room hotel-casino, boutique hotels, retail, restaurants, entertainment and high-rise luxury condos.

Other projects, such as a redevelopment of The New Frontier and the proposed $1.5 billion Foutainebleau, have yet to materialize.

In the meantime, Harrah's Entertainment, which owned the Imperial Palace, Harrah's Las Vegas, Flamingo, Bally's and Paris Las Vegas, continued to assemble land along the Strip's eastern side.

By October, the company controlled 350 acres, stretching along the Strip. The last piece of the puzzle, the Barbary Coast at the corner of Flamingo Road and the Strip, was acquired in a land swap with Boyd Gaming Corp.

Harrah's is paying what amounts to $84.8 million an acre for the 4.3 acre parcel in a deal expected to close in February.

The company, which spent 2006's last two months considering whether or not to accept a private equity buyout offer, hasn't divulged its plans for the land.

5. OUT WITH THE OLD

Lovers of old Las Vegas lore lost some of their favorite hotel-casino icons in 2006.

Chief among the shuttered properties was the Stardust, a storied resort with nearly 50 years of history on the Strip. When it opened in 1958, the Stardust's 1,032 rooms made it the world's largest hotel. Its "Lido de Paris" revue epitomized Las Vegas glamour and glitz, and was one of the attractions that helped lure 1950s-era swells such as Frank Sinatra, Dean Martin and Sammy Davis Jr. to the property. Stardust habitues Frank "Lefty" Rosenthal and Anthony Spilotro were immortalized in the Martin Scorsese mob movie "Casino."

The Stardust closed Nov. 1 and is scheduled for implosion in early 2007.

The city bid adieu to several other properties in 2006.

The Castaways, which opened in 1954 as the Showboat, fell to the wrecking ball. The 500-room hotel-casino had been closed for nearly a year when Station Casinos bought the site for $33.7 million in September 2004. Station razed the hotel, whose 106-lane bowling center was a favorite hangout for generations of Las Vegas high schoolers, in January.

On the Strip, Harrah's Entertainment imploded the 166-room Bourbon Street on Flamingo Road east of the Barbary Coast in February. And MGM Mirage shuttered and tore down the 654-room Boardwalk just south of Bellagio in January.

The hotels are making way for upscale successors: Boyd Gaming Corp. will build the $4 billion Echelon Place on the Stardust site, while MGM Mirage is well under way with its $7 billion Project CityCenter on the Boardwalk acreage. Bourbon Street stood in the way of yet-to-be-announced plans Harrah's has for refashioning the east side of the Strip around Flamingo. Station is still evaluating the possibilities for its Castaways parcel.

David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas, said the upgrades will help Las Vegas expand its customer base. They'll also employ thousands more workers, he said.

Yet, the closures and implosions also raised concerns about the fate of the budget-conscious travelers who helped put Las Vegas on the tourism map in its first few decades as a gambling destination. A town once known for affordable rooms, $3 buffets and kitschy souvenir shops is now looking to make its nut on pricey accommodations, five-star restaurants and Chanel outposts. The evolution could force midmarket and budget travelers off the Strip and into properties downtown or just off the Strip. Such visitors might also skip Las Vegas altogether and opt instead for Indian casinos or other gaming markets closer to home.

Schwartz said the changes are critical to the city's future fortunes, though.

"The important thing is that these places weren't originally built to be monuments to anything," he said. "They were built to be casinos and hotels, and I think that even the original owners would agree that, at a certain point, they could attract more people by starting fresh."

6. VEGAS NUMBERS

There was a time in 2006 when gamblers actually left Nevada with more money than they came in with.

But by year's end the state's casinos got back more than enough to make up for it.

In June statewide gaming win dropped 3.5 percent compared to 2005, the first dip in two years.

During the dreary days of June 2006, casinos statewide won just $921 million from bettors, a 3.47 percent decrease.

And in Clark County, the gaming win for that month dropped nearly 5 percent to $758 million.

"It's getting harder," MGM Mirage President and Chief Financial Officer Jim Murren said in August, when the June numbers became public.

In the year's first half, fewer people visited Las Vegas than in early 2005. The decline was just 0.4 percent, however.

At the time Bear Stearns analyst Joe Greff predicted the dark days would continue.

"Looking ahead to July the calendar is unfavorable with the nine weekend days ... versus 10 in 2005," Greff wrote.

Fortunately for the state's casino owners, the dark days ended.

Win increased in July, August and October around a slight dip in September.

The latest available figures for 2006 had the state 3.29 percent ahead of 2005. Clark County was up 4.29 percent with only downtown Las Vegas posting a decline of 7.25 percent for the fiscal year.

Air traffic and tourism also gained in 2006.

More than 4 million people arrived and departed McCarran International Airport in October, pushing the 2006 total to 38.5 million, up 3.7 percent from the year before.

Southwest, McCarran's biggest carrier, also posted the strongest growth among top five airlines at the airport with a year to date increase of 11.9 percent over 2005.

Overall, visitation to Las Vegas was up 1.1 percent through October. More than 32.7 million people visited the region. Average daily automobile traffic on Interstate 15 at the California border rose 2.5 percent from 2005.

Visitor volume was flat in Mesquite and dipped 14 percent in Laughlin.

Hotels also got more money from visitors.

The average daily room rate in Las Vegas rose more than 17 percent to $120. In Mesquite the rate rose more than 48 percent through October to $64.

7. ONLINE GAMING

Other than a ban on bets from the world's richest country and arrests of Internet gambling executives, 2006 was a great time to run an online casino.

Internet gambling grew to a $12 billion worldwide industry despite a bill signed Oct. 13 by President Bush that bans processing online gambling payments from Americans.

The law came about three months after federal agents arrested former Chief Executive Officer Peter Carruthers and several other officials from the company BetOnSports and former chairman Peter Dicks of SportingBet.

"Then it sort of dawned on us, and the industry, they are not going to take (Internet) gaming lightly," said Alex Pratt, publisher of the magazine iGaming Business, during the Global Gaming Expo in November at the Las Vegas Convention Center.

The arrests, and subsequent anti-online gambling law, drove Internet gambling companies that rely on American bettors into the ground.

And it left remaining online companies to refocus their businesses on customers from other nations while they wait out the turbulence in the American market.

"It is a funny time at the moment," Pratt said.

Although the legal developments dampened the enthusiasm for some in the industry, the business from American bettors quickly migrated to smaller sites that were less vulnerable to government interference.

Critics of the ban said that meant it was exposing American bettors to less scrupulous Web sites.

And the Democratic takeover of Congress offered hope the ban would be reviewed soon.

By year's end, however, American companies were getting back in the action.

On Dec. 4 Las Vegas Sands Corp. announced a partnership with wireless gaming company Cantor Gaming.

The partnership will offer Sands brands like The Venetian to online bettors in the United Kingdom.

The operation will be licensed in Alderney in the British Channel Islands.

"When the system is set up we'll test it to make sure that they can't accept wagers from U.S. citizens," Nevada Gaming control Board Chairman Dennis Neilander said. "That's the main concern."

8. COSTLY ENERGY

The cost of keeping the lights on and driving cars took a big bite out of Joe Consumer's wallet this year.

Nevada Power Co.'s retail rates continued their relentless march higher, and gasoline prices spiked to a new high in May before receding in the autumn.

Unleaded gasoline sold for $2.29 a gallon in Las Vegas on Jan. 10, AAA Nevada reported. But the price of a gallon surged to $3.15 on May 16, a month before the traditional start of the vacation driving season, AAA Nevada spokesman Michael Geeser said.

By mid-December, the average cost of a gallon of gasoline cost $2.45 in Las Vegas.

"Gas prices in Nevada and particularly in Las Vegas really took off in May," Geeser said.

The gasoline price spike stemmed from maintenance and operational problems at California refineries, said Rob Schlichting, a spokesman for the California Energy Commission.

Southern Nevada gets virtually all of its gasoline from California through pipelines operated by Kinder Morgan Energy Partners.

Clark County established a commission to review ways to obtain gasoline, diesel and jet fuel from other sources, and three other companies submitted plans for alternative pipelines. But only Kinder Morgan's plans were starting to be realized as the year ended.

Staying home did not provide Southern Nevadans any relief from high energy costs, however.

Nevada Power Co.'s rates increased during 2006, continuing a trend that started in 2000. Residential customers were paying $83.74 for 1,250 kilowatt hours of electricity in the second half of 1999, but the typical bill rose to $136.49 by March, according to the Public Utilities Commission. The electric company wants to boost general residential rates by 12 percent by June. In January, Nevada Power will file a deferred energy rate increase that could boost rates or lower overall power rates by June.

Nevada Power and affiliate Sierra Pacific Power Co. also announced plans to develop the $4 billion Ely Energy Center, which will burn coal, a stably priced fuel. A transmission line to the Ely project will enable Nevada Power to import electricity from Northern Nevada geothermal power plants, another source of power with stable prices.

9. AND THE WINNING BID IS ...

After 15 competing bids from four casino companies within a six-week time frame, the parent company of the aging Tropicana said yes in May to a $2.75 billion buyout by privately held Columbia Sussex Corp.

In purchasing Aztar Corp., Kentucky-based Columbia Sussex, which operates two casinos in South Lake Tahoe, a Laughlin casino and off-Strip Westin, becomes a nationwide casino corporation with properties in Nevada, New Jersey, Indiana, Illinois, Mississippi and Louisiana.

The transaction has been approved by federal anti-trust authorities and state gaming regulators, but is not expected to close until January.

The bidding for Aztar, at times, resembled an auction on eBay.

Las Vegas-based Pinnacle Entertainment made the initial offer for Aztar, signing an agreement on March 13 to pay $38 a share for the company. By May 19, Columbia had upped the bid to $54 a share. Pinnacle raised its bid four times, thwarting private equity investor Colony Capital and rival casino operator Ameristar, which had submitted competing bids. But in the end, Pinnacle wouldn't match Columbia's final offer.

Pinnacle, however, was paid a breakup fee of $78 million by Aztar when the deal with Columbia was reached -- of which $25.8 million covered the company's legal expenses.

The prize in the bidding war was the Tropicana and its 34-acre Strip location.

Columbia Sussex President Bill Yung III told Nevada gaming regulators it would spend $2 billion over the next few years to redevelop the Tropicana site, giving the location more than 8,000 hotel rooms and an additional hotel brand.

He said the Tropicana itself would be extensively remodeled but not closed during the construction period.

Meanwhile, focus turned toward the Riviera and its 26-acre Strip location.

In August, shareholders rejected a bid of $17 a share by a group known as Riv Acquisition Holdings. In November, Cosmopolitan developer Bruce Eichner and New York-based asset management firm D.E. Shaw, bid $21 a share, or $470 million, for the Riviera and a sister slot machine casino in Colorado.

The bid was pulled a month later when management and the bidder couldn't reach an agreement.

10. CHANGING LOCALS MARKET

With a surprise concert by Grammy-winning recording artist Sting and an elaborate fireworks display, the locals casino market went upscale with the April 18 public unveiling of the $925 million Red Rock Resort by Station Casinos.

The opening of the Summerlin casino, coming almost five months after the opening of Boyd Gaming Corp.'s South Coast, gave the locals gaming market a shot in the arm. By summer, the monthly gaming revenues reported by casinos in the local sector were year-over-year double digit increases compared to the same months in 2005.

Gaming analysts were quick to point out that many of Red Rock's customers were coming from other properties operated by Station Casinos.

Meanwhile, several smaller casinos, such as Arizona Charlie's, Rampart and Silverton, said they didn't lose as much business as they thought they would to the new casinos, meaning programs the operators put in place to keep loyal customers were working.

Red Rock Resort was the only new casino opening in 2006. The Palms opened its new hotel tower with ultraluxury suites and a hip, rooftop Playboy Club.

But the splash in the locals market came in the year's second half.

Boyd Gaming decided to eliminate the South Coast from its portfolio and concentrate on other projects, namely the $4 billion Echelon project on the site of the Stardust.

Former Coast Casinos founder Michael Gaughan, who had sold his casino operation to Boyd in 2004 and became a member of the company's board of directors, exchanged his stock in the company, valued at $512 million, for the South Coast. He also resigned from the board of directors.

Boyd retained control of the other Coast Casinos properties and Gaughan, who built the company into a locals giant, returned to the owner-operator side of the business. By October, the casino had a new name, South Point.

Station Casinos continued to put its stamp on the locals market. In the fall, the company unveiled plans for its next resort, the $600 million Aliante Station, which is expected to break ground in the North Las Vegas master-planned community by February.

Review-Journal writers John G. Edwards, Jennifer Robison, Hubble Smith, Benjamin Spillman and Howard Stutz contributed to this report.