2011: Economic pain persists, but signs of relief emerge

You call this a recovery?

Everywhere Las Vegans looked in 2011, they saw bankruptcies galore, shuttered hotels, plummeting home prices and shopping-center defaults. The city remained the nation’s top market for foreclosures. And the Strip, once the world’s most profitable casino center, ate dust as gaming revenue in Macau and Singapore blew past earnings in Southern Nevada.

But 2011 wasn’t all bad, as Las Vegas saw its first green shoots since the recession’s 2007 beginning. Taxable sales rose all year long, including by double-digit percentages in some months. Visitor volumes jumped noticeably compared with tourism in 2010, and statewide gaming revenue rose nearly 10 percent year over year. The jobs market finally perked up toward year’s end, adding more than 12,000 local positions year over year through November.

More importantly, 2011 brought tantalizing glimpses of some important future economic drivers for Southern Nevada. Legalized Internet poker inched closer to reality, and Internet retailer Zappos made big strides toward renewing downtown. The company signed a lease on the former Las Vegas City Hall, and its executives left fingerprints on downtown enterprises ranging from residential high-rises to the 51s baseball team.

So is it a recovery? Not completely. But in some quarters, at least, “recession” is no longer the only “r” word tossed around Las Vegas these days. And that means 2012 could be the first year in nearly half a decade that brings a dose of hope to Las Vegas.


What would happen if you built a building on the Strip, but found out a year later it was flawed and needed to be torn down?

Well, MGM Resorts International, which built the 27-story Harmon
Tower to anchor the north end of the $8.5 billion City Center development, is deciding how the structurally troubled building will be imploded.

Meanwhile, the Sahara, once the epicenter of Las Vegas style, now sits empty after falling victim to the recession. But a remodeling plan approved the Clark County Commission is expected to breathe new life into hotel-casino.

According to the plan, the existing room towers, the Tunis, Tangiers and Alexandria, will be renovated. The roller coaster will be dismantled and a 2,830-square-foot beer garden will be constructed. The number of hotel rooms will be decreased from 1,700 to 1,622.

Another upgrade to the east side of the Strip, dubbed Project Linq, is a collection of about 20 restaurants, bars and shops to be built along a winding corridor between O’Sheas and Flamingo casinos.

The Las Vegas Hilton will have a new name on Jan. 3, the LVH-Las Vegas Hotel & Casino. The name change comes as the historic property on Paradise Road lost its franchise agreement with Hilton Worldwide.

Goldman Sachs Mortgage Co., the property’s lender, is also working to foreclose on the hotel after its owner, Colony Capital LLC, defaulted on a
$252 million term loan.

While one legendary property is in default, another has been reorganized as the off-Strip Palms welcomes sports book operator Cantor Gaming and gets ready to undergo millions of dollars in renovations.

George Maloof, the driving force behind the Palms, will now partner with Leonard Green & Partners LP and TPG Capital.

— Chris Sieroty


The fallout from the foreclosure crisis continued to drag down the Las Vegas housing market in 2011 as median existing-home prices fell to $110,000 in October, down 7.6 percent from a year ago, Las Vegas-based Home Builders Research reported.

The median new-home price also decreased 7.6 percent to $196,360.

Bargain prices are attracting investors back to the market, many of whom are cash buyers, as lenders tightened financing qualifications following the subprime mortgage debacle.

That’s helped drive sales of existing homes to more than 40,000 through October, a 13 percent increase from a year ago. Roughly half of existing home sales were all-cash transactions.

Las Vegas is plagued with an inventory of more than 11,000 bank-owned homes, 80 percent of them vacant and deteriorating in condition.

Notice-of-default filings — the first step in foreclosures — fell to 897 in October as a new Nevada law took effect requiring lenders to provide an affidavit of authority to foreclose. The notices had been running between 3,500 and 5,000 a month for most of 2011, Discovery Bay, Calif.-based listing service reported.

The Nevada law was largely in response to the “robo-signing” scandal that surfaced in late 2010.

New-home construction came to a crawl. Builders expect to sell about 3,500 homes this year, the fewest since Home Builders Research began tracking the market in 1988. New-home building permits fell to a year-low 197 in October, and are down 24 percent for the year.

— Hubble Smith


Overall, 2011 was good for Las Vegas tourism, but gaming numbers suffered erratic mood swings.

As of October, the Las Vegas Convention and Visitors Authority reported 20 consecutive months of gains in prior-year comparisons. Year-to-date, Las Vegas has hosted 32.9 million visitors, a 4.5 percent increase over 2010.

In equally good news, citywide occupancy year-to-date rose 3.9 percent; hotel occupancy rose 3.8 percent and motel occupancy rose 5.2 percent.

Reports on the gaming side, however, weren’t always so positive; they were downright bipolar.

Nevada casinos finally broke a two-month gaming revenue slide in October, effectively ending consecutive months of gaming revenue declines in August and September both statewide and on the Strip. The declines followed three straight months of gains.

In October, statewide gaming revenues were $960.7 million, an
8.1 percent increase compared with $888.6 million in reported in October 2010.

In airport news, McCarran International Airport reported its highest monthly passenger counts of the year in October with 3.7 million passengers. That marks a 4.5 percent increase above 2010’s total.

–Laura Carroll


Internet poker and its potential legalization was a hot topic in 2011, before and after April 15.

The Nevada Legislature was in the early stages of considering Assembly Bill 258, which proposed the state legalize Internet poker, when federal prosecutors in New York unsealed a nine-count indictment, accusing owners of three of the world’s largest Internet poker websites of money laundering and bank fraud.

The action cut off American players’ access to the websites and put damper on the Nevada bill, which was being pushed by, one of the businesses targeted by the U.S. Justice Department.

By the end of the legislative session, Nevada lawmakers approved a watered-down version of AB258, which calls for the state gaming commission to adopt Internet poker regulations, which would allow Nevada to serve as the licensing arm and regulatory jurisdiction for online poker companies.

Of course, Congress needs to legalize the activity in the U.S. before companies could set up shop in the Silver State.

The tide seemed to be in favor of Internet poker legalization, but as the year neared a close, the issue seemed to settle down.

The Washington D.C.-based American Gaming Association, the industry’s lobbying arm, came out in support of Internet poker legalization. Several casino companies, including MGM Resorts International and Boyd Gaming Corp., agreed in principle to deal with online gaming companies to jointly operate U.S. based Internet poker website, if legislation were to pass.

Caesars Entertainment Corp. continued to be the leading advocate for Internet poker legalization.

However, early in December, Las Vegas Sands Corp. Chairman Sheldon Adelson came out against Internet poker legalization.

–Howard Stutz


You’ve gotta hand it to Nevada: When we do it, we do it big.

After posting the nation’s No. 1 job-creation pace for nearly two decades before 2007, the Silver State saw its nation-leading jobs bust run straight through 2011. As of November, Nevada had claimed the top unemployment rate for 19 months, as sustained weakness in construction and cuts in government hammered the state’s economy.

Statewide unemployment did
fall, from 14.2 percent in January to
13 percent in November, with a summer uptick as employers stopped hiring while federal budget drama played out in Washington. Economists credited the overall decline partly to job formation, as the leisure and hospitality sector added 15,000 jobs, and business services, health care and education grew. But a shrinking labor force pushed down the number, too, with the state shedding roughly 2 percent of its workers.

But though the state Department of Employment, Training and Rehabilitation announced in November that Nevada’s jobs recession ended in September 2010, it sure didn’t feel that way to the roughly 170,000 Nevadans, including 125,000 Las Vegans, who remained unemployed at year’s end.

Nor could Nevada or Las Vegas catch a break on the PR front: High joblessness put us at or near the top or bottom of some bad lists. In November, a Massachusetts group called Nevada the nation’s worst state for economic opportunity, and the Brookings Institution in September ranked Las Vegas No. 84 out of 100 cities for economic vitality, placing the city behind Rust Belt counterparts including Buffalo, N.Y., and Akron, Ohio.

— Jennifer Robison


The 34 casinos in Macau already produce more than five times the annual gaming revenues collected by the Strip.

The entire 21-state U.S. commercial casino market is next on the agenda.

Through November, Macau casinos collected $30.5 billion in gaming revenues, up 44 percent compared with the first 11 months of 2010. Analysts expected gaming revenues to increase anywhere from 15 percent to 25 percent in 2012, surpassing all of the U.S., which includes Las Vegas, Atlantic City, Louisiana, Mississippi and other regional markets.

In 2010, U.S. commercial casinos collected $34.6 billion in gaming revenues.

Meanwhile, gaming revenues produced by the two casinos on the island-nation of Singapore are expected to blow past the Strip’s 2010 revenue figure of $5.8 billion by the time this year is in the books.

“That market will maintain a double-digit year-over-year growth in gaming revenues,” Moody’s Investors Service gaming analyst Keith Foley said of Singapore, which opened its first casino in February 2010.

Las Vegas Sands Corp., Wynn Resorts Ltd. and MGM Resorts International are the only U.S. casino companies operating resorts in Macau. Next year, Las Vegas Sands is scheduled to open the initial phases of Sands Cotai Central, which includes multiple hotel-casinos and 5,800 rooms.

Macau opened one new casino this year, the Galaxy Macau on the Cotai Strip in May. Analysts said the market absorbed the property quickly. Sands Cotai Central could be last new casino opening in Macau until 2015.

Analysts looking toward 2012 don’t expect Las Vegas or other U.S.-based gaming markets to experience the growth projected for Macau or Singapore.

Still, with the economy recovering and discretionary spending slowly rising, the American casino industry is cautiously optimistic that 2012 could be a bridge to stronger results in 2013.

— Howard Stutz


With conventional markets still sclerotic, U.S. Bankruptcy Court continued as the favored venue to strike a deal.

The Riviera found new owners there. Developers and lenders worked out terms to settle sprawling litigation over the huge Inspirada development. The Mob Experience found an investor to bail it of its financial morass, while landlord Tropicana agreed to lax lease terms to help the attraction get established. The Nevada Cancer Institute proposed selling itself to the University of California, San Diego, as part of a deal to slash its overwhelming debt.

Not all emerged as they wanted. The Las Vegas Monorail’s reorganization plan was shot down by a judge who found it did not work, even after bondholders agreed to swallow losses exceeding 90 percent. Hooters ownership’s initial hopes of finding a new investor to keep them in control gave way to the reality of auction that will likely freeze them out.

Numerous real estate entities and small businesses resorted to Chapter 11 as a last-gasp effort to hold off creditors — 260 cases were filed through August — with mixed hopes of success.

— Tim O’Reiley


The wave of commercial mortgage defaults that some analysts predicted would dwarf residential losses hit Las Vegas in 2011 with major properties such as Town Square, District at Green Valley Ranch and the World Market Center in bankruptcy or some stage of foreclosure.

Commercial mortgage defaults started with vacant land that produces no income, but spread to office buildings, retail centers, restaurants and apartments.

While the default rate for bank-owned commercial loans has stabilized nationally, Las Vegas continues to see 50 to 60 commercial properties a month fall into default, according to reports from Nevada Title Co. show. A default occurs when a loan is 90 days or more past due.

Some $1 billion in bank-owned commercial real estate properties and delinquent loans were offered at a three-day auction in May. Multifamily residential drew the highest bids.

Much of the real estate-owned, or bank-owned, commercial property was built during the heyday of new development in Las Vegas, Frank Gatski of Gatski Commercial said. They were overleveraged and couldn’t be leased from the time they were built.

“Those are the first ones coming back to the bank,” Gatski said. “But I’ll tell you, at the first of the year we got an established retail center with an anchored tenant. That’s the first one I’ve seen go into REO with 85 percent occupancy.”

Mortgage defaults in October included $11 million for professional property owned by Silverstream Holdings; $6.7 million for storage facilities owned by JMAC Industries; and $5.7 million for Bonanza Springs Suites apartments.

— Hubble Smith


After shedding more than $4 billion in debt, Station Casinos LLC emerged from bankruptcy in June but still faces difficulties as the gaming company strives to return to profitability.

Even with CEO Frank Fertitta III and his brother, Lorenzo, investing $200 million to gain a 45 percent stake in the company, Stations continued to wage a vicious battle with the Culinary Local 226, which has tried unsuccessfully for more than a decade to unionize Station employees.

That battle has led to a National Labor Relations Board judge signing off on some 80 of more than 200 charges of unfair labor practices filed by the union to proceed to a hearing before a three-member panel.

While Station’s prepares for the hearing, it continues to air television ads touting how good it is to have a job in this economy. The company has also moved forward with its plan to hire 1,000 new employees.

— Chris Sieroty


City officials are already calling 2012 “the year of downtown,” but 2011 in many ways set the stage for downtown redevelopment efforts to reach their pinnacle.

The outgoing Mayor Oscar Goodman and incoming Mayor Carolyn Goodman prioritized downtown redevelopment this year; the city has worked with to finalize plans for the online retailer to relocate from Henderson to the old Las Vegas City Hall in early 2013.

Zappos CEO Tony Hsieh has big plans for downtown. Hsieh’s name is ubiquitous in the business community, and he is making his mark on downtown by providing workspaces in the Ogden residential tower to tech startups and by launching the Downtown Project, an organization that plans to target culture, education and technology as part of its mission to build a community downtown.

Seeing the wave of development to come, many business owners this year moved into the neighborhood (Insert Coins, Vanguard Lounge, Le Thai) while established businesses unveiled renovations or began remodeling (the Plaza, El Cortez and Golden Gate hotel-casinos).

— Caitlin McGarry


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