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Jeff Simpson

Columnist Jeff Simpson: Gaming Industry Hit Some New Highs, But Natural Disasters Caused Real Lows

27 December 2005

The casino industry's stocking is full this morning. Mostly gifts, but a few lumps of coal. The past year has been a great one for the Las Vegas market, and 2006 looks to be strong as well.

A look back at 2005.

The biggest news in Las Vegas was the finalizing of the two biggest purchases in the history of the casino industry: MGM Mirage's $8 billion takeover of Mandalay Resort Group and Harrah's Entertainment's $9 billion acquisition of Caesars Entertainment.

The deals reduced the Strip's "Big Four" to only two, although a few big players with plans to grow -- Venetian owner Las Vegas Sands, Wynn Resorts and Boyd Gaming Corp. chief among them -- are likely to make their own waves in the years to come.

MGM Mirage emerged from its deal as the clear leader on the Strip, the state's biggest employer, largest casino operation and controlling the lion's share of the city's high-end market, best restaurants and production shows, and first-class resorts.

Harrah's purchase cemented the company's status as the world's biggest and most profitable casino operator -- and as Nevada's second largest.

The April opening of the $2.7 billion Wynn Las Vegas was the other major event. No megaresort had opened in Las Vegas since the Aladdin debuted in 2000, and the public's pent-up demand for a new property was palpable. Wynn Las Vegas itself has been spectacularly successful, but its effect on the rest of the city has been even more remarkable.

Tourism numbers have spiked, sales taxes spiked and the money won from gamblers on the Strip fueled statewide records month after month.

Boyd Gaming's savvy 2004 purchase of Coast Casinos continued paying dividends, with the latest being last week's opening of the $600-million-plus South Coast.

A few 2005 developments caused some short-term pain that will hopefully result in future gain. The Bourbon Street and Westward Ho casinos were closed, and closures of the Boardwalk and Lady Luck were planned for early 2006. All of the moves are intended to make way for future redevelopment, but the loss of jobs -- at least in the near term -- will make for a tough holiday season for hundreds of workers. And Harrah's purchase of the Imperial Palace likely means that casino will also face near-term closure.

Outside of Las Vegas the 2005 news wasn't very good.

The industry's worst news of the past year was the devastation from hurricanes Katrina and Rita, natural disasters that destroyed many of the casinos on the Gulf Coast of Mississippi and damaged the economies and many casino properties in and around New Orleans and Lake Charles, La.

Although much of the damage was insured, the catastrophic devastation will take years to rebuild and recover from. But the most lasting hit to the broader casino business may be the fallout from politicians reacting to the growing scandal surrounding disgraced tribal casino lobbyist Jack Abramoff.

Outside of Nevada, many people already view casino industry lobbying money as being about as dirty as can be, and by the time the Abramoff mess shakes out, the industry's reputation could be much worse.

A few stories likely to happen next year will be big pluses for the Las Vegas casino industry.

Station Casinos plans to open its Red Rock Resort in Summerlin early next year; construction will continue on the Palazzo, Sheldon Adelson's second megaresort; Steve Wynn plans to break ground on Encore, Wynn Las Vegas' companion resort; George Maloof expects to open the completed Fantasy tower at the Palms; and MGM Mirage expects serious work to get under way on its $5-billion-plus Project CityCenter, south of Bellagio.

Wynn Macau is slated to open in September, and Singapore is expected to announce its choices to build two casinos in the city-state. Industry insiders would be surprised if at least one of the big Las Vegas operators isn't tabbed to build there, with Harrah's, Venetian parent Las Vegas Sands and MGM Mirage among those in the running.