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Inside Gaming: View From L.A. Shows Real Estate Spike Looms

10 January 2005

Las Vegans, I'm learning from three months at the University of California, Los Angeles Medical Center, have only to glance at Los Angeles to see another real estate-price spike coming, especially for gaming-related land. Angeleno Realtors say L.A. is recovering from the high-tech blowout, demand is hot and investors are cashing out. Because of the profit-taking, investors are looking for new lands to conquer, mostly out of state, where real-estate professionals say gaming is drawing a lot of interest. They view gaming land as the opportunity of the decade, like high-tech in the 1980s, albeit on a smaller scale.

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Hotel operators in particular say they pine for development sites in Las Vegas. Comparing Las Vegas to net fishing and the rest of the world to bait and hook, they say there's a difference between development in Las Vegas and everywhere else. There are buckets of excess demand for destinations in Las Vegas. For destinations anywhere else, demand must be created. That cuts the cost and risk of Las Vegas hospitality operations and makes the developers salivate as they look for alternative investments for the projects they're liquidating.

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Location may be key, but hospitality analysts in Los Angeles also say management contracts will be king as California casinos develop. They point to Four Seasons Hotels after it sold off key properties and re-emerged as a management company. Now, almost 95 percent of the company's profits come from fees rather than development. No other company has been more successful at luring the clientele casino operators want. Analysts say the Four Seasons is a model the gaming industry will learn to live by.

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Donald Trump has made a name with accomplishments that would land the rest of us in a loony bin. Now, he's bragged to Review-Journal gaming reporter Howard Stutz that he alone could have turned a $9 profit per share on Riviera Holdings Corp. into bad press. "Only I could buy a stock at $3, sell it at $12 and get a bad story out if it," Trump said. "I guess I could have held onto it a little longer, but that's the way it goes." Today it's selling for around $40, with institutional investors and casino operator wannabes frothing for the land the Riviera sits on.

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Who would have guessed Las Vegas would ever be among the leaders of a trend toward sophisticated dining? In USA Today's year-end wrap-up, Las Vegas tied for second place as one of its top 20 cities for best dishes and restaurants. More kudos: the national daily predicted Las Vegas restaurants would raise the bar in 2005. Top restaurants named for 2004: Seablue and Lotus of Siam. Only New York City scored higher.

The Inside Gaming column is compiled by Gaming Wire Editor Rod Smith. You can contact him by phone at 338-9653, fax at 387-5243 or e-mail at rodneysmith1@cox.net.

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