Last December, the City Center in Las Vegas opened amidst the largest decline in tourist travel in decades. This project, roughly worth 8.7 billion dollars, is more than just a hotel: there are condominiums, a casino as well as a giant mall. The hotel was supposed to start a new wave of "sophistication and urban living in the gaming capital". But the innovation of this building has almost been over-shadowed by its huge scale and cost. There is an outlined plan to seek relief for $1.8 billion loan, but if terms cannot be negotiated then City Center could be responsible.
MGM resorts reported a net loss of $1 billion, which includes a write-down of nearly $600 million. Also the hotels worth has reported fallen from $5 billion to $2.4 billion in a single year. MGM is still spending money to end construction as well as keep operations at City Center going. There was a report in July that stated within a year City Center would see major improvements and for right now they have seen an increase in earnings, yet the hotel is still on track to violate their loan.
The cost control problems with City Center have seemed to induce problems between the partners as some wish to close certain operations while others believe it would be more detrimental to the center. The executives are also faced with what to do about the nearly 2,000 condos that are unsold. At first the 2,400 condos were expected to produce a revenue of $2.7 billion, but now the total sales are $372 million. By maintaining 530 of these unsold units, the center is set to witness an additional $11 million loss in profits. One plan is to lease 200 of the condos while another is to make City Center more livable by installing a grocery store.
These financial problems co-inside with complaints from customers who say the casino is too dark as well as other design faults. I believe that this center was built at a completely wrong time in American society. With the economy still reeling from the crash, people are clearly not making to trips to Las Vegas regularly and spending thousands of dollars to stay the night. I think that this center should try to target international waters because they might be looking for an experience they could provide. I believe that it is going to take a very long time before the hotel is going to see a complete pick-up in revenue and for now they are going to have to search for ways to maintain their creation.
I also agree with you that this center was built at a completely wrong time in American society. The net loss of $100 billion that MGM reported is astonishing. I am surprised that MGM did not calculate the potential costs and revenue in the state of this economy, especially because Las Vegas is "experiencing the largest decline in travel tourism in decades." I feel like the MGM team's analysis was terrible...
ReplyDeleteI also do not understand the concept of the condos in a time like this...I have not heard anyone speaking about moving to Las Vegas...ever. Las Vegas is more of a tourism spot. Kudos to MGM for trying to change the perception of Las Vegas, but I do not think that perception will ever change. Granted, some people are bound to buy condos in Las Vegas, but I feel like the cost of building the condos outweigh the revenue from the condos. I believe this would stand true even if the economy happened to be in better condition than it actually is.