Downtown (Nevada gaming area)

Center of Fremont Street in May 2008

"Downtown Las Vegas Area" is the name assigned by the Nevada Gaming Control Board NGCB which includes the Downtown Las Vegas area casinos and the Stratosphere Tower which is located 2 miles (3.2 km) from Fremont Street.^[1] The city of Las Vegas uses the term Downtown Gaming for the casinos near the Fremont Street Experience.^[2] The land is part of the 110 acres (45 ha) that were auctioned on May 15, 1905 when the city was founded.

Downtown competition

Currently downtown Las Vegas is the only place in Las Vegas where the casinos are clustered around an outdoor pedestrian zone. Caesars Entertainment has announced plans to build a similar venue with an observation wheel similar to the London Eye near the Flamingo Las Vegas.

In fiscal year 1988 the ratio of revenue for the Strip compared to downtown was less than 3:1. In FY2008 the ratio is over 10:1. However, downtown rode the massive increase in tourist spending from 2004 through 2007 that swelled the non-gaming revenue of the area. Non gaming revenue and income hit an all-time high in FY2006.

The population of the city of Las Vegas has increased from 249,000 in 1990 to over 600,000 in 2010. In the interim three major hotels have been constructed inside the city limits (Stratosphere Las Vegas, Suncoast Hotel and Casino and Rampart Casino). The downtown casino district with over 1100 employees has remained important to the city. Since the majority of the casinos remain outside the city limit many people have been promoting the idea of a Consolidated city–county government as a more equitable way to share revenue.^[3]

Casinos in the Downtown Nevada Gaming Area

This table includes large casinos inside the area limits. The table, game, and slot count is valid on December 31, 2008. The category of over $1 million and under $12 million are re-evaluated every fiscal year. FSE means Fremont Street Experience. Games refers to table games. License numbers are issued by city of Las Vegas.^[4]

Monthly executive summary

A monthly report of gaming revenue is released about five weeks after the end of the month. These statistics are posted in several locations on the Internet. The Las Vegas Convention and Visitors Authority (LVCVA) posts an executive summary for forty one categories.^[5] The number that gets the most attention is the percentage change of gaming revenue from the same month the previous year.

Historical data is released in various formats. The LVCVA maintains year to date and year end tables with on their site back to calendar year 2002.^[6] Data presented in graphic form covering several years is easier to visualize.^[7]

Nevada Gaming Control Board publications

The NGCB maintains a list of publications.^[8] Cumulative data is reported in fiscal years (FY) (July 1 to June 30) instead of calendar years.

Downtown Las Vegas currently has 16 nonrestricted gaming locations that earn more than $1 million per year in gaming revenue. Since fiscal year 1990 when the Mirage opened on the Las Vegas Strip gaming revenue downtown has been flat. Non-gaming revenue has increased, but income also remains relatively flat. Some of the smaller casinos have since closed, and one major casinos hotel, (The Stratosphere) has opened. On average, the casinos that have less than $12 million per year in gaming revenue have a negative income.

• Based on numbers of hotel rooms, slot machines, and table games the three largest operations are (not in order of revenue) the Golden Nugget, the Stratosphere Las Vegas and Boyd Gaming downtown division which consists of the Main Street Casino, the California Hotel and Casino, and the Fremont Casino.
• In 1990 one of the 11 casinos in the over $12 million category was the Golden Gate Hotel and Casino, but revenue is now under $12 million. The Stratosphere has taken its place.
• Of the 5 current license holders in the under $12 million category, 3 of them currently offer slot machines only (no table games, poker, racing or sports), and only 2 of them have small attached hotels (100 rooms apiece).

For Downtown Las Vegas, the total revenue dropped after September 11 attacks in 2001 as it did in most resort areas including the Strip. Total revenue includes all sources of revenue for the property (food, drinks, attractions, etc.). Unlike the strip, income remained slightly positive, but revenue did not recover for three years. Profitability was restored during this period solely through cost-cutting measures. An analysis of the data could reveal how much of the cost cutting was payroll, cost of goods (food and beverage), and number of employees.

Beginning with December 2001, all of the properties changed ownership, at least once, with the exception of the 3 properties in the Boyd Gaming downtown division. Most ownership changes are accompanied by attempts to upgrade the properties with new restaurants, clubs, renovations, and games.

Tom Breitling and Tim Poster were the highest profile successful entrepreneurs who profited in the downtown market during the last crisis. As recounted in Tom Breitling's book, Double or Nothing, the partners agreed to buy the Golden Nugget and had an agreement to sell the property after operating it for only one year.^[10] The partners made $113 million in profit called the highest rate of return in such a short time in the gaming industry.^[11]

By FY2006 total revenue for downtown exceeded that of FY2004 by $106 million. Margins (income over revenue), income, and revenue all reach record highs for downtown. Margins even surpass the Strip according to NGCB Data. Although the sale of the Golden Nugget is completed after six months needed to earn gaming license, no casino purchases are negotiated this fiscal year. Heartened by the improving economic conditions, the Lady Luck is closed for complete renovations.

On February 21, 2008 corporate raider Carl Icahn sold his four Southern Nevada casinos, comprising American Casino & Entertainment Properties anchored by the Stratosphere Las Vegas and realized a gain of $1 billion after a decade of investing in the market.^[12] The price for the properties was agreed on the previous April, and was based on an appraised value of $718.443 million for the land. Although revenue drop has been comparatively benign in the recession, the interest on the long term notes for this land speculation has made the company unprofitable.

Revenue since July 1, 2006

Fiscal year 2006 (July 1, 2005 through June 30, 2006) set all time records for downtown Las Vegas in terms of total revenue gaming and non-gaming. Revenue in FY2007 and FY2008 dropped. But like the rest of Nevada FY2009 was the most severe fiscal year since downtown gaming peaked in the early 1990s.

• Boyd Gaming reported their year end revenue on February 26, 2009.^[13] The downtown properties are one of the relatively brightest properties in their portfolio. The total revenue for the calendar year 2009 was $229 million vs $240 million for the year 2008 and $255 million for 2007. Collectively the Boyd Downtown Division is the currently the largest operation inside the downtown region.

Future prospects

The Lou Ruvo Brain Institute is currently finished construction.^[14] The Smith Center for the Performing Arts was completed in 2012.

At the site of the former Holy Cow casino and brewery which closed in May 2002 (across the street from the Stratosphere and The SLS) a developer received preliminary approval to build a 98-foot (30 m)-tall video screen and a new casino. Aspen Highlands Holdings hope that the eye-catching attraction at the entrance to the city of Las Vegas will attract gamblers to the casino without an attached hotel.^[15]

Profitability has the potential to increase after March 28, 2010 when the ACE bus rapid transit project comes on line. The ACE rapid transit system will have the appearance and feel of a light rail transit network. Traffic lights will be controlled by a system similar to the one that emergency vehicles use. This modern transit system made travel from Fremont Street to the Convention Center virtually the same as the Las Vegas Monorail transit time from in front of the MGM Grand.

Some downtown casinos may come on the market in the near future, as an investor will be eager to try to repeat the success of Breitling, Poster and Icahn. In an article by journalist Ben Spillman, he describes a report that looks at historical costs and provides accurate estimates of revenues of the individual downtown casinos.^[16]

References