BUSINESS

Bright lights, free drinks, empty rooms

JASON KIRBY March 10 2008
BUSINESS

Bright lights, free drinks, empty rooms

JASON KIRBY March 10 2008

Bright lights, free drinks, empty rooms

JASON KIRBY

They say the house

always wins. But what about when the bank forecloses on the house? Or on thousands of houses? That’s the ugly situation playing out in Las Vegas, where many homeowners and at least one casino developer are in serious financial trouble. Vegas once boasted it was recession-proof, but after a terrible run of bad luck, some in Sin City are wondering how much worse things are going to get.

During the American housing boom, Vegas was one of the hottest markets in the U.S. It was also the epicentere of the subprime mortgage industry, in which anyone with a heartbeat qualified for a loan. So it’s no surprise Vegas now leads almost every other city in falling house prices. According to RealtyTrac, 12,300 Vegas homes are in foreclosure at the moment. Even on the Strip they’re hurting— last month the developer of the US$3-billion Cosmopolitan Resort Casino defaulted on a loan and is at risk of foreclosure.

The bad news has kept coming. An FBI study suggests the city is emerging as the mortgage fraud capital of America; experts are dramatically scaling back their projections for how many new hotels will be built in Vegas in the next few years, and in late January a huge fire raged through the upper floors of the Monte Carlo casino. The fire shut the hotel for nearly three weeks at a cost

of US$100 million. But the fire also exposed a more telling reality for Vegas’s crucial tourist business. Even with the Monte Carlo’s 3,000 rooms off limits, visitors had no trouble finding somewhere else to stay. The official tourism figures for January aren’t available, but as America’s economy worsens, casino executives are hedging their bets. Las Vegas is no longer recession-proof, casino mogul Steve Wynn told investors recently. Just recession “resistant.” M