[ClarkGrisowld]

Originally Posted by bledsoe3

Lets say MB gets 1000 more people (foot traffic) a day. If they get 25% of them to drop $50 at the slots or tables. That's an additional $12.5K a day. You can do a lot of maintenance for $375k a month. If they keep up the maintenance.

That's about $5M a year. Not chump change, but I don't think I'd classify that as a large amount for maintenance. I really am guessing, but I suspect something like $15-$20M a year is more the norm for basic maintenance (i.e. not remodeling or major face lifts) of a property the size of MB.

They make as much money off rooms as they do gaming, so consider that $10 a night less on rooms is like $25k less a day (at a much higher margin) and you start to understand the impact of being forced further down the value chain.

[bledsoe3]

Originally Posted by ClarkGrisowld

That's about $5M a year. Not chump change, but I don't think I'd classify that as a large amount for maintenance. I really am guessing, but I suspect something like $15-$20M a year is more the norm for basic maintenance (i.e. not remodeling or major face lifts) of a property the size of MB.

They make as much money off rooms as they do gaming, so consider that $10 a night less on rooms is like $25k less a day (at a much higher margin) and you start to understand the impact of being forced further down the value chain.

5 million a year is a lot of jack. We are only talking about increased foot traffic. How often do you have to replace the carpet, tile and paint on top of normal normal basic maintenance?

[ClarkGrisowld]

Originally Posted by bledsoe3

5 million a year is a lot of jack. We are only talking about increased foot traffic. How often do you have to replace the carpet, tile and paint on top of normal normal basic maintenance?

I think the point I'm making is $5M a year only covers about 25-30% of basic maintenance and is not enough to sustain a property if it is taking a big hit on its room revenue. It certainly would offset some of those losses, but $5M a year by itself is not enough to maintain a property at a level that would keep it from sliding down the tier. You're discussing it from the standpoint of incremental revenue for maintenance, where I'd agree with you, but I'm talking in terms of replacement revenue for maintenance and it's not enough.

Like I said, a $10 hit on room rates would result in a loss almost double that $5M and would have them in a situation where they would actually be looking to cut CapEx and/or basic maintenance despite $5M higher gaming revenues.

Occupancy and room rates drives a huge piece of your overall revenues since hotel guests also drive a large portion of the gaming and F&B revenue, so increased foot traffic is only a way to slow the bleeding not solve it.

[Willy702]

You are mostly misguided here. Very few properties are negative cash flow right now. Many aren't generating enough to cover their debt loads, but that is a problem for the bondholders. Circus Circus is cash flow positive, Trop is now cash flowing since the debt is gone. Bomdholders will have to decide how to proceed but in almost every case positive cash flow is better opened than closed. The Cosmo is proceeding for this reason. Owners believe low level cash flow beats negative cash flow of not being opened. They just have to squeeze creditors harder.

[bledsoe3]

Originally Posted by ClarkGrisowld

I think the point I'm making is $5M a year only covers about 25-30% of basic maintenance and is not enough to sustain a property if it is taking a big hit on its room revenue. It certainly would offset some of those losses, but $5M a year by itself is not enough to maintain a property at a level that would keep it from sliding down the tier. You're discussing it from the standpoint of incremental revenue for maintenance, where I'd agree with you, but I'm talking in terms of replacement revenue for maintenance and it's not enough.

We were talking about it being in addition to what MB already had. Would the extra 5 million a year cover the wear and tear of 1000 more people walking through the casino daily?

[JohnG72]

I'd like to point something out.

There seems to be people refering to the current prices as somehow not "normal".

The further implication of this is that the prices a few years ago were "normal".

This is not correct.

People really need to get out of their heads that things will every return to 2003-2008. The days of really expensive rooms are pretty much done for. A return to "normal" will only be a 10-20% adjustment upwards, with most of that being in the higher end hotels that do their job right. We are already seeing that at places like Wynn where room rates have inched up.

[Jhiker10]

Originally Posted by bledsoe3

Lets say MB gets 1000 more people (foot traffic) a day. If they get 25% of them to drop $50 at the slots or tables. That's an additional $12.5K a day. You can do a lot of maintenance for $375k a month. If they keep up the maintenance.

The operative word is the big "IF", enough said.

[ClarkGrisowld]

Originally Posted by bledsoe3

We were talking about it being in addition to what MB already had. Would the extra 5 million a year cover the wear and tear of 1000 more people walking through the casino daily?

I agree with that. But I was talking in terms of other hits to revenues (newer properties cannibalizing higher room rates, gaming revenues, etc...) as causing a decrease in cash flow and an inevitable sliding down the tier. The $5M wouldn't begin to cover those losses. When you're a middle of the pack property, inevitably maximizing profits dictates that you start skimping on maintenance/investment and milking a dying cash cow. But like I said dynamics may be changing where properties become one-size fits all marketing to larger segments with various tiers of quality service and rooms, priced accordingly.

[ClarkGrisowld]

Originally Posted by JohnG72

People really need to get out of their heads that things will every return to 2003-2008. The days of really expensive rooms are pretty much done for. A return to "normal" will only be a 10-20% adjustment upwards, with most of that being in the higher end hotels that do their job right. We are already seeing that at places like Wynn where room rates have inched up.

I partly agree and partly disagree.

Rates got to where they were because of demand, and that in part spurred all the new building. Visitors are coming back and spending money and that will return to '03-'08 levels, however it will be several years or more before the supply/demand imbalance pushes rates back up - the whole pie will be there again in a year or two but you now have more eating from that pie. 25/30% more rooms will take a long time for the market to expand to eat up, and that's probably why no new additional properties will be started for 10 years or more.

The other side of this equation is the expansion of gaming in Asia and the rest of the world, which is taking some high-end business away from Vegas. But at the same time, Vegas will always be Vegas and remain one of the more popular international tourist stops in the US.

And without getting into a lengthy discussion on the US dollar, with 35% or more of visitors to Vegas international, to the extent other economies (and currencies) continue to outperform the US that will help boost room rates which will be comparatively much cheaper for those internationals.

[KevK]

Originally Posted by airics

Look on the bright side... more jobs.... and the Cosmo will have great views when CC closes and gets imploded!

Why do you think CC will close? CC fills its mission which is family trade. I am sure they are doing well. At least one place in that town needs to cater to people with kids. don't cha think?