Reality Check: Bankruptcies Could Be in the Cards for These Las Vegas Ventures
It’s no secret we’re a huge cheerleader for Las Vegas. That said, we don’t tend to gloss over the awkward parts of Las Vegas, and financial struggles are definitely that.
Red flags abound, and at the risk of being a buzzkill, we need to talk about some Las Vegas resorts and venues facing the very real possibility of bankruptcy in the not-too-distant future.
Due to the vast amount of legal dipshittery out there (looking at you, Sahara), let us say these are opinions and speculation, things protected by the First Amendment. We talk to a lot of industry insiders, and their opinions inform ours, but we’re drawing conclusions from publicly available information, not things we know to be happening. We are not omniscient, despite all the evidence to the contrary.
We should also say we don’t root for businesses to fail or have to resort to bankruptcy protection. The little guys get screwed in those situations. But we aren’t going to sugar-coat anything, either. One person’s opinion, so take it all with a grain of salt.
We were going to title this story, “You Get a Bankruptcy, You Get a Bankruptcy, You Get a Bankruptcy,” but realized Oprah’s show has been off the air for more than a decade and the kids would’ve had no idea what we’re talking about.
Let’s start with the low-hanging fruit first.
1. The Sphere at Venetian
The Sphere cost $2.2 billion to build. The projected budget was missed by more than $1 billion. U2 is the venue’s first residency, which sounds great, but the band is keeping 90 percent of the box office. The Sphere’s owner, Madison Square Garden, sold its stake in Tao Group to help pay for the venue. It won’t be enough. The business model is $50 movies.
2. Fontainebleau Las Vegas
Somebody has to say it. Everyone is thrilled Fontainebleau is opening. We’ve heard it’s gorgeous inside. People will love it. Love is unlikely to be enough to help Fontainebleau, especially with massive debt and overly-ambitious and optimistic expectations for business levels at a resort without a database (other than from its Florida hotel, which doesn’t have a casino). Fontainebleau is throwing money around like crazy, over-hiring, over-paying for the people its recruiting (Wynn threatened a lawsuit for poaching, since shelved), and reported luring DJs away from Resorts World. We’ve heard lots of wild numbers about what Fontainebleau will need to make just to break even, specifically, upwards of $4 million a day. The owner, Koch Industries, has deep pockets, but reality is going to set in very quickly after opening. There’s too much room supply and too little demand. Gird your loins.
3. Virgin Las Vegas
Virgin Las Vegas is struggling badly, and even laypersons can see the problems at the often-empty resort. While there’s a glimmer of hope with the hiring of a new resort president, Cliff Atkinson (who was the president of Fontainebleau for a few months before parting ways due to friction with ownership), it seems likely Virgin is going to need a financial restructuring to stay in business.
4. Resorts World
Resorts World is beautiful. It’s massive. It’s ambitious. And it’s in trouble. The resort cost $4.3 billion, and while management claims its results are improving, it’s far from being a success. Resorts World suffers from the aforementioned database challenges, and has also taken a hit because international travel and conventions haven’t recovered following the pandemic. The opening of Fontainebleau complicates things even further for Resorts World, along with the rumored nightlife shake-up. A rent-paying attraction, Transfix, recently closed (soon to file bankruptcy itself), and the resort’s leadership is once again in hot water.
5. Palms
So many great resorts, so much chatter about “not meeting expectations.” Palms isn’t really a “possible bankruptcy” situation, so much as an ongoing fight to meet even modest revenue goals. Palms is owned by the San Manuel tribe, which has more cash than it knows what to do with, but its foray into the Vegas market wasn’t intended to be a non-profit. There have been rumors of a looming leadership shake-up at Palms. There’s a lot to love about Palms, but its location is tough, ditto Rio. Rio didn’t make our list, because it’s looking more like a fixer-upper that owner Dreamscape is going to flip, so while it’s likely to be on a future list of financially-challenged casinos, for now, it’s all about the renovation and getting our beloved Rio back.
6. Sahara
When was the last time you heard anything about Sahara? Exactly. We stopped talking about it after being the target of a baseless lawsuit (we beat their collective ass and Sahara paid substantially more than $95,000 of our legal fees), and everyone else stopped talking about it, too. At the time, the rumor was the resort could close. It didn’t. (Nobody said it would.) Honestly, nobody really understands how it’s still operating. If any casino ownership deserves the scrutiny of gaming regulators, it’s Alex Meruelo, the guy who took advice from a parade of idiots (including his P.R. and legal teams) and sued one of the resort’s biggest supporters. Meruelo has sunk a lot of money into Sahara, and we look forward to visiting again when new, better ownership picks up the pieces of this otherwise great resort. We assume Sahara’s EB-5 investors will never see a penny (SLS, the previous owner, got $399 million from 798 EB-5 investors, Meruelo presumably inherited the debt), and unless Sahara is a giant tax write-off, we can’t imagine it can continue much longer. Oh, and to be clear: Nearby Fontainebleau isn’t “rejuvenating” the north end of The Strip, the A’s aren’t going to the Las Vegas Festival Grounds (across the street) and All Net Arena (next door) is never happening.
7. BrewDog
Those are the biggest players with trouble on the horizon, but there are other venues with glaring financial challenges. We made our first visit to BrewDog on the Las Vegas Strip and it’s an amazing venue. It was also largely empty. There’s zero visibility from the street, the location is strange (it sits above an Olive Garden and Target store) we shared an internal document saying its hours are decreasing and rumblings of management chaos has been ongoing. Also, the place cost $17 million to build. We enjoyed it, but it just screams desperation.
8. Ocean Prime
Ocean Prime Las Vegas recently opened at “63,” sort of attached to Shops at Crystals on The Strip. The restaurant cost $20 million to build. We don’t know much about it, and haven’t eaten there, but from what we’ve heard, rough seas lie ahead. There’s just too much competition, and the only folks who can afford these prices are using corporate credit cards. They’re using them at convention-friendly hotels, not at some high-end shopping mall on The Strip.
That’s our list, for now.
There are other causes of concern, but our crystal ball is a little foggier on those. “Awakening” at Wynn springs to mind, as the production cost $150 million, more than twice the disastrous “R.U.N.” that nearly pushed Cirque into bankruptcy. “Awakening” is dramatically better after a “reimagining,” but prices have been lowered, so it’s still a loss leader. One to watch, literally and figuratively.
Again, we hope we’re wrong about all these predictions, even about Sahara. When businesses find success, it means people have jobs and Las Vegas visitors and residents have more things to do. Success also means businesses have more money to build newer, shinier things.
The reality is not everything can be successful, and sometimes there has to be an assessment of what went wrong and how to fix it. Sometimes that assessment involves a bankruptcy or reorganization. There are other options, of course. Sometimes financial distress can lead to a closure, or sometimes a sale. Las Vegas abides.
Now that we’ve gotten that out of our system, we’ll return to our usual upbeat cheerleading and unbridled enthusiasm for all things Las Vegas. Except Criss Angel, of course.
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