Here are the BYD notes from our Las Vegas trip last week
Las Vegas Locals:
- BYD doesn't think the unemployment level matters as much as consumer confidence
- People have adjusted
- They believe that they are at a bottom
- We were surprised they weren’t more negative on this market given current economic factors
New supply in LV Locals:
- M resorts, Cannery East, Red Rock, South Coast, Aliante. (Cannery, Aliante, M resorts)
- There is little change in the promotional environment other than some more free play. There has been a rational response to M coming online
- Going forward, there is not a lot of new stuff coming online
Blue Chip:
- It is too early to tell about Firekeepers. It is likely to steal a lot more business from Four Winds as it is within an hour from their property
- Competition is as rational as they could hope. Wouldn't want to open the tower in this economy and they aren't getting the return they want
Borgata/AC:
- MGM in AC - If MGM has to exit - they may not want to buy the other half of Borgata. They can't buy the other half without causing some covenant issues/amending existing agreement
- Impact from PA - There is very little impact from Bethlehem. Table games will probably have an impact on them
- AC - Revel won't be good for them. They think that the timeline laid out was aggressive
- There is $20mm of dividend payments from Borgata annually
Stations:
- They are very interested in Stations
- Offered $950 million on the OpCo – can do that under the existing financing
- Timing is uncertain – they have an exclusivity period of 120 days
Echelon
- Pretty buttoned up on capex
- They had $90mm to payout and it’s mostly done
- No deadline to do anything there – need an economic recovery and with it, clarity on what is happening on the Strip
- $700mm was of construction costs incurred on the property
Capex:
- They are still buying slots
- Spending 50mm on maintenance (used to be 120mm) – slots was 50% of that but now it is more than 50%
- They can maintain the lower level of capex for 2 years
- Properties are very fresh and there is no need to increase the level of capex at present
- All cash is going to pay down debt
- Final payment on Danai Jai Alai – $47m + interest will be made in Q12010
Credit facility:
- May 2012 – maturity of bank line
- Going out beyond 2012 for a bank line is too expensive
- They will leave the credit facility in place for now
Acquisitions:
- No fixed multiple for an asset
- One problem is that they can't buy anything cheap
Downtown:
- Still a good niche operation
- $700-$1,500 package deal from Hawaii
- It is difficult to steal from the downtown market because everything is cheaper there - harder to relocate
- 3Q - will not be an easy comp but 4Q will be
- For downtown - need to see fuel indices
Louisiana:
- Never really participated in the bubble
- Oil prices are helping. Delta downs - had easy comps due to the hurricane
- They are doing creative marketing
- Treasure Chest – there is more competition. Plus Katrina money is leaving. Business is derived almost exclusively on a local basis; there is no hotel at the property
General commentary:
- It’s all about spend-per-visitor
- It’s just a question of confidence
- Non-rated business got hurt the most - lower priority. They are higher margin customers too