Aug. 7, 2008

Leave Boyd alone! The gaming giant's delay of Echelon is the prudent move

By STEVE FRIESS

Within hours of last week's not-terribly-shocking news that Boyd Gaming was halting construction on its $4.8 billion Echelon project, message boards and blog comment sections across the web filled with a reaction that surprised me.

"Clearly Boyd was way over their heads with this one," one typical fellow wrote on my blog. "They are not really known for running a high-end casino. The Borgata [in Atlantic City] was a joint-venture deal. A few years ago, I predicted that there was no way Boyd would complete that project under their company name."

This was not an unusual response to the news. What was unusual was that I felt suddenly quite defensive on behalf of a Vegas casino corporation that seemed to be unfairly criticized and badly misunderstood.

Granted, Boyd's hand was forced by the drying up of their funding sources, but that's no fault of theirs; MGM Mirage, the folks behind the would-be Plaza, Station Casinos and Harrah's all are facing struggles brought on by increasingly reticent creditors. Nobody blames the management abilities of those companies for being impacted by a sour economic climate.

But is the construction halt at Echelon the result of gross mismanagement and over-their-heads ambition?

Actually, the delay of the addition of another 5,000 or so rooms is one of the best things to happen to Vegas lately. This decision is responsible and wise. Finally, someone has a sense of moderation and reality.

What never made any sense was the conventional wisdom that next year was the year Vegas would find its groove. For the longest time, those of us with rapidly depreciating homes and investment properties kept hearing that 2009 would bring relief and higher values once the quadruple threat of Encore, CityCenter, Echelon and Fontainebleau kicked into high gear. Thousands of new jobs would automatically mean more demand for dwellings and so on and so forth.

I can't have been the only one to wonder who the hell would be coming to occupy all those snazzy new hotel rooms, eat at all those fancy restaurants, see those $100-a-seat shows.

The oxygen of the ever-growing organism that is Vegas is not new construction and additional hotel capacity, as much as some would like to believe that.

No, this town only thrives when it is accompanied by an ever-growing number of tourists and conventioneers. Has anyone looked at the tourism figures lately? Taken note of what direction the number of flights into Vegas is going? Checked in on attendance at the biggest trade shows? Down, down and down.

The broader economy must heal itself first before people find some money left over with which to travel. How likely does it seem that the misery brought on by sky-high fuel prices and the housing-values disaster will suddenly subside by, say, this time next year?

But the thing that irked me most was how easy it seemed to pick on Boyd for getting caught up in this mess. The inability to keep the spigot of capital financing open in this challenging day and age has absolutely nothing to do with whether Boyd has the ability to operate a high-end Vegas resort.

It is true that Boyd's operations heretofore have been in the local Las Vegas market, and none of them would ever be compared with anything considered as upscale either by Strip or off-Strip standards. But so what? The same went for Station Casinos until they opened Green Valley Ranch and, in particular, Red Rock. By the time Frank and Lorenzo Fertitta announced their $10 billion Viva project plans next to the Strip along Tropicana earlier this year, nobody was wondering whether they could do it.

And contrary to the dismissive comments about the Borgata being a joint venture-with MGM Mirage, for the record-it is Boyd that operates it. So Boyd deserves the credit for the fact that from the chattering masses of websites like TripAdvisor.com to top travel media like Travel + Leisure, there is nothing but praise for the place. "Move over, kitsch; step aside, tackiness," gushed the Associated Press.

There really shouldn't be any room for schadenfreude in the Echelon announcement, not like there was the week before when the Trump International Tower in Las Vegas laid off 20 percent of its workers. The difference is that the Trump people, from their helmet-haired leader on down, are an exceedingly arrogant bunch who believe they can call the place an "incredible success" and the world will believe it to be so. After KVBC's Steve Crupi broke the story of the dismissal of one-fifth of the Trump workforce, Donald Trump called Crupi to cuss him out and insist these weren't layoffs at all. Several dozen people are out of work and aren't getting paid, but Trump's main concern is his image.

In the Echelon case, there's no such hubris. It's just not a part of the Boyd corporate culture. Those who know William S. Boyd, the executive chairman, know that. I see him at Bagelmania every so often, and although I've never opted to bother him, I've watched him interact with friends and admirers with tact and demure pleasantness. You'd never know he was a multimillionaire.

What's more, it's not like anybody did anything wrong. When they planned this project, the economy was roaring. Now it's not. So they're stepping away from the table for a breather, but they'll be back.

And when it opens and is terrific, I hope those who discounted them unfairly will acknowledge their error. But it's the Internet, so I suppose that's pretty unlikely.

###