Las Vegas, like many of its visitors, goes from boom to bust fairly often. It’s a gambling town and people (developers are reputed to be people) have a tendency to push all their winnings back on the table for the next roll.

This Wall Street Journal article describes how the boom-to-bust affects workers and businesses. In a nutshell, Las Vegas bet big on both tourism and business conventions. The current economic malaise botched both bets.

The $3.1 billion Fountainebleau project, for example, went into bankruptcy last month. ENR states that the project sits vacant at 70% completion with lawsuits piling up. The Bank of America estimates it would take $1.5 billion to complete the project and the finished value would be only $1.8 billion. So the 3,300 construction workers who were on that site in the Spring aren’t likely to be coming back. The 3,400,000 sf casino, hotel and retail complex seems destined to sit empty for a long time.

Failures like the Fountainebleau go beyond my cognitive abilities. I just can’t understand the scale. Neither do I have any sense of how a project like that eventually gets untangled. I can’t conceive of the final project resolution.

The $8 billion Las Vegas City Center project, on the other hand, seems to be likely to be completed this year. Projected to employ 12,000 people, it will help the local economy. The additional 500 hotel rooms inserted into the market will probably further drive down the daily rates.

The graphic below from the WSJ article show the many projects that are stumbling.

So if you’re working in a market that’s taken a hit, but not fallen off the cliff (like Las Vegas), you should probably take a moment to look on the sunny side. Always on the sunny side.

“Keep on the sunny side, always on the sunny side,
Keep on the sunny side of life.
It will help us every day, it will brighten all the way,
If we keep on the sunny side of life.”

When TBW and I were in Las Vegas a few weeks ago to see the World of Concrete exposition, we stayed at the Bellagio Hotel. Next door, MGM Mirage is building, “The sort of project God would build, if He had the money,” according to one of the casino competitors quoted in The Economist. The $8.6B City Center project circles the drain, perhaps to become one of history’s great design and construction failures. Dubai  World is a joint venture partner and has sued and refused to provide the next $200M payment.

The Fountains at the Bellagio Hotel

I’ve written about this project before, the concrete crews changed some rebar layouts in the foundations and the building inspectors claim the construction inadequate. They all compromised by changing from 80 stories of condos to 40 stories. I can only imagine what that does to the pro forma.

Many of the casinos expanded, believing that Las Vegas was immune to the effect of an economic downturn. Turns out, they aren’t. The gambling revenues fell 10% last year and look to continue to decline this year. With lots of vacant room now, the City Center project will expand that glut…if MGM Mirage avoids bankruptcy, actually gets the financing done and opens the facility.

City Center Cranes

In a classic construction management dispute, Dubai World claims in its lawsuit that construction costs have spiraled out of control. MGM Mirage claims all the budgets have been approved by the partners. As in, “Oh, did you expect me to look at that when I signed it?”