Las Vegas: A tale of two hotels

"It's disheartening to see the cranes just sitting there with their booms on the ground and nobody on the construction site."

Fontainebleau hotel Construction at the Fontainebleau hotel was halted in 2008

Robert Van Ausdal has worked in the construction business in Las Vegas for fifteen years and has witnessed first-hand the dramatic collapse of the industry.

He is describing the construction site of the Fontainebleau, a 63 storey mega-hotel.

The planned development featured more than 3,800 rooms - but construction was halted in the spring of 2008 with the hotel around 70% complete.

It remains the biggest monument to the city's property crash, an enormous rusting hulk at the end of the Las Vegas Strip.

Mr Van Ausdal worked as a construction glazer, installing glass windows in the city's high-rise hotel projects.

He now finds part-time work installing shower screens in people's homes.

Line of credit

Property prices in Las Vegas have fallen more than 60% since their peak in 2006.

Condominium sales were supposed to have funded a large portion of the Fontainebleau's construction cost.

The Cosmopolitan opening party The Cosmopolitan opened with a party in December 2010

When the property market crashed this source of funding evaporated and the developer's bank, Bank of America, withdrew their line of credit.

The developer, Fontainebleau Las Vegas LLC, was forced to seek Chapter 11 bankruptcy protection. All building work at the site has been halted for three years.

The hotel's construction costs were budgeted at $3bn, but last year the corporate financier Carl Icahn purchased the entire project for just $156m.

"Mr Icahn bought it as a real estate play. The value of the steel and glass on the site is worth more than what he paid for it," says David Schwartz, director of the Center for Gaming Research at the University of Nevada Las Vegas.

Many doubt that the project will ever be completed.

The furnishings were auctioned off in October 2010.

The hotel's rugs and mattresses were bought by the Plaza Hotel and Casino, which is currently being refurbished.

Massive loss

Just down the road from the Fontainebleau sits the Cosmopolitan, the last large hotel to open in Las Vegas.

David Schwartz in front of the Fontainebleau Hotel construction site David Schwartz: 'There are too many rooms and not enough people"

The Cosmopolitan's story is eerily similar to the Fontainebleau, but with a very different ending.

The project was also facing foreclosure in 2008 as condominium prices collapsed.

The multi-billion dollar hotel was financed by Deutsche Bank.

With no prospective buyers and facing a massive loss on their balance sheet, the bank stepped in and took control of the project.

In gambling terms, Deutsche Bank 'doubled-down' on its bet, investing a further billion dollars to bring the hotel to completion.

David Schwartz thinks the bank made a sensible decision.

"They tried to sell it, but couldn't find a buyer, so they decided to go it alone, open it and hopefully run it themselves for a couple of years until the market turns around and then they can sell it for a profit."

The Cosmopolitan opened in December of 2010.

Its nightclubs and restaurants have proven to be a hit on the Strip.

'Leave Las Vegas'

For a city which once had more than a hundred major hotel construction projects planned it is hard to guess when the industry might come back.

The Black Keys perform at the Cosmopolitan hotel's Marquee nightclub The Cosmopolitan's nightclub hosts international DJs and bands such as The Black Keys

Anthony Marnell is a Las Vegas architect who built many of the city's major hotels including the Mirage, the Bellagio and Wynn Las Vegas.

He anticipates that more large hotels will close down before any new ones are opened.

"In thirty-five years of my career here in this town, 20% of the hotels were always going broke," he says.

"The difference now is that 60% of hotels are losing money. Capitalism is in full play. The strong will survive."

Asked for his advice for a construction worker in the city, Mr Marnell doesn't mince his words.

"Go someplace else. Leave Las Vegas. There are no big construction projects happening here, but nationwide there are projects to be found in places like Baton Rouge and New Orleans."

For construction worker Robert Van Ausdal, Mr Marnell's advice is hard to accept.

"I'd like to stay here - our roots are planted pretty deep. But if work comes from elsewhere I'll have to consider it."

Local unions have been helping Las Vegas workers leave the city and find other projects elsewhere in the US.

"It might be a little less money and it will be difficult to make the move, but there's talk about some construction work coming up in San Francisco, so we'll see."

Optimism

So when will Las Vegas see the next multi-billion dollar hotel project?

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David Schwartz says the answer is found in the economic indicators.

"The unemployment rate will have to fall and consumer confidence must rise," he says.

"The Strip is over built right now. There are too many rooms and not enough people.

"We're going to have these derelict hulks for about ten years, then the economy will eventually get better and people will invest five billion into building the biggest and greatest casino ever."

In Las Vegas, optimism reigns eternal.

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