Las Vegas glam dulls during world economic recession, by Scott Pape - Herald Sun - 1st May 2009

If you took a fleeting look as we drove down Hollywood Boulevard in a convertible, you might have mistaken us for celebrities.

Or at least that's what we were hoping.

It was finally time to leave Los Angeles and drive to Vegas, baby!

Riding shotgun with me through the desert was an Irish backpacker from Belfast whom I'd bonded with over an atrociously bad hot dog a few nights earlier (based on the recommendation of the Lonely Planet, who I swear didn't eat there).

Screaming through the desert at sunset with the wind in our hair, we sang Beach Boys songs at the top of our lungs to get ourselves hyped up for what was to come: the legendary Sin City.

This was Irish's first trip to the Strip, and he was understandably excited to be going to the world's biggest amusement park for adults.

What happens in Vegas, stays in Vegas, reads the billboard as we enter Nevada - yet I would soon discover that statement couldn't be further from the truth.

Fifty miles from Vegas, the horizon starts to light up, becoming more intense with each passing song. As we enter the infamous Strip, Irish is impressed (if not a little overwhelmed).

I, on the other hand, have something to compare it with - and something is amiss.

Eighteen months ago when I was last here, the joint was jumping. Today it seems tired.

I drop Irish off at a backpacker hostel at the seedier end of the Strip and make my way to the Stratosphere Casino Hotel, where a room costs $US29.95 a night - or a couple of 99 shrimp cocktails more than Irish paid to sleep with strangers in a shared dormitory.

Las Vegas needs to maintain its hot status, so you won't see much advertising of the steep discounting that's occurring (you can go up-market and stay at the Las Vegas Hilton for less than $50 a night).

It's simply a case of supply and demand.

Vegas is hurting badly because of the recession.

Gambling revenues were down nearly 20 per cent last month.

Apparently about 200 conventions (the Strip's bread and butter) have been canned as companies worry about the reputational damage of their executives being seen partying it up as their businesses struggle.

All this goes some way to explaining why Jamie Packer has been looking a little blue of late.

The Wall Street Journal recently reported that at the peak of the market (about the time he was buying) the listed market value of the gaming industry worldwide was said to be about $100 billion, yet by February this had fallen to just $11 billion.

Many of the legendary Strip owners, like pioneer Steve Wynn, are reeling from taking on too much debt in the belief that the boom times would last forever.

While Wynn tries to avoid hitting the wall by renegotiating with his lenders, it's a similar story for many of his employees.

FOR the past 18 months I've been writing about sub-prime - people borrowing more than they could afford, and going bust - safely from suburban Australia.

Yet today it's all become very, very real. Las Vegas is sub-prime central - the worst city in the country.

One out of every 22 homes is in some form of foreclosure. The Case-Shiller Index shows a decline in prices of 44 per cent from the 2006 peak.

Eager to see this first-hand, I drop the top, turn off the Strip and follow the signs to downtown Las Vegas.

In less than five minutes the tacky lights and showbiz are gone, and in 10 minutes I find myself in a ghetto.

Hundreds of people are living in tents beside the road, sleeping in bus shelters or on the street, or squatting in once boarded-up buildings.

The traffic isn't moving, which gives a good number of the homeless an excellent opportunity to tell me how much they admire that a rich white guy driving a convertible has seemingly decided to take his life into his own hands.

Apart from a night in Townsville a few years ago, I've never been more scared.

Many of these people moved to the desert on the promise of plenty of jobs and cheap housing.

Visiting gamblers swallowed the same story and placed an expensive bet by buying second homes. Just like in the casino, the odds have played against them.

Yet this is America, the land of opportunity, and I can still see some people turning lemon into lemonade.

Jim LeBaum, of Squatter Alert, has a thriving business monitoring some of the tens of thousands of homes that sit empty.

Many of these houses fall prey to looters (who strip them of vanities, benchtops and kitchens, which they sell for scrap) and squatters, some of whom include families that have had their homes repossessed by the banks.

Realtor Jennifer Martin runs House-Hunting Safari - taking bargain-hunters through the sub-prime jungle while she's decked out in a safari suit (this is Vegas after all).

According to her website, the tour will show you homes reduced up to 70 per cent from peak values - some even more - priced from $US25,000.

My brief stayover has shown me that the sign we saw earlier was wrong: what happens in Vegas does not stay in Vegas.

Rather it's a mirror for what's going on in the rest of the country, and the world.

Tread your own path!

barefootinvestor@heraldsun.com.au

www.barefootinvestor.com.au (Credit: Herald Sun)

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