~ 1946 The Las Vegas Strip Begins

Humble Beginnings

• Strip only 3.8 miles long

• Consisted of only 2 resorts– El Rancho Hotel

– Flamingo Hotel

• Now consists of 20 plus

~ 1960’s The Rat Pack Era

Unforgettable Times

• Las Vegas picks up momentum and growth• Individual private owners

– Fueled by a cast of characters like:• Benny Binion• Howard Hughes• Meyer Lansky

• Entertainment started to Grow– Rat Pack– Elvis

~ Late 80’s Early 90’s ~ Evolution of the Strip

Evolution of The Strip

• Beginning of the Mega Resort– Steve Wynn Era

• Financed by Wall Street– Through junk bonds and Michael Milken

– At a cost of $630 million in 1989

– Had to generate $1 million daily to cover expenses

~ Consolidation~ 1995-2005

Consolidation• MGM purchases Mirage Resorts for $6.4b

– At the time, largest merger in gaming history

– Included Mirage, Bellagio, Treasure Island, and Golden Nugget

– After acquisition, MGM controls 26% of Strip’s hotel rooms and 50% of Las Vegas High Roller market

• Throughout the past 15 years Harrah’s has aquired multiple properties including Caesars Entertainment for $9.4b in 2005.– After acquisitions Harrah’s became the worlds largest

casino operator. Controlling 31% of strips hotel rooms

~ City Center~ 2006-2010

City Center

• Largest private construction project ever undertaken

• Original budget $4.5b

• Final price tag $8.5b

• Added an additional 5,895 rooms to the local market

~ 2010 - ?

Current

• MGM Mirage sells assets while building City Center• TI Purchased for $775M by Ruffin Acquisitions

– $500M paid in cash which helped MGMM’s cash flow• Icahn purchased Fountainebleau for $156M in cash

– $1- $1.5b to finish project. This adds 4,000 rooms to the Las Vegas Strip

• Echlon Place construction on hold until 2012• Rate war for Occupancy (Industry)• Visitors paying 50% less in rate than last year and

spending less money

Las Vegas Gaming and Resort Industry

•Industry Overview

•Evolution and Reinvention

•Revenue Streams

•Q&A

Industry Overview• Gaming Control Board (GCB) Regulation

– Collects Gaming taxes – which funds 33% of state’s budget

– Gaming tax rate 6.75%

– Compliance

• All Nevada Casinos must comply with the “Minimum Internal Control Standards” (MICS) enforced by the GCB

• 2 years audits conducted by the GCB

– Enforcement

• Resolves customer disputes

• Allows customers to disputes either W/L of $500 or more with a GCB agent

Industry Overview• Uniqueness to Industry• Complimentary Income (Phantom Revenue)

– Revenue/Expense– % of cash to comps

Comp 10%

Cash 90%

Industry Overview

• Promotions and Special Events– Designed to drive Business in casino and hotel

• Players Club (Loyalty Program)– Earn Freeplay

• Table Games Tournaments– Win Promotional Chips

• Slot Tournaments and Giveaways

• Major Sporting and Holiday Event Parties

– Customer incentives to high end players• As high as 20% discount

• Gifts

Evolution and Reinvention• Capital Investment

– Consistently putting cash flow back into property• Evolution creates synergies and competition• Competition drives properties to continually evolve

– Nightclubs– Tattoo shops– High end dinning– Retail– Entertainment attractions

• Competition in this industry is good for guests– Keeps Vegas fresh and unique– Constantly on the cutting edge

Evolution and Reinvention

Revenue Streams

• Gaming generates 44% of total revenue

• Non Gaming generates 56% of total revenue

Revenue Streams

Tables 28%Slots 69%Other 3%

• Casino Revenue– Table Games– Slots – Other (Race & Sports, Poker, and Keno)

Revenue Streams

Hotel 41%F&B 29%Retail 6%Entertainment 20%Other 4%

• Non Gaming Revenue– Hotel– Food and Beverage– Retail– Other (Spa & Salon, Wedding Chapel, Etc.)– Entertainment

Q & A