Bright lights, big bills dim Las Vegas casino profits
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LAS VEGAS - With its mammoth, beckoning signs and marquees, the hotels and casinos along the Las Vegas Strip are ground zero for dazzling displays of light.
All that glitter comes at an increasingly high price these days, as energy costs throughout the West threaten to short-circuit the state's top industry.
The amount of electricity used by a mega-resort with 3,000 rooms would power 9,000 three-bedroom homes, said Lauran Watson, an executive for NevadaPower. At peak demand, just one of these resorts uses more megawatts than a large hospital campus.
MGM Mirage, the largest owner of hotel-casinos in Las Vegas, has budgeted $39 million for power costs this year compared with last year's $33 million - an 18 percent increase, said Bobby Baldwin, president of the company's Mirage division. Even that may not be enough.
Glenn Schaeffer, Mandalay Resort Group president, predicts his company could see its power costs rise as much as 30 percent during the next year.
The increase could translate into trouble on Wall Street.
"The California energy crisis, as well as rising power costs in Nevada, remain a potential risk to earnings," said Jason Ader, a casino analyst for Bear Stearns.
As gambling corporations continue to absorb double-digit rate increases, many are looking to boost efficiency without sacrificing sparkle.
"We are in the bright-lights business," Schaeffer said. "People want the lights turned on."
Earlier this month, Nevada's major casinos announced plans to cut power usage by 20 percent. "As the No. 1 industry in Nevada, we know citizens look to us for leadership in difficult times," said Bill Bible, president of the Nevada Resort Association.
Bible said some Nevada casinos have installed "smart" thermostats to monitor heating and air conditioning in guestrooms.
The MGM Grand remodeled its 5,000 guestrooms and suites to feature low-watt fluorescent bulbs that use less than half as much energy. Casino-floor lighting also has been changed, says spokeswoman Kristin Koca.
Treasure Island's hotel-casino parking garage is switching to a system using sodium bulbs that use 30 percent less energy but provide the same light, Koca said.
Don Gold, a sales representative for Lights of America, said he is working with a number of Strip hotel-casinos. "A 100-watt incandescent bulb uses 100 watts of energy," he said. "A 100-watt fluorescent bulb is brighter, yet only uses 25 watts. So the 75 percent savings in energy and dollars is a considerable amount in hotel-casinos that are 24-7."
But Schaeffer said conservation efforts can only go so far.
"You've got to leave the lights and the slot machines on," he said. "You can do things here and there, but there's no escaping rising prices."
The light bulbs that light up the Las Vegas skyline are the least efficient source of light, said Firmin Berta, a consultant for Nevada Power. The sign in front of the Sahara, for example, has 7,250 incandescent lamps, each 25 watts.
Just one video-poker machine uses 154 watts as gamblers try to deal themselves a winning hand. That number more than doubles during payout, said Jen Edison of Mikohn Gaming. That's for one slot machine. The average casino has more than 2,000.
As the hotel-casinos gobble up power, utilities keep raising rates. The state Public Utilities Commission has approved a $311 million rate increase for Nevada Power and Reno-based Sierra Pacific Power, both subsidiaries of Sierra Pacific Resources.
Utility officials say the increases are necessary to keep the lights on. Nevada Power also has asked for voluntary cutbacks from its largest customers.
"One of the hotels will stop using their water fountains, another their volcanoes, others will help by running their backup generators," spokeswoman Sonya Headen said. "It's the last resort."
If the lights of Las Vegas and Reno dim, it could spell economic doom for the state, with fewer tourists, lower gaming receipts, perhaps layoffs. Even if Nevada remains aglow, there could be problems if its giant neighbor continues with its power struggle.
"Brownouts in Northern California affected Reno," said Bill Thompson, a gambling-industry expert and professor at the University of Nevada in Las Vegas. "If that happened in Los Angeles, I think people won't be coming."