The New Year has its restorative elements—the celebrations, the resolutions, the fresh hopes. But, against the background of the Great Recession, it’s also another occasion to fret about what lies ahead for Las Vegas casinos.
Last year began with indications of a full-fledged recovery, but that rebound lost steam in the summer. It was a paradoxical year, as more people than ever came to Las Vegas, but they didn’t spend money the way they once did. It doesn’t look like anyone’s betting on a rebound in 2013, either. Instead, most operators have positioned themselves to take advantage of 2014:
• Caesars Entertainment will open the Nobu Tower at Caesars Palace this year as a “hotel within a hotel” (an increasingly popular concept on the Strip), but the company will mostly focus on developments across the street, as Linq gets close to opening toward the end of the year and the shuttered Bill’s Gamblin’ Hall and Hotel is transformed into a boutique lifestyle concept hotel (which seems to be code for “high-priced rooms for people who go for bottle service”).
• MGM Resorts International has less construction in the pipeline, but it won’t be idle, either. THEhotel at Mandalay Bay is being transformed into the Delano Las Vegas, which will be run by the Morgans Hotel Group. Morgans once owned the Hard Rock Hotel and was slated to bring two brands to Boyd Gaming’s Echelon development. Having sold the Hard Rock and seen Echelon mothballed indefinitely, this is the best way for the company to get a foothold on the Strip. Work might be done by the end of the year.
• The big question is whether either MGM or Caears will divest any properties. After the onset of the recession, deconsolidation on the Strip seemed like a given: Both companies appeared to be too debt-heavy to stay without unpacking the portfolio a bit. But outside of MGM’s sale of Treasure Island to Phil Ruffin in 2009, deconsolidation has been illusory. With margins not improving much and debt expenses still looming (despite both company’s heroic efforts to restructure their liabilities), 2013 might be the year that we see some properties sold off. Certainly the end of 2012 saw rumors involving properties from Monte Carlo to the Rio to The Mirage. As always, if the price is right, just about everything is in play.
• Both Wynn Resorts and Las Vegas Sands will, for the most part, sit tight in Las Vegas. The majority of revenue for each company now comes from Asia, but both have domestic growth opportunities as well: Massachusetts for Wynn, and the potential of Florida for LVS. With no reason to add high-end room or casino capacity in Las Vegas in the foreseeable future, neither company will make many moves on the Strip.
• The Riviera will continue its rebranding effort, hoping that a focus on value resonates with visitors. It’s been dealt a good hand by Caesars, which in closing Bill’s and renaming Imperial Palace has removed two of the better-known value options from the mix. With Fontainebleau and Echelon years from opening (if they ever do), the only other potential lift on that end of the Strip comes from the possible addition of a water-park-type development at Circus Circus and the development of SLS Las Vegas—should SBE Entertainment get its financing in order, which is by no means a given.
• LVH will, hopefully, acquire a proper name and a renewed reason for being, as the property has struggled since losing the Hilton badge.
• The Tropicana will look to its affiliation with DoubleTree to boost occupancy and the next-door Bagatelle to bring some spark to the property, but it faces tough competition in the mid-tier market.
In the boom years, adding capacity was a surefire way of making money. Now, it’s more about finding new ways to attract people who are already coming here. Margins may be tighter in traditional casinos, but nightclubs have demonstrated that, for the right customers, Las Vegas remains a growth market.