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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Future of Gaming: A Developing Interest

20 December 2004

The scheduled opening in April of the $2.5 billion Wynn Las Vegas may be the catalyst for the newest wave of casino construction along the Strip and around the valley.

While the 2,800-room resort readies for its unveiling, other projects of diverse sizes, scopes and concepts are in varying stages of development.

Some, including the $475 million Red Rock Station at the valley's western edge, are well under way.

Others, like the $1.6 billion Palazzo next door to The Venetian, are in their initial construction phases.

And many, such as the 63-acre Strip site that currently houses the Stardust, haven't even made it off the architect's design table.

What's known, however, is Las Vegas's current inventory of nearly 129,000 hotel rooms will increase well into the next decade.

History has shown that development of one significant hotel-casino usually foreshadows future growth.

"Usually, there is a flurry of activity after one megaresort opens," Applied Analysis gaming analyst Brian Gordon said. "That seems to be the case here because we're already starting to see some activity, be it new resorts or room expansions at existing properties. It seems like were getting ready to begin the next cycle in Las Vegas' continuing development."

Susquehanna Financial Group analyst Eric Hausler said the opening of Wynn Las Vegas will set the bar for the Strip's next wave of resort properties.

"Some projects are already under construction, but what we'll see following the Wynn opening is the beginning of redevelopment plans for some of the major sites on the Strip, such as the Stardust," Hausler said. "There will be many factors figured in, such as timing, financing, design, and what's on the balance sheet. What's clear is that we're kicking off another generation of resorts."

In 1998 and 1999, four major hotels encompassing 12,000 rooms opened in Las Vegas, which was the last major construction surge.

In the past 18 months, several major resorts added room capacity and the last of those expansions are nearing completion. Bellagio is expected to open its 928-room, $375 million Spa Tower by the end of the month while Caesars Palace hopes to complete its 949-room, $280 million tower in early 2005.

Once Wynn Las Vegas opens, attention will focus elsewhere, although Wynn Resorts Ltd. announced in November a $900 million, 1,500-room expansion to the property even before the first guest has arrived.

"That shows that we're entering another construction phase," Gordon said of the Wynn expansion that has listed a completion date of 2007.

Already under construction is the Palazzo, a 3,035-room complex and sister resort to The Venetian that Las Vegas Sands expects to open in the second quarter of 2007. The company said the combined compliment of more than 7,000 rooms makes the Venetian-Palazzo hotel complex the world's largest of its kind.

Just up the street from Wynn Las Vegas, the 63-acre site that houses the time-worn Stardust offers Boyd Gaming Corp. the prospect of adding the company's own unique signature to the Strip.

Company spokesman Rob Stillwell said the initial master-planning for the Stardust site is in its infancy. The company spent $43 million in November to buy the final 13-acre piece to the Stardust puzzle. Many analysts believe Boyd will try and mirror the Borgata, the highly successful resort it operates in Atlantic City, on the location.

Similarly, MGM Mirage is looking at developing a 66-acre parcel between Bellagio and Monte Carlo as Project CityCenter, a $3 billion to $4 billion master-planned complex that would include a 4,000-room hotel and casino, three 400-room boutique hotels, 1,650 luxury condominium units and 550,000 square feet of retail.

"Those sites will take time to develop," Hausler said. "That will allow for the shake-up after Wynn opens."

Hausler added the site of Tropicana could also lend itself to future expansion.

After Wynn Las Vegas, the newest properties to open will happen outside of the traditional Strip corridor.

Red Rock Station, a 400-room resort Station Casinos is building near I-215 and West Charleston Boulevard, is expected to open in early 2006.

South Coast, which was started by Coast Resorts but is now part of Boyd Gaming Corp. following the companies' merger, is also slated for an early 2006 opening. The hotel-casino at Las Vegas Boulevard and Silverado Ranch Boulevard is expected to serve locals in the valley's southern portion. The $350 million property will have 660 rooms as well as a 4,400-seat equestrian center.

Station Casinos also has two sites along the I-215 beltway -- a 67-acre parcel near Rhodes Ranch (dubbed Durango Station) and a parcel near Town Center Drive.

Station spokeswoman Lesley Pittman said that once Red Rock Station is complete, the company's attention will turn toward the Wild Wild West, a small casino on 48 acres at Tropicana Avenue near Industrial Road. Station has submitted plans to the county calling for a 44-story, 2,500-room resort with a large casino. No cost figure has been tied to the property.

"Wild Wild West will be a Strip-style resort," Pittman said. "We anticipate that site will be our next project."

One other expansion of note currently taking place is a 300-room tower addition to the Palms Casino that is expected to be completed in January 2006. Officials from the privately-held resort would not reveal a price for the new addition.

One other site on the Strip has drawn interest -- the 27-acre parcel that housed the Wet 'n Wild water amusement park. Archon Corp., operators of the Pioneer Club in Laughlin, own the site and said earlier this year the property would house a 3,250-room resort. Company officials could not be reached for comment.

There are several other undeveloped sites throughout the Las Vegas Valley that are recognized as Gaming Enterprise Districts. Four of the sites are in North Las Vegas near the I-215 corridor, including a 40-acre parcel within the Aliante master-planned development.

Phil Peckman, chief operating officer of the Greenspun Corp., one of the partners in Aliante, said a feasibility study is under way for what will go on the parcel.

"The site is getting ripe for development, so we're starting to take a look at what we want to build in that location," Peckman said.

One other parcel still listed on the Gaming Enterprise District map is a large portion of what is now Silverstone Ranch, a Pulte Homes development. The site had been the casino element of the former Mountain Spa community that Pulte purchased and converted to Silverstone.

A Pulte spokeswoman said the company had the casino location rezoned to residential by the city of Las Vegas.

Future of Gaming: A Developing Interest is republished from Online.CasinoCity.com.