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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Once down on its luck, Las Vegas's North Strip is coming back

23 February 2015

LAS VEGAS -- For a decade, north Strip casino operators anticipated a redevelopment of the area that would include new megaresorts and entertainment complexes rivaling projects underway on the boulevard’s southern end.

The recession laid waste to those plans.

Several hulking, uncompleted buildings — including the Fontainebleau Las Vegas and Echelon — continue to symbolize the end of that era, but after years of inactivity, there are signs the north Strip is springing back to life.

About $8 billion to $10 billion of proposed development is on the table for the area defined as everything north of Convention Center Drive to Sahara Avenue. The Stratosphere Casino Hotel and Tower is often included in north Strip discussions, although the hotel-casino’s location is actually on the edge of downtown Las Vegas.

John Knott, executive vice president of CBRE Las Vegas Global Gaming Group, has watched the north Strip during the good times and the bad. He brokered several land deals, including the 2006 sale of the Sahara hotel-casino, now revitalized as the SLS Las Vegas Hotel & Casino.

“It’s part of the recovery of Las Vegas,” Knott said. “We seem to have the recession behind us, and we’re in a growth mode.”

But Knott urged caution in reading the tea leaves when it comes to the north Strip’s development signals.

Knott said the health of the area hinges on two projects — an anticipated $2.3 billion expansion of the Las Vegas Convention Center and start of construction of the $4 billion Resorts World Las Vegas on the former Echelon site.

The Las Vegas Convention and Visitors Authority’s $182.5 million purchase of the Riviera Hotel and Casino and the plans to demolish the resort for a convention center expansion adds another piece to the puzzle.

“There is clearly activity and also a lot of talk,” Knott said. “It’s going to take time.”

Casino operators in the north Strip area say development of a permanent, 33-acre, open-air concert venue by MGM Resorts International will facilitate increased business.

The festival grounds site was originally dubbed “CityCenter North” after MGM Resorts announced plans for a hotel-casino project in partnership with Paradise Island developer Kerzner International. That plan was shelved when the recession hit.

Now, MGM, which owns the nearby Circus Circus Hotel Casino, is spending $40 million to build the City of Rock at the southwest corner of Sahara Avenue and the Strip.

The initial event is the Rock in Rio concert to be held over the weekends of May 8-9 and May 15-16. Organizers expect the festival to attract 50,000 to 60,000 attendees per day.

“Obviously, it will bring a tremendous number of people to the area,” Stratosphere General Manager Paul Hobson said.

SLS Las Vegas President Scott Kreeger, whose front door is directly across the Strip from the concert venue, said the casino is putting plans into place to ensure Rock in Rio customers spend some time in his resort.

“We see the event as a benefit to our property,” Kreeger said.

But casino operators are looking beyond the two weekends.

Stratosphere recently launched a $7 million advertising effort to position the 2,427-room property with its iconic 1,149-foot observation tower as a resort that appeals to the value-oriented “average Joe” customer, more interested in shelling out a few singles for a bottle of beer than putting a few thousand on his gold card for bottle service at the Bellagio.

Guests at center Strip pay up to three times more for a room than they would at the Stratosphere.

Kreeger, who took over as SLS president in October, has been analyzing the 1,600-room resort, which got off to a shaky start after a $415 million makeover and reopening in August.

“We consider this property as a major catalyst for this end of the Strip,” he said.

The 3,000-room Westgate Las Vegas Resort & Casino on Paradise Road, which is connected to the Convention Center and considered part of the north Strip, is undergoing a $100 million resort-wide renovation.

“We’re uniquely situated next to the Convention Center,” Westgate Resorts Chief Operating Officer Mark Waltrip said. “There is a lot going on around us, but we’re focused on redeveloping and repositioning our property.”

LOOKING UP AT THE STRATOSPHERE

As Strip development moved south — CityCenter, The Cosmopolitan of Las Vegas and nongaming attractions such as The Linq — the Stratosphere felt like a castaway. The closure of the Sahara in May 2011 left the resort on its own island, surrounded by vacant lots or closed properties with little foot traffic.

That changed when the Sahara became SLS Las Vegas. Hobson, who has overseen the Stratosphere for four years, doesn’t consider the reopened resort as competition although they market to a similar customer base.

“We didn’t see it as a detriment but as an enhancement to the market,” Hobson said. “The SLS opening coincided with a general increase in demand. It’s great to have a neighbor and see some circulation of customers between properties.”

Even as other north Strip development stalled, the Stratosphere’s owners, American Casino & Entertainment Properties, spent more than $22 million remodeling and adding new restaurants and other amenities. In the most recent quarterly results, the Stratosphere increased net revenue 6.2 percent, including a 7.9 percent increase in hotel revenue and a 1 percent increase in casino revenue.

The marketing effort earned attention because it runs counter to resorts that tout high-priced nightclubs and glitzy attractions.

“What happened to Las Vegas?” the Stratosphere marketing campaign says.

“For the longest time we never knew where we fit,” Hobson said. “Were we part of the Strip or a downtown property? We think the marketing complements where we believe we fit.”

The new SLS leadership is retooling its branding as a lifestyle luxury resort with amenities to attract a variety of customers. Kreeger has seen how downtown casinos work together to market that area and wants the north Strip to try similar ideas.

The Rock in Rio event could introduce SLS to a large, new audience, said Kreeger, who predicts many concertgoers will ride the monorail to the SLS and walk through the resort on their way to the show.

“Our goal is to make sure they spend some time and hang out here before or after the shows,” Kreeger said. “We think the north end has opportunity.”

The SLS reopening in August was preceded by the Westgate’s acquisition of the LVH (formerly the Las Vegas Hilton) in late June. Waltrip said the property “isn’t chasing the same customers as SLS.” He said the resort “has always been an island unto itself,” but he also sees Rock in Rio as a customer development opportunity.

MGM Resorts Senior Vice President of Entertainment Chris Baldizan, who is overseeing the festival grounds’ development, said the Rock in Rio’s impact on the north Strip won’t be known for a while. The company is working with Clark County officials and its casino neighbors on potential negative issues such as parking and traffic and sees mostly good things coming from the development, he said.

“We’re looking at this as a citywide event,” Baldizan said, adding the site will have multiple, year-round use. “We think the site will be a benefit to the north Strip.”

UNFINISHED BUSINESS

The Fontainebleau halted construction in April 2009 and was bought out of bankruptcy a year later by Carl Icahn for $150 million. The shell of the unfinished building remains an enigma on the north Strip. Icahn has said nothing about his plans for the derelict.

An empty 27-acre lot between SLS and Fontainebleau is owned by Paul Lowden’s Archon Corp. and has been tagged for a $1.4 billion arena, hotel and shopping project by local developer Jackie Robinson. But other than a ceremonial groundbreaking last year, there hasn’t been much news on the project.

“I’m not that high on it,” Knott said.

Meanwhile, Malaysia-based Genting Berhad representatives said in January they will break ground on Resorts World Las Vegas before June.

Genting bought the former Stardust site from Boyd Gaming Corp. in March 2013 for $350 million, saying it intended to finish out the Echelon structure left when Boyd halted construction in August 2008.

Knott said Resorts World is the key to success for properties like SLS, although it’s not the only way to win.

“We’d like to see something happen with the Fontainebleau,” he said, “but we’re not counting on it.”
Once down on its luck, Las Vegas's North Strip is coming back is republished from Online.CasinoCity.com.