A slow path back - Limited slate of development projects, Internet poker debate will occupy gaming in 2013

LAS VEGAS -- The Linq won't be confused with CityCenter.

Then again, analysts have said the last thing the Strip needs right now is another massive hotel-casino complex. The Las Vegas gaming market is still in economic recovery mode after the recession sent gaming figures crashing back to 2004 levels.

Through September, Strip gaming revenues have increased 2.5 percent over the same nine months of 2011, lending some to speculate that the market is slowly coming back.

This brings us back to The Linq.

As 2013 unfolds, the $550 million nongaming Linq is one of three Strip construction projects expected to heat up during the year.

On the Strip's north end, transformation of the shuttered Sahara into the $400 million SLS Las Vegas is expected to begin after Jan. 1.

At center Strip, Bill's Gamblin' Hall will close on Feb. 4 to begin a yearlong $185 million renovation into a boutique hotel with rooftop pool deck and nightclub.

For now, that's the Strip scorecard.

The new construction won't spur Boyd Gaming Corp. to restart the Echelon project, which has been shut down since 2008. The company plans to "beautify" the site of the former Stardust by adding landscaping and other measures to hide Echelon's steel and concrete skeleton.

The projects are a far cry from the construction the Strip experienced starting in 1989, with the building The Mirage, and ending in 2010, with the opening of The Cosmopolitan of Las Vegas. In between, resorts such as the MGM Grand, Paris Las Vegas, Bellagio and Mandalay Bay entered the picture.

If anything, 2013's prospects might encourage other gaming operators, such as the new ownership of LVH, to spruce up their resorts. The property that was known for more than 30 years as the Las Vegas Hilton may soon be rebranded as the Vegas International, paying homage to its original name from the 1960s.

Union Gaming Group managing director Bill Lerner said if the Strip's economic uptick continues, Carl Icahn might be willing to restart part of the Fontainebleau Las Vegas.

Construction on the 68-story hotel-casino -- once valued at $3 billion -- was halted in April 2009 when it was 70 percent complete. Icahn, a billionaire corporate raider, acquired the property out of bankruptcy in 2010 for $150 million.

Lerner said a scaled-down version, such as completing the casino and adding some public areas, along with finishing off just a handful of the property's planned 3,800 rooms is possible, although he gave the notion a low probability of happening.

"Given the limited supply growth in conjunction with visitation growth to the market, we would be proponents of additional development such as this," Lerner said.

In other words, Nevada's major gaming companies will continue to take their development dollars to Ohio, Massachusetts, Maryland and other regional markets until the Strip shows a sufficient recovery.

In the meantime, online gaming legalization will continue to be a hot-button topic in 2013.

INTERNET GAMING

Barring a Hail Mary pass in Congress in the current lame duck session, a bill to legalize, regulate and tax Internet poker, won't see the light of day.

A draft of proposed legislation authored by Senate Majority Leader Harry Reid, D-Nev., and retiring Sen. John Kyl, R-Ariz., leaked out over the summer.

But a bill has yet to surface.

Former Nevada Congressman Jon Porter, who is now a Washington, D.C., lobbyist for Porter Gordon Silver, said if the lame duck session fails to legalize Internet poker, the issue will return in 2013.

"The need for additional revenues will not go away after Congress adjourns this month," said Porter, a Republican who has lobbied on behalf of the Poker Players Alliance.

Porter said Reid's continued role as majority leader will be helpful, as will the presence of Rep. Joe Barton, R-Texas, who authored the House's Internet poker bill.

"There are no glaring problems I foresee having with the committees of jurisdiction, and after working hard to educate members about the benefits of the bill, we can finally push this across the finish line," Porter said.

In the interim, Internet poker could roll out state-by-state in 2013.

Nevada has approved 16 companies as operators and/or suppliers of Internet poker technology. Other states are exploring legalizing Internet poker within their borders.

Deutsche Bank gaming analyst Andrew Zarnett said investors should shift their thinking to what Internet poker would look like on a state-by-state basis.

"Clearly the impact to any single operator will be much smaller," Zarnett said.

The first Nevada online poker site, catering to players within the state's boundaries, could go live by spring. However, the state's small population provides an insufficient number of players for multiple Internet poker games.

Gaming attorney Jeff Silver of Gordon Silver said the lack of a federal law enabling customers from other states to place wagers across state lines could hamper Nevada's Internet poker rollout.

"If it were just one Nevada operator, there is a possibility that at any particular time there would be enough interested players to fill the seats at the cyber-table offerings," Silver said. "But as more Nevada interactive operators came online, finding sufficient gamblers could be troublesome."

STRIP DEVELOPMENT

Caesars Entertainment Corp., which operates 10 casinos on or near the Strip, has two of the three 2013 redevelopment projects.

The Linq is a 300,000-square-foot outdoor complex of retail, dining and entertainment attractions anchored by the "High Roller," a 550-foot-tall observation wheel similar to the London Eye.

Portions of The Linq are expected to open by the end of 2013. The observation wheel is not expected to be completed until 2014.

The Linq, which will stand between the Flamingo and Imperial Palace, does not include gaming, unless you count the remodeling of the Imperial Palace into The Quad Hotel & Casino. The renovated Strip resort will contain a small Irish publike casino that is the replacement for the demolished O'Sheas.

"We don't need another big box," Caesars Entertainment Senior Vice President Jan Jones said in July. "Las Vegas needs a new experience."

Initial tenants announced for The Linq include Sprinkles Cupcakes and Sprinkles Ice Cream, a high-end cupcake bakery from Los Angeles, and Brooklyn Bowl, a branch of the New York-based restaurant that includes a 2,000-seat performance area and 32 bowling lanes.

A block south, Caesars will give Bill's a new name and theme when the property -- originally known as the Barbary Coast -- is reopened in 2014.

The conversion includes the remodeling of the 198 guest rooms, the 17,200-square-foot casino floor and common areas, the addition of a new second-floor restaurant, and construction of the 65,000-square-foot rooftop pool and dayclub/nightclub. Drai Management Group will manage the club.

As for the SLS Las Vegas, a timeline hasn't been announced.

SBE Entertainment Group LLC and Stockbridge Capital announced in April they secured $300 million in financing to transform the Sahara into the SLS Las Vegas. The companies bought the Sahara in 2007 but closed the 59-year-old casino in May 2011.

Initially, work on the redevelopment was scheduled to begin at the end of summer. The SLS Las Vegas is expected to have 1,600 hotel rooms on the north end of the Strip. SBE plans to install several of its Los Angeles-area restaurants and nightlife outlets at SLS Las Vegas.

In November, SBE gave the Los Angeles-based Fred Segal chain an exclusive hold on SLS' retail business.

2013 NEVADA LEGISLATURE

Gaming insiders said the casino industry isn't facing any "colossal issue" during the upcoming Legislative session.

Gordon Silver attorney Sean Higgins, a veteran Carson City lobbyist, said the general public usually seeks increases to gaming and mining taxes to solve the state's budget issues.

Higgins doesn't believe there will be a push to grow the state's 6.75 percent tax on gross gaming revenues.

"Never say never, but I do not see that being an issue," Higgins said.

Instead, he thought lawmakers would look to "clean up" legislation on both interactive and mobile gaming.

"Both of these areas are developing quicker than statutes or regulations can be put in place," Higgins said.

Still, he doesn't see interactive gaming expanded beyond poker.

"Casinos see that as a direct threat to their brick-and-mortar operations," Higgins said.