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Best of Liz Benston

Gaming Guru

Liz Benston

40,000 new rooms in Las Vegas? Maybe not

15 February 2008

LAS VEGAS, Nevada -- No doubt you've heard of the more than 40,000 new hotel rooms on the Strip — the biggest development boom in Las Vegas history?

This magic number has been repeated ad nauseum by casino executives, real estate brokers and others who stand to benefit by the Strip's continued growth.

While there's ample evidence that financing difficulties and cost overruns will at least delay some projects, that number has changed little over the past several months.

Until, perhaps, this week. At a Reuters sponsored travel conference in Los Angeles Monday, MGM Mirage Chief Financial Officer Dan D'Arrigo said he expected only half of the more than 40,000 planned hotel room to be built over the next few years. Operators have good reason to minimize that total, given that investors are once again concerned about overbuilding on the Strip.

Now that it's on the table for discussion, let's take a closer look at those numbers.

By some estimates, the 40,000 total includes the already-built Residences at MGM, the Trump Las Vegas condo-hotel tower and the Palazzo. Add to that the under-construction Cosmopolitan, Encore, a 665-room hotel tower at Caesars Palace, CityCenter, the Fontainebleau Las Vegas and Echelon and the total comes to about 26,600 rooms.

Not included are projects considered more speculative by Wall Street standards or aren't yet underway, including a second Trump tower, MGM Mirage's joint-venture resort project with Kerzner International (a potential 3,000 rooms), the Plaza Las Vegas (more than 6,000 rooms) and the proposed Crown Las Vegas (another 5,000 rooms). Adding those gets us to about 42,600. But it doesn¹t include the more than 8,000 new rooms envisioned by Columbia Sussex at the Tropicana, a plan coolly received on Wall Street.

Having 26,600 new rooms would increase the Las Vegas Valley's room inventory by 20 percent still the largest number of rooms built in the shortest period of time.

"Maybe one or two projects will be cancelled," Deutsche Bank stock analyst Bill Lerner said, "but we expect the majority of units in the pipeline probably get built in the timeline we've communicated."