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1999 in Las Vegas: A Huge Round of Resort Openings Succeeded in Drawing More Visitors

by Gary Thompson

When 1999 began, many investors and gaming executives worried that the new resorts -- Mandalay Bay, the Venetian, Paris Las Vegas, the Hyatt Regency at Lake Las Vegas and the Resort at Summerlin -- would result in a glut of hotel rooms and declining occupancy rates.

But those new properties, plus the October 1998 opening of the Bellagio and expansions at the MGM Grand and Hard Rock hotel-casinos, drew millions more visitors eager to experience the new must-see resorts. The old adage "build it and they will come" was suddenly back in vogue.

Adding to the allure of a Las Vegas vacation were lower air fares and increased air service to Las Vegas, including the summer's launch of the new National Airlines backed by big investments from Harrah's Entertainment and the Rio, which Harrah's acquired.

Like their American counterparts, Asian stock markets soared during the year, creating new wealth for investors eager to experience new adventures. The Las Vegas baccarat market rebounded in 1999, as revenues climbed 15 percent from the meager results of last year.

But competition for the lucrative baccarat market intensified with the addition of the ultra-swank Mansion at MGM Grand, 29 luxurious villas costing $175 million to build and aimed at attracting super-rich gamblers away from the Bellagio, Venetian, Rio and Mandalay Bay.

Most Las Vegas casino operators will spend the new year determining the best use of their increased cash flows, with many opting for share repurchases or debt reduction now that major construction projects are completed.

Just one new mega-resort -- the Aladdin -- is scheduled to open in 2000, and most big publicly held gaming companies are at least a year away from announcing plans for the next wave of new resorts.

Still, the Las Vegas gaming industry must constantly reinvent itself to compete effectively with the spread of casino gaming across the country. Phil Ruffin, owner of the New Frontier, disclosed Monday his plans for a new property at that Las Vegas Boulevard location, while Mirage Resorts and Aztar Corp. are mulling over possibilities for projects on valuable land they own on the Strip.

But Park Place, Mandalay Resort Group, MGM Grand and Harrah's aren't likely to embark on massive new projects in Las Vegas during 2000.

Park Place closed on its acquisition of Caesars World last week, and may spend $100 million to $200 million renovating the aging resort. But Park Place, Mandalay, Harrah's and Station are likely to spend much of their record cash flows next year paying down large amounts of debt incurred in the current wave of expansion and industry consolidation.

MGM and Mandalay also are planning permanent casinos in Detroit that would replace the temporary facilities they currently operate there, while MGM is also attempting to get the last small parcel of land it needs to build a $700 million hotel-casino in Atlantic City.

Mirage and Boyd Gaming are building a joint-venture resort called the Borgata in Atlantic City, but are using project financing to avoid major impairments to their highly leveraged balance sheets.

One potential threat to Las Vegas casino operators' seemingly rosy outlook is posed by the all-but-inevitable expansion of casino gambling on Indian lands in California. With about 30 percent of Southern Nevada's tourists coming from the Golden State, tribal gaming could have a major impact on repeat visitation by regular travelers to Las Vegas.

But expansion of California gambling could be a boon to gaming equipment suppliers, whose overall stock performance was dismal in 1999. Only two of the five biggest suppliers -- WMS Industries and Casino Data Systems -- are ending 1999 with higher share prices, while International Game Technology, Anchor Gaming and Alliance Gaming were lower.

If California voters approve Las Vegas-style gambling in a ballot issue on March 7, gaming equipment suppliers may be able to sell up to 43,000 slot machines to Indian casinos there, Coccimiglio estimated. That would make California the nation's second-largest slot market, trailing only Nevada and vaulting ahead of Mississippi and Atlantic City.

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