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Rod Smith
 

What Effect Wynn Las Vegas? Experts Wonder

2 May 2005

Conventional wisdom holds that last week's opening of developer Steve Wynn's newest project will spark new hotel development and economic growth. However, some industry experts say Wynn is joining the growth wave, not causing it.

Arguing the conventional view, University of Nevada, Las Vegas gaming specialist Bill Thompson said if Wynn Las Vegas succeeds financially and attracts visitors, it will drive investment in new casinos and entice institutional investors who have had little interest in Las Vegas or gaming.Advertisement

Deutsche Bank analyst Andrew Zarnett believes Wynn Las Vegas will stimulate economic growth by adding incremental demand for vacations and business travel to Las Vegas.

Zarnett said since 1989 when the developer opened The Mirage, Wynn has led waves of Las Vegas development and set the bar for the size of new resorts.

However, other experts said history is not so clear.

For example, Forbes in 1991 reported the main effect of the Treasure Island opening was not increased demand, but a squeeze to rivals, especially smaller "plain-vanilla" and poorly managed casinos.

Arguing the revisionist view, Keith Schwer, director of the University of Nevada, Las Vegas' Center for Business and Economic Research, said the new-growth hype has been unrealistic. He believes local economic growth will slow over the rest of 2005 to a normal rate around of 4 percent, no matter how successful Wynn Las Vegas is.

MGM Mirage spokesman Alan Feldman, who handled public relations for Wynn for the openings of The Mirage, Treasure Island and Bellagio, said simple historical comparisons may not help in forecasting Wynn Las Vegas' effect on the market.

"When The Mirage opened in 1989, there was very little competition," he said. "It's important to remember that the cost of building The Mirage ($611 million) was greater than the combined cost to build all of the hotels in Las Vegas that came before it. (Now) the level of investment in Las Vegas has exploded to billions of dollars."

This new industrywide investment has limited the effect of any single property on the market or the local economy, he said.

Most independent experts agree development on the north end of Las Vegas Boulevard was likely with or without Wynn Las Vegas. Five years without a major property opening led to pent-up demand for new resorts, they said.

University of Nevada, Las Vegas history department Chairman Hal Rothman said megamergers, not Wynn Las Vegas, will be the biggest factor speeding growth on the Strip's north end.

"This is the upshot of the centralization of ownership that results from the MGM-Mirage-Mandalay buyout and Harrah's acquisition of Caesars that make it silly for others to try to develop south of Flamingo in the MGM's heartland," he said. "The frenetic energy that we're about to see comes from the feeling that there are few large Strip-area tracts for development."

And although experts agreed Wynn Las Vegas will give developers and Wall Street a new benchmark for the size of resorts the market will support, they said future development will not hinge on its success or failure.

Susquehanna Financial Group gaming analyst Eric Hausler said new project openings will be more staggered than they have been in the past; most of the added capacity will come in 2008 and beyond.

The next north-end project is Las Vegas Sands Corp.'s $1.6 billion Palazzo, on which work has already started across Sands Avenue from Wynn Las Vegas. When it opens in 2007, Sands Corp. and Chairman Sheldon Adelson will own the largest resort complex in the world with more than 7,000 rooms, counting the adjacent The Venetian.

Brian Gordon, spokesman for Las Vegas-based financial consulting firm Applied Analysis, said the Palazzo will, with Treasure Island, Fashion Show mall and Wynn Las Vegas, establish the intersection of Sands Avenue and the Strip as a competitor for the Flamingo Road and Tropicana Avenue corners at Las Vegas Boulevard.

Deutsche Bank's Zarnett said it will be interesting to see whether northward Strip development will include a more intensive use of the Fashion Show mall parcel, with addition of condominium or hotel towers.

Gordon said change is next expected at the New Frontier, directly across from Wynn Las Vegas. The hotel-casino is expected to undergo a complete transformation as another megaresort.

However, Rothman said Boyd Gaming Corp. will likely benefit most from the development around the Strip's north end. He predicted Boyd will develop a "megacity hotel resort" on the property it owns around the Stardust.

Boyd President Keith Smith said the company is considering building a fourth major convention center with an adjoining hotel-casino; a mixed-use development with a major hotel casino anchor; or two adjoining major hotel-casinos. However, Boyd Gaming is in no hurry, Smith said; its evaluation of what the market will bear will probably take the rest of 2005.

Rothman said the next redevelopment candidate after the New Frontier is Riviera. Serious change at Riviera, though, will require buying an adjacent plot of land, he said.

Rothman and Zarnett said other development sites often mentioned, including the Sahara, Wet 'n Wild and the Stratosphere, are geographically too remote to be part of the initial development wave.

Gordon added that planned investments by condominium developers will also help to redefine the Strip's central and northern portions.

Proposed developments include Allure just off the Strip at Sahara, Majestic, Sky Las Vegas at Circus Circus, the Summit at Sahara and the Strip, and Trump International directly across from Wynn at the Frontier site, he said.

What Effect Wynn Las Vegas? Experts Wonder is republished from Online.CasinoCity.com.