Industry News

Las Vegas Experiencing Another Big

Building Boom

By Gary Rivlin, International Herald Tribune
April 23, 2007

LAS VEGAS: Stephen Wynn, the hotel and gambling impresario, still remembers the first time he was asked if he and other developers had lost their minds building so many casino hotels here. It was the mid-1970s, when Las Vegas had about 35,000 rooms.

He was asked that same question in the 1980s, while constructing the 3,000-room Mirage, and again in the early 1990s. By that time Las Vegas was home to more hotel rooms - 106,000 - than any other city in the country.

And so now, with Las Vegas in the midst of another big building boom, Wynn only shrugs when people suggest that the premier U.S. gambling center, with 151,000 rooms and counting, simply cannot absorb any more new hotels.

Ever since the mobster Benjamin "Bugsy" Siegel opened the first modern hotel casino here in 1946, the surest means for gaining attention has been to one-up the competition by constructing an even more monstrously immense pleasure palace.

But even Las Vegas has never witnessed anything quite like what is going on today.

This is "the most outrageous, over-the-top expansion" ever, Wynn said.

Americans - and an increasing number of foreigners - can't seem to get enough of Las Vegas. The current construction craze is driven by a 95 percent weekend occupancy rate - and rates that approach 100 percent at the city's newer properties. Last year, even the weekday rate fell just shy of 90 percent, due in part to the city's success positioning itself as an attractive convention destination.

Fueling the current boom as well are the enticing riches to be made catering to a new brand of guest: aging boomers entering the "empty nest" phase of their free-spending lives. And contrary to some predictions, the opening of Indian casinos and other gambling outposts in more than 30 states has not hurt Las Vegas. The soaring popularity of poker has also helped drive growth.

"I suppose one day Las Vegas will reach its limit," said Anthony Curtis, president of LasVegasAdvisor.com, a local travel site. "But that day is nowhere in sight."

Consider the Venetian, which already ranks as the world's sixth biggest hotel and the fourth largest in Las Vegas, home to 15 of the world's 20 largest. This colossus will assume the top spot once it opens a new 3,200-suite tower now under construction that will bring the room count to more than 7,000.

Another development, Echelon Place, will have more than 5,000 rooms when it is built on the site of the old Stardust, which its owners blew up last month. The MGM currently ranks as Las Vegas's - and the world's - largest hotel, with 5,000 rooms.

At $4.4 billion, Echelon Place would rank as the most expensive development in Las Vegas history - if not for the $7 billion the MGM Mirage is spending on CityCenter. That price tag is far over the previous record, set when Wynn and his financial backers spent $2.7 billion building the 2,700 room Wynn, which opened in 2005.

Even competitors marvel over the scope of the CityCenter project, which MGM is touting as the most expensive privately funded project in American history. This mini-city bordering the Las Vegas strip will feature six towering buildings that reach as high as 61 stories into the sky. Covering 67 acres, or 27 hectares, it will include a 4,000 room hotel, a sprawling convention center, a half million square feet, or 46,450 square meters, in retail space and 2,700 high-end condominium and condo hotel units.

The changing demographics have led the designers of the new Vegas to push a sleek and modern aesthetic, along with amenities like ever more luxurious spas, in place of the gilt and gaudy themed properties that reigned supreme in the 1980s and 1990s. But their owners' ambitions are greater than ever.

"The building we're seeing right now," said Gary Loveman, chief executive of Harrah's, which operates half a dozen casinos on the Las Vegas strip, "is by leaps and bounds bigger than anything we've ever seen."

For a long time, Harrah's had only one major casino in Las Vegas. "One of my predecessors was convinced in the late 1980s, early 1990s, that Las Vegas was overbuilt," Loveman said. "That turned out to be a wrong call. Spectacularly wrong."

Even more than hotel construction, a boom in condominium development is prompting Loveman and his fellow moguls to marvel at the number of construction cranes crowding the skies.

Developers, including real estate mogul Donald Trump with its Trump International Hotel and Tower and Florida-based Turnberry Associates with its Signature at MGM Grand, are collectively spending billions of dollars building condo hotel towers on or near the Strip, adding thousands of units even as the local real estate market, like much of the country, has been mired in a downturn.

But MGM and other developers see themselves as competing for buyers far beyond the Las Vegas market. "We see these as third homes," said Alan Feldman, a spokesman for MGM.

Data provided by the National Association of Realtors indicate that the median price of a condo in the Las Vegas metropolitan area fell by 3 percent in the second half of 2006. In a perverse way, though, the city's current boom helped developers here avoid the kind of frantic overbuilding that today plagues condominium developers and condo owners alike in cities like Miami and Washington.

As in these cities and others, a "gold rush fever" swept through the Las Vegas condo market as more than 100 luxury condo projects, totaling 72,000 units, were announced dating from 2005, according to John Restrepo of the Restrepo Consulting Group, a real estate firm.

But escalating land prices and a steep rise in construction costs, he said, has "caused most of these guys, who were never much more than a Web site and a dream, to fade away." Today there are 22 luxury condo projects under construction, he said.

Concerns over future limits on water supplies might ultimately slow development here. Eventually tourists might tire of fighting daily traffic jams or grow frustrated negotiating McCarran International Airport. But those problems have not hampered Las Vegas's success so far. The city clocked just under 39 million visitors in 2006, according to the Las Vegas Convention and Visitors Authority - an 86 percent increase over the 21 million visiting the city in 1990.

"People have been predicting dating back to 1955 that Las Vegas will reach a saturation point," said David Schwartz, author of "Roll the Bones," a history of gambling, and director of the Center for Gaming Research at the University of Nevada, Las Vegas. "But me, I wouldn't bet against casino growth."