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What happened to the Vegas development boom?
April 19 2011

Want to place a wager on how many hotels the nation’s largest hotel market has under construction?

  • The largest hotel market in the U.S. only has 96 hotel rooms under construction.
  • There were more than 9,000 rooms that came online during 2009.
  • While ADR plummeted in the face of new supply and the downturn, demand has remained relatively unchanged.

Sometimes you come across a data point that makes you do a double take—or, in the case of my perusing STR’s latest U.S. pipeline numbers last week, almost choke on your turkey sandwich.

Have you cleared your airways? Here it comes: There are only 96 new hotel rooms under construction in Las Vegas.

Only 96! In Las Vegas! The country’s largest hotel market!

This is Sin City we’re talking about here, people—the desert oasis that saw a development boom that injected 9,104 rooms into the market during 2009. Granted, it’s not New York City, which has more than 6,000 rooms under construction, according to STR’s March pipeline, but nobody’s been able to measure up with the behemoth Big Apple for years now.

 CityCenter added nearly 6,000 rooms to the Las Vegas hotel supply in December 2009.

So back to Vegas … only 96 rooms … wow.

To put things in perspective, Las Vegas has half as many rooms under construction as Detroit, one-third as many as Anaheim, and one-fourth as many as Oahu Island.

Now maybe I’m blowing things out of proportion here, but I can remember a time when seemingly every story coming out of Nevada concerned the crushing influx of supply in the market. CityCenter alone accounted for nearly 6,000 hotel rooms in one month, while another 3,000-room project, The Cosmopolitan, loomed on the horizon. The year was 2009—a 12-month span when demand was plummeting like the luck of a novice card shark at the Black Jack table. “The market would never be able to absorb the supply,” several pundits said, while others hurled charges of cannibalization.

Were their claims justified? Partially so. While total room nights occupied fell only 2.3% during 2009 (including a meager 0.4% drop during December when CityCenter came online), ADR took a 22% nose dive, according to the Vegas CVB.

Room nights occupied improved 3.3% during 2010, while rates increased 2.0%.

Through February 2011, total room nights occupied is up 6.8%, and ADR is up 4.6%.

So while it certainly didn’t help matters during 2009, Vegas’ development boon doesn’t seem to have had a devastatingly lasting effect on the market (at least none more so than would have been the case in the face of an unprecedented global economic downturn).

Still, I’m sure area hoteliers have welcomed the respite during this 96-room lull. With an additional 3,071 rooms in various stages of planning, according to STR, they don’t have very long to catch their collective breath.

4/19/2011 7:22:00 PM
Their should be more than mere 96. I know of Pacifica looking into building a springhill suites,courtyard. The demand should keep on going up now that IHG has signed the venetion and pallazo. At the same token since wyndham signed with hardrock their occupancy is surely going to drop with Wyndhams res power is plain SORRY.
4/19/2011 11:09:00 AM
People should remember that nothing of note was built in Las Vegas between the 1973 opening of the original MGM Grand (now Bally's) and Steve Wynn opening Mirage in 1989. That was a 16 year span... There have been predictions of a comparable lull following the recent construction boom. However, I would think if sufficient demand returns, Carl Ichan will want to do something with his partially constructed 3,900 room white elephant that was intended to open in 2009 as The Fontainebleau Resort...
4/19/2011 10:38:00 AM
Hi Anon. You guessed correctly. I was merely citing the number of rooms in the “In Construction” phase of the STR pipeline for this blog. I changed the wording above to “96 new hotel rooms” for clarification. Thanks for pointing that out. And while there is undoubtedly a lot of action on the renovation side, I’m still surprised there are so few new hotel rooms getting ready to enter the market—especially compared to the boom days of old when thousands of rooms were coming online every month. But you are right; the Vegas hotel market still remains one of the most exciting markets in the country, and I look forward to tracking its new additions and/or renovations in the future.
4/19/2011 10:25:00 AM
Do these 96 rooms only represent new construction? There are a good bunch of Vegas properties currently renovating or getting ready to renovate: MGM Grand, Bellagio, NY/NY, Sahara, and more. Wynn and Stratosphere just finished some renovations, Cosmopolitan is one of the most exciting Vegas properties to open in years. This article strongly implies that there is no hotel action in Vegas when the truth is anything but.
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