|The MGM Grand on the Las Vegas Strip is undergoing a $160-million renovation.
LAS VEGAS—The recent recession has left Las Vegas hotels struggling to attract guests, but hoteliers in the city believe their luck is about to change.
Some of the casino hotels on the Strip already have begun investing in renovations and making changes to their featured entertainment, which operators hope will entice visitors to return.
Las Vegas has lost its status somewhat as the gaming capital of the United States because local casinos are now available throughout the country, said Shannon Okada, VP of HVS’ consulting and valuation division in Las Vegas. The market is going to have to keep renovating itself to compete with the neighborhood casinos.
Included in the list that have recently undergone renovations or are in the process of doing so:
- The MGM Grand began a $160-million room renovation in February, which includes the property’s 3,570 rooms and 642 suites in the main tower.
- Las Vegas Sands will renovate approximately a thousand rooms in The Venetian, according to the group’s President and COO Mike Leven.
- The Riviera Hotel & Casino will undergo a $20 million to $30 million refurbishment to all of the public areas within the casino.
- The Super 8 Las Vegas Strip Area Hotel completed a $1.5-million renovation in February, which included a remodeled pool and hot tub area, improvements to the lobby and fresh carpeting and lighting.
- The 2,568 rooms in The Bellagio’s main tower underwent a $70-million renovation, which was completed in January.
- The Golden Gate Casino & Hotel in downtown Las Vegas is undergoing a $12-million expansion.
As rooms and public spaces undergo face lifts, so too are hotel’s entertainment offerings. The Palazzo, for example, ended its run of the “Jersey Boys” musical in February, which moved to Paris Las Vegas in March. In addition to featuring the musical, Paris also recently opened two new restaurants and added a new nightclub.
Caesars Palace on the Strip also is in the midst of a two-year revitalization that began in March 2011, which encompasses new entertainment offerings, the addition of two new restaurants and two new hotel towers, according to a Caesars Entertainment news release.
“(The hotels are) going to have to keep bringing new things. Stuff like that is what’s going to keep people attracted and keep Vegas fresh and new,” said Shannon Okada, VP of HVS’ consulting and valuation division in Las Vegas.
Shannon Okada, VP of HVS’ consulting and valuation division in Las Vegas
The changes will go a long way in bringing the crowds back, he said. The market already is starting to show some improvement.
As of March, year-to-date visitor volume in Las Vegas was up 3.6% from the same period last year, according to data from the Las Vegas Convention and Visitors Authority. Citywide occupancy increased slightly 0.5% to 82.3%, while rates jumped 3.6% to $105.99.
New players in the market
The recent announcement that SBE Entertainment and Stockbridge Real Estate acquired $300 million in financing to convert the Sahara into the SLS Las Vegas could be an additional sign the market is gearing up for its comeback.
The Sahara, which shut down in 2011, was purchased by SBE in 2008 with the intent to redevelop the asset, according to Rob Oseland, who will serve as president and COO of the SLS Las Vegas, which is slated to open in 2014.
“We felt we needed to close the asset so we could basically rebrand it. We wanted to bring in a new soul, bring in a new brand with an entrepreneurial spirit that Wall Street would be willing to fund,” Oseland said.
Once the economy downturned, however, it put the brakes on the project, he said.
Stalled hotel development in Las Vegas
As executives of the company began to see early signs that the Las Vegas market had absorbed the supply added between 2008 and 2010, SBE and Stockbridge considered it was the right time to move forward with the redevelopment.
The SLS Las Vegas will enter the market with a fresh concept, hoping to fill a space many of the resorts in the city have exhausted, Oseland said.
The market is definitely in a state of revitalization, he said. The two large controlling companies, MGM Resorts International and Caesars Entertainment Corporation, have been struggling financially but are starting to see some improvement.
“(They are) shedding assets that are on the Strip, and I would consider the assets they’re shedding as non-critical, non-strategic assets, but they’re products that are going to allow guys like me and SBE to capitalize on and pick them up,” Oseland said.
Rather than one or two corporations selling Las Vegas to the public, there are now at least 15, he said.
“The macroeconomics for the city are improving. It lends credibility for people to come into the market, to reinvest in the market,” Oseland said.
As for the long-term, the overall economy locally and nationally will affect how the market does, Okada said.
One thing hoteliers need to keep in mind is the market has become more susceptible to the effects of economic downturns, he said.
“Now it’s just like any other resort market,” Okada said. “But as the economy moves up, the resorts move up … and Vegas is no different.”