An official publication of Global Gaming Expo

OCTOBER 2002 

Always Evolving

The Strip promises plenty of change over the next few years

By DAVE PALERMO

Perhaps the one constant about Las Vegas Boulevard South is it never stays the same. More commonly known as the Strip, the four-mile aorta running from Sahara Avenue to Russell Road through the financial heart of the nation’s commercial casino industry has throughout its history been in a constant state of change.

There is nothing like the boulevard. It is home to 18 of the world’s 20 largest hotels. It generates some $4.5 billion of the more than $27 billion wagered every year in the nation’s commercial casinos. Only on the boulevard is the dramatic implosion of a high-rise resort surpassed by the grandeur of the opening of one even larger and more fanciful.

The evolution of the Strip’s resort industry is expected to continue in this decade. The Nevada gaming industry anxiously awaits Le Reve, the $1.8 billion resort brainchild of casino impresario Steve Wynn and a project many hope will inject economic life into the dormant north end of the boulevard.

At the south end of the Strip, Mandalay Resort Group is near completion of a 1.3 million-square-foot convention center and soon will break ground on a 1,125-suite, $225 million hotel tower. Eventually, company executives hope to build a 3,000-room hotel-casino at Russell, the far end of a “Mandalay Mile” of Strip resorts Excalibur, Luxor and Mandalay Bay.

A 1,000-room hotel tower is going up at The Venetian. Another 925-room tower is planned for Bellagio. Caesars Palace is building a “Colosseum” entertainment complex. Boyd Gaming is planning a major project at the site of the Stardust. Phil Ruffin promises to build a San Francisco-theme resort at the site of his tired-looking New Frontier. And MGM Mirage intends to eventually build a hotel-casino project designed to appeal to the Gen X crowd on the site of the Boardwalk/Holiday Inn, although no specific details or timeframe have been announced.

Meanwhile, a $1 billion, 18-mile monorail soon will link Strip and downtown resorts with McCarran International Airport and the Las Vegas Convention Center. And Clark County planners predict that the Enterprise Gateway district — a relatively undeveloped stretch of Las Vegas Boulevard extending from Sunset Road south to St. Rose Parkway — will eventually be lined with as many as 14 smaller hotel-casinos catering to local gamblers and residents of nearby time-share resorts.

Impressive? Perhaps. But Strip development in the first decade of the millennium will pale compared with the dramatic evolution that occurred on Las Vegas Boulevard in the 1990s.

Beginning with The Mirage in 1989, 10 new resorts, with a total of 32,000 hotel rooms, went up on Las Vegas Boulevard. That’s roughly a third of the Strip’s room inventory and about a fourth of the 130,700 hotel and motel rooms in the greater Las Vegas metropolitan area. At the same time, venerable hotel-casinos, such as the Sands, Dunes and Hacienda, came tumbling down to make way for the new casinos.    

The price tag? A whopping $11 billion.

“I would put it this way,” said Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas. “The decade of the ’90s is going to be a hard act to follow.”

Industry’s changing face

The gambling industry in the 1990s literally reinvented itself. Commercial and tribal government casinos throughout the country evolved into casino resorts with upscale accommodations and entertainment offerings to compliment the table games and slot machines.

Hotel-casinos in the Las Vegas Valley — headquarters for the nation’s top casino companies — took the trend to another level. Faced with competition generated by the spread of commercial and tribal casinos to some 30 states, Strip hotels with discounted rooms evolved into resorts with upscale accommodations, elaborate production shows, big-name entertainment, fine-art galleries, gourmet restaurants and big-ticket retail shops.

“The 1990s, in my mind, was one of the most exciting times in the history of the gaming industry, particularly here in Las Vegas,” said Glenn Christenson, chief financial officer for Station Casinos. “What you saw was a complete retooling of Las Vegas. We traded out the Dunes for Bellagio. We traded out the Sands for The Venetian. We traded out the Hacienda for Mandalay Bay. That process is still going forward with what Steve [Wynn] is doing, replacing the DI [Desert Inn] with Le Reve.

“At the same time you saw an expansion of what Las Vegas had to offer its guests,” Christenson said. “When I think of what Las Vegas was then versus what we have now — with the restaurants, the retail and the golf options — it is truly amazing. It was really a crucial time for the future development of Las Vegas.”

New resort development on the Strip will continue through this decade, industry observers predict, but at a much slower pace. The economic boom of the ’90s has slowed, undeveloped property on the boulevard is scarce, and casino companies will likely use additional rooms and amenities to fuel visitation and revenue growth.

“We expect the total room stock to expand by only 1.2 percent in 2002  and another 2 percent the following year,” Schwer said.

“It’ll be like a boomlet, not a boom,” said Glenn Schaeffer, president and chief financial officer of Mandalay Resort Group. “What you won’t see in the next 10 years is what you saw in the last 10, which is a virtual doubling of the rooms on the Las Vegas Strip.

“There’s only a few A-level sites left,” Schaeffer said, and resort operators will be expanding existing hotels to generate additional visitors. Strip occupancy remains high, Schaeffer said, a trend that will continue as long as the industry targets baby boomers with disposable income and a propensity to gamble, shop and eat.

“You’ll see companies adding increments to their already branded properties on the Las Vegas Strip, and we’ll have a very good relationship with the customer of the future,” Schaeffer said. “Our demographics are great with the baby boomers.

“There’s a very positive ratio between growing demand and a pretty regulated supply,” Schaeffer said. Visitor volume to Las Vegas this year will likely approach 36 million, breaking a record set in 2001, Schaeffer said. “Rev-par,” the industry axiom for total revenue generated for each available room, should exceed pre-Sept. 11 levels by the end of the year.

Decade of the north Strip

“When we look back at this current decade, it’s going to be regarded as the decade for the north end of the Strip,” said Don Snyder, president of Boyd Gaming. “We’re going to see significant investments that will total in the billions of dollars. It’s really already starting to happen. Whether it all happens this decade or spills over to the next decade, I don’t know. The momentum has clearly started.

“Probably the biggest catalyst is what Steve Wynn is going to do,” Snyder said of Wynn’s plans for a $1.8 billion, 2,455-room resort on the site of the shuttered Desert Inn. That property is tentatively scheduled to open in 2005.

The north Strip has deteriorated with the accelerated development of upscale resorts further south on Las Vegas Boulevard. But industry analysts believe Wynn’s project, a 1 million-square-foot expansion of the upscale Fashion Show mall across the Strip from Le Reve, and continued development of the nearby Turnberry Place high-rise condominiums could fuel investment capital in the area.

Snyder expects there will be investment capital for the company to remake its Stardust hotel-casino, but he declined to elaborate while Boyd is constructing Borgata in Atlantic City, a project that is expected to be completed next year.

“The tower that is there now was built to accommodate a mirror tower,” Snyder said. “We’ve got the infrastructure in place to build it.”

Meanwhile, New Frontier owner Phil Ruffin pledges to build a “City by the Bay” resort on 61 acres next to the Stardust as soon as financing becomes available.

“The banks have told us we’ll have the financing as soon as Le Reve is financed,” Ruffin told the Gaming Wire in Las Vegas. “Once Steve gets his funding, I think we’re next on the block.”

Donald Trump also is hinting that he may build a high-rise resort on a portion of Ruffin’s property.

Wynn does not encourage speculation about whether Le Reve will generate investment capital for neighboring property owners. “I’ve never had any discussions with any other operators about what they’re doing on the north end of the Strip. I don’t have any idea.

“I haven’t talked to Don Snyder in a year. The Turnberry people are friends of mine. Phil Ruffin’s a great guy. I just don’t know what’s in their heads. I think maybe they’re all waiting for me.

“I only worry about my own stuff,” Wynn said. “I really have a narrow view of what’s going on. I’m focused. I got my chin down and my butt up.”

South Strip’s future

Construction is expected to continue on the south end of the Strip.

“By the end of the decade we will have finished out the Mandalay Mile, which is already the largest, integrated resort complex in the world,” Schaeffer said.

That means a fourth 3,000-room plus hotel-casino will have been added to the company’s impressive chain of resorts — Excalibur, Luxor and Mandalay Bay — extending from Tropicana south to Russell.

Mandalay’s inventory of Strip accommodations eventually will exceed 24,000 rooms. Completion of the convention center will enable the company to replace wholesale rooms with midweek convention business that will drive room rates up “tens of dollars per night,” Schaeffer said, revenues that will fuel a dramatic increase in cash flow.

“You’re talking about sizable numbers,” Schaeffer said. “Our company is sensitive to rev-par with respect to earnings and operating cash flow. We have had all these rooms, and we haven’t been able to migrate to the high price, midweek room segment. The convention business has been starkly missing from our customer profile.”

McCarran airport and the Bali Hai Golf Club serve as a buffer between Russell, the southern border of the Strip, and Sunset, the northern end of what Clark County planners refer to as the Enterprise Gateway district. The seven-mile corridor extending south to St. Rose Parkway eventually will be developed with business offices, commercial establishments, time-share residents and up to 14 casinos, some with hotels.

“We’re looking at as many as 14 casinos in that area, something along the lines of the Palms,” John Schlegel, Clark County’s director of comprehensive planning, said, referring to the off-Strip casino and 470-room hotel on Flamingo Road.

“You probably won’t see the same scale of developments such as Bellagio,” Schlegel said, largely because of limited highway access to the area. “But, then again, it’s hard to predict. With the gaming industry, I’m usually surprised.”

Michael Gaughan, chairman of Coast Casinos, a chain of suburban hotel-casinos, owns 55 acres of land in the Enterprise Gateway zone that he plans to use for the development of a new resort, perhaps by 2005. Station Casinos is in civil court over a possible option for land in the area, but Christenson said the company sees more potential farther west in the Las Vegas Valley.

“We have looked at [the Enterprise Gateway] extensively,” said Christenson, but the lack of residential development in the area would make it difficult to operate a casino marketed to local gamblers. “I certainly wouldn’t see room in that part of the county for more than two [properties].”

A Bus Rapid Transit system, perhaps on rails, will service the Enterprise Gateway. Elsewhere, the Regional Transportation Commission hopes to develop an elevated Automated Guideway Transit or monorail system along a stretch of Las Vegas Boulevard linking the Strip to Fremont Street downtown. RTC officials believe the system will cost about $440 million and by 2020 would be carrying 58,500 passengers a day.

The system would be tied to a similar system by the public/private Las Vegas Monorail Corp. that would run from Sahara to Tropicana and, eventually, south to McCarran airport.

The airport also is expected to undergo additional expansion. Interstate 15 from Southern California is being widened, facilitating automobile traffic that is responsible for nearly half of the region’s tourism.

Together, jet, monorail, auto and bus transportation will provide visitors with greater access to and throughout the Las Vegas Valley. And their reasons for coming here also will continue to evolve.

More than just gambling

Richard Buckman, a Washington, D.C., lobbyist, had a few beers at the Orleans one afternoon in July while his wife walked the Desert Passage shops at the Aladdin.

“That seems to be the activity of choice here in Las Vegas these days,” Buckman quipped. “Shopping.”

There has without question been a retail boom on the Strip, beginning with the opening in 1992 of the Forum Shops at Caesars, which has since been expanded to some 500,000 square feet and will in the next year grow by another 300,000 square feet.

Combined with Desert Passage and The Venetian’s Grand Canal Shoppes, Strip casinos have in the last 10 years built more than 2 million square feet of retail stores.

When San Francisco television newswoman Dolores Radding visited Las Vegas recently, shopping and gambling was not on her agenda. Her preference was to hike Cathedral Rock at nearby Mount Charleston.

Cheryl Baltzer, an executive with the U.S. Housing and Urban Development office in St. Paul, Minn., asked to glimpse the dancing fountains at Bellagio.

And Gene Armentrout, a Kansas City, Mo., hospital supply company executive, toured the Art of the Motorcycle exhibit at the Guggenheim Las Vegas museum in The Venetian.

The cultural offerings of Las Vegas that began with Wynn’s Bellagio Gallery of Fine Art will continue to expand further in the coming decade with a gallery planned at Le Reve.

Outstanding gourmet restaurants such as Michael’s at the Barbary Coast, Picasso at Bellagio and Renoir at The Mirage highlight the valley’s reputation as a haven for fine food. Among the celebrity chefs operating on the Strip are Wolfgang Puck, Charlie Trotter, Emeril Lagasse and Mark Miller.

When Mandalay Bay completes its convention center, Bear, Stearns & Co. analyst Jason Ader says the Strip and surrounding resorts will have 2,989,600 square feet of convention space, second only to Chicago.

The future of Las Vegas has historically been crafted by the imagination of people such as Wynn, MGM Grand majority stockholder Kirk Kerkorian, mobster Benjamin “Bugsy” Siegel and Jay Sarno, who created Caesars Palace and Circus Circus.

“There is no city, really,” Wynn said in a previous interview. “There is just a group of developers and their imagination. Somehow Las Vegas has always managed to pull a Bugsy Siegel or a Jay Sarno out of its hat at just the right moment.”

“I’ve seen some fascinating concepts come here,” Christenson recalled. “Periodically, somebody takes things to another level. Whenever someone comes up with a new concept, somebody else comes up with a way to do things even better.

“I don’t think we’re anywhere close to the end of the evolution of gaming in Las Vegas,” Christenson said. “In fact, I believe we’ve just started.”     

Top of  Page

IGWB Magazine

 Current Issue ~ Subscribe ~ Contact Us ~ Media Kit ~ Advertise

Copyright © 2002 GEM Communications, Inc. All Rights Reserved. smile-etccard.com