Downtown Las Vegas gaming is well positioned for its future despite dealing with the downturn caused by COVID-19.
The 44-story Circa Resort & Casino laid its final beam for its tower and when the $1 billion property opens this fall, one analyst predicted it’s positioned to lure visitors from the Strip. Analysts even forecast that downtown is likely to recover faster from the coronavirus than the Strip.
Circa CEO Derek Stevens signed the beam before it was installed as part of a ceremony on Friday. Earlier in the week, Stevens announced that the property’s 1.25 million-square-foot casino will debut on Oct. 28 ahead of schedule. The 777-room hotel will open at the end of 2020 as previously announced.
Circa, which will begin taking reservations Wednesday and will be a 21-and-over property, will have the world’s largest sportsbook — three stories with a 78 million-pixel high definition screen and capacity for 1,000 people. Circa will have a pool amphitheater and six pools. The two-story casino will feature 1,350 slot machines and 49 table games.
“I think Circa is going to redefine the downtown experience,” said Josh Swissman, founding partner of The Strategy Organization in speaking to 250 Las Vegas business leaders Thursday in a virtual conference hosted by NAIOP Southern Nevada. “If you look at what’s downtown now, and you look at the new development that Circa represents, it’s the first new (ground-up resort in downtown in about 40 years). It brings a ton of room inventory, and a great new food and beverage experience to the downtown market.
“What Circa will do is not suck away volume from other downtown operators, but you will see some folks head from the Strip to downtown because of all that it represents. It will be a great asset to revitalize and reinvigorate and continue to establish downtown as one of the premier gaming submarkets in Las Vegas. If you look at the trend of their gaming revenues, they have been growing steadily for a long time pre-shutdown. This will only help accelerate that once volume gets back to normal.”
Through February, downtown gaming revenue was up 6 percent over the previous 12 months. It has grown steadily since 2011 with only one down year in 2013, according to CBRE. It rose 12 percent in 2017 — the highest increase in the 2000s.
Brent Pirosch, director of gaming consulting with CBRE Global Gaming Group, credits capital investment in downtown that includes new housing, retail and attractions and new casino ownership that has renovated rooms and done other upgrades — prompting others to spend.
The Downtown Grand, the former Lady Luck, is building a third tower after reopening in 2013 after a major renovation. The Plaza Hotel & Casino has done renovation projects this decade as well.
“I’m excited for downtown and bullish on the area,” Pirosch said. “They are doing well and as soon as things get back to normal, they will continue to do well.”
Swissman and Pirsoch were bullish about downtown’s recovery from the coronavirus ahead of the Strip, which relies more on air travel compared to downtown that counts on Las Vegas residents and drive-in traffic from California and neighboring states.
Downtown is up and running at full strength in comparison not only to the Strip but local casinos, Swissman said. The only property that remains closed is Main Street Station that’s part of Boyd Gaming’s portfolio, he said.
“In this environment, downtown is better poised to recover more quickly than the Strip because it has a stronger local base,” which has historically been about 20 to 25 percent of the market,” Pirsoch said. “Historically, downtown has not recovered as quickly as the Strip because when the Strip gets to a certain value proposition, it makes better sense to stay on the Strip. Downtown has a bigger local population base and occupancy limitations (50 percent in casinos to deal with COVID-19) are going to force people to spread out a little more.”
Swissman agreed that downtown casinos will recover ahead of Strip casinos and even suggested some Strip casinos may not open until 2021. Strip casinos learned a lesson from the Great Recession and have been opening in phases now to keep up their room rates because every $1 in rates can mean $1 million in revenue a year, he said.
Bank of America said the Strip rates for June, July and August were $107, $109, and $124, respectively. That is down 38 percent for June, 47 percent for July and 31 percent for August 2019.
“I see a much longer economic recovery model for the Strip coming into play because the room rates tend to be a bit higher, and there’s more planning because the majority (of their visitors) are flying into Las Vegas,” Swissman said. “That adds to the time to come to Vegas when there aren’t as many air flights into (here). Most models predict at the end of this year of Las Vegas being two thirds recovered and from there a much slower recovery pattern for the coming years. Many analysts are saying Vegas doesn’t get back to some semblance of pre-shutdown volume and revenue for a least a couple or perhaps three years.”
The downtown market with its lower hotel rates and market that attracts the drive-in visitors from Southern California and Arizona allows for a shorter recovery curve, Swissman said.
“You have already seen business volumes bounce back in a pretty substantial way and with some new inventory coming online downtown that only further bolsters that market for recovery. That’s one big indicator why you see all but one hotel open downtown, and you see a number of casinos not open on the Strip.”