Can Wynn jump start hotel construction?

Jan 25, 2005 4:39 AM

By David Stratton

With the opening of the $2.3 billion Wynn Las Vegas just three months away, some industry observers are predicting the new megaresort will be the catalyst for a new wave of hotel construction.

"Usually, there’s a flurry of activity after one megaresort opens," a gaming analyst with Applied Analysis told a Las Vegas newspaper. "It seems like we’re getting ready to begin the next cycle in Las Vegas’ continuing development."

A financial analyst with Susquehanna Financial Group added that the opening of Wynn Las Vegas would encourage more development along the Strip. "What’s clear is that we’re kicking off another generation of resorts," the analyst said.

Indeed, history suggests that casino/hotel construction comes in surges. The most significant construction boom started with The Mirage in 1989 and culminated with the Aladdin in 2000.

Over the course of those 11 years, a total of 23 hotels containing 47,449 rooms were built in Las Vegas.

But construction in the new millennium has been sluggish at best. In the first four years of the 21st century, only six hotels containing 2,976 rooms were built.

This year, Wynn Las Vegas will add 2,800 rooms, and new towers at Bellagio and Caesars Palace will add 928 and 949 rooms, respectively.

Nevertheless, the 4,677 guest rooms that will be added in 2005 hardly constitute a surge in construction. Especially since no other openings are planned this year.

The only significant hotel construction currently under way is the Palazzo (The Venetian’s sister property), which will add 3,000 rooms, but not until 2007, and locals’ casinos Red Rock Station and South Coast, whose combined 1,060 rooms won’t be available until mid-2006.

So, where will the next building boom come from?

"You can’t count on any new construction until they actually start pouring the cement," said a Wall Street analyst who asked that his name be withheld. "Money is tight right now, and with most mega resorts commanding price tags above a billion dollars, it won’t be so easy to tie up the right financing packages."

The analyst added that a lot depends on what happens in the wake of the Wynn opening. "Developers will wait to see the shake-out in the aftermath of the opening. There won’t be the run to build-it-and-they-will-come scenario like we had in the 1990s."

Instead of a rush to quickly build megaresorts, developments will evolve slowly, sometimes painstakingly, the analyst said. There’s speculation that new megaresorts could be built on the sites of existing hotels such as the Stardust, New Frontier and Tropicana.

In addition, MGM Grand has earmarked a 66-acre parcel between Bellagio and Monte Carlo for a hotel/commercial/residential project that could cost between $3 billion and $4 billion, and Station Casinos has announced plans to one day develop the 48 acres on which the Wild Wild West casino sits.

Other recently announced projects include the $1.5 billion Cosmopolitan Resort & Casino south of Bellagio near the Jockey Club, and $250 million Majestic hotel/condominium project on the site of the old La Concha motel.

Still, those projects may be years away from fruition. And some projects never get off the drawing board, while others are put on the back burner where they simmer to an ignominious demise.

Here are a few planned hotel/casinos that never seem to have gotten past the planning stage:

”¡ A London-themed resort on the site of the old El Rancho Hotel.

”¡ City by the Bay, a San Francisco-themed resort proposed by the owner of the New Frontier.

”¡ Dynasty Forbidden City, a 600-room Asian-themed resort on the South Strip near Belz Factory Outlet Mall.

”¡ Palace of the Sea, a marina-themed resort on the site of the now-closed Wet ”˜n Wild. The land could be sold by the owner, Archon Corp., rather than developed.

”¡ The New World resort to be built on 77 acres across from Mandalay Bay was announced in 2001 and was never heard from again.