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THE
STRIP: BREAKING RANKS
As
Reported by Las Vegas Review-Journal
LAS VEGAS,
Nevada, - What a difference a year makes, at least for gaming
industry competition in Las Vegas.
Industry
experts often compare competition among gaming companies to
a game of Monopoly. But change in the past 12 months to 18 months
has been so sweeping that the experts now say it's as if the
game has changed. There are new players, a different board and
new rules. The crowd chasing the highest-end customers seems
to be growing and the other players are working to catch the
rest of the fragmenting market.
No company's
role in the Las Vegas gaming industry has changed more dramatically
than Boyd Gaming Corp.'s.
Boyd Gaming
started out as a sleepy competitor locals gaming business, at
least in the minds of many Las Vegans. But last week the company
moved to a leading role on the national stage with plans to
develop Echelon Place, the second-costliest single hospitality
industry project in U.S. history. The project will have 5,300
hotel rooms, 1 million square feet of meeting and convention
space, 350,000 square feet of retail stores and a 140,000-square-foot
casino.
Boyd Gaming
Chairman Bill Boyd said his company plans to become a leader
in Las Vegas' luxury hospitality with Echelon Place, offering
offer world-class dining and nightlife, shopping, meetings and
conventions, and entertainment.
To achieve
top-flight luxury for Echelon Place, Boyd Gaming will partner
with Shangri-La Hotels and Resorts, the Asia-Pacific's leading
luxury hotel group, and the Morgans Hotel Group, a developer
of lifestyle-boutique hotels. Bob Boughner will leave his position
at Borgata
in Atlantic City to lead development of Echelon Place.
The end
result likely will be a new wave of development and spirit of
competition, the likes of which Las Vegas has never seen before.
As early ago as 2004, gaming officials here were saying the
casino business was a mature industry with a relatively fixed
cast of players. Boyd's bold move with Echelon seems to shatter
this notion.
Even a year
ago, the gaming industry was dominated by three giants -- MGM
Mirage, Harrah's Entertainment and Caesars Entertainment --
each of which was known for its takeovers and none for its own
developments.
Now, Caesars
has been gobbled up in a buyout by Harrah's. And Mandalay Resort
Group, which had been coming on strong, has merged into MGM
Mirage.
In the same
year, Las Vegas Sands Corp. has gone public and started work
on Palazzo, a new resort next to The
Venetian, which it also owns. Also, Wynn Resorts Ltd. opened
Wynn
Las Vegas and started work on Encore, its second Las Vegas
property. Both Sands and Wynn Resorts are chasing the premium
market.
Niche operators
such as Palms,
owned by George Maloof; the Hard
Rock Hotel owned by Peter Morton; and the Golden Nugget,
led by owner Tilman Fertitta, are going through massive expansions.
All three hotel-casinos are also chasing high-end customers.
Meanwhile,
Robert Earl, who is rebranding the Aladdin
as Planet Hollywood; and the San Remo, now the Hooters Hotel;
are chasing new classes of casino customers previously given
short shrift by major operators.
By contrast,
Harrah's Entertainment is focused on operating dormitories for
its slot shacks, except for Caesars
Palace, which at least still gives lip service to catering
to a higher-end clientele, said analysts who asked not to be
named.
Harrah's
may not stand pat. Schwartz said there is a lingering question
of when and how Harrah's will depart from this tried-and-true
strategy and unveil a redevelopment plan for its major real
estate holdings from Harrah's
Las Vegas and Imperial
Palace south to Paris
Las Vegas.
Station
Casinos is left as the sole company focusing exclusively on
the locals market. But insiders and analysts agreed although
Boyd Gaming and niche operators are not leaving locals to Station
without a battle.
While Boyd
Gaming officials were reluctant to discuss marketing strategy,
Steve Ruggerio, gaming analyst with CRT Capital Group expressed
skepticism Boyd will really forsake its traditional customer
base or conventioneers to concentrate on high-end customers.
Ruggerio
said the premium market is in danger of becoming overcrowded.
But he added that although while Echelon Place will be upscale,
Boyd will use its ExpoCenter to maintain and enhance its position
in the midtier market.
University
of Nevada, Las Vegas professor Bill Thompson, who specializes
in gaming studies, said that although high-end has been the
fastest-growing casino market segment, the market would have
to grow 10 percent a year to absorb projects now on the drawing
board, or the companies will start cannibalizing each other.
Therefore,
the dual marketing strategy behind Boyd Gaming's development
plans appears shrewd, Thompson said.
Schwartz
said MGM Mirage is pursuing a similar two-tiered marketing strategy,
initially engineered by Steve Wynn when he headed Mirage Resorts,
of offering properties for every budget.
It's better
if you can charge $250 a night, but if that's all you offer,
you can end up scaring customers away, which Boyd promises not
to do, Schwartz said.
"It's
a good business plan. Just because you have a Ritz-Carlton doesn't
mean you can't have a Holiday Inn," he said.
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