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How
long will old resorts last?
As
Reported by Business Press
LAS VEGAS,
Nevada - There has been a flurry of news reports, but so
far everything is status quo. With Boyd Gaming's announcement
of its $4 billion Echelon Place project set to break ground
in 2007, the trend toward five-star, multibillion-dollar, condominium-hotel
megaresorts continues its inexorable march north along the Las
Vegas Strip.
Outposts
of old-school Vegas that have recently fallen to the condo-hotel
blitzkrieg include the clown-festooned Boardwalk Hotel &
Casino, the Westward Ho Casino and its little sister, The
Ho. This spring, Harrah's Entertainment is expected to announce
redevelopment at the Strip-Flamingo intersection, one that could
agglomerate Harrah's
Las Vegas, the Imperial
Palace, the Flamingo
Hilton, O'Shea's, the defunct Bourbon Street Hotel &
Casino and even Bally's-Las
Vegas into one super megaresort.
Does this
onslaught of capital-intensive development exert pressure on
pre-Mirage casino-hotels to reinvent themselves? The Hotel San
Remo is receiving a facelift and augmentation, reopening on
Super Bowl weekend under the Hooters banner, while Tropicana
Resort & Casino has -- again -- stopped taking room
reservations, leading some Vegas observers to believe that owner
Aztar Corp. is serious about redeveloping the site. Maybe.
New
Frontier Hotel & Casino owner Phil Ruffin's $150 million
sale of a Bahamas resort last April was taken as a harbinger
that a re-do of the New
Frontier was imminent, but nothing has been announced.
Likewise,
all is quiet at the Sahara
Hotel & Casino, but Riviera Holdings Corp. took a stand-pat
approach to its signature Strip property last November. A possible
takeover by a group of real estate and gaming executives may
change all that (see story on page 3).
As for that
other clown-themed casino, Circus
Circus, MGM Mirage CEO Terrence Lanni has stated that the
sprawling hotel/motel/RV park complex makes inefficient use
of its acreage. However, a consensus of industry observers agrees
that MGM Mirage is unlikely to do anything with Jay Sarno's
aging clown palace so long as it has Project CityCenter on its
plate.
Echoing
previous comments by Lanni, MGM Mirage spokesman Alan Feldman
says the Circus
Circus site has 27 acres of open-air parking and low-rise
buildings "that are not efficient at all." But he
says the aforementioned consensus is correct and "that
question (of redevelopment) is, at a minimum, five years away.
Currently, the market is served extremely well at all ends,"
Feldman said, and Lanni has gone on record, saying that one
of the attractions of the Mandalay Resort Group portfolio was
that it gives MGM Mirage a presence in all price niches of the
Strip market.
CB Richard
Ellis analyst Carlton Geer isn't quite buying MGM Mirage's official
stance. "They've have a lot of plans that none of us is
privy to," he said.
"It's
still a good earner for them," Curtis said of Circus
Circus. "Right next to them might be the last real
bargain bastion, Slots
A Fun," he chuckled.
Dave Schwartz,
director of the Center for Gaming Research at UNLV, speculates
that "MGM might have their hands tied because they may
have agreed not to knock (casinos like Circus
Circus and Excalibur)
all down and build them all upscale." (Feldman flatly denies
that there is any such agreement.)
"I
think they want to adhere to Steve Wynn's vision of being the
General Motors of the Strip," Schwartz said, "where
you've got rooms in every price point."
Down at
the New
Frontier, "we're seeing a significant amount of [residential]
investment by (Donald) Trump on that site," reported Brian
Gordon of Las Vegas-based Applied Analysis. "We have yet
to see any definitive plans out of Ruffin."
"If
the residential portion wouldn't work out," added Los Angeles-based
stock analyst Saul Leonard, "that project would be very,
very suspect."
'TOO MUCH
SMOKE'
Geer is
more sanguine, saying that Ruffin will do something; it's merely
a question of when. "There's been too much smoke not for
there to be a little fire," is Las Vegas Advisor Publisher
Anthony Curtis' summary of the consensus. While he doesn't go
as far as "Doug" on the ratevegas.com blog, who wrote,
"The Frontier will look like a trailer park surrounded
by luxury if something isn't done," Curtis allows, "I
can't see (leveling) a Frontier and putting up a Frontier-style
property" in its place.
Although
Aztar Corp. filed redevelopment schematics for the Tropicana
with Clark County last July, earlier this month it was reported
that the company had retained noted casino designer-developer
Tony Marnell to come up with a plan of his own. Aztar would
neither confirm nor deny the arrangement.
"In
the current environment, having a particular contractor on board
-- particularly one of (Marnell's) magnitude -- indicates some
redevelopment plans are in place," Gordon said. However,
Leonard couldn't disagree more. "Just because they signed
Tony doesn't mean anything. A lot of things still have to come
to fruition."
Those may
include whether Aztar can definitely commit to the project after
years of public vacillation. "They've been doing it so
long that I have a hard time getting any kind of read on them,"
said Curtis. "I'm almost bored to sleep by that property.
They never seem to pull the trigger over there."
Geer believes
Aztar eventually will. Meanwhile, he thinks it's missing a business
opportunity but capital availability might be an issue. "(Aztar)
is not the type of company that moves precipitously, so they're
going to continue to evaluate it," Leonard agreed. He noted
that Aztar's pursuit of a casino license in Pennsylvania could
lower the priority of the Tropicana
still further.
Gordon expects
a joint-venture development on the site, while Schwartz goes
still further, observing that the strong performance of Aztar's
Atlantic City Tropicana
could make the company an attractive takeover target. MGM Mirage
and Harrah's are possibilities, he said, but their hands are
already full. Instead, he thinks a non-Vegas operator like Ameristar
Casinos might enter the fray, especially since "the real
value is with the land and the location."
The bottom
line, for Curtis, is that the price of prime real estate is
driving the redevelopment bus. "What's pushing these (mid-tier)
places out is land values. They can't stand up to an offer that
maximizes their return more than anything they can do."
He cites the Imperial
Palace, one of the last of the mavericks on the Strip. "They
couldn't turn their back on what they were able to get from
a buyout."
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