Las Vegas Building Boom Defies Doom Predictions
A funny thing happened to Las Vegas on its way to oblivion.
Oblivion turned out to be a high roller who hits nothing lower than 22 at the blackjack table.
Thus, just three years after the doom sayers had warned that the golden bubble had burst--that the recession and the impact of competing Atlantic City had put Glitzville on permanent “hold”--this sybaritic oasis is in the midst of a real estate boom that has no historic parallel:
Real Estate Developments
--Ground will be broken in August for the new Golden Nugget resort, an 86-acre, $500-million complex dominated by what is reputed to be the largest hotel in the world. The first major hotel to be built here in 15 years, it will cost five times more than its predecessor, the MGM Grand (now under new ownership as the Bally Grand).
--In the past year, with virtually no publicity, existing Las Vegas hotels have added more than 6,000 new rooms, as many as the total number of rooms that Atlantic City has put into place since gambling was legalized there 11 years ago, and more than some cities of comparable size have in their entirety.
--Ground will be broken this fall for a $650-million cluster of 10 hotels with 6,000 rooms at the far south end of the Strip sharing a common casino and market plaza. With 57,000 hotel rooms now in place, Las Vegas already has almost as many first-class hotel rooms available as five-times-larger Los Angeles with its 65,000 rooms.
--Hotel room tax revenues rose 19% last year and occupancy rates currently range from almost 100% on weekends to 88-89% midweek.
--Residential building spurted 19% in the last year alone.
--Caesars Palace has announced an upcoming, $175-million, 875,000-square-foot shopping plaza abutting its 80-acre resort complex.
--Twenty major companies a year are either opening new regional offices or plants or are expanding existing ones.
Gaming and Glitter
And yet, as recently as two years ago, economic analysts looking at a recession/Atlantic City-induced decline of 10% in casino revenues were warning that Las Vegas could no longer look to gaming and glitter to support an ever increasing population base. That emphasis, instead, they said, would have to shift to the attraction of more high-tech employers.
So, what happened? What prompted the Golden Nugget’s savvy chief executive officer, Steve Wynn, to pour more than half a billion dollars--roughly the original estimate for Disney’s Epcot Center in Florida--into a spectacular resort abutting Caesars Palace on the south? A 2.1-million-square foot, 5,400-employee pleasure palace that will be set back so far on the acreage and so hidden by 2,300 palm trees and 10 acres of water ponds, falls and pool gardens that the Strip won’t be visible from the hotel entry.
“Along with the recession, trouble with the airlines and concern over Atlantic City, things had gotten pretty rocky here,” Wynn said in an interview in the office of his downtown, 1,900-room Golden Nugget hotel-casino.
“And so the natural question arose: just how fragile is Las Vegas? Had our success been due solely to the monopoly that Las Vegas had on the ‘forbidden fruit’--casino gambling?
“It turned out that the town was more galvanized and powerful than anyone had thought. The image of the town as a resort destination was so strong that we weren’t really in any trouble at all.
Changed Demographics
“The meaning of our new project on the Strip is a lot more important than the project, itself,” the dynamic Wynn said, curled up on his office sofa and pounding a cushion for emphasis.
“Something like this doesn’t happen simply because a corporate board thinks it can make money doing it--it has to be a lot more involved than that. The demographics of Las Vegas have changed, and the project is a symbol of that--the entrepreneurial spirit of Las Vegas’ government and private sectors working together.”
But “the project” as a project isn’t so easily dismissed. When completed in the summer of 1989, the new Golden Nugget Strip Hotel--and demolition of the Castaways, which occupies a portion of the site, will begin in early August--will stretch 2,200 feet down the Strip from Caesars to Spring Mountain Road and to a depth of 2,100 feet to the west and will incorporate 3,000 typical guest rooms, and 303 suites and penthouse apartments in a “Y”-shaped, 32-story hotel.
(With a total of 3,303 keys, the long-standing debate over the “world’s largest hotel” between Las Vegas’ Hilton Hotel, with 3,174 keys, and Moscow’s Rossiya Hotel, with 3,200 keys should be quietly put to rest.)
Destination Hotel
“This is the first one that’s being built as a world-class resort destination hotel that just happens to have a casino in it, but that isn’t dependent on it.
“It’s not a casino that happens to have rooms upstairs and a front desk in a corner of the lobby. It’s a place that people will come to, whether they gamble or not, and it’ll do well either way,” Wynn emphasized.
The lesson learned by Las Vegas in the past couple of years, both Wynn and Frank G. Sain, executive director of the city’s Convention and Visitors Bureau, agree, is not only that most of the 17 million people who come to the city each year do so with gaming as an incidental, but that Atlantic City has turned out to be a paper tiger, appealing to an entirely different audience.
As a resort destination city, Wynn noted, Atlantic City--5, 10 or 20 years down the road--will never be in a category with Las Vegas.
“The high rollers,” Wynn added, “are always going to be important, and there’s probably more of them now than there’s ever been, but they’ve become such a much smaller part of the whole. You don’t build 60,000 hotel rooms for the high rollers, you build maybe 2,500 or 3,000.
Reasons for Visit
“What about the other 96% of the population who aren’t palpitating to play a slot machine? Almost all of the folks who come to Las Vegas are really coming for the Grand Canyon, or the weather, or the entertainment and the shows, or they’re en route to somewhere else.”
Both Wynn and Sain shrug at Atlantic City’s claim of 30 million visitors a year. “I’m not really doubting the figure itself,” Sain added. “I’m just saying that such figures are based on room nights and our average visitor stays 4.1 days.
“So, if you take last year’s figure of 16.2 million visitors and multiply it by that you’re talking about 64 million room nights, or twice Atlantic City’s total.”
Wynn laughed. “Atlantic City’s got a great potential as a regional convention center. They’ve got 6,000 rooms now and will have 7,000 shortly, but Atlantic City, over the next 10 years, doesn’t have the land mass to support more than about 15,000 rooms in all.
“Where are you going to put a convention like the National Assn. of Home Builders with 20,000 or more delegates?” (More than 50,000 have been attending that convention annually.)
Weekly Gaming Visits
“Let’s face it, it’s the local crap game for New York, Philadelphia and New Jersey--it’s a day trip. At our Golden Nugget back there, (Golden Nugget Inc., sold the Atlantic City holding earlier this year to Bally Manufacturing) we ran a survey and found that 60% of our guests came down every week or 10 days. So, when they talk about 30 million visitors, it’s pretty clear to me that they’re talking about maybe a million people coming in 30 times a year.”
And Sain said: “One of the hotel-casinos asked the passengers of one of the tour buses visiting it to come into a party room where they were entertained, and were then asked to lay out on a table all of the money they’d brought with them. Naturally, they were a little suspicious, but then when the hotel said it would match what they laid out, they did it gladly. You know what the average was? $37.”
In Las Vegas, according to best estimates, the conventioneer wagers roughly $200 per trip and the vacationer budgets about $600.
Las Vegas as a resort destination city is also the gamble behind Southstar Development Corp.’s $650 million, 10-hotel complex on 82 acres acquired from Howard Hughes Properties and abutting the Hacienda Hotel at the far south end of the Strip.
Location Advantage
With one exception--an equally large tract still owned by Hughes at the far north end of the Strip--the only undeveloped parcel on the Strip, the Southstar self-contained complex will have one undeniable advantage despite its distance from what is generally considered the “heart” of the present Strip, the intersection of Las Vegas Boulevard and Flamingo Road.
“Whether they’re driving in from Los Angeles, or flying in to McCarran,” Southstar’s President Max L. Cole, said, “we’re going to be the Gateway for them to Las Vegas--the first thing they see.”
With letters of agreement from four major national hotel chains, ground will be broken this fall on the first phase of the project--three of the hotels on the north boundary of the property, totaling about 2,000 rooms. In size the hotels will range from about 200 rooms to 1,800 and run the gamut from luxury to economy.
“Nobody has ever done a multi-hotel development with a central, 120,000-square-foot casino and entertainment center, and a covered, air conditioned 212,000-square-foot shopping mall before,” Don Allison, president of Southstar Casino Corp., and the former president of Caesars Palace, added.
“A lot of hotel people want to be in Las Vegas and want to be near a casino, but they don’t have the expertise to run one and don’t want to get into the licensing hassle. The mall will connect all of the hotels and the casino and the first 2,000 rooms, which will include one of the economy units, will sustain the casino for a year or so, and then all of the rest will come on line--all out of the ground at the same time. We should have the whole thing done by 1990.”
‘Forum of the Caesars’
The connecting-mall theme of Southstar’s development is also reflected in Caesars Palace’s recent announcement of a new 875,000-square-foot “Forum of the Caesars,” a sprawling shopping center that will connect with a 25,000-square-foot expansion of the Palace’s north Olympic Casino.
The center will house three anchor stores, 150 shops, 3,000 parking spaces and a 1.5-acre open-air Roman village bazaar complete with a replica of a Roman aqueduct surrounding the complex.
Leased from Caesars Palace, the Forum will be developed by Sheldon Gordon whose Gordon Co. projects include the Beverly Center and the Ma Maison Hotel in Los Angeles, among others. Ground breaking is scheduled for early next year.
But even though reports of the death of Las Vegas as a resort/casino hub capable of competing with Atlantic City were grossly premature three years ago, development of the other Las Vegas as a light-industrial/regional headquarters also continues at a fast, if quieter pace.
“We’ve got about 23,000 companies of all sizes in the Las Vegas area,” according to John P. Kuminecz, vice president of sales and marketing for the Nevada Development Authority.
Low Unemployment
“And it’s growing steadily because we’ve got a lot to offer: a low unemployment rate (about 6%), a young, well-educated work force (median age 31) and a housing boom (both residential and non-residential construction jobs were up 36% last year), that keeps the cost of home ownership well below the national average.”
Citibank last year increased its regional credit card operation, and employment will increase from 800 to 1,500 people in the near future. A comparable expansion is in the works for Ford Aerospace.
“About 21,000 new jobs were created here last year,” Kuminecz added, “which brought the work force to 325,000, out of a population of 610,000 people, and that 7% increase compares favorably with the national average of 4.5% to 5% in terms of new jobs. About a third of our people are employed in the resort industry, and in spite of the new boom in resorts we expect the proportion to remain about the same.”
A strong selling point for Las Vegas in attracting new industry: It’s within 500 miles--overnight--of a market of more than 22 million people with excellent freeway connections and a brand-new, massive, $280-million expansion of McCarran International Airport.
‘A Lot Going for It’
“As a warehousing and distribution center for the West Coast,” he added, “we have a unique distinction in Las Vegas. Because so much inbound trucking of consumables for the resort hotels is required, 40% of the trucking leaving Las Vegas does so empty.”
“Maybe it was true for awhile that Las Vegas thrived because of its monopoly on casino gambling,” the Golden Nugget’s Wynn philosophized, “but the events of the past two to three years proved that the town had a lot more going for it than that--a charisma that’s carried over from the old days of the Mafia right up to today’s corporate domination.
“But it’s still a town that never disappoints. It’s always been and still is, ‘a trip.’ ”
