Vegas Hotel Construction Is Booming

Southern California’s favorite gambling town is on a roll.

Spurred by strong increases in tourism and convention business, Las Vegas hotel construction is booming as never before.

Between now and 1992, more than 20,000 hotel rooms will be added to the 61,000 existing rooms, hotel owners and industry analysts say, and about 7,000 of those will be in two hotels.

One is the $630-million Mirage, being built by Golden Nugget Inc., which will have 3,100 rooms when it opens Dec. 1.

The other is the $290-million Excalibur, a project of Circus Circus Enterprises. It will have 4,032 rooms, the most of any hotel in the country when it opens in June.

“Las Vegas is experiencing the greatest growth phase of its history,” said Saul F. Leonard, a gaming industries expert with Laventhol & Horwath, Los Angeles.

“The Mirage and Excalibur will be the first new major projects in the city in 15 years, and with their unusual features, they will be must-sees.”

The president of The Mirage, Bobby Baldwin, said most of his hotel’s features were “a secret of sorts,” but earlier reports indicate that it will have a $9-million lagoon, a 49-foot waterfall and a 100-foot-high, sky-lit atrium filled with 70-foot-high banyan trees, coconut palms and tropical orchids.

Excalibur will feature a medieval theme, with a moving walkway that will carry visitors over a moat and through castle gates to a casino, an amphitheater, shops and restaurants.

Both the Mirage and Excalibur are being built on “The Strip.” But Fletch Brunelle, research coordinator for the Las Vegas Convention and Visitors Authority, said that there are hotel construction projects under way all over the city.

He estimated that about 11,500 hotel rooms are being built, and 38,000 more are proposed, some of which will be completed after the 20,000 planned to be available by 1992.

Many of the new rooms are being added to existing hotels, which are also expanding their casinos and convention halls, Leonard added.

The construction boom was created, experts say, by an aggressive marketing strategy used in the past few years by the state, the city’s Convention Authority and the major hotels to capture conventions, trade shows and group tours.

Strategy Is Working

The strategy is apparently working.

“Las Vegas is the third largest convention city in the United States and probably will be No. 2 within the next two years,” Leonard said. (Experts agree that New York is No. 1, but they’re split, between Chicago and Atlanta as to which city is No. 2.)

“Nevada, especially Las Vegas, is already one of the top destinations for group tours coming from Asia,” said Rich Moreno, state director of tourism.

Since an office to stimulate Japanese travel to Nevada was established in Tokyo three years ago, the number of Japanese tourists visiting the state jumped from 165,000 to 300,000, he added. And he expects the number of all Asian visitors to grow after a Taipei office is opened in a few months.

Tours from Europe

The Las Vegas Convention and Visitors Authority hopes to make the city a top destination for tours from Europe as well. “It’s in our budget to help fund an office in London or Frankfurt,” said Frank Sain, the bureau’s executive director.

The bureau’s advertising budget for the next fiscal year is about $10 million, and that will be spent on ads in newspapers, magazines, billboards, and TV and radio.

“Southern California is our primary market,” Sain said, estimating that Californians represent up to 42% of all Las Vegas visitors, which jumped from 11.7 million to 17.2 million in the past 10 years.

About two-thirds of the California visitors come from Southern California, said Maurice Robinson, a senior manager with KPMG Peat Marwick, Los Angeles.

The proximity of Southern California to Las Vegas undoubtedly contributes to the fact that the growth in Nevada, in terms of casino revenues and visitors, is “overwhelmingly in Clark County,” said Andy Grose, executive director of the state’s Economic Development Commission. “(It) is not a statewide phenomenon.”

Laughlin a Boom Town

“If you really want to see a boom town, though, you should go to Laughlin,” Leonard said.

Laughlin, also in Clark County but a little closer than Las Vegas to Los Angeles, had 430 hotel rooms in 1981 but slightly more than 4,000 at the end of 1988, he noted, and it is expected to have about 13,000 at the end of 1991.

Laughlin drew some business from downtown Las Vegas, he said, but owners of the downtown Las Vegas hotels and casinos have changed their marketing strategy to capture richer customers.

They switched, said Jim Needham of Arthur Young in Seattle, from courting “blue-collar workers and moms and pops carrying around milkshake containers of nickels to younger people looking for a one-stop place for a show, gambling and resort.”

Seeking Conventions

Hotel/casino owners throughout Las Vegas responded the same way to business setbacks in 1979, when casinos first opened in Atlantic City, N.J., and in the early ‘80s, when there was an economic recession.

They changed their marketing strategy by seeking conventions and those visitors who would stay longer than a day.

“Las Vegas saw what it had to do,” said Dave Daley, a partner in the Arthur Andersen Real Estate Services Group.

“Las Vegas turned from a weekend regional, getaway place where people would drive to go, to a national convention place competitive with such cities as San Francisco, Chicago and Los Angeles,” said Robinson of KPMG Peat Marwick.

Most of Atlantic City’s 30 million annual visitors do not stay overnight, observed Sean Hennessey, a vice president of Landauer Associates, New York.

Pull from the Midwest

“And I’d say that Las Vegas still enjoys a tremendous pull from the Midwestern states and even from Buffalo and areas approximate to Atlantic City, which is still trying to get better airport and convention facilities to emulate Las Vegas.”

But Las Vegas is still improving its airport and convention facilities.

Although the first of a three-phased, $1-billion expansion of McCarran International Airport in Las Vegas was completed a few years ago, the second phase is under way, and the city has just launched a $35-million expansion of its convention center.

Many hotels are also adding convention accommodations, including the Sands, where a 1-million-square-foot convention center, touted as “the largest outside a facility operated by a community,” is expected to be completed in 17 months.

New sites are also coming up for future gaming, convention and hotel development. The largest in the city is a 300-acre site owned by the Union Pacific Railroad, which is being marketed by Cushman Realty, Los Angeles.

It’s all part of the city’s drive to stay on top of the competition, including state lotteries, which, gaming experts say, have helped the casinos at the same time.

“Lotteries have made gaming more acceptable, a mainstream activity,” said Landauer’s Hennessey.

New Experiences Planned

But Las Vegas is banking on more than its current gaming and convention capabilities to draw visitors and fill hotel rooms.

New games and experiences and a proposed train are in the cards. Said John O’Reilly, chairman of the Nevada Gaming Commission: “I think that in the next 12 to 24 months, there will be some new games with more universal appeal than most games of the past.”

Las Vegas is also betting on what state tourism director Moreno describes as “new experiences,” like the live dolphins that will perform at the Mirage and jousting tournaments that will be held at Excalibur.

“People won’t just go to a hotel as a place to stay but as an experience,” he said.

Las Vegas is also betting on a super-speed train, which would make the trip from downtown Las Vegas to downtown Los Angeles in an hour--for $65, round trip.

“I want it to happen,” said Assemblyman Richard Katz (D-Sylmar), chairman of the 16-member California-Nevada Super Speed Ground Transportation Committee. “We’ll know in a year if it’s financially and environmentally possible.”

The train would be privately funded at a cost of $3.5 billion, he added.

The Race is On

Despite the price, Arnie Adamsen, a Las Vegas city councilman and vice chairman of the commission, said, “It could conceivably start construction in 1993 and be on line from 1996 to 1998.”

In the meantime, the race is on to see which hotel will have the most rooms to attract the largest conventions.

For some time, the 3,174-room Las Vegas Hilton has been billed as “the largest hotel in the free world.” It will be overshadowed by the Flamingo Hilton after a 750-room expansion there brings the Flamingo’s room count to 3,650 in early 1990, but Excalibur will be the biggest when it opens in June, 1990.

A 1,700-room, 42-story tower, which is being called “the tallest in the state,” is expected to bring the Riviera Hotel’s room count to about 4,000 in late 1991 or 1992. And a 1,500-room tower to be completed in 20 months at the Sands will bring that hotel’s room total to nearly 3,000.

The number of rooms under construction is a lot in a short period of time, experts agree, but most are optimistic that occupancy rates will remain high after a slight downturn. A glut of hotel rooms will exist, said Leonard, but only temporarily.

Occupancy Rates 85%

Current occupancy rates are in the 85% range in Las Vegas, while occupancies range between 65% and 70% for hotels in the rest of the country, according to Hennessey.

“What’s dropping is motel occupancy,” said Sain, of the Convention Authority.

It’s still at a respectable 73%, he noted, “but they’re not getting the hotel overflow. In the eight years I’ve been here, not that many new motels have been built because most convention and trade show people want hotels with all their amenities.”

In the long-range, predicted Leonard, Las Vegas will continue to grow “because there is so much happening there.

“And when you consider that only about 10% of the people in the United States have ever been to Las Vegas, you know that the city has a hell of a long way to grow.”

HOTEL ROOM COUNT FOR LAS VEGAS

Year Number of Rooms (In thousands) 1981 49.6 1982 50.3 1983 52.5 1984 54.1 1985 53.1 1986 57.6 1987 58.6 1988 61.4 1989* 62.7 1990* 74.6 1991* 82.8

*Estimate

SOURCE: Laventhol & Horwath