The Las Vegas building boom worth $20 billion, a five year timeline, is under way on the Las Vegas Strip. It will roughly double the inventory of luxury hotel rooms costing $200 a night or more, a new Standard & Poor’s study said.
This newfound focus on upscale visitors is largely a response to continuing Las Vegas demographic shifts.
Real estate projects that S&P said probably would be completed include:
• The $1.8 billion Palazzo Las Vegas high rise with 3,025 rooms.
• The $1.7 billion Encore Wynn Las Vegas with 2,054 rooms.
• The $7 billion MGM Mirage Project CityCenter with 7,700 rooms.
• The $4 billion Echelon Place with 3,300 rooms.
Projects whose fates S&P called uncertain include:
• The $2 billion Cosmopolitan condos with 3,000 rooms.
• The $1.5 billion Fontainebleau with 4,000 rooms.
• The canceled $3 billion Las Ramblas with 1,225 rooms.
• The $1.7 billion W Las Vegas condos with 3,000 rooms.
Together, those Las Vegas luxury condos projects represent a 30 percent increase in room inventory, gaming space, Las Vegas convention space and retail space.
“A key factor (in deciding which proceed) will be the capital markets’ willingness to fund many of these Las Vegas real estate projects, particularly single-site developments pursued by less established gaming industry investors,” according to the S&P report.
The real estate expansion mainly will be in the high-end segment of the market, which at the end of 2005 accounted for about 15,000 of the 75,000 total rooms on the Vegas Strip.
If some of the more speculative projects fail to materialize, S&P said that would still mean an 80 percent increase in the Strip hotel inventory charging $200 a night or more. If all materialize, a 150 percent increase in the upscale room inventory on the Strip would result.
The gradually changing characteristics of the average Las Vegas visitor are driving the transformation of the Strip into a ritzy resort destination. The report found the average Las Vegas visitor is wealthier, younger and spends more on each trip, both on gaming and amenities.
Deutsche Bank analyst Andrew Zarnett said all such developments start with customer demand. The leisure and business markets are demanding more Las Vegas luxury hotel rooms and are willing to pay “that price point.”
“The Venetian, Bellagio and Caesars’ new tower all proved the point. There is sufficient demand for existing capacity and a lot more. And then Wynn Las Vegas showed the market is willing to pay still higher prices, around $300 a room,” Zarnett said.
Developers, promoters, and marketers have been supremely successful in establishing and continually updating the brand identity of Las Vegas as an adult playground, to keep building demand. Source: LV Review Journal
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Las Vegas real estate building boom on the Las Vegas Strip.