First Free Story (1 of 3)Join Skift Pro
It didn’t take long for the buzz to become a roar after the Genting Group announced plans Monday to develop a 3,500-room megaresort on the Las Vegas Strip.
The Malaysian company’s plan for Resorts World Las Vegas includes a cluster of hotels, 175,000 square feet of gaming space on multiple casino floors, 210,000 square feet of restaurants, 250,000 square feet of retail, a 4,000-seat theater, more than 500,000 square feet of convention space and 300,000 square feet of pools and water slides.
Developers say they hope to build a replica of the Great Wall of China, faux terracotta warriors and an enclosure for pandas.
While most people welcomed the news of a new neighbor on the Strip, others weren’t quite as enthusiastic.
Here’s a look at who stands to gain from the arrival of Resorts World Las Vegas and who stands to lose:
Las Vegas visitors
One of Las Vegas’ most enduring qualities has been its ability to reinvent itself.
A big part of the reason the city expanded so rapidly in the late 1980s through early 2000s was because tourists always had something new to see: The erupting volcano at the Mirage; the pirate ship battle at Treasure Island; the Luxor pyramid; the fountains and conservatory at the Bellagio; the view from the Stratosphere. The newest version of the next big thing kept coming, year after year.
Now, after a lengthy lull, there will be a new draw. And that’s certainly good news for tourists looking for a reason to come back to Las Vegas.
The North Strip
The northern edge of the Strip is only a few miles from the Bellagio, Aria and other popular casinos, but it feels like a different city.
Three closed or mothballed resorts blight the area, and foot traffic is thin. The area is poorly lit, and many tourists avoid it because there are fewer entertainment options.
The walled-off Echelon site intimidates people because it looks “desecrated,” said Ron Gonzalez, a tattoo artist at Rock Star Tattoos across the street.
“It’s a huge economic cemetery,” said Eric Boye, owner of the Don Pablo Cigar Co. cigar shop.
North Strip retailers hope that will change when Resorts World opens.
“Not only will it be good for us, for local businesses, but it’s going to brighten up this area,” Gonzalez said.
Gonzalez joined the tattoo parlor largely because of the plans for Echelon. He figured it would bring him lots of customers when it opened.
Instead, business has been slow, and Gonzalez considered leaving for another shop. Now, he’s excited.
“That’s going to bring in so much foot traffic,” he said.
Lisa Thompson started working at Strip Liquor, also across the street from the Echelon site, in June 2008, a few months before the project was shelved. She also has seen a steady decline in customers since then. Business dropped even further when the Sahara closed.
“This area needs it,” Thompson said of Resorts World.
The sale of the Echelon site to the Genting Group could inspire other developers to buy land or resume stalled projects for new Strip resorts.
But even if they do, there’s no guarantee they’d pay big money for properties.
The Genting Group paid Boyd Gaming only $350 million for 87 acres — or $4 million per acre. That’s a far cry from the price of land during the boom years, when some developers paid between $17 million and $33 million per acre for land on the resort corridor.
Property values on the Strip have plunged in recent years, and some could even argue Genting paid too much, said John Knott, global head of gaming for the real estate brokerage Newmark Grubb Knight Frank.
Knott said Genting got a good deal partly because the project site is so big. It’s the largest contiguous undeveloped property on the Strip. As a result, a buyer would “certainly expect a size discount,” Knott said.
But by his count, there are six other properties on the Strip with enough land for a new resort. If Genting’s resort and the nearby SLS Las Vegas on the site of the former Sahara prove successful, other projects could follow.
The Genting deal sets a new low-value mark for Strip land acquisitions, but its planned megaresort already has raised nearby property values, said commercial real estate broker Mike Mixer, managing partner of Colliers International’s Las Vegas office.
“Land buyers from here on out should expect to pay more per acre to be on the Strip,” Mixer said.
The Genting Group isn’t licensed in Nevada, and because it’s a foreign company, it is going to take considerable time and energy — and billable hours — for Genting to make its way through the state’s regulatory process, which most applicants say is the most arduous in the world.
The attorneys who stand to gain the most will be from Lionel Sawyer & Collins, the law firm that will advise Genting on regulatory matters.
For the rest of the legal community, the outlook is uncertain. Local attorneys were divided on whether there might be spin-off work that results from the Genting project.
Wynn should be happy, right? He was one of the critics who complained that the abandoned Echelon construction site was a community eyesore.
But Resorts World could prove to be a mixed bag for him.
Genting’s coming to town could be a positive in that it brings new money to the Strip, new tourists to the city and new life to an abandoned property. The arrival of an Asian company to Las Vegas also signals the reversal of big-time American players setting up shop in Macau.
But will Wynn be happy about a respected competitor moving in right across the street from him?
He has never shied away from competition. But only time will tell what a big competitor — and an Asian one at that — moving in on his territory will mean.
Airlines go where there’s demand. And conventional wisdom suggests that with a new resort, there will be new demand for flights to Las Vegas.
Resorts World is expected to bring online 1.2 million new room nights per year.
Still, that doesn’t mean new flights are guaranteed. Air carriers will likely analyze the impact of Resorts World over the next several years and monitor their competitors before adding new schedules.
The big question will be whether Genting’s plan to market the property to middle-class Chinese travelers will press international air carriers to provide nonstop flights between China and Las Vegas. State officials have tried to convince airlines to try a route for years, but so far have been unsuccessful.
The only current nonstop flights to Las Vegas from Asia are three weekly round trips on Korean Airlines from Seoul, South Korea.
It has been more than two years since the last major resort opened on the Strip. Since then, most construction projects in the resort corridor have been room remodels, store renovations and other interior work.
That soon could change.
If all goes according to plan — and that’s a big “if” in Las Vegas — the Resorts World project would boost the local construction sector, which after being practically wiped out during the recession is finally beginning to show signs of improvement.
Construction employment in Nevada has plunged 66 percent since the peak of the boom days. There were 50,200 construction workers employed in the state in December, down from 146,400 in June 2006. Nevada saw the largest percentage drop in the country during that period.
Burke Construction Group CEO Kevin Burke said he was “surprised and enthused” when he heard about the Genting project. The resort is a great sign of confidence in Las Vegas.
It “sends an entire ripple effect through our industry that is so positive,” he said.
The Strip’s oversupply of hotel rooms, casino space and restaurants has kept new construction at a standstill and made renovations “the word of the day for the last few years,” Penta Building Group President Jeff Ehret said.
He described Genting’s project as a “terrific boost” to the construction industry, though it’s much larger than he would have expected, given Las Vegas’ sluggish economy.
“Hopefully there’s enough demand in order to absorb that supply,” he said.
The last major resort to be built on the Strip was the $3.9 billion, 2,995-room Cosmopolitan, which opened in December 2010.
Gov. Brian Sandoval noted at the Genting announcement that thousands of jobs will result from Resorts World opening.
Not only will the company need construction workers, but thousands of gaming and service industry jobs will be created once the megaresort opens. Not only that, hundreds more will be generated to support the resort — drivers to deliver products to the property, accountants and tax specialists to work on the corporate side, even teachers to accommodate the children of employees.
The only downside is that hiring won’t begin for several months. Ground isn’t expected to be broken until next year. Designers, planners and architects will be needed early in the process, but the most of the hiring won’t happen until 2014 and 2015.
The Las Vegas company that owns and operates several downtown casinos and Sam’s Town on the Boulder Strip once had the iconic Stardust in its line up, but the hotel-casino was imploded six years ago to make way for Echelon, which was destined to be the CityCenter of the North Strip.
Both Boyd and Echelon fell victim to the Great Recession, and the company suspended construction on the site Aug. 1, 2008. Analysts repeatedly said it was a good move by Boyd because continuing work on the project as visitor volume plummeted could have led to bankruptcy.
But Boyd has little to show for the time and effort it spent on Echelon. Genting picked up the 87-acre site for $350 million. By comparison, Phil Ruffin sold the nearby 36-acre New Frontier site in 2007 for $1.24 billion.
While some industry observers say Boyd is happy to be out from under the Echelon chapter of its history, it’s hard to make a case for the company being happy about losing the Stardust — a casino that was making money — investing in a failed dream and selling the land for pennies on the dollar.
Genting also could be bad news for other luxury resorts.
Gaming analysts say Genting will bring a new era of competition for high-end players on the Strip. Companies such as MGM Resorts International, Caesars Entertainment, Las Vegas Sands and Wynn Resorts have reason to be concerned about losing customers — particularly Asian whales — when Resorts World opens.
Michael Paladino, a senior director for the gaming, lodging and leisure sector of Fitch Ratings, said the added capacity of both Resorts World and SLS Las Vegas could drive down average daily room rates.
“The Las Vegas Strip is still in the midst of a choppy recovery, so the additional room and gaming capacity provided by SLS and Resorts World Las Vegas is notable, particularly if this is the onset of a resurgence of supply growth, given the low interest rate financing environment,” Paladino said in a recent report.
Genting’s presence in New York, where it operates the largest slot machine floor in the world at the Aqueduct Racetrack in Queens, could entice more New York gamblers to Las Vegas, Paladino said. But it is unlikely they’ll play at the Venetian, Bellagio or Wynn if they are marketed to by Genting. ___