Lodging Magazine

Ain't it Grand!

October, 2006

By Robyn Taylor Parets

Long gone are the days of 99-cent buffets in Las Vegas. And you might as well forget about finding a $29 hotel room or a kiddie theme park ride in almost every resort on the famed Strip. This ever-changing city is in the midst of yet another transformation: This time around it’s becoming a hip, urban metropolis appealing to wealthy baby boomers and those seeking a more carefree life.

Riding on the coattails of the latest luxury mega-casino resorts, such as The Venetian, Bellagio, and Wynn-Las Vegas, the city is about to unveil its next development wave. Several mixed-use projects are set to open in Las Vegas within the next three to four years. These massive developments will encompass the finest entertainment, shopping, and gaming, as well as multiple hotels, condominiums, and residences.

These projects will not only be upscale, they will also reach high “up” into the sky—resulting in a new Las Vegas skyline. In essence, they will form an entirely new high-rise landscape amid this city’s sprawling horizontal grid. When finished in late 2009, for example, MGM Mirage’s $7 billion, CityCenter will look and feel more like Manhattan or Chicago than a Las Vegas mega-resort, says Terry Lanni, chairman and CEO of MGM Mirage.

To put the scale and size of CityCenter into perspective: “It will be the largest, privately funded project in the United States,” Lanni says “This 67-acre development will be larger than [New York City’s] Soho, Rockefeller Center, and Times Square put together.

“This will be a new paradigm for Las Vegas,” he continues. “To be considered a city, you need to have a city center. Until you have people living and working in downtown, you don’t really have a downtown.”

Las Vegas has never really had that true sense of a city center. Rather it has experienced more of an urban sprawl. CityCenter, however, will create a new central place to shop, dine, entertain, work, and live. Unlike other shopping centers on the Strip, CityCenter will have residents living above the shops. And, in addition to the upscale boutiques, it will also have services for every day life, such as medical offices, a dry cleaner, and a delicatessen. It will even have a fire station.

“CityCenter,” Lanni says, “will be ‘the place to live’.”

In developing this massive ‘city,’ MGM Mirage has also charted a new course for responsible growth by pursuing the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) certification for CityCenter. To that end, the project will take steps to become one of the world’s largest environmentally sustainable urban communities. This will include incorporating the use of reclaimed water and using an on-site power generator, according to the company.

Living Large While CityCenter will be the largest project on the Strip, there are other grand-scale ventures being built all around it. Some of these mixed-use developments include Boyd Gaming’s Echelon Place, opening in early 2010; The Cosmopolitan Resort & Casino, scheduled to open in 2009; Wynn Las Vegas’ Encore; and The Pinnacle Las Vegas, a high-rise, luxury condo-hotel which will not include a casino but will also offer an exclusive pool, quarter-mile jogging track, movie theater, health club and spa, putting green, pet-friendly park, and restaurants. The rental program at The Pinnacle, slated to open in the spring of 2009, will be managed by Interstate Hotels & Resorts.

So why are developers propelled to build city-sized luxury complexes in Las Vegas, a city already filled with mega-resorts?

Perhaps Van Heffner, president and CEO of the Nevada Hotel & Lodging Association, sums it up best: “There’s a changing lifestyle in America. People aren’t traveling abroad as much and instead they want to spend their money here. By choosing to vacation or live in Las Vegas, travelers now can have it all, and it’s only going to get better with the new breed of incoming resorts.”

“It’s a new time. A new day for Las Vegas,” Heffner adds.

Michael Bellon, The Pinnacle’s director of development agrees, adding: “Our market is geared toward Baby Boomers, empty-nesters, retirees and those looking for a lock-and-leave kind of lifestyle.” All of these incoming properties, including The Pinnacle, won’t be just another hotel or another casino. They will be developments that mirror the lifestyle choices of affluent Americans who want to live or vacation where they can also shop, dine, work-out, and, lest we forget, gamble.

“Boomers are active and wealthy. They seek moderately active escapes on a fairly regular basis, and those escapes have to offer prestige and luxury. Las Vegas is among the best for that type of experience,” noted Boyd Gaming in an Echelon Place marketing brochure.

To that end, Echelon Place describes itself as a “global destination for those who appreciate luxury, seek to play, indulge, interact and escape.”

And ‘seek to play’ is no longer synonymous with casino gaming. “Gaming is not our number one industry,” Heffner says. “It’s an activity or choice. Las Vegas has signature chefs, the finest retail and spas and more. So many people come to Las Vegas and gaming isn’t even on their agendas.” As a destination, Las Vegas is already the top tourist spot in the United States and the number one pick for trade shows. So it’s no surprise that developers are doing their best to keep up with the increasing demand.

CityCenter and Echelon will together add seven upscale hotels with 10,100 hotel rooms and suites to the Strip area.

A total of 59 hotels with 48,292 rooms are in the development pipeline and expected to be added to the city’s current 152,000 hotel room count. Out of the total potential new hotel rooms, about 14,000 comprise condo/hotel units, says Patrick Ford, president of Lodging Econometrics in Portsmouth, N.H. Eighteen of these properties are currently under construction, and 21 are scheduled to begin construction in the next 12 months, Ford says.

“This is the fastest growing hotel market in the U.S.” by a long shot. Number two, to put it into perspective, is Orlando with 15,700 hotels in the pipeline, he says.

As long as the market continues to appeal to consumers on multiple levels, travelers will continue to flock to the city, says Ford, who is “bullish” on Las Vegas.

The numbers say it all: During the first seven months of 2006, average occupancy at Las Vegas hotels was 90.6 percent. Occupancy during five out of those seven months was above 90 percent. Average daily rates for the same period hit $119.34, he says.

While the hotel market expands, developers of these massive “lifestyle” projects are also banking on travelers making Las Vegas their second or third home. Perhaps they will even take up permanent residence in one of these exclusive high-rise condominium towers. This probably won’t be a hard sell, says Karen Johnson, executive vice president of the advisory division at Jones Lang LaSalle Hotels, a Chicago-based hotel brokerage and advisory firm.

“Baby Boomers without kids at home are the prime buying market,” she explains. “Las Vegas, with its world-class restaurateurs, Broadway shows, and great shopping, is almost like being in Manhattan. Las Vegas is an adult Disney World.”

Changing the Landscape Not so long ago, MGM Grand Hotel & Casino, with 5,034 rooms, seemed like a monstrous property. Although it will still remain the country’s largest hotel in terms of room count, in comparison to MGM Mirage’s new CityCenter, it will seem like a small suburb.

“Throughout its 100-year history, Las Vegas has been transformed repeatedly by a series of significant developments, reflecting the creative energies of its visionary builders and entrepreneurs,” Lanni says. “MGM Mirage’s CityCenter represents what we feel is a significant new direction for our city and our company. With this world-class development, Las Vegas is on the fast track to becoming a major urban center in the Western United States.”

The 18 million-square-foot project, being built along the Strip between Bellagio and Monte Carlo resorts, illustrates the cultural and lifestyle revival of this city. In addition, CityCenter will create 12,000 jobs —the single largest employment opportunity in Las Vegas’ history.

The project will be defined by its contemporary architecture, high-end shopping, gourmet restaurants, and unique pedestrian walkways. It will include a yet-to-be-named 4,000-room hotel, casino, and convention center, as well as a five-star Mandarin Oriental hotel with 227 residences. The development will also include a lifestyle property called The Harmon, which will have 240 condo units; a 50-story 1,543-unit condo-hotel called Vidara; and two condominium towers with 352 units each.

CityCenter will create an urban complex that MGM Mirage hopes will change the future of architecture and design in Las Vegas, setting a new standard for urban development worldwide, Lanni says. Among its unique entertainment venues, CityCenter has partnered with CKX Inc. and its subsidiaries, Elvis Presley Enterprises and Cirque du Soleil, to create a new permanent home for an Elvis Presley show.

At a project cost of $4 billion, Boyd Gaming’s Echelon Place will encompass four distinct hotel brands, including Boyd’s wholly-owned Echelon Las Vegas with 3,300 guest rooms and suites; Shangri-La Hotel Las Vegas, with 400 rooms and suites; Delano Las Vegas, with 600 rooms and suites; and Mondrian Las Vegas with 1,000 guest rooms and suites. In addition, Echelon Place will include the 1 million-square-foot Las Vegas ExpoCenter, a 300,000-square-foot retail promenade, 140,000 square feet of gaming, and more. All of the hotels will have their own entrances so that travelers can easily navigate their way to their rooms without having to walk through the casino.

“This is a next generation resort in the truest sense,” says Boyd spokesman Rob Stillwell “The casino is an important part of the resort but it’s not the only part. What drives visitation is the retail, restaurants, entertainment, and hotels.”

Boyd does not currently plan to build condo-hotels or residences at Echelon Place. But that may change, Stillwell says.

Still other developers, including 3700 Associates LLC, are banking on the allure of living the high life to help propel sales of its luxury condos. 3700, the developer of the Cosmopolitan Resort & Casino, will spend $2 billion to “merge the concept of a luxury condo-hotel with an equally luxurious hotel, retail, gaming, and meeting space development,” noted Ian Bruce Eichner, CEO of 3700 Associates, in a news announcement.

The project’s condo-hotel will feature state-of-the-art amenities like flat screen televisions and a VIP rooftop Beach Club, as well as restaurants and nightclubs. All told, The Cosmopolitan will include more than 2,400 condo-hotel and hotel rooms, more than 150,000 square feet of meeting and convention space, more than 70,000 square feet of gaming, more 300,000 square feet of retail, restaurant and entertainment space, and an 1,800-square-foot theater.

The Cosmopolitan will be located in between the Bellagio and the CityCenter. Yet, 3700 Associates isn’t intimidated by its bigger mixed-use neighbor. “The MGM Mirage brand is known the world over for hospitality and gaming excellence.” Eichner stated. “Their mass appeal will compliment our hip, boutique property’s mix.

“Quite frankly, we couldn’t think of better neighbors.” n