It will take at least a year for the new supply of Las Vegas hotel rooms to be absorbed into the market, a new report from Moody’s Investors Service said.
In the report to investors and backers of the debt covering much of the Strip’s major gaming operators, Moody’s Senior Credit Officer Peggy Holloway said an upturn toward profitability won’t begin until 2012. Las Vegas has about 150,000 hotel rooms, including 6,000 rooms added when CityCenter opened in December 2009 and another 2,000 added by last December’s opening of The Cosmopolitan of Las Vegas. No other hotel-casino openings or expansions are on the horizon, which is a good thing, Holloway said.
“The Las Vegas casinos have a high mountain to climb to grow earnings to anywhere near their previous peaks, as citywide hotel room rates remain below 2005 levels,” Holloway said. “Excess room supply will weigh on operators’ ability to raise room rates, the second most important source of profitability for casino operators after gaming, in the near term.”
Moody’s believes that Las Vegas visitor volume, which grew 2.7 percent to 37.3 million visitors in 2010, will continue to slowly climb this year. Challenges facing Las Vegas, according to Moody’s, include high unemployment, rising state and local taxes, and weak housing prices, all of which might give potential customers some concern about materially increasing gaming budgets.
“The Las Vegas Strip still faces a number of headwinds,” Holloway said.
Caesars seeks $400M. for hotel, retail corridor
Caesars Entertainment Corp. said it is seeking $400 million in financing to complete an unfinished hotel tower at Caesars Palace and develop a retail, dining and entertainment corridor on the Las Vegas Strip.
In a filing with the Securities and Exchange Commission, the company said funds raised would be used for the project’s development and to pay various fees and expenses. Caesars said the funds would be secured by the company’s assets. The company had originally planned an initial public stock offering to pay for the completion of the 660-room Octavius Tower at Caesars Palace. The outside of the tower was completed in 2009 but the interior was delayed when the economy slipped and tourism sagged.
Project Linq, a short thoroughfare that runs from the Strip to Audrie Street between the Imperial Palace and Flamingo Las Vegas, would include restaurants, bars and shops along a promenade that leads to a 550-foot observation wheel in the back of the property.
Pinnacle seeks partner for marketing of casinos
Regional casino operator Pinnacle Entertainment says it is considering a marketing alliance with a Strip casino company.
Las Vegas-based Pinnacle does not have a Strip property, so it is looking to negotiate a partnership that would have reciprocal rewards to draw visitors to its regional casinos in Louisiana, Missouri and Indiana.
“We believe it’s an idea that has merit to it,” Pinnacle Chief Executive Officer Anthony Sanfilippo said during the company’s fourth-quarter earnings conference call. He did not name the potential partner.
Pinnacle said it would delay the opening of its $357 million hotel-casino in Baton Rouge, La., by a few months. In a statement, the company said low Mississippi River water levels have kept three completed riverboat casino hulls from being moved from their construction site in southern Louisiana to the project site in Baton Rouge.
More casino-hotels add fees for extra options
Would you plunk down $30 to guarantee that a king-size bed would be waiting for you in Las Vegas?
Although mandatory resort fees have spread among many Las Vegas resorts during the recession, MGM Resorts International has quietly added several options in recent weeks. Besides the bed fee, which allows guests at Mandalay Bay their choice of a king or two queens, MGM now lists differing surcharges for differing check-out or check-in times at several properties and has extended the resort fee to the Bellagio for the first time.
But a $20 charge to guarantee a nonsmoking room at the MGM Grand was quickly snuffed out after it threatened to billow into a public relations fiasco.
“These options provide yet another tool for us to personalize the guest experience, according to each guest’s individual preferences,” MGM officials said in a statement. “We’re receiving some very positive feedback from guests.”
Not all of the MGM hotels have the new fees. The ones put into effect vary by property.
But some industry experts wonder whether that will lead the hotels down the same runway as the airline industry, which charged extra for everything from checked baggage to food to seat assignments.
Some hotels across the country have listed extended time fees, said Bobby Bowers, senior vice president at Smith Travel Research. Such options largely disappeared during the tight economy.
However, Bowers said, “I don’t think I’ve seen a bed-size fee before. It’s hard for me to fathom. I think there is definitely the danger of people feeling nickeled-and-dimed for everything they do.”