Las Vegas Expansion Report

Walking down the Las Vegas Strip, it's easy to see a major change has taken place. Almost entirely gone are the last vestiges of classic Vegas, including the Rat Pack playground where hard-nosed gamblers came to test their mettle against Lady Luck, ate a few comped meals and slept in a sparsely furnished hotel room. It happened slowly at first, but during the past 10 years mostly every original hotel has met the wrecking ball, changing the entire character of the city.
 Echelon, scheduled to open summer 2010, will feature a mix of upscale hotels

Las Vegas Today

For better or worse, a Las Vegas vacation is more costly than ever before. But then again, the experiences that are offered dwarf those from 20 years ago. It's a place where high design, celebrity chefs, luxurious spas, world-class entertainment and some of the best guest rooms in the world have harmoniously collided to create the world's most glittery, glamorous vacation and meetings destination.

Even the traditional hotel room has gotten an extensive makeover. Rather than just a place to just catch a quick nap, guest rooms have become luxurious retreats where 300-thread-count sheets, oversized marble bathrooms and flat-screen televisions reign supreme.

CityCenter is a 66-acre development project by MGM Mirage that is under construction

And while there are still a few places where cheap sleep and even cheaper eats are available, the typical cost of a trip to SinCity is constantly climbing, according to statistics from the Las Vegas Convention and Visitors Authority (LVCVA). Take packages for example, the average package price in 2006 was $662.78, a steep climb from $571.43 in 2005 and $484.13 in 2003. Room rates are also increasing rapidly. In 2003, the average room cost $81.43 and climbed to $107.12 this past year. And in the first five months of 2007, the typical room continued to get more expensive and is now $139.26.
Rendering of the Palazzo Casino Resort in Las Vegas

That's okay though, because people are willing to pay for the more upscale experiences that have emerged. In fact, since the city has been adding more upscale rooms and amenities, Las Vegas is consistently attracting visitors with a higher income level. In 2003, 12 percent of Las Vegas visitors earned more than $100,000 a year, but in 2006 that number had doubled to 24 percent. And, those earning less than $40,000 are for the most part no longer visiting. In 2003, 23 percent of visitors made less than $40,000, but by 2006 the number sank to seven percent.

In the Works

"We have $30 billion in construction going on right now and everything is in the upper scale in caliber," said Art Jimenez, director of Leisure Sales with the LCVA. "People are willing and desiring to pay for experiences. And the market is bearing it and absorbing the continual influx of new product."

Alan Feldman, SVP of Public Affairs with MGM Mirage Corp., is not at all surprised by the changes taking place. "Most of the new development is upscale because it is the least represented. There is so much room for growth on the upper end of the market," said Feldman, noting that the trend is being fueled by multiple trends: The desire to add luxury to daily life, as well as an appreciation for increased quality at all levels of the market.

Barry Liben, president and CEO of Tzell Travel, has been visiting Las Vegas for more than 30 years and has seen the seminal shift from modest hotels, at even more modest prices, into a costly upscale getaway.

"The place is a magnet for money and the most dynamic tourist spot in the world. In the old days, people only went to gamble and everyone was comped on food and rooms. Today, [casino operators] build $40 million restaurants and people will pay a lot to eat in them. It is all high-end and [casino operators] have proven that if you put in the right property and do it right, people will pay," said Liben.

At Boyd Gaming, VP Corporate Communications Rob Stillwell said that Las Vegas currently has a lower percentage of luxury-level rooms than other major sites such as New York and Chicago, which is further adding to the development of properties at the upper end of the market. "Where other cities have upwards of 30 percent of the rooms in the [upper upscale or luxury segment] Vegas is only in the mid teens," Stillwell said.

Boyd, which has traditionally played to the locals market with properties such as Sam's Town and the Orleans, is now in the process of building it's most upscale and expensive project to date. And while Boyd had proven the company can play in the upscale market with its Borgata in Atlantic City (co-owned with MGM Mirage), the incredibly high cost of land on The Strip—about $35 million an acre—makes it mandatory to build for the top end of the market.

Echelon, scheduled to open summer 2010, will feature a mix of upscale hotels that each appeal to a different type of guest seeking a luxury experience. There will be the mainstream mega resort Hotel Echelon with 2,500 rooms and the smaller 650 unit Suites at Echelon. A pair of boutique properties, Delano and Mondrian (860 and 550 room respectively), will cater to younger travelers, while the five star Shangri-La Las Vegas will appeal to the uppermost end of the market with its 282 guest rooms and 71 premium suites.

MGM Mirage already has many upscale properties such as Bellagio, Mirage and MGM Grand, which has 54 AAA Four Diamond awards—more than any other resort in the world. Now it's building the largest project ever in the Las Vegas market, MGM CityCenter.

With price estimates between $7.5 billion and $10 billion, this 76-acre complex will mesh various recreation, entertainment, business and residential towers when it debuts in 2009. There will be the 60-story, 4,000-room hotel/casino, a Mandarin Oriental Hotel, a Harmon hotel, 500,000-square-foot retail and entertainment district, and approximately 2,700 luxury residences.

Another upscale resort coming before the year is out is Palazzo Casino Resort, a sister property to the Venetian. When complete, the 50-floor structure will boast 3,025 luxury suites, a 60-foot glass dome over the lobby, two-story fountains, imported marble, bronze case columns and special custom wall finishes. The resort will also have 375 concierge-level suites and six, three- and four-bedroom villas with media rooms, private pools, hot tubs, heated spas and personal gyms. Some even have private putting greens.

Wynn Las Vegas, already the epitome of high-end luxury, is also getting a sister property. When complete in early 2009, the $2 billion resort will feature 2,034 guest rooms—from executive suites to duplex sky villas and penthouses—an approximately 72,000-square-foot casino, additional convention and meeting space, as well as restaurants, a nightclub, swimming pools, a spa and salon and retail outlets.

"All these projects say this market has clearly shifted upscale," said Jennifer Wilson-Buttigieg, co-president and co-owner of Valerie Wilson Travel. "The caliber of restaurants, shopping and all other amenities, such as shows, has continued to go up. The whole experience is different than 10 years ago. It is not about going out to gamble, it's about the overall experience and people are willing to pay a premium rate for an experience."