A growth spurt is taking place in Las Vegas and the timing is strange.
The sudden burst of casino development is typical after a long economic upturn. It is rare coming out of one crisis and entering another possibly more difficult one. In the first decade of the 21st century, the gaming industry was exploding with activity. It was just before the Great Recession, but no one anticipated the economic crisis; it was a time of enthusiasm and grand plans.
Sadly, for the projects under construction or just completed, the timing was terrible. The economy fell into a recession and projects that appeared perfect in 2005 were clearly out of sync with the real-world economic circumstances. The poster child for that was the Revel in Atlantic City. When Revel was being planned, a couple of billion dollars seemed perfectly reasonable. Atlantic City was busy and the business was increasing year after year. In 2007, however, the market changed dramatically and suddenly; there was a major recession, Pennsylvania authorized casino gaming, New York added video lottery terminals at racetracks, and other states added gaming options. A perfect storm of problems.
Revel’s design and price did not include the possibility of any of those events. Its originators saw Atlantic City on a perpetual upward spiral. A.C. was a direct rival of Las Vegas and the property was fit to stand and compete on the Strip. Revel was going to be different. It disdained slot players and a main floor filled to the brim with those ugly plebian devices. Rather, Revel was chic, sophisticated, trendsetting, and as uncasino-like as the designers could make it.
Then, in 2008, the project was scaled back and in 2009 construction stopped. Construction was renewed in 2011 after Chris Christie became governor and Revel’s champion. With his nudging, pulling, and begging, Revel was completed. It finally opened in 2012, but after a bankruptcy or two, it closed its doors in 2014. The $2.4 billion building eventually sold a couple of times for approximately $100 million, a great bargain. Revel finally got an owner with a plan; it needed a redesign, name, and an operating philosophy more in keeping with the rest of the town. The property is now called Ocean Casino Resort.
The model of a business conceived in a time of plenty, but executed after that time has passed, is typical. CityCenter in Las Vegas had a similar experience, although it did get built. Like Revel, its conceptual origin was the pre-Great Recession world, with a plan even grander than Revel’s. It cost about five times as much as Revel and was intended to change the entire landscape of gaming and Las Vegas. Unlike Revel, CityCenter did survive. That required creative financing and the recovery of Las Vegas’ tourism economy. The grand design, however, did not survive; like Revel, it had to adjust its strategy to the new reality.
Other casino projects were not as lucky. The famous Stardust was closed and demolished in 2007 as Boyd Gaming made grand plans for a megaresort on the site. Construction began, but just barely. Eventually, Genting bought the property and built a resort that didn’t open until 2021. Resorts World Las Vegas bears no resemblance to the Echelon project that Boyd had imagined. Its vision came from the company’s experience in Asia and is unique.
Another of the prerecession projects in Las Vegas was Fontainebleau. Its founding design goes back even further than the others. Its foundation was in elite tourism in Florida and even before the Great Recession, observers were questioning its viability. Fontainebleau was under construction when the recession hit. Like the other projects in the same boat, the site shut down. Then, it sat virtually untouched for 15 years; over the years, there were several changes in owners and financial status. In the end, one of the original partners came back to finish his dream. It will be very interesting to see how a resort conceived more than 20 years ago, a 20th century Floridian concept, does in the third decade of the 21st century.
Fontainebleau is in the final stages of construction; when finished, it will join Resorts World, Circa, and Hard Rock as the next generation of casinos in Las Vegas. But those are far from the last of the developments. A number of rebranded and reimagined properties are undergoing change. Stimulated by new ideas, new ownership, and an evolving landscape, they are out to bring something new and different to the Las Vegas Strip. And there is more to come: Three new properties have been announced in the last week or two. The skyline of Las Vegas is once again filled with construction cranes.
The sudden interest in new developments in Las Vegas is intriguing. We are not in a go-go era, like the one before the Great Recession. In fact, we are in a very uncertain and unsettling time. The pandemic is still lingering and its impact on the economy continues through employment and supply-chain issues and wild swings in consumer behavior. To further complicate the picture, there is rampaging inflation and the threat of another recession. Is this the time to invest?
Maybe.
The old model of investing before the decline almost guaranteed disaster. Now, during turmoil and uncertainty, investment is in the future and not in the past. Investing in the past is rarely successful, while investing in the future has a much better chance of succeeding. The problem, of course, is the risk. Facing the risk and finding financing are never easy; in the midst of a downturn, it can be nearly impossible.
The new projects in Vegas seem to have the courage of their convictions and, more important, the financial wherewithal needed to bring the projects to fruition. Las Vegas is exciting; in the fields of food, entertainment, shopping, conventions, resort design and now sports, it is a place of dynamic change and innovation. The next couple of years promise to be even more exciting. It is nice to see the state bird – the construction crane – back in Las Vegas.
In the short-term, Las Vegas needs to survive the pandemic, inflation, and a recession. When the sky clears, the new properties will be ready.
