Monday, July 15, 2024

The Las Vegas Strip says goodbye to historic properties, hello to more major sports events

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Hotels and Entertainment Venues in Las Vegas at Night - Aerial

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The Las Vegas Strip will look a little different soon, with the iconic Mirage only a few weeks away from being closed and the area around the former Tropicana Las Vegas property already being cleared out to make room for a major league baseball stadium.

Iconic properties fade into the twilight

The Mirage, opened in 1989, was a groundbreaking resort that marked the beginning of a new era of mega-resorts on the Las Vegas Strip. Developed by Steve Wynn at a cost of $630 million, it was the most expensive hotel-casino ever built at the time. Its iconic attractions like an erupting volcano, vibrant atrium, and Siegfried & Roy’s white tiger habitat set new standards for themed entertainment. The Tropicana Las Vegas, opened in 1957, was once considered the epitome of luxury and flash on the Las Vegas Strip. Despite its ties to organized crime figures like Frank Costello, the Tropicana became a haven for legendary entertainers, and was used in iconic films like The Godfather and Diamonds Are Forever. The closing of the Tropicana means that the only surviving property on the Las Vegas Strip from the 1950s is the Sahara.

Short-term impact on the Strip

While the Fountainebleau Las Vegas on the Strip and Red Rocks Resorts’ (NASDAQ:RRR) Durango property in the Las Vegas Valley both opened late last year, the Fountainebleau has struggled to generate foot traffic and the Durango is mainly competing against off-Strip casinos. Analysts think the loss of approximately 4,500 rooms on the Strip between the Mirage and Tropicana could provide a short-term pricing boost for Strip and Off-Strip properties. As it stands now, average daily room rates in Las Vegas are still higher than they stood before the pandemic as the market easily absorbed the extra rooms added from the opening of Circa Las Vegas, Resorts World, Fontainebleau, and Durango over the last four years.

The company that operates the most hotel rooms on the Las Vegas Strip is MGM Resorts International (NYSE:MGM) with nearly 37,000 rooms across 13 properties, including Luxor, Aria, Excalibur, Bellagio, Mandalay Bay, The Cosmopolitan, Park MGM, and New York-New York. Caesars Entertainment, Wynn Resorts (WYNN), and Genting Group are also major players. Behind the scenes, VICI Properties (NYSE:VICI) owns Caesars Palace Las Vegas, MGM Grand, and the Venetian Resort Las Vegas. In particular, analysts think some of MGM Resorts (MGM) and Caesars Entertainment (NASDAQ:CZR) middle-tier properties could see a benefit until Hard Rock International develops the former Mirage site. Hard Rock International announced in May that it plans to reopen as the Hard Rock Las Vegas in spring 2027.

What is next for the Strip

Looking ahead, the land beneath the former Tropicana site is owned by Gaming and Leisure Properties (GLPI) and leased by Bally’s Interactive (BALY). Part of the land is slated to be used to build a $1.5B baseball stadium for the Oakland A’s. The major league baseball team has been given nine acres of the 35-acre site to build the new ballpark. Bally’s Interactive (BALY), Gaming and Leisure Properties (GLPI), PENN Entertainment (PENN) completed the transaction relating to the acquisition of the non-land assets of the Tropicana Las Vegas in 2022 for a cash purchase price of $1488M, payable to GLPI. Bally’s (BALY) lease of the land underlying the Tropicana property from GLPI is for an initial term of 50 years at an annual rent of $10.5 million.

Other projects in the works include a 43-story casino resort project backed by billionaire Tilman Fertitta that could break ground his year. Las Vegas is also still slated to be one of the first locations for a chain of Atari-branded hotels, which are still in the planning stages. Also of note, Wynn Resorts (WYNN) still owns a 38-acre parcel just north of Fashion Show mall and across Las Vegas Boulevard from its main Strip resorts. It is not clear if Wynn Resorts (WYNN) will develop the site.

The Las Vegas Strip continues to see its convention schedule grow for 2025-2026 and expects to attract even more high-profile sporting events following a successful Super Bowl week that boosted Q1 revenue for major operators, despite a low betting hold rate on the big game. On June 28, the NHL will hold its draft at the Sphere Las Vegas (SPHR), Copa America soccer games will be held in June at Allegiant Stadium, F1 racing is coming back in November, and a new NCAA in-season tournament will take place at the MGM Las Vegas. The NCAA has warmed up to Las Vegas and has the 2028 NCAA Final Four scheduled for Allegiant Stadium. Las Vegas has also become a destination spot for NHL and NFL fans whose teams play in the city, and is likely to attract the in-season NBA tournament again.

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