Maddox and Wynn Resorts know when to hold ‘em
The Las Vegas Strip is among the most dynamic business districts in the world. On the Strip, nothing stands still for long; there, change is the rule. Sometimes it is driven by external factors, like the economy or prevailing trends in the entertainment world. But most of the time, the change is internally driven, as casino and resort operators seek new and creative ways to grow their market shares and revenues.
Going into the Great Recession, the Las Vegas Strip was poised on the edge of its biggest-ever development boom. Some $20 to $30 billion worth of projects were sitting on the drawing board, some already had shovels in the ground, and a couple, like CityCenter, were on their way to completion. The recession stopped everything, except CityCenter, in its tracks. That was over a decade ago. Today, the Strip is on the move again. However, except for two mega resort projects, Las Vegas is moving and changing in other ways.
One of the trends underway is a dramatic expansion of convention space. Five major convention center projects are currently in progress. The Las Vegas Convention and Visitors Authority is adding 1.4 million square feet of convention space. The LVCVA facility is the largest single expansion currently underway, but when all of the planned projects are finished, they will have added about 3.0 million square feet of convention space, increasing the total in the city by 20 percent. The space is needed. Last year, 4.9 million people attended some 21,615 conventions in the city. Making Las Vegas even more attractive as a prospective convention host, there are new sports and entertainment venues open or under construction. MGM has opened the T-Mobile Arena for the NHL’s Vegas Golden Knights, and a stadium is being built for NFL’s Raiders; Madison Square Garden Company and LV Sands are building an 18,000-person music venue; and two mega-casino projects are also under construction. Resorts World is scheduled to open in December 2020 and the Drew the following year. Together they will add 7,000 hotel rooms and, of course, more convention space.
Besides the new resorts and added convention facilities, there are some ongoing changes in the ownership of some key resorts which suggests there will be a few major renovations, rebrandings and other new concepts introduced in the next few years. MGM just sold Bellagio to a REIT for $4.2 billion. MGM will lease the property from the purchaser, Blackstone Group, and is said to be planning other sale-leaseback arrangements. The company also sold Circus Circus outright to Treasure Island’s Phil Ruffin for $825 million. In another REIT transaction, Caesars sold the Rio to Imperial Companies, a sale that includes a very short two-year leaseback. The short lease suggests another change is in the making. Imperial has implied it will become the operator, either alone or with a partner. And Caesars itself is, of course, being acquired by Eldorado Resorts. Eldorado has stated it believes Caesars has too many assets and will sell some of those assets once it has officially acquired the company. Any of those sales could result in implosions and new resorts, or radical remodeling of the properties.
The third trend shaping the Strip these days is a burnish and wait-and-see strategy. The leader in that category is Wynn Resorts, the company founded by Steve Wynn. Wynn Resorts once led the industry with new, different and very expensive resorts. The Wynn Resorts of today is remodeling its rooms, updating convention space and waiting. The company owns 36 acres and a golf course that Steve Wynn planned to turn into a resort on the Strip. CEO Matt Maddox says the company likes owning the land while it waits to see what results from two new mega resorts, football teams, more conventions and new casino owners up and down the Strip. In the meantime, Maddox says, “We’re spending money to create an entirely new fun experience while a lot of our competitors are not doing that, so we see a real opportunity in Las Vegas to capture share.”
In the past, I would have been critical of Maddox and his Wynn Resorts. I loved the edginess of Steve Wynn’s new resorts. He didn’t look for a ‘fun experience’; Steve looked for WOW! However, it seems Maddox is right. The Strip seems to currently be in more of a fun, rather than wow, time. The amount of change taking place is stunning, and Maddox’s wait and see plan might just be the best plan for the times. The industry is replete with stories of properties conceived in one era and ultimately opened into a completely different world. CityCenter and the Cosmopolitan are Vegas examples, but the best may be Revel in Atlantic City. It cost $2.4 billion to build and was conceived both before the expansion of gaming in Pennsylvania and before the Great Recession hit Atlantic City. It has a long history of failures, bankruptcies and sales. Today, it is operating as Ocean Resorts and it may survive, but it might not; it is still struggling to compete in a world it never imagined.
Wynn, and Maddox, are not risking anything by waiting. If it jumped in with a new two or three-billion-dollar resort, by the time it opened the Las Vegas Strip would not look the way it looks today. Even Resorts World and Drew may discover their vision is out of date the day they open, as the Palms discovered recently with its Kaos nightclub-day club; the much-hyped Kaos recently closed after only seven months. It was part of a $690 million remodel. Station, the parent company, said Kaos’ expenses were too high and there was no crossover revenue. The Strip has always been dynamic. It is now entering a period of flux. Matt Maddox is taking his cue from Kenny Rogers and knows when to hold ’em.