In 2009, Las Vegas opened several new hotels, including the Aria, the Vdara and the Mandarin Oriental at CityCenter. This year, it looks like the $3.9 billion Cosmopolitan of Las Vegas will be the only hotel opening this year in the city that arguably has been hit worst by the recession. With hotel rates the lowest in two years and competition fiercer for less visitors, opening a billion-dollar hotel right now is a bad idea.
The Cosmopolitan, which will open later this year, faces cut-throat competition from several lower-cost, high-end hotels, as well as the shiniest and newest hotels in the nearby CityCenter development: the Vdara, Mandarin Oriental and Aria. With little to differentiate itself from the dozens of others developments on the strip, the Cosmopolitan appears doomed.
So far, there is no rebound for hotels on the Las Vegas Strip. Although the Nevada Gaming Control Board has claimed a soaring 33% rise in casino revenue, the effect may be limited to Chinese New Year gaming and may not be evidence of a solid change in luck.
While casino revenue helps, it also can't make up for the loss of visitors, hotel room revenue and average food and beverage spending. TheLas Vegas Convention and Visitors Authority annual study showed that the average visitor spent 22% less in 2009 over 2008, and the average hotel room priced out at $76 a night, down from just over $100 in 2008. Trending in 2010 shows similar declines.
Depending on its residents to help with spending is also not an option. According to the Nevada Department of Employment, Training and Rehabilitation, "Consumers are still in no mood to spend. . . . It appears Nevada will be waiting for some time for its fortunes to improve." Unemployment is at 13.2%.
Instead, the resort casino is only being viewed as competition -- and not even good competition.
The competitive threat is clear, especially when even the 67-acre CityCenter hasn't yet emerged as a key reason to visit Las Vegas, according to Randy Fine, a former Harrah's Entertainment Inc. vice president who now runs a casino marketing and consulting firm, The Fine Point Group.All the 40-floor Cosmopolitan has to offer is nicely-appointed rooms and a good view -- just like a dozen other hotels on the Strip -- but nothing to make someone stay there as opposed to somewhere else. Until we know what will make the property truly unique or if the rooms are priced so well (meaning cheaply) it can't outcompete its counterparts. Because the daily room rate may be the most attractive thing the resort and casino now has to offer.
"There's nothing that I've heard about (Cosmopolitan) that makes me say, 'I've got to go see it," Fine said. "I don't know that there's this theme park-esque, I've-got-to-go-to-see-this demand stimulator."
The Cosmopolitan sat for nearly five years until its present owner, Deutsche Bank, foreclosed on the project and then decided to bankroll $1 billion to finish construction. It will finally open one phase in December and finish by July 2011. I found this particular phrase in the Las Vegas Review-Journal noteworthy:
Deutsche Bank unsuccessfully tried to sell the property and tried to find a manager, but is now resigned to operate the resort.If even owner Deutsche Bank isn't thrilled about the hotel, so why should anyone else be?
Photo: The Cosmopolitan under construction, by luisete
Vegas Visitors Spending Spending Less, Staying in Cheaper Hotels
CityCenter's 5,000 Rooms Likely to Hurt Las Vegas Strip
Travel Venues: The Economy's Five Biggest Losers