I’ve been asked by more than one media outlet about City Center, and I thought that I’d just post some of my thoughts here for public consumption.
My single-sentence response to “what does it all mean” is that City Center is a gamble in ways that previous Strip projects haven’t been. There’s been skepticism about everything built on the Strip, probably going back to Thomas Hull’s El Rancho Vegas in 1941. In hindsight, some of this skepticism looks ridiculous: many people predicted Caesars Palace would fail, but today it’s the best-known casino in the world; others thought the Mirage would tank, but instead it kicked off massive expansion on the Strip; in 1997 and 1998, there was considerable doubt in the trade papers about the viability of Bellagio; and so on.
But sometimes the skepticism looks more sensible. Plenty of people scoffed at Bob Stupak’s attempts to build the Stratosphere. The casino’s open today, but Stupak never really got to run it, and the Strat spent a few years in bankruptcy before Icahn et al turned it around. There was skepticism about the new Aladdin, which is Planet Hollywood today.
It’s an exaggeration to say that City Center has the deck stacked against it, but anyone keeping track of the running count has to notice that there are fewer high-value cards left in the deck than there were in 2004 and 2005, when City Center was planned.
City Center is a gamble because we are finishing up our second straight year of declines in revenue and visitation numbers, and there’s no guarantee that the there will be many people lining up to fill the 2,190,000 or so room nights that the project is making available. Assuming a three-night stay, that’s an additional 730,000 trips to Vegas that will have to be sold, and that’s assuming one person per room. City Center is going to have to draw as many as 1.5 million more to Las Vegas in 2010, in the midst of a steady decline in visitation.
There has never been a slide in the two major indicators of Las Vegas’ economic health–visitation and revenues–as severe as the current one. The 1980-1982 period was three years of (inflation-adjusted) flat or downward revenue numbers, and 2001-02 was two years of the same. The 2008 drop in revenues, however, is about twice that of the worse previous year, 1981. If there’s not a reversal in 2010, this will be both the most severe and longest economic downturn Las Vegas’ casino economy has faced.
So the biggest project in the Strip’s history is opening in what is probably the worst economic climate in the city’s history. That’s why it’s a gamble.
To its credit, City Center is an ambitious project that looks beyond the current market in the same way that Caesars Palace, the International, the Mirage, and Bellagio (to name a few) did. It’s unfortunate that the economic and aesthetic strands of the “what is City Center” debate are so inextricably tangled: the fascinating thing about City Center for me is that it puts a new spin on how to organize spaces for visitors to Las Vegas to eat, gamble, shop, be entertained, and rest. Aria really uses things like interior volume and views of the outside in ways that I’ve yet to see any casino do. I doubt that there’s anyone better than Steve Wynn at wrapping the guest in a bubble of luxury and creating a resort that transports them out of the everyday world. City Center doesn’t try to do that: with its traffic circles and extensive views of the neighborhood, picturesque and not, it never pretends to take guests out of the surrounding streets. That’s notable.
The big question I keep getting asked is, “Will City Center be a success?” My short answer is that I don’t know, and I don’t think anyone knows. There are just too many variables beyond anyone’s control to forecast with any degree of certainty. My usual response is, “how do you define success?” No one seems to know.
I think that the physical space that MGM Mirage has created has the potential to attract people who haven’t come to Las Vegas before. Will it? That really depends on how well the company markets and runs the property and how the broader national economic picture develops.
City Center opening means more hotel rooms which, for the Vegas visitor, is a good thing. If you’re coming to Las Vegas for business or personal reasons, you’ve got more choices, and hotels will have to price themselves accordingly.
We’re seeing the first signs of what could be an unintended consequence of these lower rates: first Binion’s closed its hotel, now the Sahara is closing two of its towers. This is the result of the domino effect sparked by low room rates: with $150/night rates at the first tier and $80/night ones at second-tier properties, third and fourth-tier properties are hard pressed to offer anything to compete. If you can pay a little more–or even the same–to stay at a newer, better out-fitted hotel, why wouldn’t you? It’s like a game of musical chairs, and those at the bottom of the ladder are going to be left standing up when the music stops. But that’s how Las Vegas works: if you want people to stay at your hotel, you have to offer them either a great spectacle that they’re willing to pay for or a great value. When your competitors can offer both and you can only offer one, you are in trouble.
From my perspective, City Center is an incredible collection of properties that is facing a formidable challenge along with the rest of the market. As the newest kid on the block, City Center will be better positioned than properties that have been open for decades. With the first guest checking in tomorrow, I see plenty of potential for success. Whether the project realizes that potential is up to the people who work there and those who will be staying there.
All of which is a lengthy way of saying that City Center impresses me, and I don’t know what the future holds for it–or the rest of Las Vegas. In some ways, the debate around City Center resembles the talk in the movie world about James Cameron’s Avatar. They’re similarly big-budget, high-concept projects that are opening at around the same size, and there’s a great deal of speculation about how well they’ll do. Maybe it would be best if we just watched the movie (or visited the casino) to see if we like it ourselves.