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Vegas welcomes the new Cosmopolitan, but will enough spenders come?

The timing isn't the best for the opening of the towering casino and hotel on the recession-weary Strip.

December 14, 2010|By Ashley Powers, Los Angeles Times

Reporting from Las Vegas — Where Harmon Avenue slices through this town's incandescent Strip, two neighboring casino complexes mark the waning days of the Las Vegas boom — and the hope for a rebound.

The dual-towered Cosmopolitan, which opens Wednesday, is owned by German bankers who foreclosed on its original developer. The property flaunts book-adorned suites (one tome explores Joni Mitchell's "blue period") and a sly sense of humor (near some "eye in the sky" security cameras: a mural of an eye).

Vegas casinos: A graphic in the Dec. 14 Section A accompanying an article about tourism on the Las Vegas Strip showed the Mandalay Bay casino and hotel as opening in the 2000s. It opened in March 1999, with an adjacent tower known as THEhotel at Mandalay Bay joining it in 2003. —

The nearly 3,000-room resort will probably be the Strip's last new offering for years. Will it revive recession-weary Las Vegas Boulevard? Next door stands evidence that hints otherwise.

CityCenter, MGM Resorts International's 67-acre "starchitect" showcase, which opened a year ago, also caters to a cocktail party crowd. But executives initially struggled to fill its centerpiece hotel, Aria, and cope with hundreds of unsold condo units. Its Harmon hotel sits unfinished, tarred by litigation and speculation about its possible implosion.

"We probably couldn't have asked for a worse time in modern history to introduce 18 million square feet of luxury product into the marketplace," said Aria President Bill McBeath. CityCenter, he said, ended up with "a customer that was in shock or in hiding or didn't exist anymore in some cases."

The downturn has erased a number of truisms in fiercely proud Las Vegas: that tourists hungered for ever-pricier accoutrements, that gamblers rolled dice regardless of the economy's strength, that Nevada's jobless rate would remain low and its housing market high-flying.

Arguably, though, the maxim hardest for Las Vegas to discard was this: If we build a casino, more tourists will come.

That belief prompted two decades of spendthrift building, from the faux-volcano-fronted Mirage in 1989 to the upscale Echelon, where construction was halted in 2008, leaving remnants suggestive of a giant Erector Set.

"I just don't think in this current economy a new casino is going to give Vegas a bump," said Stephen P.A. Brown, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas.

The Cosmopolitan is the fourth casino to launch on the Strip during the economic swoon, and none of the others boosted visitation as past openings had. In late 2009, executives predicted CityCenter's vastness and bourgeois appeal would woo, at the very least, 5% more tourists to Las Vegas. Instead, Brown said, visitor volume this year may inch up by half that.

Many analysts, however, are convinced the Strip's free-fall has halted as the nation begins a slight — although spotty — economic upswing. At CityCenter, Aria has jumped from two-thirds to four-fifths full and executives are publicly upbeat about its prospects.

Last week, Las Vegas rejoiced at a slew of statistics implying the Strip was on the mend. In October, the most recent month for data, gambling revenue soared 16% compared with October of last year. Convention attendance and hotel room prices edged higher in October as well.

But 2009 is a particularly dour base of comparison. Tourists blew far less cash on most of the Strip's enticements, partly because of heavy discounting.

In 2008, the average gambler's budget was about $532, according to the Las Vegas Convention and Visitors Authority. In 2009, that tumbled to $482.

Though the Cosmopolitan will generate 5,000 jobs, the state still has a nation-leading jobless rate of 14.2%. The firm PricewaterhouseCoopers pegs 2014 as the year Nevada gaming revenue may rebound to near-peak levels. The state's recovery will likely lag 12 to 18 months behind the rest of the nation, said analyst Mary Lynn Palenik.

Which all explains why William R. Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno, views the Cosmopolitan's opening as a point of demarcation.

"The era of new mega-casinos is over," he said.

Too many investors were burned by the gaming industry's nosedive, he said. For example, the uncompleted multibillion-dollar Fontainebleau hotel was auctioned off last year for about $150 million; it could stand sentinel for years.

At Harmon Avenue and Las Vegas Boulevard, the glass-sheathed CityCenter was so close to insolvency in 2009 that Nevada's senators pleaded with banks to give MGM Resorts a break and save thousands of jobs.

Meanwhile, Deutsche Bank had taken over the Cosmopolitan, failed to find investors and finished the $4-billion twin skyscrapers itself. Once the real estate market flopped, its luxury condos were reborn as hotel rooms. At CityCenter, there was some relief the project wasn't abandoned.

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