Condos Should Increase Casino Visitation - Tuesday 12th of April 2005
Luxury condominiums being built throughout Las Vegas should help drive additional traffic to casinos, not slow it down as some critics contend, a new report said.
"Luxury Condos -- Friend or Foe?" by Deutsche Bank Securities analysts Marc Falcone, Grant Govertsen and Elizabeth McNellis, said many of the condominium projects on the drawing board will never be built so the impact of condos on the market will be minimal.
The report also said the well-heeled owners of luxury condos would take advantage of their investments and visit more often than they would if they stayed in hotels.
In a conference call today by Falcone and collaborator Brian Gordon of Las Vegas-based Applied Analysis, the authors said they expected condominium owners would visit between five a 10 times a year instead of twice a year as many hotel guests do. Falcone said he expected condo residents would maintain the pattern of staying an average 3.6 days per visit.
The report suggests that condo residents won't spend their evenings in the hotels, but they will be at restaurants, shows and in retail outlets.
Because the revenue streams have changed for Las Vegas resorts in the past decade, nongaming revenue has become more important and resorts are depending more on attracting convention business and less with their casinos.
A local real estate expert concurs with most of the findings of the report and noted that some casino companies won't lose customers to condo developments because they're getting into the condo business themselves.
John Restrepo, principal of Restrepo Consulting Group LLC, Las Vegas, noted that MGM Mirage is partnering with Turnberry Associates to build luxury condos at the MGM Grand. In addition, the $4 billion Project CityCenter development, due to come on line in 2010, has a luxury condominium component to go along with a major hotel-casino, non-gaming boutique hotels and retail outlets.
Restrepo agrees with the report authors that many of the 55 condominium projects on the drawing board will never be built.
"It's easy to tell which ones," he said. "It's the developers that don't have any track record for building high-rise condominiums, have no track record, no construction company backing them and no long-term control of the site. They usually have a Web site and a rendering, a dream and a drawing."
Gordon said today well-capitalized, publicly funded companies are likely to see their projects move forward. With land values skyrocketing -- Gordon said that based on 2004 transactions, property value increased 149 percent last year to $520,000 an acre valleywide -- only the experienced developers will see their projects built.
He said the shake-out already has begun with Turnberry Associates' acquisition of 3.6 acres where the Algiers hotel property once stood on the Las Vegas Strip. Investors in the 45-story Krystle Sands project already have begun filing lawsuits in Clark County District Court against F.W. "Freddie" Schinz, Krystle Sands LLC, Krystle Towers LLC and Fidelity National Title Agency of Nevada in connection with that project.
The Deutsche Bank study suggests that between 9,300 to 13,500 units will be occupied by visitors to Las Vegas who would have otherwise stayed in resorts and that number of rooms will easily be absorbed as the market grows.
"For the purposes of this analysis, we assume that the 4,500 luxury condominium units under construction will be developed as planned," the report says. "Of the 32,500 proposed units that have also been announced, we have assigned a range of probabilities of development from 30 percent to 50 percent, resulting in an estimate of 14,300 to 20,800 coming to fruition.
"Furthermore, we estimate that approximately 35 percent of all units that are developed will be occupied by full-time residents of Las Vegas, while the balance will be occupied by the transient (visitor) segment," the report said.
The authors say that even with new hotel rooms and condominium units driving the volume of rooms on the Strip to between 169,500 to 173,700 units -- up from the existing 131,000 units -- the additional supply won't have a negative impact because condo residents will patronize restaurants and entertainment venues.
"Notably, we expect that the urbanization of Las Vegas will actually drive higher utilization of both gaming and nongaming amenities at Strip resorts," the report said. "Indeed, we expect that the new condo projects could actually yield incremental market trips, beyond normal hotel stays, as patrons are likely to visit more frequently if they own a condo. Further, we expect that residents, both full-time and transient guests, will be regulars at nearby casino-hotel resorts, patronizing casinos as well as restaurants, retail and entertainment venues."
Falcone said today that tourists who continue to stay in hotels may look for an upgrade experience and that visitors would "trade up" to higher-end resorts when they become available.
He also said he expects airline support would continue as it did during the 1990s in earlier resort boom periods and that additional demand would lead to increased flights to and from McCarran International Airport.
Other news from around the same time
Players Have Good Month In Nevada Casinos - Tuesday 12th of April 2005
For the second straight month, Nevada casinos reported modest increases in the amount of money won f....
Online Bookie Optimistic About Lawsuit - Tuesday 12th of April 2005
Online bookmaker International All Sports has told shareholders it's confident it can successfully d....
Sheriffs Unite Against Video Gambling - Tuesday 12th of April 2005
The sheriffs of Burke, Caldwell and Catawba counties are banding together to crack down on illegal g....
Schwarzenegger Plan Blocked - Tuesday 12th of April 2005
The Schwarzenegger administration's bid to bolster the state gambling commission with a major staffi....
Bahamas Gets Another Resort - Tuesday 12th of April 2005
A rival to the Bahamian mega-resort Atlantis will rise across the harbor in Nassau with a Las Vegas-....
Former Governor Criticizes Minnesota Proposal - Tuesday 12th of April 2005
The previous Republican governor rebuked the current Republican governor Thursday for his proposal t....
Fight Continues for UK Gamblers Money - Tuesday 12th of April 2005
Drastic cuts in UK government ambitions to reform the gambling industry appear to have pole-axed for....
Chartwell Welcomes UK Legislation to Regulate Internet Gaming - Tuesday 12th of April 2005
Chartwell Technology Inc. (TSX:CWH), a leading provider of gaming software systems to the online and....
Portland Mayor Opposes Casino - Tuesday 12th of April 2005
Casino gambling may be creeping closer to Portland, but Mayor Tom Potter still wants nothing to do w....
Gala Considers Stock Market Flotation - Tuesday 12th of April 2005
BINGO hall operator Gala is checking its numbers for a possible stock market flotation, it was said ....