MGM Seeking Guests Early for Citycenter

LAS VEGAS-MGM Mirage Inc. has begun taking reservations for two of the projects at Citycenter, the 7,000-unit hotel and condominium development project under construction between the Bellagio and Monte Carlo resorts on the Las Vegas Strip. Vdara, a 1,495-unit, 57-story condo hotel opens at Citycenter on Oct. 1, 2009. Aria, the 4,000-unit casino-resort at the heart of the development opens Dec. 16, 2009. In between those two dates the 500,000-square-foot retail and entertainment district known as Crystals will debut.

The cost to reserve a December room night at Aria ranges from $179 to $799 for a standard hotel room, $500 to $7,500 for a suite. The rate at Vdara for its October opening ranges from $159 to $2,000. The base rates are expensive when compared to the market’s current average daily rate but are a bargain when compared to base rates at Palazzo and Encore, the two new Strip resorts that opened last year.

The market wide average daily rate fell to $96.39 in December, according to a report earlier this month by the Las Vegas Convention and Visitors Authority. The least expensive room night at Aria comes at an 85% premium to the market wide ADR, but it’s also a 55% discount to the $399 base room rate room at Palazzo, Las Vegas Sands Corp.’s new Strip development, and a 42% discount to the base room rate at Encore, Wynn Resorts’ follow-up to Wynn Las Vegas.

The Las Vegas hotel market gained 7,500 new hotel rooms in 2008 at the same time the economy tanked. The result was a 10% decline in market wide average hotel occupancy rate to 76.7% from 87.4% in 2007. This year, more than 13,000 hotel rooms are still slated to come online. The bulk of the rooms are attributable to Citycenter (6,000 plus) and Fontainebleau Las Vegas (3,890 rooms).

As for how successful Citycenter and Fontainebleau will be and how that impacts the rest of the market remains to be seen. Experts say Citycenter’s business as always will be a mix of new demand–created by its uniqueness in the market—and room nights taken from older resorts. However, given that visitation and room nights occupied both declined in 2008 and continue to fall in 2009, that mix is going to shift, says John Restrepo, principal of locally based Restrepo Consulting.

“Unlike the past when you saw this caliber of an asset enter the market and create a lot of new demand, I think this time around, given the recession, there will be less new demand generated and a greater amount of cannibalism; What those ratios are exactly it’s hard to say until after the fact,” Restrepo tells GlobeSt.com. “I think what we are finally coming around to understand as a community is that this recession is unlike anything we’ve ever seen before because of its breadth and depth, which means a lot of the historical metrics have been thrown out the window.”

So while Restrepo does indeed expect Vdara and Aria to generate some new demand due to the uniqueness of the Citycenter offering in the larger market, “we can’t underestimate the impact of the recession.” Given that and the new supply, many experts are saying a great year for Las Vegas in 2009 would be maintaining occupancy and rates.

Or as Restrepo has been saying in recent market presentations, “flat is the new up cycle.”