Does Las Vegas Really Need Another Hotel-Casino?
STEVE INSKEEP, host:
Were going next to Las Vegas, where years of falling revenue have not stopped the casino industry from a stimulus of its own. The industry keeps building new casino hotels, even though existing buildings are dying for customers.
David Schwartz is following the city's latest gambles. He is director for the Center for Gaming Research at the University of Nevada, Las Vegas. He's on the line from Las Vegas.
Welcome to the program.
Professor DAVID SCHWARTZ (University of Nevada, Las Vegas): Thanks for having me, Steve.
INSKEEP: So if you go looking for new casinos or new construction along the Las Vegas Strip, what do you see?
Prof. SCHWARTZ: Well, you're going to see a surprising amount of it. One casino, called the Cosmopolitan, is about to open up. It'll open up in December. And we've also got a couple that have stopped building, but if the word came down, they'd be ready to start again.
INSKEEP: Meaning that they're half-built at this point.
Prof. SCHWARTZ: Yeah. One of them is about - probably 5 percent built. That's Echelon, where the Stardust used to be. The other one, Fontainebleau, is probably about 80 percent built. But neither of them is going to open up in the near term.
INSKEEP: But you mentioned this one that is going forward. It's called the Cosmopolitan. It seems to be a property owned by Deutsche Bank?
Prof. SCHWARTZ: Yes. Through a series of unfortunate events, Deutsche Bank ended up foreclosing on the property. They had been trying to sell it to somebody -you know, say, an MGM Mirage or a Harrah's, one of the companies that owns casinos in Las Vegas - but couldn't find any takers. So they ended up deciding to open it themselves.
INSKEEP: So are they going to end up - you know, you can go to a slot machine and pull the arm, and you're betting on a derivative or something like that?
Prof. SCHWARTZ: Yeah, they might - you know, that might give them something to distinguish them a little bit from everything else around them. So, who - you know, I wouldn't want to rule that out.
INSKEEP: Well, there you go - distinguishing yourself. This is a situation where there's already a surplus of hotel rooms and a surplus of casinos, right?
Prof. SCHWARTZ: Yes. And particularly, there's a surplus of high-end hotel rooms. CityCenter, which is MGM Resort's new development, just opened. And that has some very expensive, very high-end rooms, costs about $8.5 billion to build. They have Las Vegas' first Mandarin Oriental Hotel, which is pretty pricey, and the Aria Resorts, which was designed by Cesar Pelli - is also pretty expensive. So you have Cosmopolitan also trying to come in at this really high-end price point, which may cause maybe not the best results.
INSKEEP: Now, the number of visitors to Las Vegas has finally crept up a tiny bit after declining for years, right?
Prof. SCHWARTZ: Yes. It has. The number of visitors is up maybe about 1.5 to 2 percent. The problem is that the number of hotel rooms is already up by about 6 percent because of all the additions. So if you do the math there, there's still a lot of empty rooms. So there's still definitely a need to have even more people come, even though the number of visitors is up.
INSKEEP: Does this mean I can get a bargain on a hotel room?
Prof. SCHWARTZ: Yeah. It absolutely does. You know, you look at a place like Aria, which those rooms were probably supposed to go for about $250 a night midweek, and people are getting deals as low as $100 a night midweek.
INSKEEP: So if prices are down because the supply is far exceeding the demand at this point, what would keep people continuing to build more hotel rooms, more casinos?
Prof. SCHWARTZ: Well, I think in the case of the Cosmo, it's that they were just so far along in the process, they felt that basically opening it would be cutting their losses. They've got this thing. They've already invested billions in it, and having it just sitting there isn't going to help them at all. So they figure if they open it, at least they'll get some revenue coming in.
INSKEEP: So is there any sense of optimism as the number of hotel rooms expands even more in Las Vegas?
Prof. SCHWARTZ: Well, I think, really, it's kind of in the DNA of Las Vegas that when a new hotel opens up, this is kind of the dawn of a new millennium -no matter what's going on, you know. And this is going all the way back to the '40s. So whenever a new casino opens up, there's this belief that this is going to be the salvation of the city, and it's going to turn everything around. You know, whether that actually happens, you know, nobody can say. But I think there's still definitely some hope that it will happen.
INSKEEP: Now, is there also increasing competition from overseas?
Prof. SCHWARTZ: There's a lot more competition from overseas now, especially in Asia. Macau is now the world's biggest gaming destination. This year, they're going to make about $20 billion in gambling from 33 casinos, which is about twice what they're going to make in Nevada, from about 333 casinos. So really, Macau is a much bigger gaming destination than Las Vegas today.
INSKEEP: David Schwartz is director of the Center for Gaming Research at the University of Nevada, Las Vegas.
Thanks very much.
Prof. SCHWARTZ: Thanks for having me.
(Soundbite of song, "Viva Las Vegas")
Mr. ELVIS PRESLEY (Singer, Performer): (Singing) Viva Las Vegas. Viva Las Vegas. Viva Las Vegas. Viva, viva Las Vegas.
INSKEEP: This is NPR News.