Las Vegas undergoes its latest transformation

The Strip is undergoing a shuffling of the deck when it comes to property ownership, with a wave of construction expected in the coming years.


In a city long known for reconstruction and reinvention, the Las Vegas Strip is undergoing its latest transition with a flurry of deals involving new and old players that will reshape and rebrand the landscape over the next decade.

That next phase started last June when the Genting Group opened Resorts World Las Vegas, the $4.3bn resort on the north end of the Strip – the first such opening in more than a decade. That was followed in July by the opening of the $2bn, 65,000-seat Allegiant Stadium to concert-goers and sports fans for the first time since the pandemic.


Allegiant is already paying dividends. During the third and fourth quarters of 2021, 400,000 people came to Vegas because of the stadium, way more than expected. It’s turning the city into what it now rebrands itself as the “sports and entertainment capital” and “greatest arena on earth”.

All those added visitors helped the Strip set an all-time record for gaming revenue in 2021 despite the ongoing Covid problems.

Wall Street analysts and industry consultants are now laying the foundation for the change coming to Vegas over the next decade. It started last December with Hard Rock International reaching a deal with MGM Resorts International to acquire the operations of The Mirage for $1.07bn.

“This is a shuffling of the deck, pun intended,” says David Katz, an analyst with Jefferies Equities Research.

Hard Rock, which is owned by the Seminole Tribe of Florida, will become the first tribe to operate directly on the Strip when the deal closes in the second half of 2022. The Mohegan Sun in 2021 took over operations of the former Hard Rock, which is now Virgin Hotels Las Vegas.

The San Manuel Band of Mission Indians in Southern California ended 2021 by closing on its purchase of the Palms Casino Resort just west of the Strip from Red Rock Resorts for $650m. That property, shuttered since March 2020, will reopen in the spring.

New riff at the Mirage

No major renovations are expected at the Palms, but the Mirage is expected to undergo major changes by the Seminoles who are leasing the property from VICI Properties, a New York real estate investment trust. VICI, when it closes during the first quarter on a deal for the Venetian, Palazzo and Venetian Expo Center, will own 10 casino resorts and two entertainment venues up and down the Strip, including T-Mobile Arena.

With $1.5bn in assistance from VICI, the Seminoles plan to upgrade and build a guitar-shaped hotel tower in front of the Mirage, which will be rebranded as the Hard Rock.

“Las Vegas Boulevard is about to witness a significant amount of construction, both in the form of existing property renovations/expansions and new-builds,” says Andrew Klebanow, principal with C3 Gaming. “Combined, these projects represent a major transformation of the resort corridor. In five years, the Strip will look dramatically different.”

The Mirage deal is significant, analysts say, because it creates a framework for Caesars Entertainment to obtain a premium for selling one of its Strip properties in 2022, possibly Planet Hollywood. Caesars was acquired by Eldorado Resorts in 2020 for $17.3bn.

John Decree, a senior analyst at CBRE Equity Research, says the valuation implied by the Hard Rock purchase and the amount of capital they could be willing to spend on redevelopment “underpins the desirability and value” of having either real estate or an operation on the Las Vegas Strip.

Caesars has to be excited about selling one of its resorts in 2022 and the same can be said of Wynn, which Decree says is sitting on what is “arguably the most valuable casino resort” in Las Vegas, if not the country. He had assumed Caesars would generate $2.5bn from a sale but that could exceed $3bn now.

“We have seen a number of high-profile transactions get announced this year: Mirage, Cosmopolitan, Venetian, CityCenter,” Decree says. “There is a lot of capital chasing the very finite number of opportunities on the Las Vegas Strip. This bodes well for Caesars as they prepare to divest one of its Strip properties. The buyer pool should be quite large, which should translate to a very nice price tag for Caesars. For Wynn, the impact could be even greater. The potential value that Wynn could unlock in Las Vegas alone could be transformative, especially for an asset that needs no [capital expenditure] and has plenty of excess land for development.”

Construction time again

In addition to the great values paid for Strip properties, the Mirage upgrades could lead to redevelopment of older mid-market properties across the Strip by MGM and other owners.

“It raises the discussion of what MGM will do with Luxor, Excalibur and New York-New York,” Katz says about the properties that were part of a themed wave in the 1990s. “I think discussions will be had. There are a lot of options.”

MGM Resorts International CFO Jonathan Halkyard told an investors conference in December that with T-Mobile Arena and Allegiant Stadium in that corridor, the “energy on the Strip” has been moving in that direction. He mentioned there’s seven acres in front of the Excalibur and that it could get another resort in the future.

“The reality is – and not many people appreciate this –there’s a substantial opportunity for our company to do additional development in that area if that’s something we think (would be good for shareholders),” Halkyard said. “That’s equal to the entire footprint of The Cosmopolitan of Las Vegas. I’m not suggesting we’re going to build a 3,000-room tower there, but that’s a significant development opportunity potentially.”

Last autumn, MGM announced its acquisition of the operations of The Cosmopolitan on the south end of the Strip for $1.625bn in a deal that will close this year.

“We very much like that,” Halkyard said. “That’s our neighbourhood down towards New York New York, Excalibur, Mandalay Bay and Luxor, MGM Grand and Park MGM.”

The deal has been part of a larger trend on the Strip. MGM entered a 30-year lease agreement starting at $200m a year from the new ownership group that includes Blackstone Real Estate Income Trust, the Cherng Family Trust and Stonepeak Partners who are acquiring it for more than $4bn.

There are also plenty of other changes underway. Construction has restarted on the long-stalled Fontainebleau Las Vegas with plans to open the 67-storey casino resort in 2023. The project, originally started in 2007 before going into bankruptcy, will have more than 3,700 hotel rooms and half-a-million square feet in convention space.

Nearby, the Las Vegas Convention and Visitors Authority has sold 10 acres for $120m on the former Riviera casino site to Claudio Fischer, a Chilean entrepreneur and real estate developer who owns airlines and hotels, including the largest casino resort in Latin America. Fisher plans to develop the site as a casino resort in the future with no timeline set.

Billionaire Phil Ruffin acquired the 3,900-room Circus Circus from MGM for $825m in 2019. The ageing property, which opened in 1968, also includes 37 acres of festival grounds, the Adventuredome theme park, 10-acre RV park, and the Slots-A-Fun Casino. It’s a site ripe for redevelopment.

Wynn Resorts, which owns 38 acres across the Strip from its two properties at the imploded New Frontier, had announced plans under then CEO Steve Wynn to develop a resort before halting those plans after his departure over allegations of sexual misconduct. It has not announced new intentions for the site.

Last week, Caesars Entertainment announced a change of its Bally’s Las Vegas to its Horseshoe brand this spring with a major renovation of the casino and exterior and new entertainment options.

Bally’s Corp. chairman Soohyung Kim told the Las Vegas Review-Journal last week the company wants to redevelop the Tropicana Las Vegas that opened in 1957 at the sound end of the Strip at an intersection that includes New York New York, MGM Grand and Excalibur.

Bally’s is in the process of acquiring the property from Gaming and Leisure for $308m in a deal that’s expected to be completed early this year. The 1,400-room property may be either renovated or demolished and rebuilt.

“Bally’s acquisition of the Tropicana announces to the world that the company has emerged as one of the largest operators of casinos in the United States, and a flagship property on the most important corner in the world’s gaming capital would deliver an important message to the marketplace,” Klebanow says.

South of the Tropicana, two developers have plans to build a 527-room casino resort called Dream Las Vegas for $500m. It’s adjacent to the newly renamed Harry Reid International Airport, another Las Vegas rebranding replacing McCarran International Airport.

On the north end of the Strip, there’s an ongoing proposal for a casino and NBA arena that has yet to move forward.

“There’s a lot of opportunities at the north end of the Strip, and there’s a lot going on at the south end of the Strip where the football stadium is,” Katz says.

They came, they saw

More news will come this week when veteran Strip owner the Las Vegas Sands Corp. starts the process with Nevada gaming regulators of selling its assets. VICI, a REIT affiliated with Caesars which launched in 2017, is acquiring the Sands properties for $4bn and the site of the nearby $1.8bn MSG Sphere – the new-age concert venue that seats 17,500 and will be completed in 2023.

“Unbeknown to many tourists and locals is the unfinished condominium tower that stands on the north side of the Venetian,” Klebanow says. “Its original superstructure has been wrapped with a façade to hide the original steelwork. Originally conceived as a luxury condominium project, construction was halted during the 2009 recession. One can expect the new owners to revisit that project, rethink what it needs to be, and resume construction.”

Apollo Global Management, the previous owners of Caesars Entertainment, will acquire the operating company from the Sands for $2.25bn and enter into a lease agreement with VICI for the property that has more than 7,000 rooms, 225,000 square feet of gaming space and 2.3 million feet of meeting space.

In August, VICI announced that it was acquiring MGM Growth Properties for $17.2bn, adding eight resorts in Las Vegas. It will have about 40,000 of Las Vegas’ 150,000 hotel rooms.

VICI is also a player beyond its casino and entertainment venue ownership. It owns 27 acres of undeveloped property behind Planet Hollywood, Paris Las Vegas and Bally’s Las Vegas and has the ability to acquire 28 acres across Flamingo Road behind the Flamingo Las Vegas and Linq, including the Caesars Forum convention centre.

Las Vegas has been through a lot of transformations over the last 50-plus years, starting with billionaire Howard Hughes buying up casinos in 1967, Nevada passing legislation that paved the way for corporations to own casinos and oust the mob, and its first megaresort in 1973 when Kirk Kerkorian built the original MGM Grand.

A new era dawned in 1989 when Steve Wynn opened The Mirage, a 3,000-room Polynesian-style resort, and set the stage for elaborate, expensive themed properties in the 1990s that included Treasure Island, the new MGM Grand, the castle-themed Excalibur, pyramid-themed Luxor, Paris Las Vegas, Bellagio, Mandalay Bay, New York New York, and Venetian. It was part of a transition to focus on entertainment, conventions and other amenities that shifted the largest percentage of revenues away from gaming since casinos had been expanding across the country with commercial and tribal properties.

In 2003, the Las Vegas Convention and Visitors Authority launched its campaign to promote Las Vegas as more than a place to gamble. It was about adult freedom with its “What Happens Here, Stays Here” slogan that put a quick end to the concept that Las Vegas was a family destination.

There would be another transformation later in the decade with the opening of Wynn Las Vegas and capped off at the end of the decade with CityCenter – the casino, hotel and condominium tower development. In between was the opening of Palazzo, Encore and The Cosmopolitan.

The Great Recession that went from the end of 2007 to 2009 put an end to any new development and stopped ongoing projects in their tracks for years until the economy recovered and restarted Resorts World Las Vegas and now the Fontainebleau.

Chameleon effect

“The one thing about Vegas is no matter what, it has continuously remade itself to adjust to the customer and adjust to the customer experience,” says Brendan Bussmann, a partner with Global Market Advisors. “Whether it’s the themes of the 1990s, the family-friendly approach and going after the business customer, it all goes to how to diversify the gaming product.  Not only will you see the building that happens with the Seminoles, there’s the redoing of Bally’s to make it Horseshoe, the redoing of the Tropicana and a host of other things. You have the Fontainebleau, the vacant land west of Wynn and other developments.”

This newest push will get a kick start from The Mirage.

“The planned investment and guitar hotel would give that part of the Strip a much deserved facelift which will benefit all,” Decree says. “Over time, the centre of gravity on the Strip has migrated, and Hard Rock’s investment should help draw some attention back to that once fabled Strip neighborhood that revolved around the Mirage. Never underestimate the importance of a neighbourhood in gaming. Las Vegas Strip, the Atlantic City Boardwalk, the Cotai Strip in Macau, are all examples of clustering. The constant investment and development into Las Vegas is generally good for everyone, it keeps Las Vegas fresh and exciting and brings new customers to town and keeps repeat customers returning regularly.”

Katz reckons The Mirage hasn’t been an in-demand property for years and maintains the Hard Rock is a brand that’s an attraction for the Strip. People from other Hard Rock markets, including Florida, will be coming to Las Vegas and vice versa and those visitors will go to other locales on the Strip.

“It’s a customer that fits well with the Vegas profile,” Katz says. “They like to go to games and go to shows and enjoy what the Strip has to offer. People visit five properties when they visit and game at two to three on average. A redeveloped Hard Rock can be a first-choice destination that lifts the level of the whole Strip.”

Cliff Atkinson, president of the Fontainebleau Las Vegas, says his property could also serve as “a beacon of change” for the Strip. He’s amazed how the city continues to reinvent itself.

“Look at the emergence of sports. When I got to town (a decade ago) we didn’t have T-Mobile Arena. It was being built. You have Allegiant. Our project started 15 years ago and has been redesigned and updated for a 2023 opening. That is going to set that project on a trajectory for decades to come. All of it combined is an exciting next chapter for this town.”

As the number-one hospitality and gaming destination in the world, “What Happens Here, Stays Here” doesn’t happen anywhere else in the world, Atkinson adds.

“There’s an expectation that people will continue to come back, and we have to reinvent ourselves every so often,” he says. “This town has done that and done it well and will continue to do that. The expectation is so high because there’s gaming in 48 states now, but there’s nothing that has the excitement that Las Vegas has. I think our property will set the tone for what the future of this destination will be. Everything that’s important to the guest experience from technology and how the world has evolved over the last two years.”

Josh Swissman, founder of The Strategy Organization, says innovation in Las Vegas will be enhanced over the next decade with the arrival of new ownership groups, including the Native American tribes who have been leaders in innovation across the country. They were among the first to adopt cashless gaming and other technology.

Thinking outside The Strip

“I think what you will see here is the decade of the non-traditional Strip operator new to Las Vegas Boulevard,” Swissman says. “It’s a shift in operational mentality and tactics. Some of these privately held interests and tribal interests coming into the fold, they have a different outlook on business. It can bring some fresh thinking and hopefully innovation. They don’t live quarter-by-quarter and earnings call to earnings call. They have some nice free cash flow for investment and can take chances and learn because they’re focused on long-term growth.”

Katz expects greater numbers of tribal operators to come to Las Vegas now that three will be operating there soon. The tribes have amassed resources and their wealth has grown beyond gaming.

“Tribes have been buying commercial properties, and I don’t see why you won’t see other tribes enter Las Vegas more and more,” Katz says. “Tribes are sophisticated operators and that’s all for the better. You have to have financial resources and operating resources to be successful.”

Not everyone, however, sees the decade quite the same way.

Oliver Lovat, CEO with the Denstone Group, says Las Vegas will need to reinvent itself even more to deal with the after-effects of the pandemic. The last 22 years has seen success based on midweek conventions and weekend leisure travel, but Lovat thinks it will take a long time for conventions to recover, possibly as long as a decade.

Lovat suggests operators will have to turn to festivals and other midweek entertainment to draw customers to make up for fewer convention goers.

“The stadium is a huge help as is sports tourism, but they need more counterprogramming,” he says. “They have to double down on entertainment midweek because they can’t survive without midweek visitation.”

Katz still believes Las Vegas is in a good spot given what he’s seeing so far this decade.

“I think the Strip is one of the more interesting areas at this point,” he says. “They have professional sports. It’s a market unlike any other in the world. The level of entertainment and facilities they have is unmatched. They have something there for everyone over 21.”

Buck Wargo is a Las Vegas-based business and gaming journalist. He’s a former reporter for the Los Angeles Times. He has a degree in Middle Eastern Studies from the University of Texas and worked as a foreign correspondent in the Middle East.