Changes in the Cards for Iconic Las Vegas Strip After Big Hotel-Casino Deals
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In the past two years, there has been a flurry of hotel investment activity in the Las Vegas market, with nearly 10 transactions achieving sale prices exceeding $1 billion.
Total hotel sales volume for the past two years in Las Vegas is nearly $16.8 billion, representing 17% of the total U.S. hotel sales volume during that time frame. Las Vegas hotel transaction volume this year has surpassed the annual hotel sale totals for Las Vegas set over the past decade and is close to exceeding the cumulative sales volume from 2012 through 2019.
Luxury resort hotels have become a favorite of guests and investors alike. And not just in Las Vegas. Even with higher labor costs, the strong bottom-line performance for luxury resort properties coupled with asset price appreciation has attracted healthy investor appetite to this asset class, which has garnered a reputation of being almost “recession-proof.”
While many of the larger recent hotel trades have garnered headline attention, some of the smaller-by-comparison transactions or those stemming from merger and acquisition activity may have been overlooked but will likely factor into major property changes in Las Vegas in the near future.
The 125-room Travelodge Las Vegas Center Strip, located at the southeast corner of Las Vegas Blvd. and Harmon Ave., traded in June for approximately $141.5 million. Obviously, a small Economy-class hotel would not trade for that high a price point on its own, but it was sold for land value as part of a larger portfolio transaction. Fertitta Entertainment, headed by the billionaire owner of the NBA’s Houston Rockets and Landry's restaurant operator, Tillman Fertitta, purchased the hotel and a trio of neighboring commercial properties for a combined $270 million.
Since then Fertitta won approval to build a 43-story high-end casino resort on the prime 6.23-acre site that will include 2,420 rooms with restaurants, convention space, a spa, a wedding chapel, an auto showroom and a roughly 2,500-seat theater. A groundbreaking date has not been revealed. Based in Houston, Fertitta Entertainment also owns the Golden Nugget casino in downtown Las Vegas and recently became one of the major shareholders in Wynn Resorts.
Last December, Hard Rock International announced that it had agreed to pay over $1 billion in cash to acquire the operations of The Mirage from MGM. The deal is expected to close at the end of this year. While not specifically a real estate transaction, the operational takeover will mean major changes for the iconic 3,044-room Las Vegas Strip hotel.
Part of the sale agreement includes the ability for the property to remain branded as The Mirage for up to three years, but Hard Rock appears prepared to make changes well before then. Guests of the hotel have been informed "The Mirage Hotel and Casino will be renamed The Hard Rock Hotel and Casino effective December 19, 2022 and will no longer be under the MGM brand.” In a previous news release, Hard Rock said it expects to unveil a "property expansion" in 2025, and while no details have been released, it is speculated that the property could be converted into Hard Rock's signature guitar-shaped hotel.
The sale of the 1,470-room DoubleTree Tropicana transaction was announced last year but officially closed in September. The hotel was purchased by Bally's Corp. for $148 million, or $100,700 per key.
Details on what will happen to the hotel are unclear, but the new owners say they are considering demolishing the structure originally built in 1957 and that the Major League Baseball stadium project for the Oakland Athletics at the Tropicana is still "very much in the cards."
It's not the only Las Vegas location being considered for a potential baseball stadium, as the owners of Treasure Island and Circus Circus are open to using the Las Vegas Festival Grounds at Las Vegas Bouelvard and Sahara Avenue as a potential stadium site, as well. However, in early November, Nevada's governor said that state funding would not be used to build the stadium, so the A's may be looking at other markets as state funding is believed to be an important factor in their potential relocation.
The Fontainebleau Las Vegas isn’t a new project for Las Vegas, but there have been significant updates made in the past year. The 60-story, 3,780-room mega-resort has been under development for over a decade with numerous construction pauses and changes in ownership groups.
The hotel was nearly completed and set to reopen in fall 2009 but fell into bankruptcy during the global financial crisis. It sat empty thereafter for over a decade. Last year, the property was bought back by its original owner, Fontainebleau Development in partnership with an affiliate of Wichita, Kansas-based Koch Real Estate Investments. The previous plan for the remodeled resort to be called The Drew and house three Marriott-branded hotels was canceled.
Now, the property is back using its original Fontainebleau name and is expected to open late next year in time for Las Vegas to host the 2024 Super Bowl.
There have been several other notable changes in the Las Vegas hotel landscape, perhaps none more notable than the opening of the 3,500-room Conrad Las Vegas at Resorts World representing three Hilton brands in 2021.
Located above one of the stops of the new the Las Vegas Loop, a tunnel system being created by Elon Musk's Boring Company that connects to the convention center. The resort has three separate brands and price points. The most affordable option, and also the largest of the three hotels, is the Las Vegas Hilton with over 1,700 rooms. For those looking for a bit more luxury, the Conrad Las Vegas offers. The nicest rooms at Resorts World are part of Crockford's Las Vegas, a boutique Hilton label with just under 1,500 rooms with a private entrance and tea service at check-in. There's also a hidden a speakeasy located in the food court, with no exterior signage and a hidden entrance.
In 2020, the 777-room, Luxury class, adult-only Circa Resort & Casino opened, which was the first hotel casino built from the ground up in downtown Las Vegas since 1980, replacing the Las Vegas Club that was torn down in 2017.
The property won the North American Property of the Year award at the Global Gaming Awards Las Vegas in 2022 for the second consecutive year. This year the property unveiled its newly expanded 35,000-square-foot meeting and convention space. Featuring a ballroom, breakout and banquet rooms and adjacent pre-function space next to a 1,600-square-foot outdoor terrace, the timely new space addition opened just as business meetings and events continue to ramp up since the pandemic.
The $200 million conversion of the Hard Rock Hotel into the 1,502-room Virgin Hotel Las Vegas, a part of Hilton's Curio Collection, reopened in March 2020. The resort's more than 1,500 rooms are spread out across three towers.
OVG Las Vegas Hotel & Casino
In March, Oak View Group (OVG) acquired 25 acres of land near the intersection of I-15 and I-215. and announced plans to develop the OVG Las Vegas Hotel & Casino, which would include an 850,000 square-foot arena, a casino, a hotel, and an additional entertainment venue amphitheater. Different media sources have indicated construction would start this year or next; however, the project is not listed on the company's website with other current development projects. This year, OVG opened the Moody Center at the University of Texas in Austin, Texas, and the Acrisure Arena in Coachella Valley, California. Last year, OVG opened the $1.2 billion 18,100-seat Climate Pledge Arena in Seattle, the world's first net-Zero Carbon Certified arena; and UBS Arena, a $1.1 billion multi-purpose, state-of-the-art arena is located on the historic grounds of Belmont Park. These arena developments are home to the NHL's Seattle Kraken hockey team and New York Islanders respectively.
A couple of other large hotel projects listed below have been announced in Las Vegas, however they have remained in the proposed construction phase for years, and given the challenging and extremely expensive development costs for large hotel projects in the market the future of these projects is unclear. Still, should they come to fruition, they would also help to remold the Las Vegas hotel landscape.
The Las Vegas Convention and Visitors Authority (LVCVA) began discussions to sell 10 acres involving the former Riviera Hotel site next to the Las Vegas Convention Center to a Chilean investor, Claudio Fischer, for $120 million in 2020. The hotel was demolished in 2015 to make place for the Las Vegas Global Business District, a project planned by the Convention and Visitors Authority.
The buyer and seller have reportedly agreed on the terms of the sale and the deal is expected to close by mid-December. No official plans have been released on what Fischer intends to do with the land, and he has until 2031 to start construction on a project. However, it can be wagered that the potential buyer could build a resort casino, as he has already developed two resort properties in South America.
Nearby, former NBA player Jackie Robinson purchased land in 2013 to build an arena and luxury hotel that initially planned to open in 2016. Construction has not yet started on the former Wet 'n' Wild water park site located next to the Fountainebelau Resort & Casino. The plans have changed to include two luxury hotel towers, an arena with a retractable roof, a convention center, and movie theater for an estimated $4.9 billion project. Clark County Commission narrowly passed an extension to the project's approvals last week. Funding for the plan has changed numerous times in the past nine years, resulting in concern and skepticism over the viability of the project.
