CityCenter: Strip blessing or curse?
What are the experts saying about how well CityCenter will fare, opening this week in the teeth of a frighteningly soft Strip market?
In a report cited by the Las Vegas Review-Journal, CB Richard Ellis casino consultant Jacob Oberman predicts that Las Vegas Strip gaming and non-gaming revenues will increase 3 percent to 7 percent next year, but 70 percent to 90 percent of CityCenter’s initial revenues will come at the expense of other Strip properties. He predicts that existing casinos on the Strip will see revenue declines between 3 percent and 6 percent.
“It is difficult to make a case that CityCenter will not have at least some dilutive effect on the market,” the report says.
Deutsche Bank gaming analyst Andrew Zarnett is even more pessimistic, predicting in a recent note to investors that existing resorts could see revenue declines as high as 10 percent, with cash flows dropping 20 percent.
He wrote, “While the first few months may benefit [Strip casinos] from the initial exuberance following a new property opening, we maintain our view that excess capacity will cannibalize the market given the backdrop of contracting demand.”
Needless to say, developer MGM Mirage takes a different view.
Alan Feldman, senior vice president of public affairs, said the Las Vegas market has grown whenever new properties that “stimulated the imagination of the public” have opened.
“That has happened consistently throughout the history of Las Vegas,” he said.
Jan Jones, senior vice president of Communications and Government Relations for Harrah’s Entertainment, a major Strip competitor, says her company is waiting to see whether CityCenter does, in fact, bring new people to the Strip. And she added that if CityCenter does cannibalize customers from existing properties, it will probably be MGM Mirage’s own customers.
MGM Mirage isn’t worried, Feldman said, and the company won’t shy away from encouraging customers at its other properties to visit CityCenter because those customers aren’t the key to its long-term success.
“We don’t need people to convert from wherever they are,” he told the R-J. “What we need, and what we think CityCenter will do, is bring new people here.”