Just when things were looking good … I mean, after many a premature prediction of economic recovery, room-rate trends on the Las Vegas Strip were looking like change in which one could believe. J.P. Morgan projections for the fourth quarter (including all-important New Year’s Eve, of course) show a 24% improvement in weekday ADRs and an 8% uptick in weekend ones. A year ago, upward movement was comparatively measly: 7% midweek and 1% on weekends. Even the traditionally sucky Thanksgiving-to-Christmas lull is trending nicely.
Quarter by quarter, the Strip has posted consistent room-rate growth for the past year. Starting in 1Q11, weekend rates have improved 11%, 8% and 3%, respectively, while midweek ADRs have hopped along +6%, +3% and +13%. Cosmopolitan continues to maintain some of the highest prices on the Strip ($206-$304/night) and all major operators are experiencing better weekend rates … except Steve Wynn (above), whose Wynncore is projected to see a 9% decline in 4Q11. Midweek/weekend splits for the other Big Three are expected to be as follows: MGM Resorts International 13%/4%; Las Vegas Sands 34%/12%; Caesars Entertainment 38%/20%. The glut of mid-market exposure which initially looked like the weak underbelly of the Park Place Entertainment takeover may prove to be Caesars’ saving grace with wallet-conscious customers … that and a ban on “resort fees.”
However … a source in the real estate community is hearing from bankers than the much-dreaded “shadow inventory” of foreclosed homes may get dumped into the market, starting January 1, 2012. As if the equity value of your Sin City home hadn’t been kicked in the ass sufficiently! There’s “way too much standing inventory,” the source says, ergo the New Year’s Day fire sale. At least there’s one growth industry upon which Vegas can fall back in its half-hearted search for economic diversification.
Can it be true? Also heard through the grapevine: The Mirage is still on the block, yours for a mere $1.2 billion. If so, that’s mighty optimistic of MGM to think it can get that kind of long green for a hotel where double-occupancy rooms are going for $60/night (quel bargain!), less than half the going rate at Aria … and let’s not even get into what a room at Bellagio or Mandalay Bay will cost you.
Ok, I’m getting out the checkbook, what would I pay for Mirage if I paid what it was worth?
Lemme see if I can find a recent EBITDA number and get back to you.
I was just in Vegas over the weekend as was thinking that it was probably logical for MGM to keep Mirage on the sale block…but for that price??? I am a real estate investor and that tells me they are only serious about selling if a sucker comes around and pays that kind of price. Real estate 101….everything is for sale…for the right price!
Sad to say, Ray, MGM doesn’t bust out cash-flow numbers by property. I *suppose* you could rationalize $1.2 billion for The Mirage (vs. $775 million for Treasure Island) on the basis of greater acreage, amenities — the volcano, the tigers, the dolphins, etc. — and the equity value of the Mirage brand. Since MGM no longer uses “Mirage,” whoever buys that place could become the sole owner of that brand, which still conjures up many positive associations. But unless you’ve got your own loyalty program ready to plug into The Mirage, fughedaboudit.