Construction Update: Pipeline Slows to a Trickle

Despite a reputation for resiliency in difficult times, Las Vegas has not escaped the effects of a deep economic recession.

Absent from the skyline are the multitude of construction cranes that once swirled over the Strip, now that tough credit markets have stifled, if not choked, the building boom that long has defined one of the fastest-growing cities in America.

Still … Sin City might be down, but it’s not out. Although not as plentiful as in years past, new resorts and tradeshow venues continue to come online, despite uncertainty about what will fill them and when.

Meanwhile, other developers have decided to wait out the difficult economy, with plans to resume now-abandoned projects once the storm clouds clear. Here’s a look at venues that have recently opened, those that are about to open and others whose progress remains stalled.

A mirror image of the first bronze tower named in his honor, Steve Wynn’s $2.3 billion sister resort, Encore Las Vegas, opened its doors Dec. 22, bringing online 2,034 luxury suites and 60,000 square feet of meeting space. The new 53-story resort is a complement to the neighboring flagship property, Wynn Las Vegas, with its 2,700 rooms and 200,000 sq. ft. of meeting and convention space at its disposal.

Located at South Las Vegas Boulevard and St. Rose Parkway, the $1 billion M Resort opened its doors March 1 with high hopes. Independently owned and operated by developer Anthony Marnell III, the 90-acre, mixed-use boutique resort boasts 390 guest rooms and a 60,000 sq. ft. state-of-the-art conference center.

Geared toward small to mid-sized events, the resort had to adopt a more flexible sales strategy to attract groups in the current economy, according to M Resort Executive Director of Sales Drew Varga.

“A year ago, our anticipated revenue stream and forecast for business far exceeded where we ended up based on the downturn and the economy,” Varga said. “We evaluated where we were and adjusted our pricing, market mix, value inclusions and concessions we were offering to groups immediately.”

Maybe that’s all it took. So far, business has been booked as far out as 2012, with 50 groups scheduled during the remainder of the year, he added.

Eight thousand square feet of meeting space doesn’t take you too far in Las Vegas. So the hip, off-Strip Hard Rock Hotel & Casino on Paradise Road invested $750 million in an expansion project. The Morgans Hotel Group property now has 10 times more conference space and a new, larger music venue – The Joint.

Currently under construction are two new hotel towers, with 860 new guest rooms and suites. The additional 73,000 sq. ft. of meeting space, which debuted April 17, has opened new doors to potential business for the resort, according to Hard Rock Assistant Director of Sales David Sukala.

“This expansion truly takes Hard Rock to a higher ground,” Sukala said. “The expanded meeting space allows us to meet the demand of our unique clientele, who have been asking for more meeting capacity, new guest rooms and added amenities (to) take us to a new level while maintaining our rock star roots.”

The $8.7 billion, 67-acre CityCenter megaresort is racing toward its scheduled opening later this year, despite some serious bumps in the road. Upon completion, MGM Mirage’s five-resort and condominium development will offer approximately 7,000 guest rooms and residential units, a 150,000 sq. ft. casino and a 300,000 sq. ft., tri-level convention center.

In response to the current economic climate, scope changes have been made to one of the properties, The Harmon Hotel & Spa, by canceling the condo unit feature and delaying the hotel’s opening until late 2010, according to MGM Mirage financial reports.

Despite liquidity issues, rumblings of possible bankruptcy and conflicts with CityCenter’s joint-venture partner, Dubai World, MGM Mirage has succeeded in making timely payments on the massive development, seemingly by hook or by crook. At press time, MGM Mirage and Dubai World, through its subsidiary Infinity World, agreed on terms of a deal that supposedly will allow the project to be completed on time.

Harrah’s Entertainment is moving full speed ahead with its $1 billion Caesars Palace expansion project that includes a new hotel tower and a bi-level, 110,000 sq. ft. conference center, which will increase the 43-year-old property’s meeting space to more than 300,000 sq. ft. Although the new space still is set to open by midsummer, a slow economy and low demand have forced a change of plans for what was to be the sixth hotel tower, the $375 million, 23-story, 665-room Octavius.

According to Michael Massari, vice president of meeting sales and operations for Las Vegas Meetings By Harrah’s Entertainment, the exterior of the tower will be completed on schedule, but interior construction will be put on indefinite hold until the economy improves. Once resumed, the tower’s completion should take four to six months, he added.

If it is completed by October as once projected, the $3 billion, 63-story Fontainebleau Las Vegas will have 3,800 high-end rooms and condo units, as well as multi-level meeting and convention space totaling just under 400,000 sq. ft. available once the – usually – busy winter season begins.

But that’s a big if. At press time, the development’s future appeared to be hanging by a thread. A lender group led by Bank of America backed out of an earlier agreement to contribute $800 million to complete the project. According to news reports, Fontainebleau filed a $3 billion lawsuit against the group, even as it continued negotiations with them.

Las Vegas Convention & Visitors Authority officials are watching the economy closely as they wait to resume their $890 million LVCC enhancement project, put on hold last March.

According to Jeremy Handel, LVCVA public relations manager, suspending renovations of the 50-year-old, 3.2 million sq. ft. facility was a matter of playing it smart in a difficult economic climate.

“The LVCVA suspended its enhancement program after reviewing the economic conditions and capital markets,” Handel said. “We felt this was the appropriate decision at this time. The LVCVA will re-evaluate the conditions in the second quarter of 2010 to determine whether it is prudent to proceed with the project then.”

Mum’s the word from anyone associated with the Cosmopolitan Resort & Casino. Although construction continues at the 8.5-acre site, the fate of the troubled $3.5 billion project remains uncertain. Slated to be a mixed-use property, with 2,998 guest rooms and condo units and 150,000 sq. ft. of meeting space, the high-end resort was scheduled to come online in early 2010.

Initiated by developer Ian Bruce Eichner, the property was taken over last September by primary lender Deutsche Bank AG after Eichner defaulted on a $760 million loan. Although Grand Hyatt was slated to operate the hotel and condo project, the company is no longer involved with the project.

Cobwebs are starting to collect on the half-constructed, 87-acre site of Boyd Gaming’s mega-resort project, Echelon, which remains in suspended animation as the company waits for the economic outlook to improve. Last August, after a year’s – and $500 million – worth of construction, the company decided to put the project, with a $4.8 billion total price tag, on hold pending more favorable credit markets.

The development originally was planned to have five resorts, as well as 750,000 sq. ft. of convention space. According to Echelon spokesman Rob Stillwell, Boyd and its hotel partners remain optimistic about the project, even though they are keeping their options open about its size and scope.

“We will take the remainder of the year to develop and consider a full range of options for this project,” Stillwell said. “Having a significant presence on the Las Vegas Strip is still an important element of our long-term strategy, and we continue to view the 87 acres on the Strip as a major, long-term strategic asset.”