Mandarin Hotel’s dedication to excellence a great start

 An article in the Las Vegas Review-Journal about MGM Mirage’s CityCenter project recently caught my eye.

It was not the typical story we’ve seen so many times about the property’s debt or prospects or the Perils of Pauline race to complete financing.

It was, simply, a look at the features of the Mandarin Hotel that will be part of the $8 billion-plus complex.

That is the kind of story we will soon see frequently as attention turns to titillating tourists with the wonders they can experience in American history’s most expensive resort.

And titillate it must, because CityCenter has got to be a very big draw to succeed.

CEO Jim Murren recently told the Oppenheimer investor conference that he expects visitation to Las Vegas to grow by 10 percent next year, at least partly because of CityCenter.

That means 4 million more visitations, a really big number.

Then there’s the cost. Just to get a 10 percent return on CityCenter requires generating more than $800 million in EBITDA, or nearly twice what Bellagio did in its peak year. And it needs to do better than that to be an unqualified financial success. And do it without significant cannibalization of sister properties that now appeal to the high-end: Bellagio, MGM Grand, Mirage and Mandalay Bay.

As everyone knows, past Las Vegas building booms created must-see demand that grew the market.

But that model tired in this recession. Encore has yet to benefit Wynn Las Vegas. Indeed, a recent JP Morgan room rate survey showed rates quoted to free-and-independent travelers actually higher for Wynn than the supposedly more upscale Encore.

Ditto Palazzo and the Venetian.

So it will be interesting to see the public reaction to CityCenter.

If the effect is mostly to bring new capacity to a static market, the ramifications will be felt by MGM, and along the entire Las Vegas Strip.

And the following openings of Fontainebleau and Cosmopolitan will be greeted more with dread than anticipation.

But if CityCenter can pull some percentage of 4 million additional visitors, MGM will have pulled off what now looks like the industry’s biggest gamble ever.

Meanwhile, another approach to development may be taking place in Las Vegas.

According to the Las Vegas Sun, Harrah’s may have an alternative method of redeveloping its properties in an urban way, and at a cost far less than $8 billion.

Whereas MGM is building grandiose towers, Harrah’s method might be called in-fill.

As described in the Sun, Harrah’s will fill the alley between Flamingo and O’Sheas with restaurants and clubs. A giant Ferris wheel like London’s Eye might anchor the eastern end.

The goal, obviously, is to attract customers without having to demolish and rebuild.

The idea has appeal given the thousands of Harrah’s-owned hotel rooms within walking distance.   

And with the age of the multi-billion resort about to end, or at least go dormant for a very long time, the Harrah’s approach may become Las Vegas’ new development model.

We’ll see.

By Frank Fantini

Frank Fantini is the editor and publisher of Fantini’s Gaming Report. A free 30-day trial subscription is available by calling toll free: 1-866-683-4357 or online at www.gaminginvestments.com.

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