It’s not 2010 anymore.
The Strip has awakened from its recession-induced coma, and signs of life are writ large in the $2 billion in construction projects along the resort corridor. From Caesars Entertainment’s Linq retail center next to the Flamingo to the pedestrian mall MGM Resorts International is building between the Monte Carlo and New York-New York, there’s suddenly work for local contractors. And that’s before you include countless hotel renovations under way, or the Resorts World Las Vegas megaresort planned for the former Stardust site.
“Certainly, that’s where the market is right now,” said Greg Korte, president of The Korte Co.’s Las Vegas division. “Out of all the construction sectors here, the Strip is definitely the bull market.”
But there’s an art to landing big contracts, especially if you’re a smaller, local operator. What’s more, today’s construction frenzy can teach any small company a few lessons on how — or even whether — to land those big fish.
Excitement about the resort corridor’s revival is palpable, said Steve Brooke, executive vice president of Jaynes Cos., and president of the local chapter of Associated General Contractors.
“The other construction markets have been so depressed,” said Brooke, whose company has finished improvements at the Tropicana and is wrapping up renovations at the Sands Expo and Convention Center. “Strip building is construction, and we need it. The Strip is the driver of our town, and the driver of much of our industry, if not most of our industry, these days. Our whole strategy is, if you’re going to survive in this town, you have to be in that market.”
But if you think every contractor is salivating over resort business, think again. Sure, there’s anticipation, but some people are feeling cautious.
“There’s a wait-and-see attitude, because there are a lot of grandiose plans,” Korte said. “Until things start really happening, people start pushing dirt and you see progress, everybody is kind of holding their breath, wanting to make sure it’s real.”
So it’s the question on the lips of plenty of local contractors: Should you throw your hat in the ring? Before you do, consider a few factors.
First, resort work is high-pressure and intense, Brooke said. There’s no room for missed deadlines, and finishing on time may require 24/7 staffing for a few months. It’s all too easy to burn out employees, so you need people who are up to the task.
Also, look out for even bigger problems. Korte’s previous company, Korte Bellew & Associates, closed its doors in 2002 after the Aladdin skipped out on payments for completion of its new performing arts theater. The experience was so bad that The Korte Co. eschews the Strip altogether, sticking instead with medical projects, churches and military work, such as an Army Reserve project in Sloan.
The worst part, Korte said, was being one of hundreds, and even thousands, of contractors. That kind of arrangement is typical of resort construction, and the sheer size of those projects makes it tough to go to the top person and talk face to face if problems arise.
“Off of the Strip, I do typically have a relationship with my clients, and there’s a trust factor that gives a level of comfort,” Korte said. “With big resorts, you get lost in the crowd, and when things go awry in big corporations, sometimes there’s no consideration on a human level. You’re just a number.”
To their advantage, though, resort projects tend to finish up fast. Delays, which eat away at profits as staffing costs stack up, are rare.
“You can get in and out of the job if you do it right,” Brooke said. “You can make your profits quickly — or you can make your losses quickly. But it’s over fast, one way or the other.”
Plus, it’s tough to beat the cache a Strip project lends to a portfolio, Korte acknowledged.
If you decide to go for that huge contract, keep in mind it’s as hard as it is in any industry to score the deal.
“The market has shrunk, and a lot of these big properties have their stable of contractors that they know and trust. It’s really hard to break into that. You just have to be in the right place at the right time, knock on a lot of doors, hopefully have an opportunity to prove yourself, and then build on those relationships,” Brooke said.
Also, don’t expect huge earnings. At 2.5 percent, profit margins along the Strip are half the 5 percent average before the recession, Brooke said.
Finally, don’t make those slumping incomes worse by pricing your work too low. That not only hurts your company, but keeps marketwide profits on their downward spiral of the past five years.
“Nobody wins in those scenarios,” Korte said.
■ Looking for cash flow? Marcus & Millichap has listed a 14,992-square-foot retail property at Tropicana Avenue and Decatur Boulevard for $6.25 million. The store has a corporation-guaranteed lease with Walgreens, little drugstore competition in the neighborhood and more than 80,000 cars going by every day, listing agents Tina Taylor and Ray Germain say. The anchor tenant in the shopping center is 24 Hour Fitness.
Contact reporter Jennifer Robison at firstname.lastname@example.org or 702-380-4512. Follow @J_Robison1 on Twitter.