Reservations put rebranding of The Hotel on hold

A planned transformation of The Hotel at Mandalay Bay into the Delano Las Vegas may be on hold for a good reason.

MGM Resorts International needs the rooms.

Increased convention and meeting business at the adjacent Mandalay Bay conference center is a sign the casino operator, which owns The Hotel and Mandalay Bay, has visitation requirements booked that would fill the 1,100 suites at The Hotel. Mandalay Bay has more than 3,300 hotel rooms and suites.

In a research note to investors, Sterne Agee gaming analyst David Bain said MGM Resorts might hold off on the rebranding, which was expected to begin at the end of the year. Bain met with Las Vegas resort management officials from MGM, Las Vegas Sands Corp. and Wynn Resorts Ltd. recently.

“We believe MGM may delay the room remodel at The Hotel,” Bain wrote. “A potential delay in taking rooms out of service at the end of this year demonstrates MGM’s high-visibility and confidence in calendar year 2014 group booking trends, in our view.”

In the two most recent MGM Resorts quarterly earnings conference calls with analysts and investors, Chairman Jim Murren has touted an expansive convention calendar of reservations heading into 2014. Mandalay Bay has one of the company’s largest convention facilities on the Strip, along with MGM Grand. Aria, CityCenter’s 4,004-room centerpiece hotel-casino, is also becoming a popular meeting destination.

Murren has said publicly that a healthy convention and meeting business was a key component in rebuilding the company’s Strip business in wake of the recession that gripped the tourism and gaming industries.

“The Strip is on a positive pace,” Murren said in August.

MGM Resorts has been reinvesting in its 10 Strip properties, remodeling rooms at several hotels and adding attractions, including spending $100 million to turn MGM Grand’s shuttered Studio 54 nightclub into the Hakkasan nightclub, restaurant and lounge.

The company’s most ambitious upgrade is the outdoor $100 million retail, dining and entertainment district being created on the Strip between New York-New York and Monte Carlo. The attraction includes the New York hamburger stand Shake Shack, a Hershey’s Chocolate World, and Double Barrel, a roadhouse-style bar and restaurant from SBE Entertainment, and other retail and dining offerings.

The plaza will lead into a central park that will serve as the gateway to a $350 million, 20,000-seat sports and entertainment arena MGM Resorts is planning with national arena developer AEG to be built behind the two resorts.

Upgrades are also expected at New York-New York and Monte Carlo, which has already seen its old Strip exterior torn away.

“I would say our goals are to reinvest in our assets that we own to drive higher cash flow,” Murren said in February.

The Delano brand is owned by Morgans Hotel Group. More than a year ago, MGM Resorts and Morgans announced plans to convert The Hotel into the Delano Las Vegas through a room upgrade and a renovation of the Strip property’s public space. MGM and Morgans also planned to change out bars, lounges, a restaurant and the spa into Delano-branded amenities.

Part of the renovation, which involved nightclub operator the Light Group, has already taken place in portions of the adjoining Mandalay Bay. The Light Group closed the restaurants China Grill and Red White and Blue and replaced them with Citizen Kitchen &Bar and Kumi Japanese Restaurant and Bar Akira. Also, the Light Group revamped the Red Square restaurant.

The shuttered Rum Jungle nightclub was reopened this year as Light Nightclub, a 38,000-square-foot venue equipped with state-of-the-art production, lighting, sound and special effects. The company also opened the DayLight Beach Club in Mandalay Bay’s pool area.

Morgans has been itching to put the Delano brand in Las Vegas. The concept was part of the failed Echelon development, which halted construction in 2008. The site will house the planned Resorts World Las Vegas.

“We’ve had our eye on Las Vegas for many years and have finally found the right location and opportunity,” Morgans Hotel Group CEO Michael Gross said in a statement in August 2012.

Bain, in his report to investors, said the Wynn Las Vegas and Encore were also experiencing similar “bullish” trends in 2014 convention bookings.

One analyst, writing for Seeking Alpha.com, called Mandalay Bay the “third most important property” in MGM Resorts’ Strip portfolio. The transformation of The Hotel into the Delano Las Vegas would help improve the overall property’s results.