After four turbulent years for Strip resorts, could 2012 be the year that a modest recovery finally takes hold?
Analysts with CB Richard Ellis’ Global Gaming Group say the answer is yes.
“We are positive about the Strip for 2012,” said Jacob Oberman, director of gaming research and analysis with CB Richard Ellis. “We are also in a good spot in 2011, with Strip revenues up 3.9 percent.”
The jump in 2011 revenues was at the upper end of the analyst’s forecast. Oberman had predicted anywhere from a 1 percent decline to 4 percent growth for this year.
In a report released Tuesday, the analysts said they expect overall Strip resort revenues to increase from 1.9 percent to 5.7 percent in 2012, assuming a negligible 0.6 percent increase in the supply of hotel rooms.
“With the Octavius Tower opening at Caesars Palace and The Cosmopolitan having more available room nights on average, growth will be partially offset by the closure of the Sahara in May,” the report said.
CONVENTIONS TO DRIVE GROWTH
The international commercial real estate firm’s Las Vegas-based Global Gaming Group’s “2012 Las Vegas Strip Forecast & Investment Guide” predicts demand for rooms associated with conventions and meetings will be a catalyst for growth in 2012. Room nights are expected to increase 2 percent to 5 percent.
Convention and meeting pricing is also expected to increase 6 percent to 10 percent.
“Hotel rates should grow faster than gaming revenue because of the strong demand for conventions and meetings,” the report said. “This is attributed to the fact that conventioneers have a lower gaming propensity than leisure visitors.”
Oberman cautioned that with airline profitability “eroding” in 2011, airlines have cut fights to Las Vegas, and most airlines have said they don’t see system-wide additions in 2012. But the expansion of McCarran International Airport to be completed in June and WestJet’s expected growth could offset some of the losses.
Oberman said that with 70 percent of the conventions already booked for next year, higher airfares and fewer flights are not “likely to have an impact on convention and meeting” business.
He said he would be even more optimistic if ConExpo and its 120,000 visitors were in Las Vegas. He said the construction industry trade show won’t be back until 2014.
Even with the loss of ConExpo, Oberman said the convention and meetings market was “very strong.”
LOOKING FOR LUXURY
Meanwhile, revenue growth for luxury properties — Wynn Las Vegas, Bellagio and The Cosmopolitan of Las Vegas — is expected to be 10.8 percent, compared with 2.3 percent for non-luxury brands. Recent rapid increases in luxury rates will moderate because baccarat, a segment controlled almost entirely by luxury properties, will not experience growth rates higher than gaming revenue as a whole.
In fact, report co-author Brent Pirosch said baccarat could actually under-perform mass market gaming revenue next year.
The analysts expect gaming revenue on the Strip to increase 0.3 percent to
4.8 percent next year. Baccarat revenue is projected to see anywhere from a
5 percent decline to 5 percent growth in 2012.
Pirosch said baccarat numbers are hurt by the weakening of “wealth metrics” for China, demonstrated by the country’s anemic stock market, which has fallen 17 percent this year, and slowing luxury residential market. Meanwhile, competition from Singapore is rising.
“For these reasons, baccarat growth on the Strip could stall in 2012,” Pirosch told a group of bankers, real estate executives and casino operators during a luncheon Tuesday at Panevino restaurant in Las Vegas.
The forecast was the third released by CB Richard Ellis’ Global Gaming Group.
The report didn’t address the locals market. In terms of employment growth, Pirosch said the industry had added 6,100 jobs through the end of the third quarter, which equals a 4 percent growth rate.
He said Strip resorts were responsible for 20 percent of the region’s total employment.
Pirosch expected 1 percent to 3 percent employment growth next year. He described the employment growth as a positive trend for the region’s recovery.
Oberman agreed, saying, the positive trend in Strip employment should benefit the entire region as Strip employees start spending more freely.
Contact reporter Chris Sieroty at email@example.com or 702-477-3893.