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Will Strip resort closures change the hotel market?

Updated June 3, 2024 - 12:02 pm

It’s been a year of change in the Las Vegas hotel industry. Two hotels opened at the end of 2023, adding thousands of rooms to the largest hospitality market in the country.

Recent developments on two sides of the Strip, however, will quickly take those gains away from the market’s total room inventory. The Tropicana, a Rat Pack-era property, closed April 2. And just a few weeks ago, hotel operators revealed they will close The Mirage this summer for a three-year renovation that will culminate in a newly designed hotel.

Simple laws of supply and demand might make observers think that losing two resorts within three months would have a significant effect on the Strip market. But industry watchers say that Las Vegas is so saturated with hotel rooms, the loss of about 4,500 rooms in a market of more than 153,000 won’t rock the boat.

Post-closure plans

Operators Hard Rock International, which finished its acquisition of the iconic Mirage from MGM Resorts International in 2022, announced in May its plans for closing the 3,044-room Steve Wynn property during a massive renovation project. The property is expected to reopen as the Hard Rock Las Vegas in spring 2027.

Hard Rock plans to transform the property, open since 1989, by adding a 660-foot tall hotel tower resembling back-to-back, all-glass guitars along Las Vegas Boulevard. To do so, they’ll demolish The Mirage’s iconic free roadside attraction, nightly volcano shows that can be seen from the street. Hard Rock also plans to add more casino space, update the interior and renovate the theater where the Cirque du Soleil-Beatles production “Love” and iconic magic act Siegfried &Roy performed.

The property is expected to add about 600 rooms to the property’s total when the new guitar hotel opens.

Meanwhile further south on the Strip, the Tropicana closure took 1,470 rooms out of the Vegas market. Rhode Island-based Bally’s, the property’s operator, closed the 66-year-old resort to make way for a $1.5 billion, 33,000-seat Major League Baseball stadium.

Bally’s has said the Oakland Athletics will build a stadium on nine of the site’s 36 acres and that the remainder will be developed for a casino-resort. But those plans are not as firm as Hard Rock’s — Bally’s executives have said they would be open to a partnership that would help bring the resort to fruition sooner, but that there is no urgency in developing a project.

Industry watchers say the two closures could help competitors on the Strip — at least for the next few years. Amanda Belarmino, assistant professor at the William F. Harrah College of Hospitality at UNLV, said the lowered total market supply could drive up average daily room rates and hotel occupancy at other hotels.

“As the Tropicana was a lower-priced property, this will probably drive the value-seeking customer to similar hotels, and some off-Strip properties may benefit from this as well,” Belarmino said in an email. “As the Mirage closure is temporary, there may be a boost for the short term but that probably will change once it reopens as the Hard Rock, especially since the plan is to increase the number of rooms.”

‘Even swap’

Others point out that the changing room inventory is almost a normalization of the market. Zach Demuth, global head of hotels research for JLL Hotels and Hospitality Group, said the two closures equate to about 3 percent of Southern Nevada’s total hotel room supply.

“In some ways, it’s sort of an ‘even swap.’ I use quotes because we’re talking about two very iconic hotels,” compared to new properties like the Fontainebleau and small nongaming hotel openings that occurred in 2023, Demuth said.

In the past, hotel openings and closures had a more noticeable effect on the market in the form of higher occupancies or changing room prices, he said. But the Strip market is now so large and typically runs an occupancy rate of about 80 percent, meaning there are often plenty of rooms available.

And, Demuth noted, average daily room rates continue to run much higher than pre-pandemic levels despite additions like Circa’s 512 hotel rooms that opened in 2020; Resorts World’s 3,506 in 2021; and Fontainebleau and Durango’s 2023 openings that added 3,644 and 211 rooms, respectively. Room rates were 44.2 percent higher in 2023 than 2019, according to data from the Las Vegas Convention and Visitors Authority.

The closures could be an opportunity for large hotel brands to re-evaluate their presence in Las Vegas. Marriott International recently entered the market through a loyalty program partnership with MGM Resorts International that added seven MGM properties to Marriott benefits. Demuth said others could see the changes on the Strip as a chance to enter new brand deals.

“Will this change any of the brand strategy?” he asked. “Will that create an opportunity for Hilton or Hyatt or IHG now that one of the brand giants has entered the market?”

McKenna Ross is a corps member with Report for America, a national service program that places journalists into local newsrooms. Contact her at mross@reviewjournal.com. Follow @mckenna_ross_ on X.

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