Wynn may add up to 1,400 rooms at Bellagio

Gary Thompson and David Strow

Wednesday, Jan. 12, 2000 | 11:01 a.m.

High customer demand is prompting Mirage Resorts Inc. Chairman Steve Wynn to consider a major expansion of the Las Vegas Strip's $1.6 billion Bellagio hotel-casino, which opened just 15 months ago to rave reviews.

Under consideration is a plan for a hotel tower with up to 1,400 rooms and expansion of the resort's convention center on land just south of the existing structure, west of the Jockey Club and east of the monorail running between Bellagio and the Monte Carlo.

The additions, which may include a restaurant overlooking the resort's sprawling pool area, would connect with the south side of Bellagio's colorful conservatory, an industry source told the Las Vegas Sun.

If the plan is approved, Wynn may announce it later this month when Mirage issues its quarterly earnings report.

Adding 1,400 standard rooms to Bellagio's current inventory of 3,025 rooms and suites would boost the resort into second place on the list of the largest hotels in Las Vegas, trailing the 5,034 rooms, suites and villas at MGM Grand and edging just a single room ahead of the Luxor.

The expansion would propel Bellagio from 11th to third -- again just ahead of Luxor -- among the world's largest hotels. MGM Grand ranks first and the Ambassador City in Thailand second.

Jason Ader, gaming analyst with Bear Stearns & Co., said he was told by Mirage officials that the expansion, if approved, is at least three to five years away.

Mirage struggled amidst an industry-wide boom among gaming stocks in 1999, falling from a 52-week high of $25 in May to as low as $11.50 in November, as returns lagged behind its competitors. The stock has been recovering in recent weeks, nearing $16. A contributing factor was the high pricetags of the Bellagio and Beau Rivage in Biloxi, Miss.

Ader isn't certain the Bellagio's expansion plans would ease investor concerns much -- but said the project is long-term enough that it wouldn't cause new concerns.

"Wall Street is looking forward to the fact that there's no new supply coming into the Vegas market," Ader said. "While Bellagio could fill that overflow, new supply coming into the Vegas market in the short-term is not going to be well-received.

"But 2003, 2005 is likely when that plan may be executed. It's far enough out there, so it's not an immediate concern."

Stuart Linde, gaming analyst with Lehman Bros., noted that the tide was turning for Mirage -- and that this turn could fuel the company's plans to move forward at Bellagio. Linde upped his rating on Mirage to "buy" in December.

"I think Mirage wouldn't announce something like that until they saw the fundamentals turning," Linde said. "If they felt the return was there it would be something they'd explore."

Linde said Bellagio has been performing well, and the performance of the Beau Rivage is improving. He's expecting Mirage to announce much-improved results on Jan. 24, when it's scheduled to release fourth-quarter and year-end earnings.

One element is certain -- demand on the Strip is rising enough to absorb new capacity, said Dave Ehlers, chairman of Las Vegas Investment Advisors. Win on the Strip has been steadily rising, and airlines have been steadily adding flights at McCarran International Airport.

"Let's face it, we've got more capacity to get visitors into Las Vegas," Ehlers said. "Mirage will get its share of customers.

"Wynn's vision is great. Rumors of Mr. Wynn's demise were premature. He's going to make that (the Bellagio) work. One of the ways to make it work is to add convention facilities.

"This is constructive for Las Vegas, and it's constructive for Mirage shareholders."