New rooms provide reasons for optimism

Leila Navidi / FILE

Teresa Ninman, center, of Las Vegas greets her friend LaNor Maltby, who flew in from Milwaukee, in November at McCarran International Airport. Capacity at the airport fell about 15 percent in 2008, but some airlines are adding flights — and other things may be looking up for the local economy.

By Richard N. Velotta (contact)

Monday, Jan. 5, 2009 | 2 a.m.

Although pessimists don’t expect Las Vegas’ Strip economy to fare better in 2009 than it did in 2008, there are rays of hope that Vegas’ tourism industry will improve this year.

The reason: Las Vegas thrives when resorts open. Just look back to when Luxor and Treasure Island opened in 1993 and when Bellagio, Mandalay Bay, the Venetian and Paris Las Vegas opened in 1998-99.

The number of rooms that opened during those periods will be eclipsed in 2009 by the next wave of resort openings, highlighted by MGM Mirage’s CityCenter at year’s end. The $9.2 billion project will add more than 6,000 hotel rooms and residential units.

But there are other projects due to open that will make 2009’s room boom the biggest in the city’s history.

The parade starts in March with Anthony Marnell III’s M Resort at St. Rose Parkway and Las Vegas Boulevard South. The $1 billion project will add 390 rooms.

A new tower at Caesars Palace is expected to open in the middle of the year. The $1.3 billion project will add 665 rooms and raise Caesars’ capacity to about 4,000 rooms, bumping it into the top five largest properties in Southern Nevada.

In August, Planet Hollywood is due to open its Planet Hollywood Towers by Westgate, a $1.2 billion project that will put an additional 1,228 time-share units on the Strip.

The $760 million Hard Rock Hotel expansion in September will beef up that property by 875 rooms, and downtown’s Golden Nugget should complete its $150 million, 500-room addition by the end of the year.

Representatives of Fontainebleau, the nearly 4,000-unit, $2.9 billion project being built on the Strip, say construction is on schedule for a late 2009 opening.

Add in a number of smaller suite hotels being built across the valley and Southern Nevada — the Cabana, Staybridge, TownePlace, Holiday Inn, Comfort Inn, Hampton Inn, three Springhill properties and the boutique Indigo — will have nearly 14,000 hotel rooms with investment totaling more than $16.5 billion. That’s quite a leap from the 8,600 rooms that came online in 2008 worth an estimated $6.6 billion.

The question: Will tourists come?

That’s what has occurred traditionally when new resorts open their doors. But 2008’s economy was far from traditional.

Lower gasoline prices toward the end of last year certainly provided some optimism that the drive-in market could get stronger. But forces are at work to increase the cost of oil. How successful those efforts are should determine how strong the drive-in market will be and whether Californians are willing to see the new resorts or be content to stay close to home at tribal casinos.

The fly-in market is another story.

Capacity at McCarran International Airport was down about 15 percent in 2008, which makes the decline in passenger volume of 7 percent a little easier to comprehend.

Will capacity come back at McCarran? Most aviation experts are skeptical, noting that the airline industry is having as difficult a time as ever because consumers aren’t flying as much.

Some stories that should have an effect on aviation in 2009 involve McCarran’s big carriers. Will US Airways, which cut its Las Vegas capacity by about half in 2008, come back? Most experts are saying no.

How about Southwest Airlines? It made some minor capacity cuts at McCarran. Going forward, there could be some optimism because Southwest will enter a new major market, Minneapolis-St. Paul, in March and New York’s LaGuardia International Airport later in the year. At the end of 2008, Southwest Chief Executive Gary Kelly said there are “decent odds” Southwest would add another major airport destination in 2009. How that would play out for Las Vegas is an unknown.

But Southwest also should make some headway in 2009 with its announced code-share agreements with Canada’s WestJet and Mexico’s Volaris, moves that could boost international traffic to the local airport.

WestJet, in fact, has been one of McCarran’s bright spots in 2008 with 57 flights a week between Las Vegas and eight Canadian destinations added in the past 12 months.

Another airline that has Las Vegas’ best interests in mind is locally based Allegiant Air, which has seen passenger volume increase despite fewer flights into the local market. The story to watch in 2009 is whether the airline’s growth will be heavier in some of the other resort communities the airline has chosen to serve in addition to Las Vegas.

The Hawaiian market has always been strong for Las Vegas and Honolulu-based Hawaiian Airlines will capitalize on that once again next month when it introduces a new four-times-a-week nonstop round trip between Honolulu and McCarran.

A version of this story appears in In Business Las Vegas, a sister publication of the Las Vegas Sun.