Debt-rating agency says Cosmopolitan will drive demand on Strip

By Steve Green

Wednesday, Feb. 2, 2011 | 10:15 a.m.

The new Cosmopolitan casino-resort on the Las Vegas Strip may be hurting competitors, but overall it's good for the city.

That's according to Fitch Ratings, which on Tuesday issued its 2011 forecast for the gaming industry. The industry outlook overall is stable, with the largest U.S. market, the Las Vegas Strip, expected to see its recovery gain traction this year but be more pronounced in 2012.

"Fitch’s base case incorporates 2011 visitation increases of 4 percent to 5 percent, driven by improving economic trends; increased convention attendance; the recent opening of the Cosmopolitan; and the continued ramp-up of CityCenter," the debt-rating agency said of the Strip in its report.

"Fitch expects Las Vegas Strip gaming revenue growth in the mid-single digit range in 2011, ramping up to the high single-digit range in 2012," the report said.

"Fitch believes that the Cosmopolitan, with 2,000 rooms opened in December 2010 and another roughly 1,000 more due to open in mid-2011, will drive incremental demand and visitation on the Strip. The Cosmopolitan is a unique resort for the market and will be able to tap Marriott International Inc.’s customer database through an agreement to join Marriott’s Autograph Collection, which was signed in August 2010," the report said.

While that database is skewed toward non-gamblers, it should bring new visitors to the Strip who otherwise would not visit, Fitch said.

"Despite the increased demand, Fitch expects a moderate level of market cannibalization from the new property. Much like with CityCenter’s opening having a `push-down' effect on lower-tier properties, Fitch thinks that the Cosmopolitan opening will make it more difficult for properties such as Mandalay Bay and Mirage to raise rates in 2011," Tuesday's report said.