Editor's Letter
The Next Wave is a Tsunami
By Adam Fine
By the 2012 election, Vegas could see over $30 billion in new casino projects
With January's opening of the Palazzo in Las Vegas, industry watchers insist we're embarking on the start of a "third wave" of gaming industry growth, though that phrase may be a bit one-dimensional. Not to mention that the phrase itself has been used before: back in the late 90s, it was the opening of Bellagio (October 15, 1998), Mandalay Bay (March 2, 1999), Venetian (May 3, 1999), and Paris (September 1, 1999) that marked the "third wave."
If we must refer to the growth of Las Vegas as a series of waves, then we're clearly entering the fourth wave, depending how you define the chronology. Interestingly, as we begin this cycle of growth in Vegas, it appears we're running in tandem with Atlantic City, which is experiencing the most significant phase of its own development since gambling was legalized there in 1978.
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The so-called first wave was marked by the openings of The Mirage, in November, 1989, and Excalibur, seven months later. Of course, we didn’t call it the first wave until the second one came along. This wave was defined by the rapid-fire openings of Luxor and Treasure Island, both in the second half of October, 1993, and MGM Grand two months later.
That leaves a hole in the waves where the Stratosphere, Monte Carlo and New York-New York opened, from April, 1996 to January, 1997. We can call this the second-and-a-half wave.
Likewise, we have a post-third-wave bump with the openings of Aladdin in August, 2000 (though Aladdin would close three years later and then reopen in November, 2007, as the refreshed Planet Hollywood), and the emergence of trendy, boutique casinos such as The Palms (November, 2001) and Green Valley Ranch (December, 2001).
And shouldn't we also include major renovations, costing hundreds of millions of dollars and transforming entire properties? In that case, the conversion of the Holiday to Harrah's Las Vegas in 1997 would be included, as well as the two waves (there's that word again) of renovation required to make Luxor competitive. Caesars Palace will have seen investment of close to $2 billion by the time its current expansion is complete, and the Rio has transformed itself into a major resort through a decade-long plan of well-conceived expansions.
Nor have we included the explosion of casinos in the local Vegas market, fueled mostly by Station Casinos and the now-combined Boyd Gaming and Coast Casinos, culminating with the opening of the billion-dollar Red Rock Resort in April, 2006.
If in fact we divide the 90s into three waves—the first heralded by The Mirage; the second by large, heavily themed resorts focusing on the middle market; and the third defined by the opulent exclusivity of Bellagio and Venetian—then it's clear that we entered the current, "fourth" wave with the opening of Wynn Las Vegas, in April, 2005.
Why the dry spell between the third and fourth waves? First, of course, was the drop in tourism following the terror attacks of 9/11. Second was the consolidation of gaming companies that evolved into the megacorporations of Harrah's and MGM Mirage. And third was the opening or maturation of several markets around the country, and particularly the opening of new global markets, such as Macao. And still there is Atlantic City, newly viable since the opening of Borgata.
But this wave will make the previous ones seem small in comparison.
Just look at the investment dollars: Wynn Las Vegas cost $2.7 billion, to be followed by the $2.2 billion Encore. Palazzo cost Sheldon Adelson $1.8 billion. But by 2012, we could be looking at $30 billion sunk into these Vegas sands: the $3 billion Cosmopolitan; $7.8 billion CityCenter; $4.8 billion Echelon; $2.8 billion Fontainbleu; $5 billion Plaza; and the still hazy Crown Las Vegas and MGM-Kerzner-Dubai World projects, each with $5 billion price tags. (By the way, that also means about 75,000 new jobs.)
In Atlantic City, the new casinos could invest upwards of $9 billion in the same period, from the $5 billion MGM Grand Atlantic City to the $2 billion Pinnacle project (at the site of the former Sands) and the $2 billion Revel project, adjacent to the Showboat. And while the smoking ban and slots in Pennsylvania may have taken some of the luster off of AC, plenty of options are still being discussed behind closed doors.
So whatever wave we're in, it's looking like a tsunami. Over the next four years, in this country alone, the gaming industry is set to spend as much as $50 billion, creating upwards of 100,000 new jobs. Those are staggering numbers for those of us involved in the gaming industry, whether as players, workers or investors. It's also deeply encouraging for the economies of places like Las Vegas and Atlantic City, the largest recipients of those investment dollars.
Frankly, we're just excited to be part of it. And if the Palazzo is an indicator of what's to come, those billions of dollars are buying a lot of luxury.
