Three different events coming out of Las Vegas suggest that the dices are not rolling for area hotels.
First of all, the Cosmopolitan of Las Vegas reported poor results last week for its first quarter activity. The Deutsche Bank-owned resort lost US$56.8 million in the first quarter, despite excellent occupancy rate (85.7%) and ADR (US$241). The US$3.9 billion property generated just US$105 million in revenue during the quarter.The common denominator in all three cases is, as Mr. Ettedgui stated, indeed overcapacity. It’s slowing Mandarin Oriental’s return on investment and completely closed down the Sahara. At the same time, the Cosmopolitan is showing a 85.7% occupancy rate.Secondly, Las Vegas strip’s oldest operating casino, Sahara Hotel & Casino (owned by SBE Entertainment Group) shut its doors last Monday after 59 years of operation. They blame their closing on their location. They’re on the northern part of the strip while all the architecturally eccentric hotels that attract tourists have all clustered themselves in the southern portion of the strip through the years. Furthermore, there are many construction projects surrounding the hotel that are at a standstill.Lastly, The Mandarin Oriental Hotel Group announced at the Travel and Tourism Council Summit that their return on investment in Vegas will not be quick, but they expect it to come at a slower pace than in residential real estate. Mandarin CEO, Edouard Ettedgui, attributed this slowdown on overcapacity.The common denominator in all three cases is, as Mr. Ettedgui stated, indeed overcapacity. It’s slowing Mandarin Oriental’s return on investment and completely closed down the Sahara. At the same time, the Cosmopolitan is showing a 85.7% occupancy rate.
