Analysts: Conventional Wisdom Likely for Stardust

Boyd Gaming Corp. remains mum about its plans for the Stardust and the land on the Strip on which it sits.

But gaming industry experts agree that a convention center is likely to be part of whatever Boyd decides to do with the 63-acre site.

Boyd Gaming President Keith Smith, who dropped the veil a bit in April when Wynn Las Vegas was opening, said three concepts are under consideration for the site, valued by experts at $1.3 billion in land alone.

He said Boyd is considering adding a fourth large convention center to Las Vegas with an adjoining hotel-casino; a mixed-use development with a hotel-casino anchor; or two adjoining hotel-casinos.

"It's still early, and it could be any of a combination of those things," he said. "We will take the better part of 2005 to make that decision. What we have to figure out is what will Las Vegas, the destination, be all about in five or six years."

University of Nevada, Las Vegas history professor Hal Rothman said timing is key and delay works in Boyd's favor -- for now.

"Waiting through 2005 is very smart. The market is in chaos right now, with land going for exorbitant rates, all kinds of knuckleheads and a few smart folks deeply invested, and a great deal of smoke, but considerably less fire," he said. "There's absolutely no premium on rushing in at this moment."

Gaming industry experts said the ultimate development will probably include a hefty component of all three elements.

"Except for cashing out, they'll likely do a combination of all three," Brian Gordon, a principal with Applied Analysis, a Las Vegas-based financial consulting company, said. "The size is so great, they have to allocate land across different uses to drive shareholder value. Density is the key to the future development at the Stardust site because increased density is historically associated with increased profitability."

The convention center is nearly a sure bet, although how to market the project remains much more up in the air, experts agreed.

Gordon said that if market research shows it could compete, a fourth convention center is the most compelling aspect of the development.

Rothman said a convention center could be a sure thing, although he said it is "not necessarily the most exciting thing to do with the best developable land on the Strip."

"The only scenarios in which convention business does not greatly grow in the near future are those in which we experience major national and maybe even international economic problems," he said.

In addition, Gordon said, the hotel will have to at least match the bar set by Mandalay Bay and The Venetian, offering 4,000 rooms at a minimum. With the Palazzo expansion, The Venetian will be the largest resort in the world with more than 7,500 rooms and could possibly set the bar even higher.

"The argument for two major hotel-casinos suggests to me a larger partnership model, something between Boyd group and someone who brings something to the table that they do not have," he said.

And adding a mixed condominium component would increase density and profitability, while spreading the risk, Gordon said.

"The more traditional convention and casino components will be the drivers behind it, depending on how the first wave of new condos comes on line. Condos also would have a lot of potential if the entire parcel is master planned," he said.

Jim Medick, chief executive officer of the MRC Group, Nevada's largest market research firm, said if he were to design a project, it would include a casino with a convention facility that would target a specific market.

"Not only will we capture a segment of the faster-growing market, it will help stabilize the weekday room rates. And the more hotel rooms the more delegates we can keep on property," he said.

MRC Group projects local visitor volume to increase at 1.8 percent per year to reach a little over 42 million in 2009, Medick said.

At the same time, MRC Group projects conventioneers to continue increasing almost twice as fast as tourists at 3.5 percent per year, topping 7 million in 2009 with an economic impact of $8.5 billion.

"The high end of the market is well covered and the boutique hotels are quickly taking up the 'hip' crowd, and while families and seniors are nice, their spending is not where the dollars lie," he said. "That is our target, those who like to play but don't want to pay Wynn, Bellagio or Venetian rates and want something newer and hipper than Treasure Island and Mirage.

"To make sure I capture this target I would deliver on the activities they most like to do in Vegas, and that is: have a fun slot floor; a world-class buffet, a shopping mall; several fine restaurants; a hip nightclub; and a unique non-Cirque production show."

Eric Hausler, gaming analyst for Susquehanna Financial Group, said Boyd is in a unique position with 63 acres, which allows it to pursue a master-planned development in multiple phases over several years, while also cashing in on some of its land holdings through condominium development to help fund the project.

"Obviously, mixed-use seems to be a critical component of future developments, recognizing that Las Vegas is turning into not only an entertainment environment and an urban environment with high-rise residential developments," he said. "The concept that a lot of people would live in high rises in Las Vegas is relatively new, but has been going on in other cities like New York for decades. This is going to require some adaptation of the Strip into smaller neighborhoods with services for residents."

Rothman, however, disagreed with the argument for mixed-use.

"I'd lean away from mixed use right now. I'd want to see what happens with many of these other operations (such as MGM Mirage's Project CityCenter)," he said.

However, Rothman said for Las Vegas as a destination, none of the options Boyd's Smith suggested are genuinely transformative.

"Transforming Las Vegas as a destination takes a lot more than a couple of hotels. In fact, it's hard to envision any one property in the future transforming Las Vegas the way that the Mirage did or maybe even the Bellagio did," Rothman said.