Recovery of Las Vegas locals gaming depends on a Strip development

LAS VEGAS -- The Las Vegas locals market is playing a game of “Waiting for Godot.”

But unlike Vladimir and Estragon from the Samuel Beckett play, Boyd Gaming Corporation and Station Casinos, Inc. aren’t waiting for some imaginary person.

Genting Malaysia Berhad will soon arrive in Las Vegas from Malaysia. The company will create thousands of construction jobs for Resorts World Las Vegas.

So they say.

A spokesman for the company said an announcement about the $4 billion hotel-casino complex could come in a few weeks. Genting, which bought the former Echelon site in March 2013, was found suitable by Nevada gaming regulators last May.

But the 87-acre parcel and its unfinished steel and concrete structures remain untouched.

Although Resorts World Las Vegas will aim for an international market, operators and analysts view the project as the fuel needed to ignite the locals gaming market.

More construction workers means more locals to fill Boyd and Station properties.

Unlike the Strip, the locals market has been slow to embrace the state’s economic recovery.

On a whole, the locals market gaming revenue through September is down less than 1 percent from 2013, according to the Nevada State Gaming Control Board.

Some areas have performed better than others.

North Las Vegas casinos, primarily driven by improvements at the Aliante Casino Hotel and Spa, are up 1.7 percent. The Boulder strip, which includes Henderson, is down 2.4 percent. The balance of Clark County has been relatively flat.

In September, the locals market rebounded from an August decline, posting a 6.8 percent gaming revenue gain.

Union Gaming Group analyst Robert Shore said the economic fundamentals — housing, wage growth, employment, and population — have been pointing in the right direction for locals casino operators.

“We continue to note an apparent lag between improving economic conditions and gaming growth,” Shore said.

Boyd Gaming CEO Keith Smith said locals customers have been comfortable spending money, but not in the amount produced before the economy tanked.

Like the Strip, the locals market is turning to nongaming amenities to increase business.

Station Casinos and Boyd Gaming — the locals market’s dominant players — are devoting millions to improve the offerings outside the casino floor.

Station Casinos is spending $55 million to reprogram restaurants and facilities at its two flagship properties, Red Rock Resort and Green Valley Ranch Resort.

Boyd Gaming is evaluating its restaurant options and remodeling hotel rooms at its Coast Casinos-branded properties. Boyd will overhaul 400 rooms at the Suncoast and recently opened a new eatery attached to the race and sports book. Hotel rooms at The Orleans will also be refurbished.

“This is a really a multiyear project,” Smith said. “The first phase is to re-position the existing amenities. This will be a thorough process. We’re going to determine what we need to be competitive in the market.”

Wells Fargo Securities gaming analyst Cameron McKnight said Boyd’s locals gaming business, which had a 1 percent revenue increase in the third quarter, is already benefiting from strong nongaming business at its off-Strip resorts.

“Going forward, management expects the improving local economy, upcoming renovations and new nongaming amenities to reinvigorate growth for these properties,” McKnight said.

The key for the locals market, however, is Genting.

The company expects to employ upward of 3,000 construction workers once work begins on Resorts World Las Vegas. At its May suitability hearing, Genting officials said the development would provide $1.5 billion in construction wages.

History has shown a correlation between construction jobs and locals casino profits.

In the heyday when the Strip was building megaresorts every other year and the housing market was flourishing, Las Vegas was home to more than 100,000 construction jobs.

That number has dwindled.

MGM Resorts International has two construction projects underway.

At the Rock in Rio festival site on the Strip’s north end, MGM Resorts has created 150 construction jobs. The figure could grow to 275 as work increases.

At the Strip’s south end, 450 construction workers are employed at the company’s Park and sports arena developments. Eventually, 1,450 construction jobs will be at the site.

Nice numbers, but not when compared with 10 years ago. Construction then was at a record high.

“The construction worker has been a traditionally strong customer,” Smith said.

He hasn’t spoken with Genting officials since Boyd Gaming sold them the Echelon site for $350 million. So he has zero insight on when Resorts World construction will commence.

Shore called Genting “a catalyst” for Boyd Gaming and other locals casino operators. They are an “indirect beneficiary” as construction labor and eventual permanent jobs at new and expanded Strip resorts become a draw for locals properties.

“We continue to be optimistic for a pickup in the locals market in the upcoming months driven by a confluence of factors including a continually improving Las Vegas Strip, improving economic conditions and reprogramming of assets,” Shore said.

Until then, Boyd Gaming and Station Casinos will explore other means to capture additional consumer spending beyond the casino floor. Analysts believe that enhancing nongaming attractions will help drive spending habits in other areas of the property, including gambling pits.

This path should improve business, while the locals market is “Waiting for Genting.”