Las Vegas Strip Hotel Closures Set to Boost Earnings in 2024
The director of equity research at Global Commercial Real Estate Services (CBRE), John DeCree, has predicted that the closure of The Mirage and Tropicana hotels on the Las Vegas Strip will lead to higher earnings for mid-tier hotels in the area due to the reduction in supply pushing up prices.
Closures of titan hotels on the Las Vegas Strip to drive up prices.
LISTEN TO THIS ARTICLE:Later this month, The Mirage is due to close to undergo a major renovation project and become the Hard Rock International, which will take until spring 2027 to complete. The Tropicana’s closure in April reduced the number of rooms available by 1,467. The two closures will result in a reduction of 4,511 beds on the Las Vegas Strip, which is 4.9% of the total.
Good News for Vegas Strip Hotels
The research conducted by DeCree found that the closures are good news for the other hotels on the Strip. Last year, The Mirage had roughly one million occupied room nights and close to $596 million in revenue. This translates into a large demand that will need to be met by the other hotels in the area, providing them with an earning opportunity. According to DeCree, the financial impact of the closures may exceed 2023 forecasts due to the lower supply driving up average daily rates.
Despite economic uncertainty and inflationary pressures affecting investor sentiment, The Las Vegas Strip has shown resilience. Since 2021, over 7,000 new rooms have been added, including properties such as Fontainebleau Las Vegas and Resorts World Las Vegas. Although occupancy rates have not fully returned to pre-pandemic levels, the market has successfully increased average daily rates. In the past three months, occupancy has averaged 88.3%, supported by a packed event calendar and a recovery in convention and international travel.
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No Impact on Consumer Demand
DeCree thinks that consumer demand will remain steady despite the significant reduction in available rooms on the Strip. MGM Resorts and Caesars Entertainment can accommodate much of this demand at their other mid-tier properties. However, there is a limit to how many additional room nights these operators can provide, especially during peak events. This situation presents an opportunity for properties like The Strat, owned by Golden Entertainment, to attract more high-spending customers.
DeCree’s analysis estimates that redistributing one million room nights previously occupied at The Mirage could significantly help Strip operators increase occupancy and drive up average daily rates. Since 2019, the number of rooms on the Strip has increased by 8.4%, now totaling 92,093 rooms. As the market adjusts to this reduced supply, DeCree anticipates a possible boost in investor confidence in the latter part of 2024. He highlights that, despite many analysts predicting lower earnings due to broader economic issues, the substantial decrease in room supply could offset this trend, potentially resulting in higher earnings for Strip operators.
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