Recently ranked one of America’s most affordable cities, the No. 1 U.S. destination for domestic business and leisure travel, and the second-most popular international destination for global business and leisure travelers, one could say Las Vegas is successfully rebounding from a difficult 2009.
But although 2010 is looking brighter, the Las Vegas hospitality and tourism industry is still reeling. Partly at fault: a fledgling economy, the political and media firestorm that scared off would-be conventioneers for fear of seeming lavish, and President Obama’s remarks about TARP-recipients and other groups spending money in the city.
Once the destination of choice for incentive and corporate groups with something to celebrate, Vegas has had a difficult time shrugging off the twin labels of frivolity and excess. The resulting loss of revenue not only has contributed to the city’s increasingly high unemployment rate, it’s also added to the instability of many hotels in the area. To compound the matter, thousands of new hotel rooms have begun to flood the market, creating a surplus of un-booked rooms.
Now, hotels that thrived in happier, more prosperous, times have begun to shake and altogether crumble under the pressure. Many properties have removed “resort” from their names in an effort to seem more budget-friendly; some have reduced their rates so low that they’ve cut into profit margins, forcing layoffs and watered-down service offerings; while others have fallen into deep debt, making bankruptcy or foreclosure inevitable.
For instance, construction on the 3,889-room Fountainbleau Las Vegas was halted after the hotel’s owners went into bankruptcy in 2009 (although, it has since been purchased by Vegas billionaire Carl Ichan). The famed Tropicana, which was expected to complete phase two of a multi-million dollar renovation in August, is said to have recently filed for bankruptcy. The MGM Mirage, which has seen sharp drops in revenue and stock prices over the last few quarters, announced that it might not be able to stay in compliance with a loan, which could lead to default. But perhaps the biggest sign of the times is the foreclosure of the Ritz-Carlton Lake Las Vegas, which will close its doors on May 2.
The AAA Five-Diamond hotel, which opened in February 2003, was purchased by Village Hospitality LLC (a division of Deutsche Bank) in 2009 to stop foreclosure on a $103 million mortgage. However, according to Ritz-Carlton spokesperson Vivian Deuschl, Deutsche Bank has decided to no longer fund the 348-room property. Deuschl stated that the closing is attributable to the bad economy and waning demand for luxury meeting sites in the Las Vegas area; she added, it is the first time a Ritz-Carlton property has ever had to close due to lack of funding. Others speculate its location, 17 miles from the Strip, made it a difficult sell in a soft market.
But there is a silver lining for Las Vegas: Not all demand for luxury has dried up. Deutsche Bank is, ironically,funding The Cosmopolitan, a 2,995-room luxury hotel, condo and gaming property expected to open in December. The Cosmopolitan is scheduled to open in phases with two 50-story towers, 150,000 square feet of banquet and convention space, a 110,000-sq. ft. casino, a 50,000-sq. ft. spa, three pools and several restaurants and retail outlets.