Las Vegas Room Rates to Climb Following Mirage, Tropicana Exits

Posted on: July 2, 2024, 09:32h. 

Last updated on: July 2, 2024, 09:42h.

The nightly rate for a Las Vegas hotel room is expected to become costlier following the closures of Tropicana and The Mirage.

Las Vegas Mirage Tropicana room rates
The Mirage’s shutdown later this month for a multibillion-dollar renovation into Hard Rock should benefit the Las Vegas Strip’s other casinos in the meantime. That could provide buying opportunities for shareholders, a gaming analyst says. (Image: Tripadvisor)

Tropicana closed in April and with it, the Strip’s room inventory dwindled by 1,467 guestrooms. The Mirage is set to close on July 17 and take another 3,044 guestrooms offline for several years as Hard Rock International converts the integrated resort built by Steve Wynn in the late 1980s into a rock ‘n’ roll-themed destination highlighted by a guitar-shaped hotel.

John DeCree of CBRE Equity Research thinks the removal of the 4,511 rooms is a clear benefit for all Strip operators, but MGM Resorts and Caesars Entertainment will likely be the greatest benefactors. The gaming analyst also forecasts that with “more customers chasing fewer rooms,” rates will be driven up.

Rosy Outlook

The Tropicana’s nearly 1,500 hotel rooms have permanently left the market as the resort is being demolished to possibly make way for an MLB stadium. The Mirage’s room inventory and more will return, but not until sometime around the spring of 2027 once Hard Rock completes its property overhaul.

In the interim, fewer rooms are welcome news for the Strip’s casino resorts.

While Tropicana could be meaningful for some properties, the demand displaced by The Mirage closing is large enough to potentially move the needle for all operators on the Strip,” DeCree wrote.

The Mirage’s guestrooms generated nearly $600 million in revenue for MGM Resorts on more than one million occupied room nights last year.

DeCree says investor sentiment for Strip casino companies remains low regardless of relatively strong recent quarterly performances and record gaming revenue from the publicly traded players. Despite room inventory additions brought by the openings of Resorts World in 2021 and Fontainebleau last year, daily rates have continued to climb while occupancy levels haven’t yet returned to 2019 numbers.

“With help from a strong event calendar and the continued recovery of convention and international demand, we expect 2Q24 Strip earnings to be in line or slightly ahead of expectations, and with a tangible catalyst from material supply contraction on the Strip, we believe forward estimates could be overly conservative, which could help lift investor sentiment,” DeCree explained.

Buy, Buy, Buy

DeCree thinks the room contraction on the Las Vegas Strip could result in stronger earnings ahead for MGM, Caesars, Wynn Resorts, and Golden Entertainment, the latter of which owns and operates The Strat. DeCree has given “buy” ratings to each firm.

With MGM and Caesars’ mid-tier rooms booked months out because of a strong events and conventions calendar, DeCree thinks less-popular properties like The Strat and Sahara could capture some of the late bookings that might have gone to Tropicana or Mirage. The Meruelo Group privately owns Sahara.

“There are likely limitations on how many incremental room nights these two operators (MGM, Caesars) could capture, particularly during peak events and weekends. This could create an opportunity for under-occupied assets like The Strat to benefit from both higher occupancy and a higher-spending average customer,” DeCree concluded.

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