After visiting Las Vegas last week for a look at Steve Wynn’s Encore, I can believe the numbers in the story, Las Vegas Craps Out, written by Ed Watkins.

I wouldn’t describe Vegas as sparse, but it certainly wasn’t buzzing and bustling with activity like normal, from the moment I stepped off the plane all the way to the easiest jaunt through security I’ve ever had on a return trip. It took less than 10 minutes to grab my ticket, check a bag, breeze through security and take the shuttle train to my gate. That’s got to be a record, by at least 30 minutes, for me in Vegas (And I did not spend the extra time at the slot machines).

While on the strip, the pulse of the city seemed much slower than usual. Dealers and cab drivers wondered aloud when things would turn around. Table limits, even at the usually pricey Wynn Las Vegas, were reasonable, with minimums as low as $10, even after dark when things started to pick up.

I heard more rumors that MGM Mirage could be looking to sell another casino, potentially one of its namesakes, to help keep CityCenter afloat. MGM Mirage recently sold Treasure Island to Phil Ruffin for $775 million, which sounds like a lot, but pales in comparison to the $1.2 billion he got for selling the New Frontier in 2007, showing just how far, and fast, the market has dropped.

On a positive note, which I’ll be writing about more in depth in an upcoming issue of the magazine, was Encore, which lived up to its hype and then some. The resort has a similar feel to Wynn Las Vegas, but on a smaller, more intimate scale. Not that this makes much sense, but it feels less casino-like than any of its strip counterparts. Anyway, the designs by Roger Thomas, Todd-Avery Lenahan and others were impressive.

Open less than one year, the Arctic Club Hotel, a Seattle boutique, is taking a step I’ve never seen before: It plans to reposition itself downward from four-diamond quality to three-diamond level. GM Stan Kott is blunt about the reason: The economy sucks and more guests are looking for value than for high style and high prices. This may be the beginning of a wave of properties built for the high-flying economic environment of the mid-2000s but no longer viable in the current recessionary atmosphere.
The property plans to pursue a national franchise brand and rejigger its restaurant, JUNO, from fine dining to what Kott calls “an urban casual dining outlet.”

AboutAnywhere.com is offering what it describes as the first completely free online distribution network for the hotel industry. A press release from PRNewswire reports the company has built a global network of websites in over 30,000 destinations, accessible via http://www.aboutanywhere.com.

Now, according to the release, “any hotel regardless of size, star rating or location can create a profile containing as much content as desired, and manage reservations and bookings in a website that specializes in their destination — at absolutely no cost.”

The company refers to the hotel industry as the victim of commissions and fees of online travel agencies (OTAs) as high as 35 percent, and claims there is “no logical reason that hotels (and all travel suppliers) should pay any fees to conduct business with Internet-savvy customers.”

“The beauty of this model is that smaller, boutique hotels that cannot afford to work with the OTAs will be more than happy to work with us since we do not cut into their revenue . . .” says Ashwin Kamlani, CEO of AboutAnywhere.com.

Whether the service becomes “the catalyst to end commission-based online distribution” (as stated in the release) remains to be seen, but these days any potential improvement to the bottom line deserves consideration. In addition to giving hoteliers a much needed shot in the arm, the traveling public might benefit as well.

OK, so maybe the headline is a reach, but I’ve got lots of questions and thoughts as we near the first major investment conference of 2009—The Americas Lodging Investment Summit in San Diego from Jan. 26-28.

• I just saw a press release announcing the ALIS Awards finalists and there are some huge developments (the $1-billion Fontainbleau Miami Beach and the $1-billion Gaylord National Resort and Conference Center in D.C., for example), transactions (e.g., purchase of the Hyatt Regency Century Plaza for $366.5 million) and mergers & acquisitions (e.g., Apollo Management and Texas Pacific Group’s $28-billion buy of Harrah’s Entertainment) up for consideration…some really impressive numbers in all the categories.

But I’m wondering what the finalists will look like next year if 2009 is as gloomy as predicted. I’m guessing we’ll have some big developments again (does the $2.3-billion Encore count for ‘09?) because most were well on their way before the credit crisis escalated, but what about in the transactions and acquisitions categories? Those seem to be dead in the water right now thanks to the credit crunch, but there will be plenty of hotels for sale for the same reason, and probably some chains as well. There are sure to be some buyers looking for a deal, but will they have the money and how low will the price tag go?

• I just received my official invitation to Hilton’s press conference announcing the company’s “innovative new development concept” and I can’t wait to see what’s coming. I’ve heard plenty of rumors, but nothing concrete. I’m guessing the term “lifestyle” might be mentioned…

• Speaking of Hilton, the host hotel of the event is the newly opened Hilton San Diego Bayfront. I’m looking forward to checking out the 1,190-room hotel, developed for $348 million by Portman Holdings, LLC and Phelps Development, LLC (the project is a finalist for the Development of the Year ALIS Award).

• And I’m really curious if the Hilton Bayfront will be as jammed as the Hyatt Regency Century Plaza was last year, when nearly 3,000 attendees made LA’s biggest convention hotel feel small. I’m guessing this wasn’t the year the site had to be moved because of growing attendance, with the industry in a tailspin and so many companies scaling back travel.

Either way, sunny San Diego or L.A. is always a pleasant change from snowy Cleveland, OH.

With casino-hotel revenues expected to drop 2.9 percent this year, some Las Vegas gambling establishments could be hard hit. Slot machines, however, may prove the exception to the rule. “Players who have incurred major losses from financial investments over the past 12 months may pass on the high-stakes tables for the next couple of years,” says George Van Horn, senior analyst with IBISWorld, an independent publisher of industry research.

Gross gaming revenue for Nevada in 2008 was nearly $12.9 billion, about 1.8 percent higher than the previous year. That number could fall by 3.2 percent this year due to a drop in international and domestic visitors, as well as tightening in the corporate sector. To make matters worse, Las Vegas is also facing tougher competition from the U.K.; Hong Kong and Macau, China; Eastern Europe; and the Middle East.

Revenues for non-casino hotels may decline by 2.1 percent this year. And the instant-gratification of poker machines and sports betting is likely to woo many gamblers away from state-run lotteries.

IBISWorld expects slot-machine gambling on Native American Reservations will benefit from agreements with large casino operators.

As the rest of the hotel industry continues to sink into a deeper recession, Smith Travel Research recently released a report showing the extended-stay segment was holding its own. Nationwide through November, it had a 9.2-percent growth in room supply, versus 2.6 for the entire industry. Occupancy grew 3.5 percent and fell 1.5 percent industry-wide.

The extended-stay segment even had positive demand growth in September, October and November when the rest of the industry slumped badly. Upscale extended-stay hotels were the primary reason, outpacing their midscale and economy counterparts. The logic for that, STR contends, is leisure travelers are recognizing the value and convenience of the extended-stay segment, usually with complimentary breakfasts and light dinner and larger rooms with kitchens, all potentially perfect for a lesser expensive vacation.

That makes sense and I would think the trend continues, but a cause for concern will be if supply growth continues to outpace demand. Negative occupancy numbers (year vs. year) loom, but the extended-stay segment ought to continue to hold up better than the rest of the industry.

One by-product of the current hotel recession we’re in will certainly be a spate of mergers, acquisitions and other types of consolidation. The world of commercial real estate is a high-stakes game of musical chairs, and those developers, owners and speculators caught with large or ill-conceived debt related to development or acquisition of properties, portfolios or brand companies may have found themselves with no place to sit when the music stopped last fall. Put another way, some companies and entrepreneurs are facing mountains of debt that will come due this year or next. They may opt instead (or be forced) to sell their positions at unfavorable terms.
The brand companies, particularly the publicly traded ones, are also under intense pressure. The public glare of reporting sinking occupancies, RevPARs and profits has severely dampened most hotel stocks. As of this morning, Starwood stock is down 63 percent from its 52-week high. Similarly, Wyndham shares are off 68 percent, and Marriott is down 47 percent. Last week’s speculation that vulture investor Sam Zell may increase his eight-percent stake in Starwood boosted its stock by 16 percent in one day. It’s all a sign that those companies in trouble may quickly become targets for opportunistic investors.
One also has to wonder about the fate of Hilton Hotels, which The Blackstone Group took private following its stunning $26-billion purchase of the company in 2007. Blackstone bought Hilton at the top of the market and, like most companies, has sailed into rough waters in recent months with all of its investments, not just hotels.
The urge to merge or at least sell is not limited to brand companies or portfolios. CSX, the Florida-based railroad, announced last week that it may sell The Greenbrier, the venerable luxury resort in the mountains of West Virginia. The property lost $35 million last year and has had a series of management changes and labor unrest. Although it’s owned the property for a long time, CSX probably realizes it needs to stick with what it knows and get out of the hotel business.

MGM Mirage, according to various media reports this morning, announced it was delaying the opening of the Harmon Hotel & Spa and the condo component of that building will be canceled at the huge $9.1 billion CityCenter development in Las Vegas. The Las Vegas Review Journal cited construction issues as the reason. Fox Business says the company plans on saving about $600 million from the action.
The Harmon opening has been pushed back to 2010 and purchasers of the 88 condo units already under contract would be entitled to refunds of their deposits. The Harmon had planned for 200 condo units. Residential units are still available in other parts of the development. The rest of CityCenter remains on schedule for a December 09 opening.
The news is not surprising, considering Vegas has been hit the hardest by the recession. MGM Mirage and partner Dubai World, according to the Review Journal, are still looking for additional financing for the project, which certainly won’t be easy to come by until the credit markets loosen.