Given the current state of the United States economy, many businesses are making taking steps to adjust through drastic cutbacks, delaying or cancelling planned expansions in an attempt to compensate during this time of economic uncertainty. In a town where gambling and games of chance are an everyday part of life, Station Casinos, is gambling in a different way. They are wagering that by doing just the opposite, during the downward spin in today’s economic picture, they will be successful.
What is the bet? They are speeding up their plans for a massive casino resort in Las Vegas that is planned to be even larger than the $8 Billion MGM CityCenter, currently slated to open in 2009. This new resort will be the largest of the casinos they are planning to build over the next ten years.
Station Casinos, owned by Frank and Lorenzo Fertitta, currently runs 17 casinos that are geared toward the Las Vegas residents more than the tourist crowd, with their theaters, bowling alleys, restaurants and slot machines having payouts in excess of 90%. The brothers privatized Station Casinos last year and are moving forward with their plans to redevelop the area previously occupied by the Wild Wild West casino and motel in Las Vegas.
The property started with the idea of building one casino but quickly grew into a much more substantial project as the Fertitta brothers continued to quietly buy various surrounding properties thus expanding the area in which to develop. The new Viva Resort will be the site of at least three hotels and three casinos. Initially these hotels will house over 5,200 rooms within the 110 acre property once completed at an expected cost exceeding $10 Billion. The entire Viva development could eventually have as many as 10,000 hotel rooms once completed. There are also plans to incorporate into the design, condominiums and possibly an arena to provide a venue for a wide variety of different events.
One of the reasons behind the Fertitta brothers’ planned project is their belief in the continued growth of Las Vegas over the next ten years. While the economic difficulties of today rage one, they believe that by the time their project is completed the economy will have changed and Las Vegas grown to the point to where this will be a profitable venture for them. One of the explanations as to why they can even attempt such a risky proposition is because they are a now private company and don’t have to worry about responding to understandably nervous stockholders. However, they will require investors in order to take on a project of this magnitude and must convince them that such an investment is worth while and ultimately profitable. This is partly where the challenge lies as the capital market is in decline and Station Casinos would need the market to take a dramatic turn upwards within the next two years if they are to start the project on their accelerated schedule.
Frank and Lorenzo are currently focused on the next one to two years as they try to lure investors who have similar visions and will be willing to put money into the venture. The Fertittas believe that while the current economic picture is poor, they are betting Las Vegas will continue to grow and expand to the point where the local economy and population will be able to sustain all of their planned developments. They have several projects either in the planning stages or underway like the Aliante Station which will open up in 2008. The brothers have purchased substantial amounts of real estate in Las Vegas and plan to continue developing their properties rather than take a step back and wait for the capital market to turn around. Aside from the Viva Resort they plan on breaking ground next year on another new project, the Durango Station.
The company ultimately plans to develop and build on over 500 acres of undeveloped land, purchased over time by the company, throughout the Las Vegas Valley. This land which was initially purchased for approximately $600 million is estimated to be currently worth $1.6 billion. Station’s vast landholdings give it a strong market position that will only improve as Las Vegas continues to grow, as the Fertittas speculate. Most of the land that will be developed for the Viva Resort is currently home to small retail stores and warehouses.
Over the next ten years, the aggressive development plan by the Fertittas will see the building of nine new casinos in Las Vegas. This will include the immense Viva complex which, once completed, will be the biggest and costliest of them all and will become the largest off-strip casino with the highest price tag throughout Las Vegas. Once these nine casinos have been completed it will bring the total to 26 casinos operated by Station Casinos in Las Vegas.
As history has shown, to be successful in Las Vegas in the long run you must cater to the residents as much if not more than the millions of tourists who visit this city each year. Station Casinos plans to continue to do just with their new developments by providing a myriad of services in each casino which are intended to bring the local residents into their doors. Many casinos in Las Vegas have had to learn this lesson the hard way as they experienced failure by trying to cater almost exclusively to the tourist industry.
Frank and Lorenzo Fertitta continue to push forward with their grandeur development plans for the city of Las Vegas with the hopes of a positive spin of the United States economy. As with many things in Las Vegas luck will play a key role in the success or failure of their plans as they work to solicit investors in their plans for expansion. While obtaining investors is a large part of the plan, this will only get the projects off the ground with no guarantee of success.
Will they crap out or win the mother of all jackpots with there aggressive play at the game of investments and developments? Only time will tell if the Fertitta brothers’ gamble will bust or prove to be the winning hand in this multi-billion dollar game of chance.