April 01, 2006 - Successful Meetings
Even by Las Vegas standards, this is a big development: $4 billion, 5,300 guest rooms, and a million square feet of meeting and exhibit space, including a freestanding convention center.
Its name is Echelon Place, the operator is Boyd Gaming, and the estimated completion date is early 2010. But while the city has had no trouble absorbing such mega-projects in the past, some industry observers are wondering if history can repeat itself yet again.
For one thing, Echelon Place is just one aspect of a Las Vegas building boom that is even more ambitious than the extensive resort booms of the past. An estimated 40,000 hotel rooms—a 25 percent increase over current supply—are slated to open in Las Vegas over the next five years.
"We are seeing the largest number of new hotel rooms under development in the next five years of any five-year period in our history," says hospitality industry consultant Brian Gordon, principal of Las Vegas-based Applied Analysis. "There's a lot of high-end product coming in, more than at any other time."
A Sizable Bet
Echelon Place is to be developed on a 63-acre site on the Las Vegas Strip currently occupied by the Stardust Hotel and Casino, which is scheduled for destruction early next year. Along with hotels and a convention center, the complex will include a 350,000-square-foot retail shopping and restaurant promenade.
Among the hotel components will be the 3,300-room Echelon Resort, consisting of a 2,600-room Resort Tower and a 700-room Suite Tower, each with its own spa. Both towers will connect to a 140,000-square-foot casino, 25 food and beverage outlets, meeting facilities, and two theaters.
Echelon Place also will include a 400-room hotel operated by Hong Kong-based Shangri-La Hotels and Resorts. The hotel will feature 100 suites, an Asian-influenced restaurant and a poolside restaurant, 20,000 square feet of meeting space, and a full-service spa.
In addition, the Morgans Hotel Group has signed on to operate two hotels, the Delano and the Mondrian, which will be reminiscent of the company's high-style properties in Miami and Los Angeles. The 600-room Delano will feature a destination nightclub, Asia de Cuba restaurant, and an Agua spa with a private pool and fitness center, while the more business-oriented Mondrian will offer a distinctive restaurant and bar, private pool and recreation area, and conference space.
Most meeting space at Echelon Place will be concentrated in the Las Vegas ExpoCenter. The facility will offer 675,000 square feet of exhibition and pre-function space and 175,000 square feet of meeting and conference space. When ExpoCenter is combined with the hotel meeting space, Echelon Place will offer a million square feet of function space, including 200 meeting rooms.
According to Boyd Gaming spokesman Robert Stillwell, the company did extensive market research before deciding to develop a complex primarily targeting upscale meeting and leisure business.
The Space Race
"Our research has shown that there is continuing demand for meeting and convention space in Las Vegas—it's one of the best opportunities for growth," Stillwell says. "On the room side, it's the upscale segment that has the most growth potential for Las Vegas. That, combined with the strength of meetings, makes this a winning combination."
Stillwell adds that, unlike earlier convention-hotel complexes in Las Vegas, Echelon Place is not being built in several phases.
"Other such complexes have been built in stages, and there have been connectivity problems," he says. "Echelon Place will integrate the hotels and the convention space in a way that other complexes have not—there will be good ebb and flow between all the components."
Stephen Darling, regional vice president, North America, for Shangri-La Hotels & Resorts, says his company, which is in the midst of a North American expansion, looked at several possible sites in Las Vegas, but was most impressed with the Echelon Place project.
"The location is right on the best part of the Strip where new development is happening," Darling says. "Plus, Boyd Gaming really did its homework and knows the market. We appeal to the high-end market, and we are confident that that market is there for us in Las Vegas."
Taking a somewhat different view was Rick Forman, senior vice president of sales for the Alan Waxler Group, a Las Vegas-based destination management company, who is concerned that new Las Vegas development is weighted too heavily toward upscale travelers.
Will Planners Fold?
"The new Wynn property already has pushed up the price point, and you've got a lot of properties below Wynn that are charging $150 to $200 a night," says Forman. "Everyone is pursuing the high-end customer and ignoring the mid-market and budget customer."
Forman adds that the trend toward luxury hotels is happening at a time when corporate America is taking a cost-conscious attitude to meetings management. "More meetings are being managed by a procurement approach, and there is only so much companies will pay," he says. "So does it really make sense to add more high-end hotels to drive up the price point?"
Gordon of Applied Analysis says he expects hotel rates to continue to rise in Las Vegas, and that new high-end development will put the brakes on rate increases at many existing properties. "As new luxury hotels come in, the mid-level hotel guests will be directed towards the existing properties," he says. "While I don't think their rates will drop, rate increases at these hotels will be much slower than if the development were not happening."
David Schwartz, director of the Center for Gaming Research at the University of Nevada at Las Vegas, is among those who believe there is plenty of room for more upscale hotels as well as another convention center.
"Las Vegas is well established as a high-end destination, so the Boyd Gaming project has a great chance of succeeding," he says. "The convention market is also strong, so the ExpoCenter is coming at the right time."
John Kaatz, a convention center consultant with Convention, Sports & Leisure in Minneapolis, agrees, noting that existing convention facilities in the city are doing well. "Nothing that I've seen indicates that another convention facility in Las Vegas won't make it," he says. "The new ExpoCenter is actually modest in size, by Las Vegas standards, and it has 5,300 rooms to support it. It's a really nice package."
It's Another World
Successful Meetings: Is there something about today's market conditions in Las Vegas that made this the right time for such a massive development?
Bob Boughner, president and CEO, Echelon Resorts (a subsidiary of Boyd Gaming): In 2000, roughly $14 billion was being spent on the Strip. By 2004, that number grew to $34 billion. Also, we've seen a tremendous uptick in Las Vegas' convention business; it's growing at three times the rate of leisure visitors. Additionally, the luxury and upper-upscale segment are under-penetrated in Vegas, with only about 16 percent of the market. International visitation is rebounding, and Vegas has become a favorite shopping destination, just behind New York. So the operating metrics are improving, and all of the trend lines are pointing in the right direction. It's time to diversify, not just with more product, but with more upscale supply.
SM: What is it about Echelon that will appeal to meeting planners and attendees?
Boughner: While the project is four years away, we have already started getting together with meeting planners to understand their needs, wants, and desires. That feedback is essential because we have a blank canvas to create our facility, and we intend to make meeting and convention sales and services a core competency. We will do that through strong partnerships with customers.
SM: How can Vegas still have room for development?
Boughner: Las Vegas is in a unique position because it has an extraordinary infrastructure—our airport is functional, roadways to accommodate travel are good, we have a burgeoning workforce that supports service, we have good taxicabs, a functional local government, and a strong room-tax base—all because the city says, "Out with the old, in with the new." Plus, the properties under development now are being designed with sustainable architecture that can survive into the future. They will be able to return superior capital and sustain strong returns over a longer period of time, versus having their best period in the first few years of operation.