'Second-tier' resorts do nothing to compete with Bellagio

Mirage Resort's Bellagio hotel-casino heralds the beginning of a new round of Las Vegas mega-resort construction, and Mirage competitors are scrambling to come up with an answer to the resort Mirage Chairman Steve Wynn intended to be the best in the world.

Some of those answers are obvious. Directly across the street from Bellagio, Hilton Hotels' Paris resort -- complete with a replica of the Eiffel Tower -- is rising above the Strip.

Farther north, Sheldon Adelson's Venetian, another vision of Italy-in-Vegas, is well under way. At the south end of the Strip, Circus Circus is building Mandalay Bay. And a new Aladdin resort is promised on the site of the old Aladdin.

The MGM Grand is transforming itself into the "City of Entertainment," with an expansion and renovation that includes a new nightclub, convention center, pool and spa facilities, a redesigned buffet and a Tuscan-style mansion that will be a separate 29-suite hotel and casino.

Last year, Starwood's Caesars Palace opened a 1,200-room hotel tower. And the Desert Inn has undergone a remarkable transformation, emerging as an elegant, albeit small, hotel-casino catering to high rollers.

The Rio hotel-casino is expanding, and the Sahara has plans for a new convention center.

Even the Mirage and Treasure Island are getting in the act. The Mirage is adding three new restaurants, and Treasure Island is looking at expanding its entertainment offerings and possibly adding a restaurant, said spokesman Alan Feldman.

"These are enhancements to keep these properties fresh," said Feldman.

Many of the Mirage-Treasure Island enhancements would likely have happened anyway, but have been accelerated by what Feldman calls Bellagio's raising of the bar for all Las Vegas resorts.

Less obvious is what the smaller -- some say second-tier -- properties are planning for the new era. That may be because, in many cases, they're not planning anything.

"We have determined (a major development) is not in the best interests of the company," said Rob Stillwell, a spokesman for Boyd Gaming, owner of the Stardust hotel-casino.

Boyd will wait and see what effect the additional 20,000 rooms have on the Las Vegas market before deciding what, if anything, to do with the 61-acre Stardust site, said Stillwell.

Similarly, the Riviera hotel-casino continues to evaluate expansion proposals that have been under consideration for some time, but has no immediate plans.

"We're still evaluating that with various groups," said Duane Krohn, chief financial officer of the Riviera.

The Riviera is looking for a partner to help it develop an adult-themed attraction in a dome-shaped structure planned for the roof of its casino.

Oddly, many Bellagio competitors feel the resort will actually help them.

"There's no question that Bellagio is an event that everybody will benefit from," said Stillwell.

"Any property that's built in Vegas that brings in gaming visitors is positive for all the properties," said Starwood spokesman Jim Gallagher.

The Clark County Planning Commission recently approved a time delay for yet another Caesars hotel tower. This one, a proposed 14-story, 702-room addition, was first approved in 1997. Still, Gallagher said Caesars has no immediate plans to expand.

"What we did to make ourselves competitive was to add the (existing) tower and the rooms," Gallagher said.

"The Bellagio, we think, will have a positive effect," said the Riviera's Krohn. "We're more concerned about the ones that come on later and aren't as visible."

Mirage's aggressive Bellagio advertising campaign will bring so many new visitors to Las Vegas that all properties will benefit from the overflow, said Krohn. But the next four mega-resorts probably won't carry the same buzz, Krohn continued.

"They won't bring more visitors, they'll just cannibalize the visitors that are already here," said Krohn.

The optimism of Bellagio's competitors is not shared by many in the analyst community who feel visitor volume will not keep up with increases in hotel capacity. No matter what they do, the older resorts will suffer, these analysts say.

"Some of them, there's not much they can do," said Andrew Zarnett, an analyst with Ladenburg Thalmann & Co.

"We're going to have some haves and some have-nots," said Mark Harms, an analyst at CIBC Oppenheimer.

Daniel Davila, an analyst at South Coast Capital, said he expects five Las Vegas resorts to close within 18 months of Bellagio's opening.

The increasingly competitive environment will also have another kind of effect, analysts say.

"We think that the pressures to consolidate are going to continue to increase," said Harms.

Unfortunately, argues Zarnett, there aren't many resorts left that bigger companies would be interested in acquiring.

"If you look around over the last couple years, the good stuff's ... been picked over," said Zarnett.

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