Monday, April 9, 2001 | 11:02 a.m.
Despite fears of a general slowdown on the Las Vegas Strip, two gaming operators -- Mandalay Resort Group and Boyd Gaming Inc. -- are looking at big expansions of their Strip convention operations.
That's not a bad strategy, gaming analysts say. The challenge -- particularly in a slowing economy -- is filling hotel rooms during the mid-week period. Convention space can help accomplish that.
"Going forward, it would seem the wisest investment any of the operators could make is to build out their convention facilities," said Daniel Davila, gaming analyst with Hibernia Southcoast Capital. "They really need to drive mid-week business through their properties ... and that will be tougher and tougher to get.
"Room rates are going to start to tail off in the summer. I think it's smart of the operators to look for ways to drive volume into their properties during the off-peak times."
Mandalay's expansion will be the most sizable, should it move forward. John Marz, vice president of marketing at Mandalay Resort Group, said an expansion of exhibit and convention space at Mandalay Bay would be "substantial," but said its size, cost and timeframe have not been identified yet.
"We have so much demand for our existing convention space at this property that we are considering the opportunity of meeting that demand by adding more space," Marz said. "We're working through it right now, and when we get all the details buttoned down, we'll have a formal announcement."
The project would be an expansion of Mandalay's convention center, rather than a separate new building, Marz said. It wouldn't only benefit Mandalay Bay's hotel business, but also demand at the Mandalay-owned Luxor and Excalibur hotel-casinos, each located just north of Mandalay Bay, Marz said.
Currently, Mandalay lists about 190,000 square feet of meeting space, trailing only the Venetian, the MGM Grand and the Las Vegas Hilton, according to the Las Vegas Convention and Visitors Authority. This includes space in its 125,000-square-foot convention center as well as space in its events center.
Several miles north on Las Vegas Boulevard, Boyd has a similar idea. It is studying the addition of 40,000 square feet of exhibition space to its 25,000-square-foot convention center at the Stardust. Like Mandalay, Boyd hasn't yet nailed down a start date or budget.
"What this really allows us to do is reach out to a whole new part of the convention business, the 100 to 200 (exhibitor) trade show," said Boyd spokesman Rob Stillwell. "It's not so much just conventions ... we would have a venue for concerts, dances, and other kinds of special events, and obviously the convention part of the equation."
The Stardust has had to turn down a good deal of convention business because it didn't have the space to accommodate it, Stillwell said.
The two expansions would be the latest in a boom in the convention center business Las Vegas has seen over the past several years.
The latest convention center expansion came at the Mirage, which opened a 90,000-square-foot events center in recent days. The expansion gives the Mirage more than 170,000 square feet of convention space, making it one of the larger facilities on the Strip.
Other notable expansions in recent years include the addition of 60,000 square feet to the Riviera's convention center and the addition of a 110,000-square-foot convention center at the Rio, both in 1999.
But two of the largest new centers came in 1998 and 1999. In 1998, the MGM Grand opened its 380,000-square-foot conference center, the second largest operated by a Las Vegas hotel. In 1999, the Venetian topped the MGM Grand with its 500,000-square-foot Congress Center, connected to owner Sheldon Adelson's neighboring 1.15 million-square-foot Sands Expo Center.
Following the opening the convention center in 1998, the MGM Grand's room revenues rose 6 percent in 1999 and 4 percent in 2000. Food and beverage revenues grew even faster, rising 11 percent in 1999 and 18 percent in 2000 -- movement the company attributed largely to the new convention space.
One risk of becoming more dependent on convention business is that convention attendance is particularly sensitive to a slowing economy, said Robin Farley, gaming analyst with UBS Warburg.
"But so far, Mandalay has not seen delegate attrition (a decline in attendance), and neither has MGM," Farley said.
Even if such a slowdown were occurring, Farley said, Mandalay should move forward with its project.
"You're talking about demand two to three years out," Farley said. "You have to look beyond what's happening (today)."
And Farley says she's convinced that the demand is there at Mandalay Bay. While visiting the resort last week, she noted a number of white tents set up behind the convention center. When she asked Mandalay Resort Group President Glenn Schaeffer why, Schaeffer responded that the tents were handling overflow from a particularly large convention.
"Clearly, there's a demand for convention space," Farley said.