The economy:

Strip development ongoing, but it looks different

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At left, Caesars Entertainment is planning to erect a Ferris wheel near O’Sheas. At right is the Skyvue Las Vegas Super Wheel project, which has already broken ground near Mandalay Bay.

Changing face of the Las Vegas Strip

An artist's rendering of the Skyvue complex near Mandalay Bay on the Las Vegas Strip. Launch slideshow »

Among the assumptions of the Las Vegas business model is that something big — think opulent resorts — should open every few years to keep the town fresh and give tourists a reason to return.

Instead, resort construction has stalled because of the toxic economy, and big-name investors have abandoned projects once hailed as transformative. Returning tourists today will see the same vacant lots and incomplete buildings they saw two or three years ago.

That isn’t to say development is dead. It’s just not what we had grown accustomed to. Investors are adjusting to a new economy and banking on tourists still being pleased by what they see.

“It’s easier to get $50 million these days than to get $5 billion, so you can make more cosmetic changes on the Strip without building a megaresort,” said Randy Fine, a casino marketer-turned-industry consultant.

Thus, the Strip is entering an era of smaller-scale entertainment ventures, with developers and tourists alike tightening their belts.

Chief among the changes awaiting tourists on the Strip: two Ferris wheel projects, one at an amusement park being built across from Mandalay Bay, and another between the Flamingo and O’Sheas that will include a 325,000-square-foot outdoor corridor of bars, restaurants and shops. Also being pitched by a developer who needs a place to put it: Parabounce Vegas, an aerial bumper car game featuring people strapped to helium balloons.

Elsewhere along the Strip, the Flamingo is turning part of its casino floor into Margaritaville; Treasure Island is building a Strip-front Starbucks; and Bellagio is refurbishing rooms, as Wynn Las Vegas did this spring.

Investors are backing less-ambitious projects that can generate quick returns. This is the first year in decades without plans for construction of a resort.

“In an environment where there are not big resort openings, companies are hoping with all these smaller projects they can still create a buzz and attract customers,” said Patrick Bosworth, an industry consultant at Duetto Consulting and former business strategist at Wynn. Even relatively minor changes such as room renovations can keep a property fresh and justify maintaining room rates, Bosworth said.

Caesars Entertainment breaks ground this month on a $500 million mid-Strip development that will feature a 550-foot observation wheel and entertainment district. The project includes the “reskinning” of the Imperial Palace and O’Sheas facades to give them new looks.

Developers of a 500-foot Ferris wheel and amusement park across from Mandalay Bay launched their project in May. When completed, that wheel is expected be the tallest in the United States.

Howard Bulloch of Compass Investments, lead developer of the project, said his company studied the economic potential of a Ferris wheel and amusement complex and found it to be a sound investment. Las Vegas tourists want the biggest bang for their buck. An observation wheel with views of the city and a low price tag offers that, Bulloch said.

“When they come to Las Vegas, they can spend so much gambling and it’s gone in two minutes, or they can spend the same amount and go to a nice dinner or see a good show. Or they could spend it on an amusement. People are being conscious of how they spend their money and are looking for all the different opportunities,” Bulloch said.

Whether the development of two giant Ferris wheels on the Strip will help or hurt one or the other remains to be seen.

“If we can come up with fun things for people to do, it can’t be a bad thing for Las Vegas,” Fine said. “But they need to be unique or interesting.” And he suggests that two big observation wheels is overkill, especially because there are other high vantage points along the Strip to view the area.

But it has long been true in Las Vegas — at least until lately — that the more resorts and attractions, the better, because of the synergy they create in attracting tourists, just as auto dealers frequently seek to congregate along a single street or mall because of the drawing power of so many cars at one venue.

And tourists have shown a liking for attractions. Last year, a fifth of Las Vegas visitors spent time at an attraction other than a show, such as a thrill ride or theme park. Turnout was up 4 percent from the previous year. In Singapore and London, Ferris wheels are top tourist attractions.

“It’s human nature that people want to check out the newest thing,” said Kevin Bagger, senior director of marketing for the Las Vegas Convention and Visitors Authority. “In Las Vegas, we benefit from a lot of really smart marketers who work to keep their product exciting, and it’s keeping our economy going. Beyond a new resort opening, the individual hotels are very proactive about keeping their product current and fresh.”

The challenges facing Las Vegas are shared by the city that most competes with it, Orlando, Fla.

When the stagnant economy caused profits to dip at Walt Disney World at the East Coast’s tourist mecca, Disney abandoned the building boom it adopted during the flush years, when it regularly introduced new theme parks and rides, and instead redesigned and relaunched aging ones and embarked on a marketing campaign that tried to entice visitors to stay longer and spend more.

The approach paid off. Attendance rose at Disney properties. Just recently, a retooled Star Tours at Hollywood Studios caused so much buzz that the park extended its hours and doubled its tour schedule. Company profits increased, in part because of the larger attendance, but mostly because customers bought more food and souvenirs.

Resort owners and developers hope to see a similar result in Las Vegas. Analysts expect the trend away from megaresorts toward entertainment to continue for several years, until the economy rebounds. The challenge that comes with that is to offer entertainment options that aren’t found in other vacation destinations. And for Las Vegas, given the spread of gambling across the country, offering entertainment diversity has become all the more important.

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