Fon­tainebleau fu­ture

Own­ers quiet as oth­ers talk pos­si­bil­i­ties

Las Vegas Review-Journal (Sunday) - - FRONT PAGE - By Richard N. Velotta

The own­ers who spent $600 mil­lion on the never-fin­ished Fon­tainebleau are quiet, but oth­ers have ideas about its po­ten­tial.

It was MGM Re­sorts In­ter­na­tional Chair­man and CEO Jim Mur­ren who jump-started the most re­cent con­ver­sa­tions about Fon­tainebleau, the 68-story blue glass mono­lith that has long been the Strip’s re­minder of the eco­nomic dam­age caused by the Great Re­ces­sion.

In the mid­dle of re­port­ing the com­pany’s quar­terly earn­ings in July, Mur­ren piv­oted and told an­a­lysts that he had heard that the se­cond-tallest struc­ture in Las Ve­gas that cost an es­ti­mated $2.8 bil­lion to build was about to be sold.

He as­sured those lis­ten­ing to the call that MGM wasn’t the buyer, but the trans­ac­tion could mean good things for his com­pany, which op­er­ates the nearby Cir­cus Cir­cus prop­erty and holds 26 acres at Las Ve­gas Boule­vard and Sa­hara Av­enue that has been used as a mu­sic fes­ti­val site.

Mur­ren re­marked that he’d heard “a ho­tel flag will be put on it,” im­me­di­ately spark­ing ru­mors that Marriott, a big player in nongam­ing ho­tels in the neigh­bor­hood, would be the flag-bearer, tak­ing ad­van­tage of Fon­tainebleau’s close­ness to the ex­pand­ing Las Ve­gas Con­ven­tion Cen­ter.

The Hil­ton brand also has been men­tioned as a po­ten­tial op­er­a­tor.

Keep­ing quiet

The peo­ple with the an­swers, Fon­tainebleau’s New York-based buyer,

Steve Witkoff, and Mi­ami in­vest­ment firm New Val­ley, who picked up the prop­erty Aug. 29 for $600 mil­lion, aren’t talk­ing.

It’s pos­si­ble that Witkoff and New Val­ley haven’t wrapped up talks with a ho­tel op­er­a­tor or that other play­ers could be in the mix. That hasn’t stopped in­dus­try watch­ers from spec­u­lat­ing about what they would like to see Fon­tainebleau be­come — or what they ex­pect it to be­come.

When the prop­erty’s orig­i­nal de­vel­op­ers, Fon­tainebleau Re­sorts and Turn­berry As­so­ciates, launched work in 2005, they en­vi­sioned it as a sis­ter prop­erty to the famed South Beach Fon­tainebleau in Mi­ami with 2,800 ho­tel rooms, 1,200 con­do­minium units and a 95,000-square-foot casino.

High-end prop­erty

Clark County Com­mis­sioner Chris Gi­unchigliani, whose dis­trict in­cludes the Fon­tainebleau, said she thinks the new own­ers con­tinue to en­vi­sion it as a high-end prop­erty.

“The new own­ers def­i­nitely plan on keep­ing it as a casino and high­end ho­tel,” Gi­unchigliani said. “They did their due dili­gence, and (the build­ing is) very struc­turally sound.”

Gi­unchigliani said she was “thrilled” by the news of Fon­tainebleau’s sale and sees it as a means to the com­ple­tion of un­fin­ished projects un­der­way on the Strip’s north end.

“What I want is to make sure that north end of the Strip gets fin­ished, whether it’s Re­sorts World or Fon­tainebleau,” she said. “It also spear­heads Jackie Robinson’s pro­ject next door, the All-Net (Arena) pro­ject. It’ll bring syn­ergy to the area.”

The Robinson pro­ject plan in­cludes a nongam­ing bou­tique ho­tel, so Gi­unchigliani doesn’t ex­pect Fon­tainebleau’s re-emer­gence to be a com­pet­i­tive is­sue. She said she hasn’t heard whether the new own­ers will con­tinue plans for con­do­mini­ums.

“They’re go­ing to have to see what their price point is and what makes the best sense for that north end of the Strip so that they com­ple­ment each other. SLS is do­ing well with their new W brand, and they’ve got some fan­tas­tic restau­rants in­ter­nally.”

John De­Cree, a gam­ing in­dus­try an­a­lyst with Las Ve­gas-based Union Gam­ing, said the new own­ers would be best-served seek­ing a va­ri­ety of cus­tomers and not fo­cus­ing on just con­ven­tion­eers.

“It needs to be an all-in-one entertainment re­sort desti­na­tion,” De­Cree said. “Las Ve­gas has be­come a lot more than just gam­bling, and it’s still a lot more than just con­ven­tions. Be­cause that prop­erty is some­what re­moved from the rest of the con­tigu­ous Strip, it needs to be the whole she­bang.”

Casino im­por­tant

De­Cree said that though casi­nos gen­er­ate around 40 per­cent of re­sort rev­enues, gam­ing is still a key in­gre­di­ent for the prop­erty’s suc­cess.

“That big chunk that is gam­ing re­ally sub­si­dizes the de­vel­op­ment costs,” De­Cree said.

He said be­cause the prop­erty will be com­pet­ing with MGM, Cae­sars Entertainment and Wynn Re­sorts for cus­tomers, he ex­pects the suc­ces­sor to Fon­tainebleau to be a high-end com­peti­tor.

“I don’t know if it has to be uber­high-end, but it has to be com­pet­i­tive,” he said.

Room glut?

De­Cree isn’t con­cerned about Fon­tainebleau’s ho­tel rooms com­ing on line at around the same time 3,000 rooms open at Gent­ing Group’s nearby Re­sorts World Las Ve­gas prop­erty.

“Right now, the ho­tel oc­cu­pancy rate is around peak­ish,” he said. “It’s well into the 90 per­cents. Dur­ing peak pe­ri­ods like CES and ConExpo-Con/Agg, th­ese places are com­pletely full. We’re see­ing a lot of the ho­tel rev­enue growth com­ing from rates, the in­crease in the price.”

“I think we’ve fi­nally ab­sorbed much of the sup­ply that had come on line around the re­ces­sion,” he said.

“When th­ese projects come on line re­al­is­ti­cally in the next 24 to 36 months, there is some ca­pac­ity for ho­tel rooms. We wouldn’t want to see the Strip get over­built.”

An­other in­dus­try watcher who be­lieves the Strip will be able to ab­sorb the new rooms brought in by Re­sorts World and Fon­tainebleau is Bo Bern­hard, di­rec­tor of UNLV’s In­ter­na­tional Gam­ing In­sti­tute.

Bern­hard and his col­league, Shek­inah Hoff­man, spe­cial projects co­or­di­na­tor at the in­sti­tute, got a close look at Fon­tainebleau’s po­ten­tial by bring­ing in in­dus­try ex­perts to talk about it with 30 high school stu­dents dur­ing the Young Ex­ec­u­tive Schol­ars Hospi­tal­ity and Tourism Pro­gram.

Mil­len­nial view­point

The fi­nal pro­ject of the five-week sum­mer pro­gram was to have the stu­dents de­sign what they would like to see hap­pen to Fon­tainebleau — an ex­er­cise that en­abled Bern­hard to get per­spec­tives from mil­len­ni­als.

Ev­ery ma­jor op­er­a­tor on the Strip work­shopped ideas with the stu­dents and their lead­ers.

“It’s been a long time since the Strip has ab­sorbed that much new room vol­ume,” Bern­hard said of the prospect of 6,000 rooms be­ing added within four years.

“But we have oc­cu­pancy rates that the rest of the tourism world drools over,” he said. “But there ob­vi­ously has been a pause in de­vel­op­ment. With a cre­ative room prod­uct or value propo­si­tion and the link­age to the con­ven­tion cen­ter,” the north Strip should be able to ab­sorb the new sup­ply.

Bern­hard said many have lost per­spec­tive of how ac­cess to the prop­erty from Par­adise Road can pro­vide new op­por­tu­ni­ties for the de­vel­op­ment.

Con­ven­tion cen­ter link

“It re­ally links up well with the con­ven­tion cen­ter and, es­pe­cially, the new con­ven­tion cen­ter (a 600,000-square-foot ex­pan­sion that is ex­pected to be com­pleted by 2020). The abil­ity to be both Par­adise-fac­ing and Strip-fac­ing is not to be un­der­es­ti­mated,” Bern­hard said.

While Bern­hard isn’t as versed in ho­tel brand­ing, he sees the value of mar­ket­ing po­ten­tial with a na­tional brand in the same way that casino com­pa­nies use data col­lected with loy­alty cards draw­ing cus­tomers or tar­get­ing spe­cific cus­tomers with ap­peal­ing of­fers that will bring them back as re­peat cus­tomers.

El­iz­a­beth Brum­ley Las Ve­gas Re­view-Journal

The un­fin­ished Fon­tainebleau, cen­ter, on the Strip has been sold again, this time for $600 mil­lion.

Wes Rand Las Ve­gas Re­view-Journal

Im­age courtesy of Google

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