Tropicana and Mirage closures to Increase Las Vegas Hotel Rates

Tropicana took its final bow in April, erasing 1,467 guestrooms from the Strip’s landscape. Now it’s The Mirage’s turn, poised to close its doors on July 17th and leave a further 3,044 rooms vacant for several years. This temporary void will allow Hard Rock International to breathe new life into it, transitioning the resort built by Steve Wynn in the late 80s into a rock ‘n’ roll destination. A guitar-shaped hotel will be the crown jewel of this conversion.

John DeCree, a voice of authority from CBRE Equity Research, views the reduction of 4,511 rooms as favorable for all Strip operators. However, he singles out MGM Resorts and Caesars Entertainment as most likely to reap the substantial rewards. DeCree anticipates that the supply-demand seesaw will tip more steeply, with ‘more customers chasing fewer rooms’ predictably driving up rates.

Tropicana’s near 1,500 hotel rooms have been permanently erased from the market, making space for a potential MLB stadium. The Mirage’s absence, on the other hand, is not forever. Its rooms are expected to re-enter the fray sometime around spring 2027 once Hard Rock wraps up its grand property makeover.

In the meantime, however, the Strip’s casino resorts welcome the shortage, anticipating an increase in their own room occupancy rates. DeCree underscores the impact that The Mirage’s closure might have, suggesting that its magnitude ‘is large enough to potentially move the needle for all operators on the Strip’. Last year, The Mirage’s guestrooms churned nearly $600 million in revenue for MGM Resorts from over a million occupied room nights.

Despite a decent quarterly performance record and record gaming revenue from the publicly traded operators, investor sentiment remains sluggish. This standstill is even in the face of improved daily rates and the room inventory bumps provided by the introductions of Resorts World and Fontainebleau in 2021. While occupancy levels are yet to mimic the glory of 2019, DeCree anticipates a strong event calendar and an upswing in convention and international demand to align the 2024 Strip earnings with, or even exceed, expectations.

The room contraction on the Las Vegas Strip, says DeCree, could make room for stronger earnings for MGM, Caesars, Wynn Resorts, and Golden Entertainment, the latter being the proud owner and operator of The Strat. Each of these entities has received ‘buy’ ratings from DeCree.

Although MGM and Caesars have a commanding lead with their mid-tier rooms booked months in advance, DeCree posits that less popular properties such as The Strat and Sahara could potentially snag some late bookings. These might have ordinarily been directed towards Tropicana or Mirage. This new demand landscape, DeCree suggests, could furnish these typically under-occupied assets with win-win of higher occupancy rates and higher-spending average customers.