Please ensure Javascript is enabled for purposes of website accessibility

New Las Vegas Megaresort Is a Game-Changer: Wynn, MGM and Caesars Should Pay Attention

By Bradley Seth McNew - Oct 14, 2014 at 12:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This new resort could be the major boost that helps to lift Las Vegas back to its pre-recession highs, but it could come at the expense of other Vegas casinos' earnings.

Construction will soon begin on what should be one of the biggest developments to hit Las Vegas in years. Following the 2008 recession, Las Vegas has struggled to get back to its 2007 peak of gross gambling revenues. However, revenues in the city are picking up again, and this new resort from Malaysia gambling company Genting could be the next Las Vegas game-changer, even though it may come at the expense of the other casino companies, including Wynn Resorts (WYNN 12.05%), MGM Resorts International (MGM 11.30%), Las Vegas Sands (LVS 5.86%) and Caesars Entertainment (CZR).

What this game-changing resort will look like
Genting announced in 2013 that it purchased the half-finished Boyd Gaming Group project on the Vegas Strip that's been sitting vacant since 2008. Next, the company announced plans to build its Resorts World Las Vegas. The project is estimated to cost $4 billion, and the first phase is set to open in 2015.

This Asian-themed resort looks amazing already. Phase one, which is expected to complete next year, will include 3,000 table positions across 100,000 square feet of space. This phase will also include 22 villas, 45 shopping and eating options, and much more. But that's just the start. By the completion of the entire project, the resort will include three hotel towers, one of the highest observation decks in the city, a giant exotic aquarium, a terra-cotta warrior exhibit, a scaled-down Great Wall replica, and even live pandas. The property will also include a large theater and convention center, and there are talks of adding a theme-park partner, as the company has done in Singapore and Malaysia.


Rendered view of what Resorts World Las Vegas is expected to look like. Source: Genting.


Rendered view of what Resorts World Las Vegas is expected to look like. Source: Genting.

The company to know, even if you can't own it
Genting is one impressive company. This Malaysian gambling company runs Resorts World casinos in Malaysia, Singapore, New York, the Philippines, and soon other Asian locales including Macau, South Korea, and potentially Japan. The company has also been teaming up with theme parks at its locations around the world, and a Genting subsidiary even runs a cruise line, including on-board gambling, out of Hong Kong. The bad news for U.S. investors is that the company is listed in Malaysia and Singapore, making it difficult to buy shares.

Source: Genting.

Still, U.S. gambling investors still need to watch Genting closely. The company has already been a fierce competitor for Las Vegas Sands in Singapore, where they are the only two companies with gambling licenses. Likewise, Genting's Resorts World New York last year was claimed to be the highest-grossing slot machine parlor in the United States.

There are plenty of reasons to believe that Resorts World Las Vegas will also compete well, even against established brands such as Wynn, MGM, and Caesars. For Wynn and MGM, the most recent quarter showed signs of growth and hope for their Las Vegas operations. Now, these two companies will need to figure out how to keep this Las Vegas revenue momentum going in the next few years while competing with the new Resorts World. For a company like Caesars that has nearly all of its portfolio in Las Vegas but that's still struggling just to minimize losses, new competition like this could be very bad news. 

Is this new resort good or bad for gambling investors?
For the Las Vegas economy, this could be a great way to help return things to where they once were. For one thing, it's said that this resort will generate 11,000 permanent jobs in Nevada, where unemployment is currently a major problem. Furthermore, the resort is expected to attract many new international visitors. All of these things should help future growth and development. Long term, it looks like a great project for the city as a whole.

But the competition will be tough on rivals such as Wynn and MGM, as the number of rooms and gambling positions on the way will probably lower margins at the other casinos nearby. A Fitch Ratings director noted in a report that the added lodging capacity of Resorts World Las Vegas will probably drive down average daily room rates for nearby casinos such as Wynn and MGM properties. For a struggling company like Caesars, this could be felt even more so.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Wynn Resorts, Limited Stock Quote
Wynn Resorts, Limited
WYNN
$58.29 (12.05%) $6.27
MGM Resorts International Stock Quote
MGM Resorts International
MGM
$30.24 (11.30%) $3.07
Las Vegas Sands Stock Quote
Las Vegas Sands
LVS
$33.43 (5.86%) $1.85
Caesars Entertainment Corporation Stock Quote
Caesars Entertainment Corporation
CZR

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.