Las Vegas could be the next city to get its own professional hockey team. This could be good for investors in Las Vegas resort companies such as MGM Resorts International (NYSE:MGM). Even as Sin City draws more visitors than ever, a record 41 million in 2014, gambling revenue continues to decline. Vegas' future growth will come from nongaming entertainment, and a local pro sports team (along with an arena that doubles as a convention and entertainment venue) would help this push even more.
Ice hockey in the desert?
While Las Vegas might seem like an odd choice for an ice hockey team, given its desert climate and lack of other major sports teams, backers are nonetheless trying to persuade the NHL leadership to put the league's 31st team there. It might take a lot of convincing for the NHL to go for the idea, but the effort has strong support.
Bill Foley is the chairman of Fidelity National Financial (NYSE:FNF), the largest title insurance company in the U.S. His resume features a degree from the United States Military Academy at West Point, a law degree from the University of Washington, previous work with Boeing, and much more before becoming chairman of FNF, a company that was ranked one of the "26 Best Managed Companies in the U.S." by Forbes magazine in 2004 under Foley's tenure. Now he wants to move to Las Vegas and invest in starting the city's first pro-hockey team.
Foley is joined in this effort by the Maloof brothers, former owners of the NBA's Sacramento Kings. Should the team come into existence, Foley would own 80% and the Maloofs 20%, according to the Las Vegas Review-Journal.
Meanwhile, MGM has teamed with the Anschutz Entertainment Group, or AEG, to build an arena that could house the team. The massive 20,000-seat arena, set to be completed in 2016, will be the largest in Las Vegas and will get plenty of use even if an NHL team never skates into town.
The arena will be next to the Las Vegas Strip, beside the New York-New York Hotel & Casino. Along with hockey, its potential wealth of uses could include concerts, awards shows, large business meetings or conventions, or major competitions for sports that don't have home arenas -- gymnastics and table tennis, for example, have held national championships in Vegas before.
Long way to go
According to Foley and his supporting team, the Las Vegas community wants a pro hockey team and would pay to attend the games. To demonstrate that support, the group started a campaign to sell 10,000 season tickets for an anticipated first season, mostly likely the 2017-2018 season, and easily passed that mark. Buyers will receive refunds if the plan to bring hockey to Vegas fails.
There is still far to go. According to ProHockeyTalk from NBC Sports, the NHL board of directors appears to be far from an affirmative decision on expansion. Deputy Commissioner Bill Daly said "The Board hasn't even determined what next steps, if any, it should entertain with respect to expansion generally." However, Foley and his supporting group continue to lobby for a decision from the NHL that could come as early as September of this year.
Why this matters for Las Vegas resorts investors
In 2014, gambling revenue made up only about one-third of the total tourism economy of Las Vegas, its lowest level in recorded history. For investors betting on continued growth in Las Vegas, gambling alone will not drive future growth, but instead it will be the entire nongaming resort economy.
MGM is on the forefront of this nongaming growth, with 27% of all Vegas hotel rooms and more convention space than any other company. With the addition of this arena, MGM's convention use will grow even more. While the arena is being built regardless of the NHL's decision, a pro hockey team would boost the payback period for this arena and offer a nice reason to remain bullish on MGM and Las Vegas' growth.