CityCenter has now been open for about 18 months.
This time around, Jeff looks at how things are going for MGM with their gigantic project.
While CityCenter was being built I was conflicted about its design and prospects. I thought the project looked very cool but questioned whether its design would appeal to Las Vegas visitors. I wondered whether the money that could be made on condominium sales justified the long-term loss of control over the project footprint that would accompany thousands of property owners.
CityCenter has now been open almost a year-and-a-half and I'd like to use this column to reassess the Strip's biggest project.
First, let's take a look at the elements that MGM Mirage (now MGM Resorts International) decided to include in CityCenter: A resort casino (Aria), a condo-hotel (Vdara), two boutique hotels that were also to have condominiums (Mandarin Oriental and Harmon), two condominium buildings (Veer Towers) and an upscale retail center (Crystals).
A casino resort was an obvious keystone for the project and MGM decided to build a big one, Aria, which opened with more than 4,000 rooms. Aria's room rates have been below those of its primary competitors, but the property will be around for a long time and other resorts (Venetian and Palms come to mind) were able to significantly ramp up room rates within a couple of years after opening. Reviews have been mixed for Aria's dining options and tilted negative toward its show, "Viva Elvis." The property has a big and well-designed parking garage, although entry and exit is more confusing than competing garages at Bellagio, Wynn and Encore. In total, I think Aria is a beautiful resort and I love its lobby and its art. I also like its rooms, interiors and casino and believe the public's appreciation of Aria will increase, especially once weaker elements are improved or replaced.
MGM decided to bet big on retail, building a big and architecturally dramatic center and giving Crystals its premier location in the heart of its Strip frontage. (I'll address the decision to place Crystals in its spot on the Strip later.) Although most of the retail leasing took place after the economy plunged into recession, MGM Resorts successfully landed many of the world's most prestigious brands. Many critics seem to take delight in slamming the lack of foot traffic in Crystals, but I'm not sure that is such a bad thing. The Forum Shops, Grand Canal Shoppes, Fashion Show and Via Bellagio all have lots of foot traffic, but those retail hubs have different uses and/or store mixes. As long as Crystals retailers are happy with the amount and quality of prospective customers they are getting -- and that's my understanding -- then it's tough to criticize MGM for its focus on upscale retail.
Building separate boutique hotels and a condo-hotel was a questionable decision, I believe. Mandalay Bay had its Four Seasons hotel-within-a-hotel from the start and added its THE hotel tower, but both are part of the same resort footprint. The Mandarin Oriental, Vdara and, if it had been completed, Harmon, are separate hotels (more like the Signature towers at MGM Grand or Palms Place) and I think MGM Resorts overestimated the public's desire to come to Las Vegas to stay at non-casino hotels. Connecting those hotel properties closely to Aria would have been a better move. Indoor and outdoor easy access to the main resort's features would have been a better decision, as far as I'm concerned.
CityCenter's residential components have clearly failed. The billions of dollars MGM spent to build the Veer Towers, Vdara and the top half of Mandarin Oriental will likely take many years to recoup. Sales of Vdara's condo-hotel units (condominium units that would have been owned by unit buyers but rented to Vdara visitors, similar to the way MGM Grand Signature units are owned and rented) were so anemic that MGM Resorts decided to treat Vdara as a non-gaming hotel. The company may eventually decide to sell Vdara units. The Harmon, obviously, was the biggest catastrophe, and it will probably take years before MGM Resorts collects -- if it does -- on its lawsuit against Perini Building Co. over the Harmon's construction failures.
The decision to build condominiums was a mistake, I believe. I remember writing before ground was broken on CityCenter, Fontainebleau and Echelon that I thought Bill Boyd was making a wise decision not to build condominiums at Echelon. Steve Wynn told me back then that condos took away a developer's control over the property footprint, reminding me that Las Vegas resorts are eventually imploded to make way for new ones. Boyd explained his decision by saying that he just wasn't convinced there were that many affluent people who wanted to own a residence on the Strip. I think Boyd and Wynn were right and that Terry Lanni, Jim Murren, Glenn Schaeffer, George Maloof and Sheldon Adelson were wrong to bet on condominium development, and doubly wrong given their bad timing.
That said, I like the Mandarin Oriental brand and I believe adding a scaled down MO closer to Aria would have been a good decision. The same goes for the Harmon. A small boutique hotel run by the Light Group could have been a positive feature if it were connected more closely to Aria. As for Vdara, I've long questioned the whole condo-hotel idea. The concept has always seemed like a con game, suckering unit buyers into thinking that room demand would be strong enough to generate sufficient room revenue and unit appreciation to make the purchases a good investment. I always thought that some people might like to live in a Strip condo and maybe more would like a unit as a second or third home. But I never could figure out why people would want to buy a condo-hotel unit to have a resort company rent out to others. The hotel company would always have more incentive to rent out its own rooms. So, in my opinion, building Vdara was a terrible mistake. (Buying a Vdara unit would be an even bigger mistake.)
As for CityCenter's location, I think it is a great one. The line of resorts stretching from Mirage to Aria (with Caesars Palace, Bellagio and Cosmopolitan the meat in the sandwich) is only matched by the Encore to Venetian wall (with Wynn and Palazzo at its heart). While CityCenter does not have direct access to an Interstate 15 exit road, it has direct access to the west of I-15, by way of Harmon Avenue.
Now that I've evaluated CityCenter's components and location, let's take a look at its design.
CityCenter's architecture is the most controversial element of the project. I loved the way it looked as it was being built and I love the way most of it looks now, but I have long questioned (way before it opened) whether its sophisticated architecture was the kind of architecture likely to capture the attention of Las Vegas visitors. Aria, I think, has a cool look that would be more impressive if it stood alone rather than surrounded by so many other towers. Mandarin Oriental, Vdara and the Veer Towers are also interesting buildings that I think are great additions to our city, but they not only surround Aria -- a problem for the project's financial dynamo -- but they are the kind of modern buildings one might find in any major city. People come to Las Vegas as an escape, and if they come for architecture it is for our whimsical buildings, not to appreciate urban modernism.
The Harmon has a cool, blue look that might have been a plus for the project but its dead, half-finished state is obviously a major blight on the project now, as it sits on the Stripfront corner of the project closest to the city's high-end competition. The Harmon disaster added to CityCenter's design problem, devastating the project's streetscape. CityCenter's Strip frontage would have looked much cooler had Harmon been fully built, with Mandarin Oriental and Harmon, two hybrid condominium-hotels, framing the dramatic Crystals retail plaza.
Personally, I believe Crystals is a beautiful structure. Too many journalists have been tossing the word "iconic" around lately -- Sahara? Tropicana? Give me a break -- but Crystals' architecture is beautiful day and night. I think the look of Crystals is iconic and the big question is whether its stunning appearance is valuable enough to offset MGM's questionable decision to place Aria at the rear of its CityCenter footprint. As I've had time to consider Crystals and MGM's decision to place it front and center, I've come to acknowledge one advantage to placing the retail center and its dramatic architecture where it is: The power of its brands. For Las Vegas visitors surveying the Strip, it is hard to underestimate the look and power of the Crystals retailers. Each of the stores are big and the brands facing Las Vegas Boulevard send a clear message about the mall and the entire development: Gucci, Tiffany & Co., Tom Ford, Louis Vuitton and Prada. I think the Stripfront brand and store placement impress international visitors in particular.
That said, no other resort gives such prominent placement to its retailers. Even the horribly designed Planet Hollywood (which opened as Aladdin v.2), which surrounded most of its casino with retail and made self-parkers walk by a couple of football fields worth of stores to get to its casino, gave most of its Stripfront to its casino (albeit elevated to a height forbidding to passersby). And there's a reason why most modern developers don't hide the casino resort behind a wall of retail -- the retail is an amenity, the casino and hotel are the centerpiece, the reasons for being. Some resorts -- even the newest ones -- still underestimate the core importance of the casino, emphasizing the hotel and its food and beverage offerings (cough, Cosmo, cough Venetian/Palazzo) but no one hides both the casino and hotel behind retail. So, while I love the Crystals stunning architecture, brilliant interior design and unmatched brand power, I believe the trade-off in hiding Aria was too great. Aria should have been on the Strip, perhaps with part of the Crystals and one of the boutique hotels.
Finally, I'm going to briefly address one of CityCenter's biggest problems, its financing and cost. Some of the aforementioned problems led to CityCenter's incredible $9 billion price tag. Skipping the building of Vdara and the Veer Towers and removing the condominium elements from the Mandarin Oriental and Harmon would have cut much of the cost. The remaining elements, a couple of boutique hotels and Crystals closely attached to the Aria resort, with the resort given the prime Stripfront location, might have cost more than a third less to build.
Thankfully for MGM the company was able to get Dubai World to buy half of the project (even more, really, when you consider that DW bought almost 10 percent of MGM Resorts stock). MGM had to fight some of its financiers (and Dubai World) to fulfill their commitments to finish building, and has steadily written down the value of the project since its opening in 2009.
Because of the drag from its residential component and continuing weakness in the U.S. economy it is hard to envision CityCenter being much of a positive for MGM Resorts in the near future. As I've written before, perhaps MGM can use CityCenter's lagging performance and Dubai World's impatience to entice the Gulf State's investment vehicle to make a second bad decision and sell its stake while times are bad. Then MGM could take double-sucker advantage of the Middle Eastern rubes: Sell CityCenter to them high and buy it back low. P.T Barnum would be proud.
-- Jeff Simpson, June 2011