Las Vegas room rates to rise after Mirage, Tropicana close

Published on: July 2, 2024, 09:32h.

Last updated on: July 2, 2024, 09:32h.

The nightly rate for a Las Vegas hotel room is expected to become more expensive following the closure of the Tropicana and the Mirage.

Las Vegas Mirage Tropicana Room Rates — The Mirage’s closure at the end of the month for a multibillion-dollar renovation into Hard Rock should benefit other Las Vegas Strip casinos in the meantime. That could provide buying opportunities for shareholders, according to a gaming industry analyst. (Image: Tripadvisor)

The Tropicana closed in April, and the Strip’s room count has dropped by 1,467. The Mirage is scheduled to close July 17 and put an additional 3,044 rooms out of service for several years while Hard Rock International transforms the integrated resort built by Steve Wynn in the late 1980s into a rock-and-roll destination, headlined by a guitar-shaped hotel.

John DeCree of CBRE Equity Research said the elimination of the 4,511 rooms is a clear benefit to all Strip operators, but MGM Resorts and Caesars Entertainment will likely be the biggest beneficiaries. The gaming industry analyst also predicts that with “more guests looking for fewer rooms,” rates will rise.

Optimistic outlook

The Tropicana’s roughly 1,500 hotel rooms are off the market for good as the resort is being demolished to eventually make way for an MLB stadium. The Mirage’s inventory of rooms and others will return, but not until spring 2027, once Hard Rock completes its property renovation.

In the meantime, a decline in the number of rooms is good news for Strip casino resorts.

While Tropicana may be significant for some properties, the demand displaced by The Mirage’s closure is significant enough to potentially shake things up for all Strip operators,” DeCree wrote.

The Mirage rooms generated nearly $600 million in revenue on more than 1 million occupied room nights last year for MGM Resorts.

Investor sentiment toward Strip casino companies remains weak, DeCree said, despite relatively strong quarterly performance in recent months and record gaming revenue from publicly traded players. Despite room additions from the openings of Resorts World in 2021 and Fontainebleau last year, daily rates have continued to rise while occupancy levels have yet to return to 2019 levels.

“With the help of a strong event calendar and the continued recovery in conventions and international demand, we expect Strip earnings in the second quarter of 2024 to be in line with or slightly above expectations, and with a tangible catalyst from shrinking physical supply on the Strip, we believe forward-looking estimates may be too conservative, which could help improve investor sentiment,” DeCree explained.

Buy, buy, buy

DeCree believes that the shrinking number of rooms on the Las Vegas Strip could translate into better results for MGM, Caesars, Wynn Resorts and Golden Entertainment, the latter of which owns and operates The Strat. DeCree gave each company a “buy” rating.

With mid-range rooms at MGM and Caesars booked months in advance due to a busy calendar of events and conventions, DeCree believes less popular properties like The Strat and Sahara could capture some of the late bookings that might have gone to Tropicana or Mirage. The Meruelo Group privately owns Sahara.

“There are likely limits to the number of incremental room nights these two operators (MGM, Caesars) could capture, particularly during peak events and weekends. This could create an opportunity for underoccupied assets like The Strat to benefit from both higher occupancy and a higher-spending average guest,” DeCree concluded.