Downtown Las Vegas- An Outside Bet

Las Vegas. The name alone invokes images of the famous Strip, featuring unique hotel brands of MGM, Caesars Palace, The Wynn and The Bellagio, with its iconic dancing fountain. However, about 4 miles north of the Strip, sits Fremont Street, the original Las Vegas Glitter Gulch. This once decaying relic is in the midst of a remarkable regeneration project and is pulling many tourists, locals and businesses away from more established destinations.

Welcome To Fabulous Las Vegas

Fremont Street is as old as Las Vegas, with the 1906 building of The Hotel Nevada (today’s Golden Gate) leading the way for integrated gambling and lodging. The following decades saw the likes of Binion’s Horseshoe, The Golden Nugget, The California and El Cortez decorate the area with bright flashing neon. However, as land became scarce the new larger resorts left Fremont and mushroomed down the Highway 91, known as today’s Strip.

The Desert Inn (now Wynn) opened in 1950, The Sands (now The Venetian) in 1952, Caesars Palace opened in 1966, The MGM Grand (now Ballys) opened as the largest hotel in the world in 1973. Development stopped until Steve Wynn opened the Mirage in 1989, which sparked a building boom, ending some 20 years later with over 20 new resorts on The Strip containing over 60,000 bedrooms.

This development on The Strip was unprecedented, and today 15 of the 25 largest hotels in the world are located on a single street, with the most recent completion, MGM’s City Center, costing a reported $8.4bn.

For the legacy properties on Fremont Street, life was somewhat different, and when the 2007 recession hit Las Vegas, Downtown suffered disproportionately, with a 21.27% decline in gaming revenues between 2007-2012, compared to 0.16% on The Strip.[1]

When I began my research into Las Vegas casino resort operators in 2010, the main focus was on The Strip resorts, but more recently, my attention has been drawn to the events occurring Downtown Las Vegas, as this area is undergoing a most interesting revival.

As recently as 2008, Downtown was seen as a memorial to past glories and a niche attraction for low rollers and gaming buffs. Attempts to stimulate tourism led from the City Hall had failed. Hotel doors remained shut, tourists stayed away and the $100m Neonopolis, once seen as the saviour of Downtown, lay practically vacant.

At the western end of Fremont Street, the Plaza, owned by Tamares, a recent investor in 61 acres of Downtown, saw their investment eroding, as occupancy was falling and room inventory urgently required modernising.  At the east end, former Mob owned El Cortez, sat as a smoky bookend, with a no-go area and a number of non-descript resorts limply competing for a diminishing dollar sandwiched between.

However, the opportunistic actions of occupiers, investors and creative businesses have led to the most interesting of grassroots regenerations.

Phase One – Fresh Ideas

Alexandra Epstein is a daughter of Las Vegas, having grown up in the Downtown casino environment where her father operated the El Cortez. In 2009, on moving into the family business, she began by engaging local designers to renovate some of the El Cortez’ more tired hotel rooms, which led to broader redevelopment goals, not just in the property, but in the community. Dead space in El Cortez’ back office was re-launched as an arts collective – Emergency Arts, which brought independent creative professionals together in a single building, creating an environment of vibrancy, innovation and a degree of style that corporate Las Vegas could not replicate.

This seemingly small move of creating an incubator to develop grassroots level creative talent was not immediately obvious to a town focused on gambling; typically creatives don’t have money to gamble, but this formed the cornerstone of what was to follow.

Phase Two – External Events

Whilst schadenfreude is not always pleasurable, when the $3b Fontainebleau Las Vegas project fell into bankruptcy, for the Plaza the opportunity to purchase five star inventory for cents in the dollar was too good to miss. For a development cost of  $35m, (under a quarter of the cost of MGM’s new nightclub) The Plaza closed in 2010, reopening in 2011 as a fully modernised resort, with a refit attracting locals and tourists alike.

Fearing for the future of his Detroit based automobile parts business, Derek Stevens, sought to diversify his business interests, and as a regular visitor to Las Vegas casinos, he thought he’d try his hand at owning one! The Stevens brothers had previously invested in The Golden Gate, Fremont Street’s oldest casino, but in acquiring Fitzgerald’s in 2011, Derek led a full-scale redevelopment and rebranding of the property. Out were the lucky charms beloved by few and instead came a high energy, rock music playing, full scale party casino, with scantily clad dancing dealers, 24 hour sports on multiple TVs and an environment more akin to a nightclub than your local Gala!

Within three years, Downtown had gone from unloved, to having a sense of community provided by the artists, many of whom had moved nearby, quality room product in several properties and a fresh vibrant casino, different from anything else in town.

Phase Three – Consolidation

Downtown once again had a vibe. Whether it was this, or the cheap land that attracted Tony Hsieh, CEO of Zappos, to decide to relocate his business from Los Angeles to Downtown Las Vegas in 2011, Hsieh is very much part of the future.  In addition to relocating Zappos, he has created the Downtown Project, investing $200m in property, $50m in start-ups, $50m in education programmes and $50m in hi-tech businesses. Hsieh is seeking to increase residential density in a once transient community, creating an environment of co-working, cross-pollination of ideas and innovation; a model micro-society where work, life and play are all integrated.

Where once Las Vegas was famed for implosions, Downtown properties are being painstakingly restored. The City of Las Vegas has invested alongside the private sector in The Smith Centre for the Performing Arts and the former Courthouse is now the Mob Museum. Both opened in 2012.

Many of the original neon signs have been restored as public art and in keeping with the history, all new openings must include neon in their signage. The prominence of such ornate and colourful signs reminds any visitor that this is still Las Vegas and it is proud of it’s heritage.

Most weekends, Downtown has street festivals, featuring art, food and music, all safe and focused on families who once feared to drive through the area.

Once derelict retail units are highly in demand as bars and restaurants, many with strong independent ownership. Each opening generates great local excitement, which was once the preserve for Strip resort openings. Blogs and magazines about Fremont Street bars are now gaining prominence and tourists are leaving The Strip and venturing – even staying – Downtown, seeking to buy into this new and exciting atmosphere.

But the proof of Downtown’s revival is in the numbers; between 2011 and 2012, gaming revenues reversed their losing streak and grew by 2.51% in Downtown Las Vegas, compared to a 2.28% increase on The Strip, the first time Downtown’s gaming revenues have grown as a larger percentage than The Strip in many years.

In February 2013, the renovated El Cortez was listed on the US National Register of Historic Places. Today, as it’s Executive Vice-President, Alex Epstein has completed the refurbishment and repositioning of her family’s property and been the catalyst in the renewal of Downtown Las Vegas. At only 27, she is already gaining national attention as one of the brightest young leaders in a city that prizes creativity and exports innovation.

With Epstein’s vision, and Tamares, Derek Stevens and Tony Hsieh all investing in the area, Downtown Las Vegas may well be a safe outside bet in a city where the odds are usually against the punter.

(Originally Published, April 2013)Image

[1] Source: UNLV Center For Gaming Research.


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