As Las Vegas landmarks like the Mirage and Tropicana prepare for their respective exits, tourists and visitors to Sin City looking for lodgings also prepare for more expensive prices, as they vie for the best rooms in the Strip, especially during peak times like weekends and holidays.

Las Vegas is bracing for an increase in hotel room rates as two major resorts, the Tropicana and The Mirage, are set to close. But the impending closures, while bringing a sense of sadness, are also anticipated to benefit other casinos along the Strip and create investment opportunities, according to industry analysts.

The Mirage will shut down later this month for an extensive multibillion-dollar transformation into a Hard Rock Hotel, a process that will temporarily take thousands of rooms off the market. In the meantime, Tropicana, which closed its doors in April, has already removed a grand total of 1,467 rooms from the Strip's inventory. With The Mirage’s impending closure on July 17, a whopping 3,044 rooms will also be unavailable for several years. Hard Rock International plans to overhaul The Mirage, originally developed by Steve Wynn in the late 80s, into a themed rock 'n' roll resort featuring a hotel with the iconic guitar shape.

John DeCree, a gaming analyst at CBRE Equity Research, predicts that the removal of close to 5,000 rooms will significantly benefit other Strip operators, particularly Caesars Entertainment and MGM Resorts. He explains further that with "more customers chasing fewer rooms," room rates are expected to rise.

Positive prospects for the Las Vegas strip amid closures

Tropicana's closure is permanent, as the site is being cleared for a possible Major League Baseball stadium. The Mirage's rooms will eventually return to the market around spring 2027, following the completion of Hard Rock’s renovations. In the meantime, the reduced room supply is likely to boost business for other casino resorts and hotels on the Strip.

DeCree notes that while the Tropicana's closure may impact some properties, the displacement of demand from The Mirage is substantial enough to affect all operators on the Strip. As a matter of fact, in the previous year alone, The Mirage's rooms produced almost $600 million in profit for MGM Resorts, with over 1 million inhabited room nights.

But despite strong recent quarterly performances and record gaming revenues from publicly traded casino companies, investors remain cautious. DeCree points out that even with new room inventory from the openings of Resorts World in 2021 as well as Fontainebleau in 2023, daily room rates have carried on rising, and the levels of occupancy have yet to reach pre-pandemic numbers from 2019.

With a robust event calendar and ongoing recovery in international travel and convention demand, we expect second-quarter 2024 earnings for the Strip to meet or at least slightly exceed expectations. The significant reduction in room supply could lead to conservative forward estimates, potentially boosting investor confidence, DeCree elaborates.

Investment opportunities in Las Vegas

DeCree believes that the contraction of room availability on the Strip could lead to stronger earnings for casino companies like Caesars, MGM, Wynn Resorts, and Golden Entertainment, which also owns and runs The Strat.

Due to a busy schedule of events and conventions, the mid-tier guest rooms at Caesars and MGM properties are often booked solid months in advance. DeCree suggests that less-popular resorts, such as the Sahara and The Strat, might benefit from the overflow of bookings that would have otherwise gone to The Mirage or Tropicana.

DeCree concluded that there are likely limits to how many additional room nights MGM and Caesars can accommodate, especially on the weekends and during peak events. This scenario could well present an opportunity for properties that are under-occupied, like The Strat, to see both higher occupancy and increased spending from guests.

As the landscape of Las Vegas’s hotel industry shifts with these two significant closures, one permanent and one temporary, the remaining resorts on the Strip could capitalize on the increased demand and potential rise in room rates. As we speak, investors and operators alike are closely monitoring how these changes will unfold in the coming years.