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Vegas Boom Sees No End

"Whenever Wynn opens a new property, it does increase demand for visitation," said Gary Thompson, a spokesman at Harrah's Entertainment (HET), which is in the process of acquiring Caesars Entertainment (CZR - Get Report) in a deal that will create the world's biggest casino company.

But a new supply of hotel rooms by itself is not enough, said Feldman and Thompson. The additions must be of high quality and come with new attractions. History reveals just slapping up a new hotel tower without new restaurants, retail shops or shows doesn't always boost demand.

Feldman said the Luxor, a Mandalay resort, roughly doubled its rooms in the 1990s but failed to offer significant new attractions, with initially disappointing results. "If the lesson hadn't been learned by then, it was absolutely learned at that moment," he said. "This is not about inventory. It's about attractions."

A more recent example suggests fresh supply is being gobbled up without hurting occupancy or room rates.

MGM Mirage's Bellagio opened its 928-room Spa Tower in late December, increasing the Bellagio's capacity by roughly 30%. Even so, occupancy for the entire resort has risen, Feldman said.

The company won't comment about the effect on room rates. But a weekly survey of Las Vegas room rates by Merrill Lynch analysts suggests they have remained firm, despite the expansion.

Midweek rates at the Bellagio have increased 7% on average from a year before, while weekend rates are up 34% year over year in the two months since the Spa Tower opened, Merrill analyst David Anders wrote in a research note. (Merrill Lynch does and seeks to do business with companies covered in its research reports.)

"We find it very encouraging that large assets can increase by 30% with no diminution in pricing," wrote Merrill's Anders.

MGM Mirage's Feldman pointed out that the Spa Tower came with plenty of attractions, including an elaborate spa, the Sensi restaurant and expanded convention space that will allow it to host larger group events.

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