Rooms coming, but who will stay?

Despite historic visitation drops and the Strip’s worst gaming revenue declines since regulators began keeping records, more hotel rooms are on the way.

Some 15,600 rooms are under construction in Las Vegas. The figure, however, includes 3,800 rooms at the bankrupt $2.9 billion Fontainebleau, which stopped construction and isn’t expected to restart anytime soon.

The largest collection, 6,300 rooms, will open in December at the $8.5 billion CityCenter.

Even troubled downtown, thanks to a $200 million tower at the Golden Nugget, will see another 500 hotel rooms by year’s end.

So where are the guests to fill these rooms coming from?

That’s the question posed by Janney Montgomery Scott gaming analyst Brian McGill.

His biggest concern surrounds airline capacity into Las Vegas. The average daily arriving number of seats into McCarran International Airport has fell almost 18 percent in the past two years. Airlines, notably US Airways, have eliminated flights in answer to the recession.

McGill, in a note to investors, estimates that airlines need to restore 10 percent of the lost flights to help Las Vegas fill the new rooms. Fat chance of that happening.

“The new supply, without an increase in airline capacity, will not allow for the required number of visitors,” McGill said.

The Strip, he said, will become more dependent on drive-in customers if the airlines don’t respond.

According to the Las Vegas Convention and Visitors Authority, drive-in tourists spend about 15 percent less than airline customers.

“We expect this to continue to impact profitability across the Strip,” McGill said.

Other travel means, such as a high-speed train between Southern California and Las Vegas, are still years away. McGill said regaining lost airline capacity is key to the Strip’s survival as the number of rooms grows in 2010.

Until that happens, the analyst predicts low hotel rates on the Strip will continue into next year while cash flow will be “muted” over the next few years.

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Speaking of CityCenter, Oppenheimer gaming analyst David Katz believes Wynn Las Vegas and Encore will be hurt by the project’s opening. Macau, however, will soften the blow.

Katz said the Macau market is getting stronger. Gaming revenues unofficially rose 17 percent in August. Wynn Macau will benefit when the $650 million Encore at Wynn Macau opens next year, adding 400 suites and 100 gambling tables to the combined properties.

A planned initial public offering through the Hong Kong Stock Exchange will also further strengthen the company’s balance sheet.

Katz’s opinion “is driven by our view that the performance in Macau can more than offset the weakness in Las Vegas.”

Howard Stutz’s Inside Gaming column appears Sundays. E-mail him at hstutz@reviewjournal.com or call 702-477-3871. He blogs at lvrj.com/blogs/stutz.