The Las Vegas strip will experience the next innovation in an unlikely form - shared accommodations.
It's a less expensive, enhanced social experience which is new, cool and different. And it will perform as well as, if not better than, existing hotel operators in Las Vegas on the Las Vegas Boulevard Strip, as it relates to occupancy rates, which currently run at 86.8% on average.
A 5 acre parcel on the Las Vegas Boulevard has been identified and the owner has been contacted.
A plan has been outlined to develop the land to build, operate and potentially lease or sublease a 150,000 square foot hospitality concept called Hostel Village providing shared accommodations as well as micro and capsule hotel room options. Guest profiles who will find this type of accommodation appealing is changing and the number is growing every day all over the world. What once was a concept for youth travelers on a budget and extreme travel enthusiasts is now appealing to professionals traveling for business, married couples new and old, families as well as young active singles traveling in groups both internationally and domestically.
The plan calls for 400 rooms offering 2,400 beds. To reach full capacity the project will have to capture 292,000 guests annually which represent a .7% market share of the current 41m visitors Las Vegas sees annually.
Today there are approximately 150,000 hotel rooms in Las Vegas. Adding 2,400 beds or 400 rooms to the market will increase supply by approximately 1.6% and .2% respectively.
Las Vegas is currently operating at an ADR (Average Daily Rate) of $145. Pricing for existing hostel operators located in the downtown area are currently at $14.5 per bed on average. Offering similar accommodation types on the Las Vegas Boulevard with modern designs should support a premium. The supply will be limited and demand is expected to be high resulting in a higher RevPAB. For modeling purposes we used a $25 RevPAB.
Each bed can be delivered for under $15,000. Delivery is based on wood construction with a maximum height of four stories. This number is based on an $18m land acquisition cost with development, construction and financing fees, costs and rates accounting for approximately $25m.
Gross operating income is forecasted to be approximately $22m a year. The cost to operate is far less than traditional hotels. The cost to provide one bed night is approximately $8. This delivers an average net profit of 68% with COGS of 32% delivering nearly $15m of free cash flow annually. A collective marketing agreement with companies offering tours, attractions, nightclubs, restaurants, shows and casinos can increase gross revenue to $52m with a net revenue of $30m by leveraging the 292,000 annual guests and 2,400 guests on property nightly.
We could operate the whole facility or offer to carve off build-to-suit triple net leases with 25 year terms at $48 per square foot per year to select brand operators with strong financials. Interest in such opportunities have been confirmed by multiple operators in Europe who have existing plans and budgets to enter the U.S. market and see this as an easy point of entry for Las Vegas on the Las Vegas Boulevard Strip.
Expected consumer demand for the new product type and increased interest from North American, Asian, Central American and South American hostels and micro/capsule hotel operators could spark a wave of activity first on south Las Vegas Boulevard, later as infill and ultimately within resort hotel and casino footprints as a means to win back guests.
Uber – airbnb – Expedia / They each managed to enter existing markets whereby disrupting the industry, finding traction with consumers and gaining momentum daily as awareness and visibility increases. I believe a similar opportunity exists for shared accommodation offering in Las Vegas.
I can move this idea forward with the help of a few willing participants.
Contact me for more information.
Patterns and trends on occupancy and RevPAB have been identified and experienced by a longtime Las Vegas Hostel owner and operator. Success rate considered to be high by interested international and North American operators surveyed.
P.S. Early valuations of the completed project come in at 9 figures.
Add the following to google alerts and open yourself up to a steady flow of information.