As Las Vegas looks to double down on sports driving tourism to the city, its hopes for a long-sought NBA expansion franchise may have to wait longer than expected and a relocation can’t be ruled out if the league doesn’t expand beyond 30 teams, according to Steve Hill, CEO of the Las Vegas Convention and Visitors Authority.
Hill spoke recently at The Orleans to the CCIM Southern Nevada chapter, a group of commercial real estate agents about the city’s ongoing visitation decline and was asked about the latest with the NBA.
Las Vegas and Seattle are expected to be at the top of the list when the NBA expands. When league officials were in Las Vegas for the NBA Summer League in July it requested its Board of Governors carry out an in-depth analysis of expansion.
“It’s up to the owners ultimately and of the 30 owners you need 23 or 24 to approve the expansion,” Hill said. “Their calculus is largely that we get X amount of money from our media deal, and we’re either going to split it 30 ways or 32 ways. If they split it 32 ways, the folks who buy a franchise are going to have to pay it out of that so it doesn’t dilute the amount of money they make.”
Hill said the cost of acquiring an expansion franchise is “astronomical” with the projection of at least $6 billion for the right to own a team in Las Vegas.
“It might take more than that to get owners to vote for that expansion,” Hill said. “If that doesn’t work, is there a chance that a team moves here? I think yes. Las Vegas is a very attractive market. We’re not a big media market, but the global attraction — that is Las Vegas — the NBA generally feels the city needs to be a part of the league. We’re a basketball city, and we have a great relationship with them so one way or another an NBA team gets here.”
Hill highlighted three groups that want to bring an NBA team to Las Vegas starting with Golden Knights owner Bill Foley who would put them in T-Mobile Arena, which would need to be upgraded with a significant investment.
“I know everybody involved is willing to do that there,” Hill said.
Fenway Sports and LeBron James are part of a second group with former Los Angeles Laker star Magic Johnson part of a third group. He said it won’t be as quick a decision as expected without giving a timeline.
“Those are very credible names,” Hill said. “You can’t get better basketball royalty right now than LeBron James and Magic Johnson. And Shaquille O’Neal is probably part of one of those efforts. I think it’s a real possibility (to get a team), but I think it’s going to take a little bit longer than we had originally anticipated.”
The efforts to bring an NBA team to Las Vegas took a hit when the Oak View Group pulled out of building a $1 billion arena south of the Strip across from the Las Vegas South Premium Outlets shopping center. Its CEO, Tim Leiweke, recently stepped down in controversy when he was indicted on bid-rigging charges involving the arena built at the University of Texas. LVXP has announced plans to build an arena on the north end of the Strip where previous efforts by others have failed to yield results.
Hill told the audience that he expects visitation, which is down 6.5 percent for the year, should continue to see declines until at least the fall and should rebound in 2026. People are putting off decisions because of their finances, he said.
“Visitation is down about 7ish percent and ADR (average daily room rates) are also down and revenue per room is down 14 percent,” Hill said. “That’s the largest drop we’ve seen year over year, month over month this century other than in a crisis (such as Sept. 11 terrorist attacks, the pandemic and Great Recession). The top of the market is still doing fine and not having any difficulty, but folks around the country are concerned about their jobs and their financial situation causing them to hesitate.”
When asked about casino deals, Hill said properties are targeting the “price-sensitive audience or consumer” and cited the Sahara eliminating resort fees for the summer.
“We are not seeing any problem at the top of the market,” Hill said. “I don’t know how deep that goes but it’s probably the top third. There are some concerns in the middle third and some action on the part of the customers. Where the 7 percent drop in visitation is at the lower end of the financial spectrum. The properties that target that are probably going to start responding more frequently than they have.”
Because higher-end properties are doing well over the last year-and-a-half, Hill said that has masked what’s happening in Las Vegas at lower levels of the marketplace.
“If you look at occupancy, for example, and between the higher-end properties on the Strip, they are still way into the 90s percent (in occupancy) and it’s down in the spectrum and off the Strip they have been in the 70s percent and so we’ve haven’t seen it in the city’s numbers until recently. But as the bottom of the market has suffered a little more, you will start to see the numbers happen that affect the entire city and you’ll start to see some of the properties that have six, eight or nine hotel resorts manage them differently depending on who their target audience is.”
In light of that, the LVCVA has focused its message on how Las Vegas has something to offer in every price range. No matter that tier, anyone can come here and have a good time, he said. It has also marketed Las Vegas on travel sights to lure visitors.
“Our job is to drive demand to the extent it exceeds supply,” Hill said. “The health of Las Vegas as a community and job market is partially predicated on the healthy growth of the tourism industry, and we have been flat. It is exceptionally difficult now to make a major integrated resort pencil right now. It’s going to be $2 million a key to be competitive in Las Vegas and with interest rates that hardly makes sense. We feel responsible to drive demand to cause construction.”
Las Vegas continues to recover from the pandemic, Hill said. It had 88.5 percent occupancy in 2019, and that has since dropped to 85 percent and below.
“A part of that was a decision by our hotel partners who thought it was better from a customer-service standpoint to have a little less occupancy, and it was also better financially for them to raise average daily rates,” Hill said. “That’s worked really well. If you look back at our average daily rates and scale back from 2019, we’re up 32 percent from that. We were almost exactly the national average in 2019, and today the national average is 22 percent. I don’t know if average daily rates are what is causing concern for some customers, but we have taken the opportunity to maximize ADR and not visitation.”
As to why he’s optimistic for a better showing in the fall and in 2026, Hill cited the fight between Canelo Alvarez and Terence Crawford at Allegiant Stadium on Sept. 13. The Raiders host the Los Angeles Chargers on Monday night football to close out the weekend.
“There’s no event that creates the energy that boxing does,” Hill said. “That weekend is going to be huge. There is no place that provides the escape and opportunity for celebration with the intensity that Las Vegas does. What you can do in three days here you can’t do the same way elsewhere. For the most part, the proliferation of gaming has been helpful for Las Vegas and on the sports scene it has for sure.”
