Investing in Las Vegas Is About More Than Games of Chance

By Bradley Seth

Las Vegas has been evolving over the past few years, and the changes it's undergoing have had a serious impact on companies like MGM Resorts International and changed the landscape for Las Vegas industry investors.

Have you noticed how we no longer say "gambling" companies? Now we only talking about the "gaming" industry. Gambling conjures up negative images, whereas gaming is merely an entertainment service for vacationing families. This change is more than just wording: According to data compiled by the Las Vegas Convention and Visitors Authority's (LVCVA), only one-third of the Las Vegas resort economy's revenue was made up of gambling revenue in 2014, its lowest percent of overall revenue in recorded history.

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This change has been good for the rebranding of Las Vegas as a broader vacation destination, and has also created major opportunities for the companies working there. As Vegas continues to "re-invent" itself, its new image as a convention and business meeting hot spot could be good for long-term investors.

Convention space growsWith nearly 6,000 conventions and business meetings held in Las Vegas in 2014, hosting over 5 million convention attendees, Las Vegas has proven an increasingly good meeting place. With even more conventions and meetings planned for 2015, companies are building new and upgraded convention space to host the influx of convention attendees.

MGM is already the industry leaderin Las Vegas based on the total square feet of convention space available. MGM is upgrading itsMandalay Bay Convention Center, which currently has 1.7 million square feet of meetingand convention space, by adding anadditional 350,000 square feet of space -- along with otheramenities -- by early 2016. With this additional space, MGM will further its lead over competitors in the amount of in convention space for rent.

Las Vegas means businessLVCVA's board of directors has been discussing the need for a business district within the city, and recently approved a contract to make that happen. The board agreed to purchase and demolish the historic Riviera Hotel & Casino. The resulting 26-acre plot will be the start of the new Las Vegas Global Business District. A set completion goal date hasn't been published yet, but long term this could be a major boost for Las Vegas.

This district is another reason to believe that more business, more companies, and more organizations will be using Las Vegas as a meeting hub. And when that happens, local hotels will benefit from the increased total number of Vegas visitors, which the LVCVA is trying to push to 45 million a year within the next few years, up from 41 million in 2014.

A rendered view of what the arena is expected to look like when it opens. Photo:

The best way to play this reinventionMGM is the best play on both convention space growth and hotel revenue. Other than its Mandalay Bay convention center, MGM is also teaming up withAnschutz Entertainment Group, or AEG, to build a massivemulti-purpose arena near the strip. When this 20,000-seat arena opens, slated for 2016, it will be able to serve as a place for conventions, large meetings, concerts, sporting events, and more.

Another reason to be bullish on MGM Resorts is its hotel revenue growth in Las Vegas. MGM owns and operates approximately 27% of all hotel rooms in the city, more than any other single company. It's also been growing its revenue per available room (RevPAR) at its Vegas properties steadily. In 2014, MGM saw revenue per available room increase 8% at its Las Vegas properties.With the rise in business and convention attendees, it's likely that hotel revenues will grow even more in the years to come.

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Bradley Seth McNew owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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