The massive CityCenter project opening in Las Vegas this week boasts bragging rights that are big even by Sin City’s excessive standards.

For starters, the $8.5 billion, 67-acre residential, hotel, casino and retail development is the largest construction project in U.S. history. It’s being touted as the world’s largest green development.

And it will redefine Las Vegas’s famed Strip.

CityCenter also stands as a symbol of the extreme highs and lows the global economy has seen over the past few years. And, if the optimistic predictions hold, it may well become a symbol of recovery.

"Here is the thing that was so ambitious that it could only be planned in the boom times," said Alan Feldman, senior vice president of public affairs for MGM Mirage, which is developing CityCenter in partnership with Dubai World.

"It was the thing that was so ambitious that people questioned how it could possibly make it through the downturn, the thing that was so ambitious it could possibly drive the recovery."

MGM Mirage officials are the first to admit that if they could choose, they would not be opening the project at this point in time.

But, Feldman said, "It is much better to be opening now than it would have been a year ago. And the fact remains that these kinds of projects are not made for the next quarter, or the next month."

While Las Vegas hotel rates are down nearly 25% this year and visitor numbers are off nearly 5%, MGM Mirage President and CEO Jim Murren told investors in a recent conference call that the company’s data indicate visitor numbers are rising, and meetings business is getting back on track. Besides, he said, historically, Vegas has proven time and time again that new developments lure new visitors.

"The most significant development in this city’s history is about to open," he said. "We are cautiously optimistic for what lies ahead."

Not everyone shares his optimism.

Bill Thompson, a professor of public administration at the University of Nevada, Las Vegas, agreed that historically, new developments in Las Vegas "are a positive." But he was also quick to add: "That’s history. We are not in history. We are in 2009."

Thompson said the success of CityCenter would ultimately ride on the timing of the recovery.

"If we can hold our breath for a couple of years, it’s going to be a wonderful addition," he said. "The question is: How long can we hold our breath?"

Conceived in a boom time

Planning for CityCenter began in 2004, at the beginning of what would become one of the biggest building booms in hotel industry history.

MGM Mirage, the largest hotel and casino operator in Vegas, where its properties include the Mirage, the Bellagio, New York New York, Luxor and Mandalay Bay, began exploring options for what was then a 55-acre parcel it owned on the Strip between the Monte Carlo and Bellagio resorts.

It acquired 12 more acres and began developing what many see as the next iteration of Vegas: a high-end city within a city, more like Wynn and Encore than the themed types of resorts that had marked pre-Wynn development.

The project is anchored by Crystals, a retail district. It is surrounded by six large glass towers that include four hotels and high-rise condominiums.

More than just a collection of resorts and residences, MGM officials say, CityCenter is designed to be a "community."

"CityCenter bridges the vitality of Las Vegas with the experiences travelers seek when they visit great cities around the world," Bobby Baldwin, president and CEO of CityCenter, stated in a press release describing the project. Those experiences, he said, will include "spectacular architecture, culturally significant art, great public spaces, sophisticated hotels, unique restaurants and incredible amenities."

"It is an evolutionary destination that aims to transform Las Vegas as a new symbol at its core, like the Guggenheim in Bilbao, the Pompidou in Paris or the Sony Center in Berlin," Baldwin said.

The first part of CityCenter to open is the Vdara all-suite hotel and spa on Dec. 1. The 57-story hotel features 1,495 suites, all with complete kitchens; an 18,000-square-foot spa, fitness center and salon; conference facilities; and a "Sky Pool and Lounge" with views of the city.

On Dec. 3, the 500,000-square-foot Crystals retail and entertainment district opens. Retailers will include high-end jewelers and designers like Tiffany & Co., Hermes, Prada and Louis Vuitton, as well as a number of retailers opening their first locations in Las Vegas. Dining options will include "Desperate Housewives" star Eva Longoria Parker’s Beso restaurant.

The next day, the Mandarin Oriental opens. The 47-story, nongaming hotel and residences will include a spa, meetings space, dining and a pool.

The project’s flagship property, Aria Resort & Casino, opens Dec. 16. Aria is in a double-towered "crystalline building" that MGM promises will be "demonstrably different than anything that has preceded it."

Aria will feature more than 4,000 guestrooms, an 80,000-square-foot spa, 10 bars and lounges, a variety of restaurants and premium meetings space.

The rest of the project, the Harmon Hotel and Veer residences, is expected to open in late 2010.

CityCenter also will host a resident Cirque du Soleil production recalling the music of Elvis Presley as well as a fine art collection.

CityCenter is one of the world’s largest green developments. Aria and Vdara are the first Las Vegas hotels to achieve Gold certification under the U.S. Green Building Council’s Leadership in Energy and Environmental Design program.

Crystals also has received LEED Gold certification, making it the world’s largest retail district to achieve that level of recognition. And CityCenter’s remaining venues are poised to receive a combination of LEED Gold and Silver ratings.

A troubled gestation

As MGM Mirage and the city of Las Vegas gear up for a series of grand opening parties, it’s easy to forget that it wasn’t that long ago that CityCenter’s future was in doubt.

Last January, MGM Mirage announced it was scrapping the top floors of the Harmon Hotel in CityCenter because inspectors had found that inadequate rebar had been used in the building’s poured concrete.

The next month, with meetings travel, hotel rates and the global economy all in a seemingly endless free fall — and with credit for hotel construction essentially frozen — MGM and its CityCenter partner, Dubai World, appeared headed for a potentially devastating divorce.

In February, Dubai World sued MGM Mirage, demanding to be released from future payments for the project. The resulting legal battle threatened to shut down the development because of MGM’s high debt load and the ensuing doubts about its ability to secure the capital necessary to finish the project without its partner.

In its lawsuit, Dubai World claimed that costs had soared "significantly over budget, despite downsizing certain of the facilities. This has caused [Dubai World subsidiary] Infinity World to make capital contributions far in excess of the levels originally estimated by MGM."

Essentially, Dubai World said it was being asked to pay significantly more and would be getting less in return, amid uncertainty about MGM’s future.

MGM was able to cover its partner’s payments until the end of April, when the two patched up their differences and secured the financing necessary to keep the project on track.

The big question now is whether CityCenter can lure enough visitors to Las Vegas to support the 6,000 rooms it will introduce to an already unstable market, or whether it will just be cannibalizing itself and its competition while further eroding room rates.

Las Vegas, long considered recession-proof and coming off one of the greatest boom periods in its history, began seeing its numbers drop at the beginning of 2008.

Then came cuts in airlift, closely followed by the credit crunch, which has sidelined several other key hotel projects, including the Miami-themed Fontainebleau.

Capping off all this misery was the "AIG effect," the public backlash against corporate and meetings travel, which was exacerbated when President Obama commented that companies receiving government bailout money "can’t go take a trip to Las Vegas or go down to the Super Bowl on the taxpayers’ dime."

Although occupancy has dropped from the 2007 average of 90%, occupancy rates have been hovering all year in the very respectable low- to mid-80% range.

Average daily rates now stand at $91.18 after hitting highs in the $135 range in 2007 and early 2008. And visitor volume, which was down 4.4% last year, dropped another 4.7% through September of this year.

Waiting for a rebound

Still, it appears that things are starting to look up. In September, Las Vegas posted its first increase in visitor volume since May 2008, jumping 4.3% compared with September 2008, according to a report from the Las Vegas Visitors and Convention Authority.

"We have 150,000 hotel rooms; 10 million square feet of meetings space; 800 to 900 flights a day. You take all of that, and we are still at 82% occupancy right now," said Art Jimenez, senior director of leisure sales for the LVCVA. "We are still filling our city on weekends and are still extra busy with special events. We are still 26 points higher [in occupancy] than the national average."

Average daily rates, however, are down 25% in 2009 so far.

"No one can predict when it’s going to end," Jimenez said. "But we like to think the worst may be behind us."

Murren told investors in a recent earnings call that MGM Mirage had been able to maintain occupancy rates in the 95% range, although rates remained low. He said meetings bookings were back to where they had been before the crash, with 500,000 convention room nights booked in the third quarter and "more leads than almost ever before in the pipeline for 2010 and beyond."

Murren and Jimenez are also predicting that the number of visitors to Las Vegas will be close to 38 million this year, about 7% higher than last year. Moreover, they expect visitation to outpace the growth of inventory.

And MGM and LVCVA officials say they are confident that the historical trends of new projects attracting new visitors will hold true again. When the Mirage opened in 1989, the city saw double-digit-percentage increases in visitor numbers, Jimenez said.

MGM’s Feldman said data for the last three or four decades show that new, quality projects energize the market.

"There is an extensive history and an awful lot of data on what happens when high-quality, new projects come on the market here," Feldman said. "I have been here 20 years now. I have seen these ups and downs before, and I have also been through the opening of several big properties. Every single time, someone has spoken of the enormous cannibalization that was going to occur."

It didn’t happen then, and it won’t happen this time, he said.

"The market will absorb this investment," Feldman predicted. "We are confident in our ability to drive new audiences here. There are tens of millions of people who find Vegas perfect the way it is, but we also know there are millions of others looking for something more sophisticated, less themed."

Thompson of UNLV said he had no doubt that CityCenter would have a positive impact on Las Vegas — someday.

"It should be a positive," he said. "Usually when we hire 10,000 people, we are waving flags everywhere. The question is: How do we get the bodies that have the money and want to come to Las Vegas? If CityCenter just diverts people from other casinos, the positive impact won’t be until the future."

In the short term, he said, if visitor numbers don’t increase as predicted, CityCenter could be forced to consider partial shutdowns. Likewise, other hotels and casinos could be forced to lay off workers.

"I think it will be a double negative if we don’t have enough bodies to support CityCenter," Thompson said. "At the moment it’s sort of a fragile egg. We are walking on eggshells."

For related news, see "MGM Mirage: Dubai's woes won't affect CityCenter."