Opening of casino ups the stakes in Las Vegas amid recession

Detonating a spectacular burst of rooftop fireworks into the night sky, MGM Mirage upped the stakes in Las Vegas forever a couple of weeks ago by throwing open the doors of a new casino, Aria, that sits at the heart of a vast $8.5bn (£5.3bn) complex, CityCenter. It is the biggest, most expensive development in the desert city. But not everybody is thrilled at the huge new arrival on the Strip during such a severe recession.

Surging through the doors into an airy glass atrium, the first few people to enter Aria thrust their arms in the air. In a rare privilege, MGM's chief executive, Jim Murren, was allowed to ring open the New York Stock Exchange remotely from Vegas, wielding a bell generally used for the city's boxing prize fights.

In a city already stuffed with superlatives, CityCenter delivers a surge of razzmatazz. A cluster of newly minted skyscrapers forming a city within a city, it was the largest privately funded construction project in the US. It comprises four standalone hotels, a sprawling shopping and entertainment district and, once completed, two 37-storey glass towers of luxury flats. Architects involved in the project include Norman Foster and Daniel Libeskind.

Murren described the complex as a "landmark of taste and style", while MGM's 92-year-old largest shareholder, the veteran Vegas billionaire Kirk Kerkorian, declared himself thrilled: "Of all the wonderful Las Vegas properties with which I've been associated, CityCenter is simply the most amazing."

The timing, however, is hardly ideal. Las Vegas has felt the icy wind of recession worse than most cities in the US. Unemployment is running at 12% and property prices have fallen 50% over three years. Visitor numbers to the city were down 3.9% to 30.6m for the first 10 months of the year, despite Vegas's enduring popularity among sun-seeking British tourists. With tourism dwindling, Las Vegas's existing hotels have had to slash average rates by 23% to a paltry $93 a night to fill rooms. The CityCenter complex will increase the city's hotel capacity by 4.2%, adding 6,000 rooms.

The property developer Donald Trump, never short of a strong opinion, last week blasted CityCenter as "an absolute catastrophe" and said it had cost "billions more than anticipated". Critics point out that two recent openings on the Strip – Steve Wynn's Encore casino and the Italian-themed Palazzo – have had a hard time hitting targets.

"The Las Vegas market has really struggled over the last year or two with the economic downturn and it's hard to see any sign that Vegas is ready to absorb the amount of capacity CityCenter's adding to the market," said Matt Jacobs, a gaming analyst at the investment firm Majestic Research, who reckons the opening will "prolong the recovery" point for the city's other casinos.

The 27-hectare CityCenter site, which lies between the city's Bellagio and Monte Carlo resorts, will employ 12,000 people and is supposed to inject a sense of Manhattan-style density into the heart of the sprawling desert city. It will contain 2,400 flats, making it the first large-scale residential development on the Strip. MGM broke ground on the project back in April 2006 and came within hours of abandoning work entirely earlier this year when a key investment partner, Dubai World, pulled out.

MGM maintains that historically, new casinos have expanded the Vegas market, sucking new visitors to the city rather than winning tourists from existing hotels. The company reckons CityCenter will help drive a 5% to 10% rise in visitor numbers next year and it will be one of the losers itself if it cannibalises existing business – MGM already owns nine Vegas casinos including the MGM Grand, the Bellagio, New York New York and the pyramid-shaped Egyptian-themed Luxor.

Mary Riddel, an associate professor of economics at the University of Nevada, says CityCenter is opening in a different economic atmosphere from any other game-changing casino: "When we had other big openings – the Bellagio, the Mirage, Mandalay Bay – they came at times when people had a massive amount of disposable income and there was a great deal of wealth creation in the economy."

She points out that CityCenter has thrown open its doors following a slump in which Americans have lost $4tn of housing wealth. The Los Angeles Times wondered whether the development is destined to "stand as an island surrounded for years by low-rise, car-centred urbanism, foreclosure-filled single-family neighbourhoods and general sprawl".

On hand for the glitzy opening were the Desperate Housewives star Eva Longoria and Priscilla Presley, ex-wife of Elvis. But up the road from CityCenter, another huge building site, intended to be the site of a $2.9bn casino named Fontainebleau, has stood idle since funds for the project dried up in June.

"Las Vegas is going to come back but it's going to take time," says Mike Paladino, a gaming analyst at the credit ratings agency Fitch, who predicts a muted pick-up from late 2010. "This has been the most tumultuous period the gaming industry has had to endure in its history."

• US economy
• Travel & leisure
• Global recession
• Real estate
• United States holidays
• Las Vegas holidays
• Las Vegas
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