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LAS VEGAS-Landry’s Restaurants Inc. opened the first new hotel tower in Downtown Las Vegas in 20 years over the weekend. The 25-story, 500-room Rush Tower at the Golden Nugget resort is the first tower to open since the Golden Nugget’s Carson Tower opened in 1989. With 2,414 rooms, the Golden Nugget is the largest in Downtown Las Vegas.

The $150-million addition–up from $121 million earlier this year–features a porte-cochere entry at First and Carson streets opening into a lobby surrounded by several retail stores and slot machine banks. The retail is anchored by a 3,000-square-foot Chart House restaurant, which will feature a 75,000-gallon salt water aquarium with exotic fish and a custom fabricated reef system.

Levels two through four of the new tower will be a parking structure with a pool at the second level that will tie into the existing pool’s upper deck, above the live shark aquarium. Levels 5 through 24 hold the guest rooms, which include four penthouses, 70 junior corner suites and standard rooms that are 20% larger than the Nugget’s existing standard rooms. The top level is the owner’s suite.

Standard room features include pillow-top mattresses, down feather comforters and a 42-inch plasma television. Asking rates are $69 for weekdays and between $89 and $129 on weekends. Of course, that means the rates on its two older towers will have to come in below that mark.

Mayor Oscar Goodman and Landry’s Restaurants top dog Tilman Fertitta hosted a ribbon cutting ceremony in the Rush Tower lobby Monday evening. As much as a new Downtown tower is good for luring tourists from the Las Vegas Strip, it comes at a time when the casino-hotel market here is ailing from a glut of hotel rooms amid a dearth of visitors.

Earlier this month, Landry’s Restaurants, which is being taken private by Fertitta, reported less than stellar third quarter performance from its gaming unit, though it still turned a profit for the company. The unit consists of the Golden Nugget casino-resorts in Downtown Las Vegas and Laughlin, NV.

Landry’s gaming unit saw its profit decline 40% to $7.6 million from $12.7 million in the same year earlier period on a 13.5% decline in net revenue $52.4 million from $60.6 million. Casino revenue fell 8.5% to $32 million, room revenue fell 22% to $11.8 million due primarily to lower occupancy and room rates on the Strip, and food and beverage revenue fell 13.3% to $10.8 million.

Through the first nine months of the year, casino revenue at the two Golden Nugget properties was running 13.3% behind 2008, room revenue was running 26.5% behind and food and beverage was 10.8% behind. The current status is a slight improvement from mid-year, when casino revenue was running 15.3% behind, room revenue was running 28.5% behind, and food and beverage was running 15.1% behind.

In July, Fertitta told analysts that the larger luxury and upscale operators on the Las Vegas Strip were continuing to buy business by discounting room rates and offering cash incentives, which put heavy downward pressure on competitors like the Golden Nugget that have made a living by being the value proposition. “What that does to us is a stranglehold…[because] if we don’t drop rates we won’t have any occupancy and the incremental cost of selling a room doesn’t change just because the room rate changes,” Fertitta said. “Last year we were renting them for ninety dollars and this year it’s sixty; that’s twenty-five dollars of one-hundred percent profit [that's now missing] and that is where we are just being murdered trying to compete with MGM and Bellagio.”

With several thousand additional rooms opening next month at MGM Mirage’s CityCenter development on the Las Vegas Strip and several thousand more new hotel rooms opening in 2010, it appears the downward pressure on room rates will continue for some time.

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