Las Vegas Power Brokers
From the Print Edition:
Kevin Costner, Nov/Dec 00
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The insiders remain unconvinced. Adelson has thrived during an economic boom, but will the numbers work in a recession? "Right now, while business is good, people will pay that $176 room rate, or whatever it is," says Goldberg, whose Bally's and Paris Las Vegas properties do 40 percent convention business. "But bad times will come eventually. When they do, people will pay $105 for a room somewhere else. And they'll take a taxicab to the convention."
Adelson has concentrated his business at one end of the economic spectrum. "I would open a low-end property, too, but I wouldn't get convention business there," he says. Arthur Goldberg's strategy with Park Place is the opposite. He owns a range of properties, low to high, taking pains not to compete with himself. In his mind, Wynn doomed the Mirage to obscurity the day he opened the Bellagio.
Goldberg's genius was recognizing the value of Las Vegas itself. It wasn't so long ago that smart money said the city was finished. America's gamblers would be flocking to riverboats and Indian casinos, playing Lotto in coffee shops and Powerball. Who needed gridlock and 110-degree weather? Goldberg just kept nodding and buying property. He bought land and built Paris Las Vegas. He bought Caesars Palace, perhaps the finest equity in the hotel business: a name that ranks with Pebble Beach and the Waldorf-Astoria as a shorthand for elegant luxury. He has the Las Vegas Hilton and Bally's. Together, they worked like a winning poker hand. "No matter how many riverboats open, walking down the Strip is unlike anything else," he says. "Vegas--that's where the action is."
He's keenly aware of the Strip's geography. Caesars, the Bellagio and Paris Las Vegas, all virtually on the same corner, are the epicenter. The farther you go from there, the more risk you take. "People don't want to walk that far," he says. Mandalay Bay, set close to the airport in what used to be Siberia, is an impressive hotel, but Goldberg seems to all but dismiss it--despite rumors that he's actually negotiating to buy it. "Even Mandalay Bay is having trouble," he says. "You want to be near the money, and the money is up where Caesars is."
Rejuvenating Caesars Palace is at the centerpiece of Goldberg's plan. Previous owners ITT Sheraton, later folded into Starwood, couldn't maximize the equity. They were hoteliers, not casino people. "There's a little bit of glitter off the name Caesars Palace," says Harrold. "But Arthur Goldberg didn't pay $3 billion to keep it tarnished. He's going to take us right to the edge: in entertainment, in service, in dining facilities. A lot of people have a lot of money these days, and you have to get them to spend that money in your hotel. Mr. Goldberg is on a mission to do that."
Mandalay Bay was another daring innovation, and not merely in geographic terms. When it opened 20 months ago, it became the first hotel on the Strip with elevators that empty directly into the lobby, not the casino. "That's a departure from traditional casino architecture, which believed you had to march customers back and forth past slot machines to catch their interest," says Glenn Schaeffer, who along with Bill Richardson and Mike Ensign of the Mandalay Resort Group created Mandalay Bay. "These days, maintaining a resort ambience for our guests is as important as the casino alone."
Before Mandalay Bay, the triumverate had helped run Circus Circus, the Luxor and Excalibur, all aimed at a lower-income consumer. Mandalay Bay, with restaurants such as Aureole and high-end shopping, is the product of a decision to go where the money is. "The direction of the marketplace here is toward the baby boom consumer," Schaeffer says. "The average age of a customer in Las Vegas is 49, and that tends to be a customer who has the tastes of a sophisticated traveler and more money to spend. He's willing to spend more money for the attributes of a resort."
While Mandalay Bay is a theme hotel filled with lush jungle foliage that replicates the tropics, it also has the future tucked into one wing in the form of a Four Seasons Hotel that is owned by Mandalay Resorts, which licenses the name. "There's a very high service quotient there that can only be achieved on a small scale," says Schaeffer. "That serves the customer who is looking for what customers didn't traditionally look for in Las Vegas, which is a high degree of service."
Mandalay Bay, like all the newer properties, is a step down the road of evolution. Caesars was the first true theme hotel, opening in 1966. The new Aladdin opened 34 years later almost to the week, and it may well be the last. The implosion that leveled one of the city's most historic properties made news around the country, but the resort that has emerged $1.3 billion later is even more of a spectacle. At its center is Desert Passage, a 500,000-square-foot shopping and leisure mall set in the heart of the Strip. Tenants include high- and mid-range stores, from Eddie Bauer to Clio Blue Paris, Tommy Bahama to Greenwich Village's Blue Note jazz club.
Wrapped around the casino, Desert Passage provides easy access to the street, and to the original 7,000-seat Theatre for the Performing Arts. "We'll get 50,000 people a day passing through the shops," Aladdin president Timmins reports. "At least some of them will go inside the casino."
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