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(Bloomberg) -- The top four floors of the Cosmopolitan hotel in Las Vegas have been vacant since the day the casino opened in 2010. But as part of a five-year capital investment plan by the Blackstone Group that shifts the hotel’s focus from culinary destination to stylish casino hotspot, they’ve finally been furnished and opened to the public.
Well, sort of. The 21 Boulevard Penthouse suites that now fill those top floors have balconies overlooking the Bellagio fountains and Vegas strip, designs by Adam Tihany, and $56,000 bottles of Louis XIII Black Pearl cognac—and a minimum buy-in of $1 million at the Reserve, the Cosmopolitan’s high-roller lounge. According to travel specialist Jack Ezon of Ovation Travel, that may make them the most expensive hotel rooms anywhere in the world.
The main driver here is to attract so-called whales. Before, those who wanted to play a million or more in the casino could go elsewhere and get more than what the Cosmopolitan was offering. “They were players and not stayers,” explained Brian Benowitz, senior vice president of casino operations. “People play more where they sleep.”
So what will those high rollers get now? Bloomberg took a first look inside the Richmond Penthouse to get an idea.
About that Price Tag ...
In Vegas, a million-dollar buy-in isn’t unheard of—at least not on big weekends such as those that straddle the Super Bowl, the Chinese New Year, or New Year’s Eve. But even the nicest rooms in town—such as the villas at Bellagio and the Mansions at the MGM Grand, where built-in massage rooms, indoor swimming pools, and billiard rooms all can come inside the suite—are regularly available for far less money. MGM’s Mirage Villas? They hover around $20,000. The 10,500-square-foot, David Rockwell-designed villa atop the Nobu Hotel (which is part of Caesars Palace)? It's dripping with gold, besides having an Instagram-worthy tub and piano—and it's about $35,000 per night.
Ironically, managers of top Las Vegas suites have been dropping the high-roller requirement in recent years, opening them up to regular, nongambling guests—so long as they’re able to pay. Prices shift depending on time of year, who you are, and what kind of a relationship you have with the marketing manager, but sometimes these palatial rooms can go for as little as $5,000. Not bad, compared with the Cosmopolitan’s buy-in.
“Our guests were telling us that even if they weren’t in the casino, they wanted a villa experience, so we opened it up to anyone, and people love it,” said Melissa Bailey, director of Sky Suites at MGM’s 4,004-room Aria. From a business perspective, she says the move has helped the hotel compensate for midweek slumps, when whales aren’t working the baccarat tables.
A Risky Bet
Here’s why many Vegas managers have been ditching the “high roller” in their high-roller suites: According to the University of Nevada Las Vegas Center for Gaming Research, casino revenues have declined sharply, and consistently, since 1984. Back then, gaming represented nearly 59 percent of total revenue on the Strip, with hotels pulling in just 16 percent. By 2012, that had shifted to 36 percent casino revenue and 25 percent hotel business. Today, that gap has continued to narrow, with casinos now pulling in 34 percent and hotels yielding 28 percent.
It goes to show that whales aren’t the only big spenders in Vegas. The conference business, it turns out, is where MGM is putting its money. “It’s not always about the casino guests,” said Aria’s Bailey “It’s about functions and hosted events—a wedding or the launch of an app, or anything in between—and the importance of conventions.”
But hotels in Sin City can’t yet survive without a great casino—and high-roller suites are still a big catalyst for that key business. Since gambling has never been the Cosmpolitan’s strongest suit, investing in this weakening-but-still-strong industry is a play the hotel needs to make, even if it has already missed the boat on the industry’s best days.
Cosmopolitan’s Benowitz estimates that his 21 suites will add 10 percent to 20 percent to his bottom line. It’s not as much as MGM resorts like Aria make on their suite products—Bailey says her suites represent far more than 20 percent—but Benowitz sees it as an incremental play worth making.
The Value Proposition
It’s hard to argue that the Cosmopolitan’s suites are “worth” their million-dollar price tag—particularly when the competitors offer a similar range of amenities. But if what you want is exclusivity and style (at any price), the Boulevard Suites will win your affections.
Here’s what they promise: around-the-clock butler service, chauffeured airport transfers in a variety of luxury SUVs, and a full culinary team that will “create whatever our guests desire,” said Benowitz. “If a guest wants stone crabs for dinner in their Penthouse, we’ll go to Joe’s and procure them.”
Welcome amenities are selected based on each guest's preferences and could include a hard-to-find bottle of bourbon or a humidor full of their favorite cigars. Living-room walls are swapped for resin panels trimmed in 24-karat gold, and bathrooms have floor-to-ceiling marble and pod-like soaking tubs. A white grand piano stands in the living room. And whereas Sin City’s other megasuites all conform to kitschy themes, the Cosmopolitan’s are worthy of the name.
The True Cost of Entrance
Not everyone gets in to the Boulevard Penthouses. To do so, you have to prove your net worth, clear a few security hurdles, and have paperwork submitted to the Gaming Commission—which gets you into the high-roller lounge called the Reserve, where you’ll play your requisite million.
There are, and will be, exceptions to those rules—this is Vegas after all, where rules are meant to be broken. “Some of our slot guests don’t have as much as a bankroll per individual trip but they come often, so their value is still very high,” Benowitz said. “Anyone who spends over $100,000 on a given trip could be considered.”
As for the 98 percent occupancy rates that most hotels in Vegas like to brag about? They don’t apply here—which is to say, the Boulevard Penthouses will never be given away for next-to-nothing. “We’re not overly concerned if a room goes vacant because there’s an opportunity cost of getting someone in there,” Benowitz said. “They’re not at the same occupancy as the rest of the hotel, but on weekends? The demand is astronomical.”
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