News: Analysis & Commentary: MAKEOVERS
LIZA MINNELLI, NEIL SEDAKA, AND...CLAUDE MONET?
Las Vegas is spending vast sums to draw upmarket customers
Forget Wayne Newton, Paul Anka, and Elvis lookalikes. The baroque marquee outside Las Vegas' brand new $1.6 billion Bellagio Hotel reads: "Coming soon--Van Gogh, Monet, Renoir, and Cezanne with special guests Pablo Picasso and Henri Matisse."
Scheduled to open Oct. 15, the 35-story Bellagio--modeled after the grand villas near Italy's Lake Como and boasting its own 12-acre lake with 1,200 synchronized fountainheads--marks a new direction in Sin City's endless campaign for new customers: going upscale.
Still the capital of kitsch, the Nevada gaming mecca has been transforming itself into a Disneyland with gambling over the past several years. Now, it is focusing on the luxury-resort customer who usually heads to Palm Springs, Calif., or Vail, Colo. Within the next eight months, more than $3 billion in upscale hotels will open alongside the glitz and glitter of the city's fabled strip--offering spas instead of showgirls and five-star restaurants instead of $2.99 buffets. It's a hefty wager: A raft of new hotel rooms has already driven down Vegas occupancy rates and room prices just as newcomers like the Bellagio want to charge $200 and up.
Leading the charge, as he frequently does, is Mirage Resorts Inc. Chairman Stephen A. Wynn. It was the ostentatious Wynn who introduced white tigers and exploding volcanoes to the Strip at his Mirage Resort in 1989. Now, the 56-year old casino king is bringing nearly $300 million worth of art treasures to his new 3,005-room hotel. The Bellagio also features real Italian marble on the floors, New York's famed Le CirqUe restaurant, and the requisite casino.
But Wynn is not the only hotelier chasing the resort crowd. In April the $1.4 billion Venetian, with 3,036 suites that it claims are larger than the average Bellagio room, will open. Offering its own 630-foot long canal filled with gondolas, it will charge up to $250 a night. After that, Circus Circus Enterprises Inc. will open its $950 million, 42-floor Mandalay Bay Resort & Casino, a South Pacific-themed complex. Within it is a 424-room Four Seasons hotel. "A lot of [visitors] will wantto come to a place like the Four Seasons that has immediate name identification," says Glenn W. Schaeffer, president of Circus Circus. And despite the high prices, some VeGas resort owners point out the room rates are less than in comparable resorts in other states.
Even before the first of the new hotels opens, analysts are talking about overkill. "It's probably too much for the market," says Michael French, a PriceWaterhouseCooPers partner in charge of the consultant's U.S. hospitality practice. "The question is, why spend $200 a night when you can get a pretty great room at the Mirage for half the price?" Hotels--facing an occupancy rate down to 86% this year from 88% in 1997-- are cutting rates. And even at Mirage Resorts--considered the most profitable of the operators, rates are expected to be down for the year, says Cowen and Co. analyst Hal Vogel. Still, he sees the Bellagio adding to Mirage's cash flow, although with much weaker margins--17% to 19% vs. 25% to 30% at other top city resorts. Predicts French: "Not every one of these hotels is going to be a winner."NO GAMBLING? Those occupancy numbers persuaded Marriot International to rethink its next move: It postponed plans to build a 400-room Ritz-Carlton. And MGM Grand Inc. is also balking. "We're not sure there are that many resort customers out there," says MGM Grand President Alex Yemenidjian.
For the new clientele that the luxury resorts covet, gambling may not even be in the cards. At Circus' Mandalay complex, to keep the neon and clamor to a minimum, Four Seasons will offer customers their own, more dignified entrance--instead of trekking across the casino to check in as visitors do at most places on the strip. There won't even be a casino or slot machines anywhere in the five-floor oasis. But if resort owners are betting on finding loads of rich tourists looking for sun instead of neon in Las Vegas, it seems like a long shot.By Ronald Grover in Los Angeles with Joe Weber in TorontoReturn to top