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COVER STORY THE ROOMS The nearly 3,000 guest rooms are designed like chic, urban, luxury residences. Each room is filled with custom furniture, and layered in custom materials and finishes to give every guest a unique sense of city living, even if they’re just there for the weekend. Also designed by Rockwell, the rooms feature kitchenettes, large bathrooms with soaking tubs overlooking the Strip and sitting areas with dark indigo couches and strategically mismatched pillows. Quirky accessories and coffee-table books on art pepper Cosmopolitan’s rooms, adding to the feel of a collected downtown apartment. locales for superstar DJs. Rich Wolf, co-founder and principal of Tao Group, which manages Marquee, tells me he and his partners just had a feeling about it and wanted to “tap into the next wave.” “We were told we would fail and end up abandoning the format. But to the contrary there’s more house music than ever. We felt the time was right,” he says. Wolf says this insight came from traveling to major party spots around the world, where progressive house music is dominant, but where clubs often feature several musical experiences in different rooms. That’s how Rockwell designed Marquee, with several rooms, including the Library, which has a fireplace, shelves filled with books from The Strand in New York— pointless? yes, but a sign of obsessive detail—pool tables and hipster rock and electro-pop that you might hear in cool Williamsburg, Brooklyn. Tao Group operates Tao at the Venetian and Lavo at the Palazzo, but I can detect Wolf’s favorite spot. “The hotel has the air of a super sophisticated party place that was lacking in Las Vegas,” Wolf says. “The formula has worked, and Las Vegas sorely needed it.” The formula has certainly worked for Marquee, and, thus, for Tao Group, but has it worked for the unlikely owner, Deutsche Bank? Here’s where it gets tricky. For all its success, Cosmopolitan’s 22 path to profitability is hazy. In the first quarter, it lost $56.8 million on revenue of $105 million, or less than half of what Aria and Bellagio pulled in. Some of that could be attributed to comped rooms, drinks and meals of $22.5 million, and the fact that despite high occupancy and room rates, the full inventory of rooms—2,995—won’t be online until late summer, according to an SEC filing. Here’s the composition of revenue: Room revenue of $34.4 million; food and beverage revenue of $57.6 million and, $31 million in gross gaming revenue. This means just a quarter of the resort’s revenue was from gaming, significantly lower than the Strip average of 40 percent. I talked to a number of rival operators and consultants, to whom I granted anonymity so they would speak candidly. They tend to take the view that Cosmopolitan is an interesting space that’s great for Vegas but can never succeed without hordes of the mathematically ignorant, aka, gamblers. “Unless they can attract more gamblers, they’re going to have a tough go of it,” one says. A gaming consultant scoffs, “Without gambling, it’s a $4 billion hotel, and how does that work?” Lafleur, while praising the Cosmopolitan for its early buzz, agrees that gaming revenue must rise: “They’re getting people into the clubs and the rooms, but not the tables or the slots. That’s going to be the very THE CASINO The resort’s casino floor buzzes with all of the gaming standards—blackjack, roulette, craps, baccarat, poker games and slot machines. The race and sports book by Cantor Gaming offers the latest in sports betting technology. But if you’re going, go to bet, not just watch. Unlike other areas, there are no spare chairs for spectators. difficult challenge—to drive that gaming business while not affecting the important buzz.” Indeed, a source at a rival operation suggests loosening the slots and going to single-deck blackjack and other gimmicks and then advertising those gimmicks heavily. To me this seems like a terrible idea that would ultimately damage the brand. Lafleur concurs while noting that this is the Cosmopolitan’s essential dilemma: “That’s the double-edged sword. You want the beautiful people, but you need the fanny packs. There aren’t that many 20- and 30-somethings who give your place a nice vibe and a nice look and you need those people to lose money.” The Cosmopolitan’s serious | 13 JUNE 2011 |