The Cosmopolitan in Las Vegas has struggled to turn a consistent profit since opening in 2010, but a new emphasis on gaming could change that.
Cosmopolitan owners Blackstone Group in late 2014 hired Bill McBeath to run the 3,000-room hotel and casino, which was noted for charging high nightly room rates, hosting trendy restaurants, nightclubs, and entertainment venues, and having mostly empty seats at the slots.
The Cosmopolitan initially relied on its trendy clubs and restaurants, to help position it as a resort destination for affluent, hip, and trendy visitors. The problem is, many of them are millennials, and millennials don’t like traditional slots, which drive most casino profits.
McBeath said the seats at the Cosmopolitan’s slot machines, on many evenings, mostly were filled by people waiting to get into a club or restaurant, instead of gamblers. The resort neglected its gaming and lacks a comprehensive network of properties that are capable of generating more gambling clientele, unlike many of its competitors.
McBeath made changes to the resort’s operation, which now is emphasizing its gaming operations more and reported its first two profitable quarters last year. Gaming revenues rose by $176 million – 13 percent – through the first three months of 2015, despite gambling on the Las Vegas Strip being down by 1.5 percent during the same period.
To help boost gaming action and revenues, McBeath raised betting limits to up to $200,000 in order to draw in more high-rollers, allowed the casino to extend up to $5 million in credit to gamblers, and increased the maximum payout on slot machines from $400,000 to $1.25 million.
Meanwhile, McBeath reduced the Cosmopolitan’s entertainment budgets by decreasing the number of concerts, refusing to pay high rates for club DJs, and got rid of the go-go dancers in the casino.
As a result, the Cosmopolitan reported $569.3 million in revenue, with $14.7 million in net income, through the first nine months of 2015. The resort also reported its EBITDA rose by 25 percent to more than $145 million.
McBeath said the Cosmopolitan is a luxury resort, but it wasn’t operating like one, aside from charging high room rates, so he sought to change that. With gaming revenues up, he plans to add 21 VIP suites to the Cosmopolitan’s top four floors in its east tower and continue catering to high rollers looking for action on the casino floor, instead of in nightclubs.
