The Virgin Group-led consortium that has bought Las Vegas’ Hard Rock Hotel plans to outsource casino operations at the iconic off-Strip resort under a financing setup unique to the gaming industry.
Plans call for Virgin to manage the hotel, which will be rebranded as a Virgin property, while Warner Hospitality, the Hard Rock’s current casino management company, will lease the gaming space from the new owners.
The purchase, which closed last week for an undisclosed sum, transfers ownership of the Hard Rock to a group including Richard Bosworth, Juniper Capital Partners, Fengate Real Estate Asset Investments and Virgin Hotels, a division of Richard Branson’s Virgin Group.
“In this case the landlord is really a new financial structure,” said Bosworth, who heads the consortium. He said the outsourcing is designed to offset the high cost of casino financing in Las Vegas.
“When you look around town and you see there’s been so many stalled construction projects since the great recession, you have to wonder why. It’s certainly not because of the economic dynamics. This town has had record breaking hotel revenues, record breaking food and beverage revenues, record breaking entertainment revenues but it also has record low return on invested capital.
He described the purchase as a “capital-smart and a real estate-smart acquisition, so we can spend hundreds of millions of dollars to transform the property.”
“The property does have strong occupancy Sunday through Thursday,” he said. “But we will be tapping into one of greatest conference and meeting networks in the world that will be affiliated with us and Virgin to drive strong convention conference business. And that will give is a much more profitable lift.”
Details of the transformation are still being thought out, he said. At this stage, according to Virgin, plans for a redesign envision 1,504 rooms, suites and penthouse suites, a newly renovated 60,000-square foot casino, seven new restaurants and three nightclubs and bars.
Major work is slated to begin early next year, targeting back of the house and pool areas to minimize the impact on guests. Extensive renovations will follow in the spring with the makeover completed by late fall, Virgin said.
