Ending years of speculation, struggle and doubt, the Cosmopolitan Las Vegas opened last month on the Strip to a glittering crowd and generally rave reviews. Sandwiched on 8.7 acres between MGM Resorts’ Bellagio and CityCenter, the vertical Cosmopolitan includes nearly 3,000 rooms and suites (2,000 will open immediately), and its 100,000-square-foot casino includes 1,500 slot machines and 83 table games.
The groundbreaking for the troubled resort took place in October 2005, when Bruce Eichner was introduced as the property’s CEO. Financial difficulties brought down the original investors and in early 2008, Eichner and his backers defaulted on $768 million in loans. The principal debtor, Deutsche Bank, took over the property and decided to continue construction under its ownership. Another casualty of the bankruptcy was a relationship with the Hyatt Hotel chain, leaving the Cosmopolitan alone in its quest to fill the many rooms.
Several CEOs came and went until John Unwin was named to lead the property in October 2009. A former COO at Caesars Palace, Unwin brought a stability to the management of the property and a knowledge of the high-end market in Vegas. His hotel background indicated that the property would concentrate on the hotel product.
Unwin worked out a deal with the Marriott Hotel Corp. to align the hotel with the company’s reservation system. Even better, the Cosmopolitan will be listed in Marriott’s high-end Autograph Collection, giving the resort access to millions of Marriott Reward customers.
One of the big mountains Cosmopolitan has to climb is the acquisition of a database. Starting from scratch is difficult in any jurisdiction, but a major drawback in Las Vegas. While Unwin has hired many casino hosts, some of them have little gaming experience. The property has instituted a unique compensation program that includes a 5 percent commission on all F&B spend, effectively incentivizing the non-gaming customer.
According to Las Vegas’ Union Gaming Group, the property is also taking a risk by instituting a very large maximum bet of $300,000. While Union did not cite a minimum bankroll, that kind of action should require a deposit of at least $5 million. It’s a risky proposition for a stand-alone property and even riskier for its investment bank owner.
Most experts agree that Deutsche Bank will start shopping the property to existing casino operators and other potential investors should the initial numbers start to materialize in a positive fashion. But it’s not likely the bank will get anywhere near the $3.9 billion it cost to build.