In Las Vegas, all roads lead to Rome—make that the “faux Rome” known as the Forum Shops.
The sprawling, 635,000-square-foot shopping piazza at Caesars Palace would make Caligula himself feel at home. Under its blue painted sky, the three-story supermall is known for its Corinthian columns, ornately carved archways, a replica of Hadrian’s Palace, and the giant fountain where, every hour, the fall of Atlantis is reenacted for gaping tourists. Fittingly, that show—with its animatronic deities, bursting fireballs, and a climactic descent into the sea—takes place opposite the Cheesecake Factory.
Cheesy it may be, but that spectacle helped bring some 28 million people to the Forum Shops in 2012—almost three-quarters of Sin City’s annual visitor volume.
Amid all this opulence, luxury brands are a good fit. Along with the usual mix of mid-level retail—H&M, Victoria’s Secret, Ann Taylor, Ugg—the Forum Shops offer high-end labels that are typically unavailable at the average suburban mall: Versace and Cartier, Baccarat and DeBeers, Gucci and Pucci. Surprisingly in light of the still-tepid economy, these gilt-edged emporiums are not just for the rich and high rolling, says Maureen Crampton, director of marketing and business development for the Forum Shops.
“Basically 35 percent to 40 percent of our annual sales are attributed to luxury sales, whether it’s Ferragamo, Gucci or Louis Vuitton,” says Crampton—proof that even habitual window shoppers will splurge given the right incentive and environment.
‘What Happens in Vegas’
Part of it is the giddy fun of being in Las Vegas, where rules (and budgets) are meant to be broken. Of the approximately 75,000 people who visit the mall each day, more than 80 percent are out-of-towners, and 60 percent are women. The bulk of high-end sales—about 30 percent—are arguably in the “splurge” category: luxury jewelry and watches. “The mindset is different when you come to Las Vegas,” Crampton says. “People are feeling free. They’re ready to spend a little more, eat a little more, shop a little more.”
The escapism and indulgence embodied by the Forum Shops have made it among the strongest retail districts in the United States, with average sales of about $1,400 per square foot. Compare that to the average U.S. shopping mall; according to the International Council of Shopping Centers, the seasonally adjusted average in 2011 was $386 per square foot, down from $416 in pre-recession 2007. The Forum Shops also boasts 100 percent occupancy, while the average vacancy at malls in the top 80 U.S. markets was 8.3 percent in first-quarter 2013, according to real estate research firm Reis Inc.
Sometimes a Great Notion
It’s hard to believe now that the concept of retail in the casino environment was once a hard sell. Back in the late 1980s, when developer Sheldon Gordon first proposed a high-end retail district to adjoin Caesars, the idea was seen as ill advised if not absurd. At the time, as Gordon told Forbes magazine, people considered him “an absolute idiot” for believing gaming and retail could not only coexist, but complement each other, boosting both patronage and profitability. Gambling was the money-maker, and shopping was viewed as a distraction that could keep players away from the slots and tables. But when the Forum Shops opened in 1992, Gordon’s great notion proved a wild card that would pay off big, and inspire others to replicate the formula.
Take General Growth Properties’ Grand Canal Shoppes at the Venetian. Evoking the grandeur of Venice on the Vegas Strip, the shopping district attracts some 20 million patrons per year with its 160 upscale shops and “experiences,” including gondola rides, strolling troubadours and a Madame Tussaud’s Wax Museum. Last year, the stores at the Grand Canal delivered $1,100 per square foot in revenues. Not surprisingly, in its pitch to re-create the “integrated resort model” on Macau’s Cotai Strip, Venetian owner Las Vegas Sands Corp. asserted that retail sales volumes in Vegas have increased 99 percent in the last 10 years, versus a comparatively anemic 22 percent gain in gaming revenues.
In one failed experiment, Miracle Mile in Las Vegas, formerly the Desert Passage, attempted to mimic its upmarket sisters in Sin City. With too much competition from established luxury retailers, the mall foundered. The approach changed when the adjoining Aladdin hotel casino became a Planet Hollywood. Since then, in a miraculous turnaround, the mall has successfully laid claim to the mid-market value shopper, and some national stores at the Miracle Mile have achieved top-of-the-chain revenues.
Look Who’s Shopping Now
The sheer breadth of retail options has brought new classes of customers to Las Vegas, says Terri Monsour, Caesars Entertainment’s vice president of retail and a veteran of the Cosmopolitan, Wynn Resorts and the venerable Neiman Marcus department store.
“Twenty-five years ago my dad was a craps player who loved to come to Las Vegas, and he wouldn’t think of leaving the resort,” Monsour recalls. “My mother would catch the dinner shows, but otherwise there was very little to do. As the city evolved, my mother had reason to come—she wanted to come—because there were so many more amenities. Retail has really transformed our city and helped elevate it to those 40 million visitors a year.”
International visitors are making a big mark too. Fifty percent of customers who patronize the Forum Shops are international tourists, according to Crampton. And at the Grand Canal Shoppes, fully 89 percent of guests are foreigners with a median income exceeding $93,000 per year.
“We have an amazing international crowd,” says Monsour. “With our dollar, we’re a bargain in the U.S.”
Hey, Big Spender
Not everyone who visits a luxury retail center in Las Vegas buys a Rolex (which can top out at $450,000) or a pair of red-heeled Christian Louboutin shoes (a steal at about $1,000). But sometimes browsing can be just as much fun. “Maybe most people can’t afford to buy the Louboutin shoes and the Jimmy Choos they see on the awards shows or in In Style magazine,” says Monsour, “but they have a chance to try on those shoes and be a princess for a moment.”
And sometimes, they do buy. Monsour tells the story of a particularly flush customer who bought two Christophe Claret watches, dropping a cool $750,000 in one visit. And Crampton remembers the high roller who requested a private shopping spree at a boutique at the Forum Shops.
“I received a phone call from VIP services saying this gentleman wanted to close Juicy Couture after-hours and decorate it according to his girlfriend’s tastes, and then bring her and her friends in to shop,” Crampton says.
Though the store manager was uncertain—“She said, how can we justify staying open for an extra hour?”—Crampton told her to make it happen. “I said, ‘Honey, if they’re asking for this, I guarantee it’ll pay off.’”
The free-spending high roller filled the place with “hundreds and hundreds of pink roses—his girlfriend’s favorite,” and on the stroke of midnight, the boutique opened for a private party. The women were given the equivalent of a blank check and one hour to shop, and spent a total of $20,000—more than $330 per minute.
Of course, premiere service is always available for celebrities, such as Jennifer Lopez, who once closed the Gucci store for an hour to shop with her entourage. Monsour says the smart retailer knows to dispense the same level of thoughtful service, no matter who walks through the door.
“Fortunately, everyone who works here lives here, and when you live here you have a natural understanding that you don’t judge a book by its cover,” she says. “If someone comes in wearing tattered, worn-out jeans and an oversized T-shirt, they could lift that T-shirt, unzip their money belt and pull out tens of thousands of dollars in cash to pay for that merchandise. Our job is to make sure everyone who leaves here is feeling great about it, whether they’re spending a lot of money or just want to pick up a keychain or a magnet for whoever is taking care of their dog. We want people to know we will fulfill their desire no matter what their price point is. Then we know they’ll come back.”
One Plus One Equals Three
Adding retail to gaming can generate new profits for both
In 2009, as Maryland legislators considered a casino to be located at the state’s largest shopping center, Gregg Goodman of the Simon Property Group set out to win them over. “The synergy between shopping and gaming leads to both successful retailers and casinos owners,” Goodman wrote in the Washington Post, “and city and state governments that are thrilled with their increased tax revenue.”
Lawmakers were persuaded. In June 2012, the Cordish Cos. opened the $500 million Maryland Live! Casino, adjacent to the Arundel Mills Mall in Hanover. In its first 10 months of operation, the slot parlor took in nearly $320 million in gaming revenue, of which the state and county pocketed a handy 67 percent. And the mall side has seen a 12 percent year-over-year sales increase, says Joe Weinberg, managing partner for the Cordish Cos. In this case, Weinberg adds, “One plus one equals three.”
In March, the casino won $44.6 million, easily routing its in-state competition. Hollywood Casino in Cecil County and Ocean Downs Casino in Worcester County took in $9.48 million and $3.95 million respectively, down 35 percent and 3.2 percent from the year before. “We have 25 percent more slot revenue than our nearest competitor,” says Weinberg. “We exceed Borgata (in Atlantic City). We exceed Parx Casino in Philadelphia in slot revenue. So it works.”
The Baltimore developer had already tested the gaming-retail recipe at the Seminole Hard Rock Casino Hotel in Hollywood, Florida, where Cordish added a 400,000-square-foot retail entertainment complex. It also worked at the Walk, an open-air outlet mall with more than 100 stores near the Atlantic City casino district. When Cordish sold the Walk to Tanger Factory Outlets in 2011, the collective stores were earning a healthy $500 per square foot, well above the national average.
But Arundel Mills may have offered the optimal playing field. The mall, which opened in 2009, had an existing annual customer base of some 14 million people, as well as 1,800 nearby hotel rooms, and easy access from the Baltimore-Washington Parkway and Interstate 95.
“A lot of people said we were crazy for doing it, but we had a high level of understanding and confidence we could create a spinoff between the retail-entertainment and the casinos,” says Weinberg. “We get tremendous crossover between the two elements.”
Arundel Mills Mall’s value-based lineup of stores (J. Crew, Banana Republic, Old Navy) is a far cry from the luxury retail of the Forum Shops in Las Vegas. But it shows how the retail-gaming alliance can pay off for both sides. In April, the casino added 166 table games and a two-story poker room, which could appreciably amp up the revenues.
“With an existing customer base and infrastructure, existing amenities and hotel rooms, we came in and added a world-class gaming-entertainment facility,” says Weinberg. “We created a real category-killer—a unique destination with both gaming and entertainment.”
Caesars hopes Gen X and Gen Y will buy in to its new open-air retail-entertainment plaza
The typical retail customer in Las Vegas is a 39-year-old female tourist who spends about $150 on shopping during her three- to four-day stay. While she may be coveted by most merchants in town, she’s not the primary demographic targeted by the Linq, the much-ballyhooed $500 million open-air entertainment district set to open on the Strip in December.
“Everyone will be comfortable at the Linq, but we’ve curated the mix so it’s conducive to the Gen X-Gen Y consumer,” says General Manager Jon Gray of Caesars Entertainment.
Flanked by the Flamingo and Quad casinos, the 200,000-square-foot Linq will offer what Gray calls an “experiential” blend of bars, restaurants and about 10 retail spaces, all operating in the shadow of the 550-foot High Roller, touted as the world’s largest observation wheel.
“There will be a lot of new-to-market concepts—for example, Koto, which is a cool accessories store from Aspen and Miami,” Gray says. Other tenants include Ruby Blue, a funky women’s boutique, and Bella Scarpa, a footwear store for women that sells “statement shoes” for the young and trendy.
“We’re in a very comfortable position; in most spaces, there’s more interest than square footage,” says Gray. “I have the luxury of being able to select who’s the right tenant for our overall mix.”
By design, visitors to the Quad, the Flamingo, and the upcoming Gansevoort Hotel (formerly Bill’s Gamblin’ Hall) will find the Linq easy to find and to navigate. “We have a lot of touch points from the casino floor out into the Linq and right into those retail spaces,” Gray says. “One is O’Shea’s Irish pub and bar, which has an entry point from the Quad casino floor; if you keep going, you end up right out into the Linq, and vice versa.
“We’re adding over 200,000 square feet of retail, dining and entertainment to service all three of those properties. It was very intentional that the Linq was part of this master plan to invigorate our casino and hotel offerings on that side of the Strip.”
Gray is confident that location alone will make the Linq a can’t-miss destination. “In 2009, we conducted a video study to watch the pedestrian traffic that walked by the entrance of the proposed Linq—it was 20.4 million people,” says Gray. “Since then, visitorship has gone up. So as the macro environment gets better and we see more visitors to our city, we think obviously we’ll attract even more people. On the Strip, we’re on the 50-yard line.”