As someone who has spent his entire career on the Las Vegas Strip, the new owners of the Cosmopolitan of Las Vegas could not go wrong when they chose Bill McBeath to lead the often-beleaguered property.
Conceived as one of the highly touted “mixed-use” developments on the Las Vegas Strip in the 1990s, the Cosmopolitan seemingly could not get out of its own way. While its non-gaming amenities were undoubtedly successful, its casino struggled while operated by Deutsche Bank, which foreclosed on the original owners.
Now that the private equity firm Blackstone has taken over, McBeath is able to run the casino the way he has other properties over his long Strip career with Mirage Resorts and later MGM Resorts, where he most recently was the CEO at Aria.
“It’s really pretty simple,” says McBeath. “The strategies I employed were able to correct a lot of the deficiencies in the operating platform in the first year. Now it’s fine-tuning, expanding the brand and the options provided to the customers, and increasing the awareness across the high- and mid-end of the customer segments.”
Blackstone truly understands hospitality and the risk/reward mechanism in casinos, McBeath says.
“We’ve been able raise our limits,” he says. “The bank didn’t understand volatility and didn’t want volatility. Blackstone takes a much different approach. They understand that there are going to be ups and downs, but at the end of the year, if we manage operating and acquisition costs correctly, the math will take care of itself and this will be a profitable segment.”
McBeath says improvements in slot marketing and database management have helped to boost casino revenues and allowed the Cosmopolitan to post a profit for two consecutive quarters for the only the second time in its history.
However, the story of the Cosmopolitan has always been in its superior room product, popular nightclubs, cutting-edge entertainment, food-and-beverage outlets and successful meeting-and-convention business. But even there, McBeath is making changes.
While the hotel’s nightclub, the Marquee, managed by Tao, is still one of the top venues in Vegas, McBeath is concerned about the prices paid to the leading DJs.
“It’s pretty crazy now, but those things have a way of correcting themselves,” he says.
McBeath says the eclectic mix of entertainment at the Cosmopolitan will become a bit more approachable.
“Entertainment should be designed to make money on its own,” he says. “It has to be a stand-alone profit center, which was not the focus here. We booked a broad range of acts, some of which were outside the scope of our
demographics. Some of these young acts attracted people who aren’t even old enough to drink or gamble. They didn’t give us the ancillary contributions. We’ve rebooted the entertainment program and will present much more relevant acts to a cross section of demographics that fit the other products in the building.”
The restaurants at the Cosmopolitan have also been successful.
“Food and beverage has always been a significant part of the growth and profitability of the Cosmopolitan, and that was one of the compelling reasons that Blackstone saw value in the property. And there hasn’t been a lot of turnover.”
McBeath says some new restaurants will be opening in the hotel this year, all of which are recognizable but new-to-Vegas brands.
“I want food-and-beverage to be a driver of people,” he explains. “It’s hard to differentiate yourself, and a quality culinary experience and a quality entertainment experience can do that. People are demanding to be entertained during dinner. You can’t just serve them a great steak and Caesar salad anymore. You have to have design, ambiance and great service.”
With a focus now on the high end of the market, McBeath says the future of the Cosmopolitan is often dependent upon macro-economic issues, even the economy of China.
“With Macau revenue now retreating rather than expanding,” he explains, “that impacts how quickly we can reach our goals. A lot of our initiatives to drive an increase in EBITDA are tied to the international economy. We have a very solid foundation for this year’s financial performance. We’ve achieved a much higher return in our first year than anyone would have imagined. And we’ll build from that.”