MGM's Biggest Bet
November 5, 2009
We are now one short month from the opening of the largest project ever to grace Las Vegas, and there is already more anxiety than there is anticipation.
MGM just reported “less bad” earnings, but they did take a nearly one billion dollar charge against the City Center project.
I think the most insightful comment of the day had to go to the Motley Fool Investing site which said:
“For investors, CityCenter must be an unqualified hit. Otherwise, MGM Mirage will have difficulty keeping shareholders happy by continuing to say, “We’re not doing as poorly this quarter as we did a year ago.”
I was talking with someone this past weekend, and the topic was this very project. I expressed my anticipation for the opening, and the person asked me an extremely simple question that caused me to have a bit of an epiphany.
The question was “Why are you looking forward to City Center?”
“Because it’s going to be huge.”, I said, “It will be the largest property Las Vegas has ever seen.”
“Yeah, so what?”, he said.
As I was ready to rapid-fire my reply as I often do, it dawned on me that I did not have a response.
So what if it is large?
Mandalay, Luxor, and City Center from Freeway
Las Vegas City Center from Freeway
Las Vegas City Center from Freeway
Las Vegas City Center from Freeway
Las Vegas City Center from Freeway
Las Vegas City Center from Freeway
Las Vegas City Center from Freeway
Las Vegas City Center from Freeway
Las Vegas City Center from Freeway
Las Vegas City Center from Freeway
I anticipate City Center like I anticipate a Playboy Magazine.
A single Playboy only lasts me about a dozen charges, at which point it may as well be an issue of Better Homes and Gardens. This is why Hugh Hefner releases new copies every month. The centerfold is most arousing the first time you see it, and less so every time thereafter. By the 20th time, you may not even get a partial chub.
City Center is not unlike a pair of breasts. The only reason I give a damn about the buildings in the project is because they are new, artificial, and huge. Once I am done exploring them, there has to be something else to hold my interest or I will just move on to the next pair.
The Encore suffered a bit of the “Centerfold Effect”. It was the darling of Las Vegas three months before and three months after it opened. After that … it was just another hotel on the skyline.
When all was said and done, it was a hotel/casino. A really nice one, but a casino nonetheless. City Center can’t just be “good”, it has to be a consistent draw pretty much immediately.
However, what exactly, is City Center going to have that the MGM Grand and the Bellagio do not have?
I want to be able to answer this question with whole paragraphs of substance, but I just can’t do that.
I understand that the buildings will be new and shiny, but what will be the “killer app” for the project?
It certainly can’t be video poker. We already have that in spades. Ditto for Blackjack, and every other game of chance under the sun. 1,000 thread count sheets won’t do it either.
The sky lobbies will be really neat, but the red chandeliers and the ever-changing “Switch” restaurant at Encore were cool too.
Will enough people fly across the country or the globe to see abstract canoe art?
Maybe, but to be completely realistic – probably not.
As the date draws closer, I’m starting to wonder what it is that I will be looking for.
I’ve already seen the outside. I’ve seen it for years. I saw the implosion of the Boardwalk, and I have seen the outside of the City Center complex weekly, if not daily, for quite some time. I’ve gotten used to the hugeness already (that’s what she said).
Once inside the massive property, how will it be different?
You can only play one table at a time, and the overall largeness of the facility may not mean much beyond the initial “wow” factor. Bigger doesn’t necessarily mean better, but in this case, it’s City Center’s main selling point.
I finally got some shots of the City Center freeway sign over the past few days. Given the size of the overall project, it is a tiny bit underwhelming and it’s not appreciably different than other marquees which already exist.
Las Vegas City Center from Freeway
City Center Sign from Freeway and Bellagio Sign in Background
City Center Sign from Freeway and Bellagio Sign in Foreground
For the sake of comparison, here is the Mandalay Sign, photo taken on the very same day:
Mandalay Sign from Freeway
I do look forward to the new tram system and some alternate view of The Strip, but by this time next year … City Center is going to be an eleven month old project.
We tend to romanticize upcoming properties, and we have a honeymoon period shortly after their opening, but will it be as exciting then as it is now?
I hate to say it, but some doubts are creeping in.
I want the thing to be great, I expect it to be great, but it may be time to start tempering my own expectations just a bit. I have to remind myself that when all is said and done, it’s just another hotel/casino/retail project like so many before it.
It’s better to under-promise and over-deliver rather than the other way around, but in Vegas, we have a knack for doing the opposite. I don’t think we’ve ever lived up to our own hype.
Here’s hoping this time will be different.
Written by mike_ch on November 5, 2009 at 4:26 pm
You’re forgetting the Manhattanization effect. That Las Vegas might finally get over the fact that it has vast, vast, VAAAAA~AAAST wide tracts of unexpanded land and begin condensing boxes and bodies like a real city does.
Further more, CityCenter, and Steve Wynn hotels do something that Harrah’s and the condo-focused just don’t get: Artistic expression just for the sake of it. Vegas has created such cynicism, and you and I know it best because we’re on the Strip a lot and cynical about prices and odds and paytables, that it’s comforting to see the resort invest in aesthetic beauty or something else just for the sake of it. No obvious monetary influence involved. No admission prices, or “gotcha.”
Now I’m not going to say that there isn’t capital in public art, obviously Bellagio is benefitting huge from having the fountain show out front, though the fountains themselves don’t offer any quarterly earnings (and in fact have always been reporting a loss) they bring an absurd amount of traffic into Bellagio, and even the casinos hanging around it. If you own a hotel with room windows that face out to the Bellagio fountains, you’ve probably been able to get away with overinflating the prices of those rooms sometime in the past few boom years.
CityCenter needs to be a success. Hell, the city wishes it to be a Mirage, so successful that it spawns a whole block of knock-off “office tower” style casinos in the way Mirage bred a whole street of casinos that made gestures at being a fake getaway to something more exotic than the middle of the desert (like Paris, Venetian, etc.) However, people may have actually jumped the gun on the CityCenter bandwagon and wound up being washed out by the crash (Cosmo, FBlue.)
Written by tully on November 5, 2009 at 6:54 pm
No idea what City Center’s “killer app” will be. Art? Maybe. But will a person want to visit a typewriter eraser sculpture and a canoe mishmash over and over, the way they visit the Bellagio Conservatory and the fountain shows? Will the art at CC appeal to a wide range of people, the way the Bellagio’s does?
CC’s art is static, whereas as at the Bellagio, it changes. There is a reason to return to the fountains and conservatory. Will be there a reason to go see the canoes and eraser again?
Written by BigRedDogATL on November 5, 2009 at 7:07 pm
After City Center opens you can move your anticipation over to the opening of the Cosmo. After the Cosmo opens and fades, then you can move onto the Foutainbleau. After the Fountainbleau comes and goes then you will have a few years to anticipate Echelon coming. After Echelon, then will be the Station Casinos to replace the old Castaways and Wild Wild West. Rex you have plenty to anticipate and the whole time Mayor Goodman will still be anticipating getting a pro sports team in Vegas.
Written by blueboar on November 5, 2009 at 7:33 pm
“Manhattanization”? No, I don’t think so. This seems more like a nice new office park.
I’m sure it’ll be interesting. But I could go to Manhattan every month and walk around and discover new things every time and not be bored. I’m not so sure that will be the case here.
How much changing street level stuff will there be to grab my attention? Is it all just inside the soaring buildings?
I’m looking forward to seeing it. But I come out a few times a year anyways. Is this thing going to get people to come see it AND return if they aren’t regular visitors anyways?
I think it’ll be really nice. But I also think it has a better chance of cannibalizing room rates in town more than it does of turning the town around.
Written by FoolsGold on November 5, 2009 at 8:18 pm
City Center will have Adjectives!!
All the press releases will use lots of adjectives. They always do.
Yeah, the novelty wears off. That morning sun eventually shows Maggie Mae’s age. Or atleast you just finally start to notice it some day.
Will it succeed? Beats me. Why don’t you ask the dealers who applied for jobs there? Oh I don’t mean the dealers who were out of work or who were getting tokes so low they might as well have been out of work. I mean ask the employed dealers who were given the option of transferring to City Center or staying where they were. Now see whether those dealers jumped at the chance without any hesitation whatsoever or whether those dealers decided to take the chance but were not particularly ecstatic and not particularly convinced they would be seeing miles and miles of high rollers lineing up to get to City Center and spend their money nowhere else but City Center.
Mirage proved you could build a great big mega casino and make a mint. Mirage was a long time ago. Maybe the rule holds true still. There is always someone in last place. Most real estate projects are financed through the developer’s downpayment and the bank’s later committments to advance funds. The banks HAVE to invest that money. They hope that interim changes have not altered the situation, but the economy is different and the times are different.
Will someone soon be finding out that City Center is really and truly great or will they just be finding out that “Hey, man… its a casino. Its got flashing lights and jangling slot machines and you can get a free drink there.” Beats me. Its aimed at the upscale market, but markets shift.
If it succeeds, the developers were visionary. If it fails, the developers will still claim to be visionaries but the banks and shareholders won’t be overly impressed.
Written by BeeeJay on November 5, 2009 at 9:58 pm
MGM-Mirage has a well designed marketing plan, but their front line employees are consistantly poor at execution across all their properties.
I expect City Center to be no different.
In these difficult times, and the far more difficult times just around the corner, City Center is positioned to succeed. But ultimately that will depend both on the overall concept and the front line execution. I think if they can nail both they will do well not just by canabalizing other properties in their ownership group, but by taking market share from Wynncore, Palazzo/Venetian, and Caesars.
Obviously for MGM-Mirage to succeed they are going to have to take some market share. If they could tweak their marketing plan to mimic Harrah’s at the low end, they could crush that demographic with their relatively better properties. If they can properly execute at the high end with City Center they can steal some disenfranchised Wynn and Palazzo customers.
I feel like they will succeed on concept, they will get a lot of people to give them a shot. I suspect they will fail miserably on execution. A lot of people will have bad initial experiences and there is potential for some piling on to occur.
If its any indication of my confidence in MGM-Mirage to manage an opening of this size, I actually had a reservation at Aria for opening night, but moved it over to Bellagio spa tower. The experience is going to come down to front line single employee-customer interactions and my experience has been that this is the companies biggest weakness.
Written by Double Down Now on November 6, 2009 at 8:30 am
Am I the only one who thinks CC is ugly as hell? I mean what kind of tourist wants to gamble in an office buildin’ like see at home every day? That being said I’ll definitely check it out when I’m in town for NYE! LOL
Written by Mark on November 6, 2009 at 8:44 am
The CC is an ugly conglomeration of generic steel and glass. Any of these buildings could be in any downtown area not stand out. The project will ultimately be perceived as an also ran. Factoring in the size and inaccessible layout it will fizzle after its initial infatuation period. The good news is that they will offer single deck blackjack with 95% penetration, full pay table video poker, and single 0 roulette.
Written by FoolsGold on November 6, 2009 at 2:33 pm
>they will offer single deck blackjack with 95% penetration, full pay video poker, and single 0 roulette.
Only because they feel they have to do so.
Perhaps as part of their attempt to snag the Venetian crowd but also perhaps they’ve looked at “M” and seen the writing on the wall about a return to the days of Benny Binion’s “Good Gamble”.
Written by Huddler on November 7, 2009 at 6:14 am
I always knew Rex was a size queen!
Written by mad dog on November 7, 2009 at 8:23 am
Why did they black out your web address on their sign?
Written by Tom on November 7, 2009 at 9:06 pm
To me the test of whether I like a new casino hotel is the answer to this question; Do the physical surrondings and the employees make me feel wanted, or do the place have the attitude that it is so cool that I should love it? After the newness is over the comfortable feeling of being wanted better still be there. Biggest can be a negative.
Written by keith on November 8, 2009 at 7:45 am
i personally think the “killer app” should be a strip club inside the casino. why not be the first?
i would prefer a legal brothel in the casino, but i guess we won’t have that until Rex becomes mayor/overlord.
Written by Cindy Lou Who on December 1, 2009 at 12:15 pm
City Center – more of the same. It will be a complete flop. And the residential tower will never be over 20% owner-occupied.