The Billion Dollar Baby

After crawling through year one, M Resort banks on better fortunes to hit its stride

No neighborhood casino has been immune to the Great Recession, but one property has had it especially rough. M Resort opened a year ago March 1 against the biggest headwinds the Las Vegas gaming industry has ever faced. It wasn’t cheap—$1 billion. It had no sister properties to help market it. And its expected customer base never materialized around its isolated location, way out on Las Vegas Boulevard and St. Rose Parkway.

So today it’s a neighborhood casino without a neighborhood—one with a lot of debt, though no one knows how much. As a result, many of its anticipated extras, such as a shopping mall and movie theaters, have been put on hold for a few years while the family-owned company waits for the economy to rebound.

But developer and CEO Anthony Marnell III is otherwise sticking to the plan. He isn’t down about the bad timing or location. As far as he’ll go with his analysis of Year One is describing it as “interesting.”

He’s listened to the skepticism of M Resort’s remote location as being an obstacle to luring customers, but considers it only a short-term problem. Over the past year, the company has gained a better handle on planning, Marnell says, and he’s optimistic the global and national economies are on the rebound, which is the key to the gaming industry’s recovery as a whole.

“After you have a year under your belt, you have a very good understanding of what the market wants,” Marnell says. “[But] they never turn out to be what you thought when you built them.”

Marnell’s father’s firm, Marnell Corrao Associates, designed M Resort. The family has gaming and hospitality experience in that Tony Marnell Jr. designed the Rio and was its CEO until Harrah’s bought it in 1999. Also on the M team is gaming giant MGM Mirage, which invested $176 million in a form of lower priority debt. In MGM Mirage’s third-quarter earnings report last year, it wrote off the entire debt because of the investment’s diminishing value.

Because M Resort is a private company, it is difficult to assess how well the casino, hotel and restaurants have fared this past year, says Brian Gordon, principal economist at Applied Analysis. “Certainly, M Resort did not open at an ideal time,” he says.

The location may have been a good gamble a couple of years ago when homes were being built on the Valley’s periphery, Gordon says, but today there’s a lot of vacant land where rooftops were to have been. Meantime, population of this southwest corner of Henderson has stagnated, perhaps even fallen a bit, he says.

“It’s a different world than when these projects were designed,” Gordon says. “Now they are doing what they can with what comes through the door.”

The buzz over M Resort has been good since the glowing blimp named the “M Lightship” was dispatched over nearby neighborhoods during the grand opening. Regulars and tourists have taken to the resort’s mix of contemporary design and family-style service. At its main entrance is Marnelli’s, the Italian restaurant that greets diners with the family’s coat of arms and boasts Marnell family recipes. The diner, Baby Cakes, bears the nickname of Marnell III’s daughter.

It’s no accident that the restaurants are the stars at M Resort. Exhibition cooking is a major focus inside the resort, inherited from the Rio, when the Marnells brought in one of Las Vegas’ first celebrity chefs, the late Jean-Louis Palladin. Each venue is upscale beyond its menus, with floor-to ceiling-windows and floors made of travertine from Italian quarries. In the basement, the Hostile Grape wine cellar and tasting room caters to connoisseurs looking to sample the next great vintage.

There’s also demonstration kitchen Studio B, which was home to a season of the popular TV show Top Chef, but normally is all about enticing residents to live studio action cooking. The studio may soon be “broadening,” although Marnell won’t elaborate on what the additional service or entertainment might be.

Marnell’s favorite part of M Resort is the casino. He loves how its “clean, modern design displays warmth.” It’s worked to attract the one thing—other drinking and gambling, of course—that always attracts men. “If it feels sexy and cozy, and females like it,” he says. “It’s a key part of the design.”

Marnell’s other efforts to lure more customers include hosting the premier league of Party Poker this month to determine whether the draw of bringing in the top 15 players makes good business sense. He doesn’t know yet whether M Resort will host the event next year.

“We try some stuff that works,” he simply says, “and others that don’t.”

Meantime, several difficult decisions were made in the first year, including cutting back on staff and increasing the remaining workers’ contributions to health insurance.

“My team’s not applauding [the decisions], but it keeps more people employed,” Marnell says. “I would describe us as an efficient business. … As a business guy, you can cut to the bone, [but] after a while you cut through the bone. You risk doing damage that’s beyond repair.”

M Resort could get a boost from a turnaround in regional and destination tourism, which is expected to improve by 2011-12. But, due to unemployment and lack of discretionary income among locals, neighborhood gaming could lag beyond that recovery—perhaps as late as 2012-2013, says gaming analyst Bill Lerner of Union Gaming Group.

“It’s no secret that [locals casinos] have an abnormal amount of debt,” he says.

Ultimately, M Resort’s best hope for a quicker change in fortunes may lie in its niche location, Lerner says. There isn’t an oversupply of local casinos around it, like you find in such areas as Boulder Highway. Its nearest competitors are South Point and Green Valley Ranch. And the bedroom communities that are closest—Southern Highlands, Anthem, Seven Hills—are on the affluent side of the ledger.

“That whole feeder market is at their capturing,” Lerner says. “And it’s definitely an excellent property.”

A bonus is that it’s not all about locals for M Resort, Lerner says. Because of its visibility from Interstate 15, the resort also attracts regional and destination traffic. Not many neighborhood hotel-casinos can say that.

But moving forward, the main thing Marnell is banking on is the return of long-term growth in Southern Nevada.

“We’re going to keep very focused on good service and good value, and keep listening to the customers,” he says. “We just need a little tailwind. That will go a long way for this town.”

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