The First 100 Days

Gaming industry expert David G. Schwartz examines CityCenter’s giant learning curve

Five and a half years ago, MGM Mirage announced a project designed to “change the way we think about Las Vegas forever.” As CityCenter approaches its 100th day of operation (March 26), the dice are still in the air: It’s still too early to tell if CityCenter is the Big Vegas Boom’s last hurrah or a model for future sustainable development in our desert metropolis.

Aria, the centerpiece of the 67-acre mini city, has drawn the most attention simply because it’s the main place that people want to visit, thanks to its restaurants, bars and casino. The Crystals shopping center is only about half full. The Mandarin Oriental, by design, pursues a mere sliver of the luxury market. And Vdara at this point seems like just another finely appointed nongaming hotel—pleasant enough but nothing to inspire a trip to Las Vegas. Right now, Aria defines CityCenter.

So the question of the moment is, does Aria work?

MGM Mirage executives will tell you the overall project has been an unqualified success. “CityCenter is the single most powerful reason to have hope for a resurgence in our tourist economy,” MGM Mirage chairman and CEO Jim Murren says.

Do the numbers justify this optimism? Most metrics of casino performance aren’t publicly available, but we do know a little bit about Aria: Over its first 15 days of business, it earned $7 million in operating income, or about $466,000 a day. Its successful big sister, Bellagio, by comparison, averaged $430,000 for all of 2009. If projected out for the year, that would make Aria about 8 percent more profitable than Bellagio. But Bellagio only cost $1.6 billion to build. Aria carries the weight of CityCenter, and that’s a $8.5 billion load.

There are two ways to spin these numbers. You could argue that with the property just starting to ramp up, these are great results. Or you could say that with two big draws—the opening festivities and New Year’s—they should be much better. Because numbers for Strip casinos aren’t yet available for the same period, it’s hard to call. Either way, the totals for both properties are far below the $841,000 a day in operating income Bellagio was earning in 2007, when CityCenter began to take shape, which is likely closer to the property’s projected income.

Nobody in town can touch 2007 numbers these days. Murren concedes that, outside of changing some price points, not much was done to alter the scope of the project as it became clear that the market it was planned for no longer exists. “We had to be careful not to change too much,” he says. “We would have lost ourselves. We couldn’t compromise on quality. We knew that if we would have finished on time and with quality, ultimately we’d be OK.”

That is likely true for the long haul. But in the short term, the project’s Promethean scale may be working against it.

“I love Aria,” says Anthony Curtis, editor of the Las Vegas Advisor. “I love it for its ideas, for what it can be. But right now it’s too expensive. It’s not working now because they haven’t adjusted anything outside of the room rates to make it fit into today’s economy.”

Room rates confirm that demand for Aria has been moderate. In a recent survey, rates at Aria for the early spring tracked lower than Bellagio, Encore or Caesars’ Augustus tower. That wasn’t part of the plan.

“We thought we’d be higher than Bellagio,” City Center president and CEO Bobby Baldwin admits. “But ultimately we don’t price rooms, customers do.”

Some who have stayed at the hotel have customer service issues. Several online trip reviews and comments reference unmade beds, long lines at check-in and dirty windows.

Those responsible for Aria are taking the criticisms seriously. If you stayed at the hotel or visited the casino and had a problem with your service, Aria president and COO Bill McBeath knows about it. He gets about 10 letters a day with a mix of praise and customer complaints; he scans security reports and front-desk logs; and he reads a weekly digest of TripAdvisor reports.

“In the first week, they were 80 percent negative,” McBeath says. “But now they’re 90 percent positive.”

McBeath is committed to fixing the causes of those complaints. The spotty cell-phone reception—a beef among customers since Aria opened—has taken about 100 days to resolve (AT&T full service started on March 5, and Verizon was slated for March 22, which is expected to give 98 percent of cell phones complete coverage). The dim casino lighting has been a point of contention, too (see page 38). And those striped-off spaces you see in the self-park garage represent another work in progress.

As far as more general complaints about the level of service, McBeath explains that any new project has a learning curve—especially one as giant as Aria, which has 4,004 guest rooms in its 61 stories, 16 restaurants, 10 bars and lounges, and 300,000 square feet of convention space.

“We’ve got a big challenge,” says McBeath, a Las Vegas native who’s been running casinos since Steve Wynn tapped him to helm Treasure Island at the age of 33. “We’ve had to create a brand awareness for many different elements under CityCenter, all targeting luxury, in this economy.”

Aria must do this while the casino’s 10,000 employees find their footing, which involves learning the property—one designed to be like no other.

At the start, innovation has had some unforeseen costs. Guests unfamiliar with Aria’s guest-room technology (the advanced system that saves a guest’s temperature, lighting and musical preferences) have flooded the front desk with requests for help, slowing down check-ins. After amping up the in-room tech support, McBeath believes that the front desk is now better able to meet its projected standard, and wait times have improved.

Some of the most crucial guests at Aria, though, don’t wait in line at all, and they are already embracing Aria. The high-rollers who fill the SkySuites and play in the Salon Prive have added substantially to the resort’s bottom line, even if they don’t make a dent in its occupancy rate.

With convention-block rooms penciled in for nearly a fifth of the hotel’s occupancy, business travelers are another important piece of the puzzle. Baldwin believes that the property’s LEED-Gold certification helps lure conventions that might not ordinarily come to Las Vegas. Increasingly, Fortune 500 companies prefer facilities that pass environmental muster. Aria’s conference center does, making it a positive addition to the Las Vegas convention market. Recently, Las Vegas Sands unveiled an eco-initiative for its own convention center, so MGM Mirage can rightfully claim to have blazed a trail here.

The project, though, was meant to do more than incrementally draw more convention visitors to town. It was conceived, from the start, as something unlike anything that had come before. And this was necessary, Baldwin insists. “There’s been a continuing evolution since I first came here in 1969. CityCenter is the next step. Las Vegas has to continue to reinvent itself.”

Baldwin has history on his side. It’s a cliché to say that, in Las Vegas, change is the only constant, but it’s nevertheless true. The game-changers of Las Vegas history—Caesars Palace, the International, The Mirage, Bellagio—have done much more than add room capacity and slot machines to the city; they’ve put a new twist on what’s already been successful.

“We could have designed a new themed hotel or expanded Bellagio south or developed a stand-alone contemporary hotel-casino,” Murren says. “It would have been interesting but predictable, and at the end of the day it would have just cannibalized existing properties. CityCenter is none of that. It appeals to people who already come here, but it also will attract people who had heretofore no interest in Las Vegas, who are worldly, who travel to great cities, recognize superior architecture and design, seek out art galleries, museums and public spaces that have significance.”

“It’s a game-changer,” McBeath adds. “The design is so different, this is going to be relevant for a long, long time.”

So just how long before the reality matches the expectations? “It usually takes about a year to get all the refinements,” Baldwin says. “But about 80 percent of them are handled in the first 120 days. The last 20 percent are the most difficult, and they take more time.”

Many of these “difficult” problems are tied to bigger economic concerns. CityCenter was conceived when Las Vegas seemed to be on an indefinite upswing. With the first towers of Signature at MGM Grand selling out, condo and condo-hotel rooms were hailed as the wave of the future. CityCenter bet big on the trend, planning more than 2,900 luxury rooms that would sell for about $2.5 billion combined.

There are now fewer condominium units for sale (the Harmon will no longer offer a residential component), and prices have been lowered by 30 percent. According to MGM Mirage’s latest conference call, it has 400 loan applications—a positive start, perhaps, but not a sign of overwhelming demand.

The CityCenter team is banking on easier financing changing that. And the result, someday, will be a CityCenter that’s more than the sum of its parts. “When it’s totally developed,” Baldwin says, “we’ll be hitting on all 12 cylinders.”

Until there’s a more robust national economy to support it, however, CityCenter is like a supercharged Lambroghini inching along in a rush-hour traffic jam. It’s a machine that needs the open road to live up to its promise—and its price tag.

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