The Nightclub With a Casino Attached

The Cromwell heralds the coming age of niche marketing on the Strip and beyond

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Way back in 1989, when The Mirage opened, Steve Wynn wanted something revolutionary for Las Vegas: Not a casino that also had a hotel, but a world-class resort that just happened to have a 100,000-square-foot casino.

Wynn was prescient. For the past 25 years, nongaming elements—rooms, restaurants, shows and, increasingly over the past decade, nightclubs—have steadily gained market share relative to slot machines and table games. Which might be why, a generation and a still-lingering recession later, Caesars Entertainment’s Cromwell and the soon-to-open SLS Las Vegas are the logical continuation of the process that started with The Mirage.

The Mirage started shifting the focus of Strip resorts away from gambling, but since the recession, there’s been a more subtle change in how casinos are positioning themselves. With a slowdown in spending among the mass-market customers, the most successful resorts have been able to cater to the wealthy—both at the baccarat tables and with high-end amenities.

And, if night- and dayclubs have a track record of drawing outrageous return on investment, hotel-casinos are going to find a place for them. This is why Wynn spent $67 million to add Encore Beach Club to his just-finished Encore resort. Once that proved a profit-maker, the path to success for post-recession casinos was clear.

In the case of the Cromwell, which opened May 21, a day/nightclub has been literally built over the remnants of one of the most notorious bargain joints left on the Strip. The massive superstructure that houses Drai’s Beach Club shows us just what the brass at Caesars think is important in 2014. They had a property, Bill’s, that was well positioned to cater to budget-conscious gamblers. With a small footprint and few rooms, it was primed to deliver the kind of intimate “Old Vegas” experience that has become hard to find on the Strip. Since its guests were more concerned with value than novelty, the property required relatively little reinvestment. It might be a sign of just how much the “average” gambler’s bankroll has shrunk that Caesars decided to close and gut such a sure thing and instead make a $200 million bet that there’s room on the Strip for another beach club—and that guests would pay a premium for rooms close to the thumping beat of the DJ sets.

While The Mirage’s volcano symbolized where Las Vegas was headed in the 1990s—super-sized spectacle—the transformation of Bill’s into the Cromwell tells us that in the coming years we’ll see casinos catering more to specific groups that happen to have plenty of disposable income. It’s at once a continuation of Wynn’s concept of showcasing amenities ahead of gaming, and a retreat from the ’90s model in which casinos sought to be everything to everyone. Properties are now finding a niche and building a business plan around it.

When the SLS opens on Labor Day weekend, it will be further proof that narrowcasting is here to stay. It has all of the elements of traditional casinos—gambling, convention space, dining, retail—but is expected to appeal most strongly to Southern Californians familiar with SBE’s branded offerings—and more than a few of the 800 mostly Chinese citizens who helped fund the project via the EB-5 visa waiver program.

The big-box casinos, particularly those with tendrils in Asia, won’t go away, but the Cromwell and SLS, if successful, will make a compelling argument for smaller properties with a laser focus on specific demographics. As always, Las Vegas will shift to meet customers at the intersection of their wallets and desires.