Home » VT News » Boasting About Billions

Boasting About Billions

By MikeE on Sunday, 12th December 2010 9:03pm
  » filed under Las Vegas  comments: 8


Remember when Bellagio opened? The presses ran wild with the figures: suites some several thousand in square feet, hundreds upon hundreds of jets in a fountain shooting who knows how high in an 8-ish acre lake, and supposedly more than 2000 hanging flowers in the lobby's Chihuly. Nevertheless, none of those numbers appeared as frequently as the price tag.

1.6 billion dollars. Say it in your best Dr. Evil voice.

Wynn Las Vegas was no different - stats upon stats, none mentioned more commonly as the $2.7 billion it took to build. To some extent, even Encore's 2.3B ran wild in the presses.

But CityCenter changed all that. Maybe it was the ballooning costs. Or maybe because people will always refer back to its price tag in ridicule. In any case, the appeal of coming to Vegas's/The World's/The Strip's/MGM's most expensive Resort/Hotel/Casino/Disaster (however way it's spun) just lost its appeal. Suddenly, with rampant unemployment and economic uncertainty, the notion seemed downright ridiculous.

Now let me make you familiar with a figure that I'm sure most of us hardcore Trippers know about, but hasn't received nearly as much hype.

$3.9 billion.

That's Cosmopolitan's price tag. In the cost-per-room statistic that Steve Wynn so loves to boast about, Cosmo's even got Encore beat. Sure, they had their share of problems inflating construction costs, but 3.9 billion is hard to ignore.

So with that said, consider this my final feeding to the hype machine fire before opening. We've heard about the cool restaurants, the views, the unique comp system, etc. But the one thing we haven't heard about? The fact that this thing is perhaps the most expensive stand-alone resort in Vegas.

If Cosmo believes they can create more trips to the city that otherwise wouldn't have happened, their price tag is one statistic they should bank on.

Tagged: cosmopolitan   encore   wynn las vegas   city center   


Comments & Discussion:

It's really kind of a dumb metric. Inflation, cost of labour (you could build a duplicate hotel that costs more in terms of getting the humans to build it) and so on.

If someone builds a casino out of their personal fortune, I'm impressed. People used to. They don't so often anymore. Nowadays it's these large public companies and shareholders, not the guy with the dream, is the one who takes the fall if it's a disaster.

Cosmo is almost one of those cases of an eccentric trying to build a casino on his own dime, and we all saw how that turned out. It's also why the price tag is what it is. Investment banks have money, you say? No shit.

^ argument is too flawed to comment on.

Sure, you can say inflation and labor costs have greatly skewed building statistics today. The bellagio would undoubtedly cost a LOT more to build today. However, nearly 4 billion dollars on a stand-alone resort isn't exactly chump change, no matter how you try to shape it. Its obvious some serious money and TLC was put into this project, which raises my expectations that they really have tried to perfect everything (even the smallest details) about the place. Cant wait to see it in person.

Random question - Does anyone see (when the economy rebounds) someone investing in a large, value oriented hotel/casino? I mean, the way hotel evolution seems to work today is the Biggest, most expensive, most luxuriest hotels are the only things opening, which in turn makes older hotels (Which cant compete with the level of luxury provided by the new ones) head for the "Value" image. Anyone think this could happen? Or will we continue to see new resorts in Vegas merely fighting each other to "raise the bar" even higher?

To add to what i just said, I don't mean a hotel openly saying "We may not be the best quality, but we're cheap!" as i know that wouldn't ever happen. But what about a NEW hotel shooting for an affordable, upper tier image without trying to steal the crown of swankiest resort?

"Cost to the current owner" is a more interesting number to me. I believe DB's tab is somewhere around $2.4B, as others (Eichner) lost their investment when it changed hands. A $2.4B number (which compares nicely with Encore and Palazzo) indicates there is still a (small) chance the property could end up being viewed as a financial success (and DB might be able to get its money back in the long run).

No value properties have been built recently because the land, financing, and construction costs were so out-of-line. Also it is much easier (and cheaper) to rennovate an aging property (which is already in operation; see e.g. Mirage, Tropicana). There are enough of these aging properties on the strip that I doubt we will see any on-strip value properties built from scratch in the next 10 years.

10 Years is a VERY LONG TIME, in technology, and in Vegas terms. Almost half the LV Strip was constructed in a 10 year period. In a singe decade we saw, Mirage, Excalibur, Luxor, Planet Hollywood (New Aladdin), Venetian, Mandalay Bay, Bellagio, TI, MGM Grand, Monte Carlo, and Paris all open. So Vegas was totally transformed in a single 10 year period. I do think it might be 5 years before we see the "next thing" though. I disagree with people on FB, I'd be very surprised to see it get imploded. I believe that eventually, someone will finish it, and open it, but time will tell. I do agree that these numbers we hear, do get inflated as they include land, etc. For example, MGM loves to mention CC was $8.5 Billion, but what did they really spend out of pocket for that? They only owe $1.8 Billion on the property. So lots of games are played when it comes to numbers. I bet you DB does have far more than $2.4 in Cosmo though, I seriously doubt, their original investor, had $1.5 in equity/down payments.

It's difficult to compare Cosmo's cost with other properties because my guess is that a disproportionate amount of Cosmo's budget was spent behind the scenes.

In the movie business they talk about how much of a budget ends up "on the screen". Here we need to consider how much of the $3.9B was actually spent on the finalized public areas and rooms, and how much went into the multiple discarded redesigns, failed contracts with Hyatt and Hilton, settlements with condo buyers, complex engineering and construction issues with building around the Jockey Club site, excavating the below-grade parking garage and dealing with the underground aquifer.

Considering the original budget for Eichner's proposal in 2005 was supposed to be $1.8B with 2 1/2 years of construction (similar to Encore's original numbers), I'd be hesitant to make a straight dollar-for-dollar comparison with the final $3.9B figure for Cosmo and the final cost:quality ratio of other properties built in the most recent era.

Mike E,
Heh, reading the morning stock news what do I see? AP has a story entitled "Stylish Cosmopolitan in Las Vegas needs every edge" and the second paragraph begins: "The 3.9 billion Cosmopolitan of Las Vegas,..."

...Good call, man.

Elsewhere, the article echoes some of the Aria marketing-speak others have alluded to: "The Cosmopolitan's insides are designed to make people gawk." No schlong gestures, though. Just remember to breathe.

Comments Are Closed

Subscribe via RSS

Recent Comments:

michigan2010 posted: "MGM equals cookie cutter casino. No to reason to step foot in Bellagio again. Just hope they don't screw up..."
» Sayonara Bellagio Table Game Canopies...
saharalv posted: "I wish the editors were the entire electoral college in 2016...."
» Introducing the Trippies Class of...
fatbastard posted: "So many people letting a billionaire live rent free in their heads. Funny. Too bad it also detracts from the..."
» Introducing the Trippies Class of...
wpsteel66 posted: "Total bummer…talk about taking the class and uniqueness away from the Bellagio…another smart move on CEO Jim and making all..."
» Sayonara Bellagio Table Game Canopies...
damania posted: "Is there a podcast?..."
» Introducing the Trippies Class of...

» More Comments