Q&A: Ned Collett, CEO of Pure Management Group

By Richard N. Velotta

Friday, June 4, 2010 | 3 a.m.

When the Internal Revenue Service sent agents to investigate Pure Management Group in February 2008, it didn’t look good for the company or the Las Vegas nightclub industry.

One of the first steps the company took to change course was to hire Ned Collett as CEO of the live entertainment management organization with more than $80 million in annual revenue and more than 1,000 union and nonunion employees.

Collett had served as chief operating officer from late 2007 through mid-2008. He left briefly to take an executive position with Premier Exhibitions before being hired for the top Pure position.

Today, the company operates a range of offerings such as Pure Nightclub and Venus Pool Club at Caesars Palace; LAX Nightclub, Noir Bar and Company Lounge at Luxor; and Coyote Ugly at New York-New York. The company will relaunch its Social House restaurant at Crystals at CityCenter this summer.

Collett talked with In Business Las Vegas about company changes and the local nightclub industry:

IBLV: Give us a short thumbnail sketch of the different operations in the Pure Management Group.

Collett: We have a broad range of properties in Las Vegas with 11 different locations that cover the whole demographic spectrum. We have casual dining, bars and restaurants all the way up to the meganightclub. The highlight is Pure Nightclub and the Venus Pool Club at Caesars Palace. We also run the LAX Nightclub, the Noir Bar and Company Lounge at Luxor and Christian Audigier at Treasure Island. Dick’s Last Resort at Excalibur and Coyote Ugly at New York-New York are more casual, but they’re a lot of fun and have a great following. We also operate the Aura Nightclub at the Atlantis resort in the Bahamas and we have some things planned with our Social House brand, both in Las Vegas and in Mexico City.

When some people think of Pure, they think about the IRS raids of Pure’s business office in Las Vegas in February 2008. Give your view of what happened and how matters were resolved.

I can’t talk about a lot of the details because it’s an ongoing investigation, but I can tell you that we are in full compliance with the IRS and the Department of Justice. We are transparent with them, and the investigation continues. And we will continue to comply to work toward a resolution in this as quickly as possible. (On May 27, Pure announced it launched a regulatory compliance program that was developed with the assistance of the state Gaming Control Board).

Part of your responsibilities with Pure include setting things right. What’s been your strategy for accomplishing that?

I have a public-company background and that’s a big part of it. We started a restructuring in 2009. The former minority investors gained majority control of the company. Our parent company is called FDR Management doing business as Pure Management Group. In our corporate-restructuring effort, we streamlined operations and we developed sound, strategic partnerships. We moved our corporate headquarters (to another location within Las Vegas) and we started diversifying our company outside of Las Vegas. It always has been, but we wanted to show the public and the consumer that we are more than a nightclub company.

Why is it advantageous for the casino companies where Pure clubs are located to contract with you?

We have the same goal as the casino — we want to bring customers through the door. We are leaseholders for the most part. We have a couple of management agreements, but most of our properties are owned and operated. We feel we have a dynamic marketing approach to bring people to our establishment. We’re inside the resort, so you have to walk through their front door to get to our front door and when you walk out of our property, you’re still in that casino-resort. It’s a symbiotic relationship that we feel is a win-win for both of us.

Tell us about the company’s partnership with the Red Light Management group to book entertainment at your clubs. Why do you contract this?

Red Light Management is one of the largest independent artists management companies in the world, and we entered into a partnership with it to revolutionize the entertainment component. What we do every day is operate this diverse entertainment company. But what Red Light does every day, among other things in its many divisions, is to represent artists — recording, movie and television artists, writers, the whole gambit. So we thought, corporately, we were wasting too much of our time trying to figure out the best way to keep our entertainment offerings at the highest level. So we said, “How do we get the best bang for our buck?” So we outsourced that area to keep ourselves with the brightest, newest and best entertainment.

In the design of a club, what’s the single most important element? What is it that you’ll spend the extra money on to get it right?

It’s not the same thing at every property, so I’d have to say it varies from club to club. We call it the “fifth dimension” of the property. Sometimes it involves the sound, sometimes the visual element and sometimes it’s something else — for example, the White Room at Pure and the terrace there, or the iconic look when you walk into LAX. It’s dramatic. It’s just a stunning visual experience. Coupled with the music, that whole thing just comes together. You have to produce that fifth dimension to draw the people from Dallas or Indianapolis who don’t normally have that experience at home.

In addition to the IRS investigations, the nightclub industry has been involved in a scandal involving illegal activities at Privé that led to Planet Hollywood being fined by gaming regulators. How have these scandals affected the nightclub industry?

For us, it meant clarifying the role of the internal compliance department. We have a corporate message and it’s to run safe, well-run establishments that the tourist community can approach and feel safe and secure, And it’s a place to have a great time. We work with Metro and the enforcement division of the state Gaming Control Board, even though we’re not a license holder. But we are in a licensed property. We attend the seminars over at the Gaming Control Board that involve security. We work with our partners in the casino properties and their security divisions and heads of security to know what to expect in the hotel at any given day when we’re open. We keep that free flow of information. We use the word “transparency” a lot these days. That is our mantra. We’re transparent with our properties; we’re transparent with our government agencies; we’re transparent with our colleagues. That free flow of information is only going to help grow the business and create that environment that when people come to a PMG property, they will know that we are preparing for them to have a good time, if that makes sense.

How does that philosophy work its way down to the employees who actually touch the public?

We have a lot of meetings and a lot of training. It takes open communications with everybody to make it work.

Let’s face it: A lot of the nightclub patrons expect the Las Vegas club scene to be a wild place. Do you think the things that happened at Privé may have boosted business?

No. While there is an expectation that you’re going to have fun at one of our clubs, we can’t lose sight of the fact that the first order of business is to keep our customers safe and to maintain control over the operation.

Many view a night in a Las Vegas club as a pretty expensive proposition. Where do your customers get their money?

It’s not so much about where our customers get their money as it is that we cast a pretty large net to get a variety of customers. The different tiers of clubs we operate assures us that we get many different customers, all of whom have disposable income to have a good time when in Las Vegas. A lot of our customers find us as opposed to us finding them. That’s just good marketing, and I think we do that pretty well.

How has the recession affected business?

2009 was lean, but in 2010 we’ve started to see the growth in volume of visitors coming back. We have a plan, and we’re going to stick to our plan in lean times as well as good times. The first person in line is going to receive the same experience as the last person in line gets. We don’t cut back based on those times. There has been a change in buying patterns, but it hasn’t affected us to the point that it’s problematic. In addition, a lot of our venues match the demographic of the property they’re in and that’s the key.

What are the trends in spending in the clubs? Some say the days of $500 or $1,000 bottle service are ending because people just aren’t spending money like they used to.

We don’t really have the “bottle service,” per se. We sell the real estate. In the Pure Nightclub, for instance, if you want to sit on the main stage, that table will cost you a certain amount for the table. It’s not like you get the table and you start buying one, two or three bottles with your party. You pay for that table and it might be you’re paying a premium for that table because you are sitting next to (award-winning rapper) 50 Cent on New Year’s Eve, and he’s a megastar. It’s airline pricing. If you’re in first class, you pay for the first-class seat and there are certain amenities you get with that first-class seat — an expedited line, you’ll have a host and all the people who will work with you. We consider ourselves a more diverse entertainment company. We’ve morphed from a nightclub company to an entertainment company. So you’ll have all these different touch points, the wonderful dance-crowd music, great service, a celebrity or some kind of performance by chance at the nightclub that night. It’s the entertainment experience that we’re selling. We compare our pricing model to the (Los Angeles) Lakers. If you sit courtside with Jack Nicholson, you pay one price. If you sit farther back, you pay a different price, but you’re still seeing the game. A customer can come to any of the clubs on their terms.

What percentage of your business is local versus visitor and how is that percentage changing? How have the clubs been affected by the reduction in convention traffic and are higher-spending conventioneers returning?

I don’t know the exact percentage of locals to tourists, but our industry nights that attract locals are doing very well at all of our outlets. About 40 percent of our traffic comes from Southern California and the rest from all over the world. Yes, we have seen a falloff due to the convention business, but I’m happy to say for all of us that that’s in the rearview mirror. It’s coming back. Our sales department is seeing more and more coming back to Las Vegas. It was a sign of the financial times, and now the times are getting better. And companies are feeling better about things thanks to growth in U.S. and world markets. Some of the conventions and trade shows in previous years came with 2,000 people, and now they’re coming with 1,000, but you know what? At least they’re coming back. We can thank the (Las Vegas Convention and Visitors Authority) and Mayor (Oscar) Goodman. I don’t know how many morning shows I’ve seen him on, but he really promotes the city.

A decade ago, few people predicted the exploding popularity — and profit — of nightclubs in Las Vegas. Are they here to stay?

I think they’re here to stay because they’ve become a part of our culture. We have really great nightclubs in Las Vegas, but it’s a world phenomenon. We’ve studied clubs in Korea, Singapore and Frankfurt and some of them have been hitting the mark for more than 20 years. The clubs complement the tourism industry and every major tourism destination has the megaclubs. They’re even starting to show up in some small cities.

Is this something Las Vegas is going to have to worry about, like the casinos? If you can get the same experience at a club at a casino in California, why make the trip to Las Vegas?

No, because Las Vegas is the entertainment capital of the world. It’s one of those touch points that is in that traveler’s mind — the gaming, the food, the drink, the show and the nightclub. It’s what we do as a city.

On top of night life, we have the megapools that are introducing a new wave of “day life.” Where is that going? What might we see in 10 years?

We operate Venus Pool at Caesars Palace, and it’s our only pool operation. Our pool is somewhat different because it’s a Euro-pool with a different type of admission structure. Being that I’m not in that day-life business, I don’t know. Is it something we’re exploring? Absolutely. But it’s not something we do every day. From what I’ve seen, there may be more coming because it’s a wonderful business. I think it’s become a part of the Vegas experience that you have to be a part of.

Is there a demographic out there that, when you mention Las Vegas, they think of clubbing instead of gambling?

Yes, I think there is. It depends on where we’re marketing and promoting. We started a relationship with Bragman Nyman Caferelli BNC, an international public relations company based in Los Angeles, in May last year. It is out there with us working with our PR team here getting our messages out worldwide. The message we send out is “Come to Las Vegas, have a great time and we’ll show you what we do best.” As I said before, we cast the wide net, so we have people coming to Excalibur to Dick’s Last Resort eating burgers and crab cakes and watching our entertainment. And then, there’s the Pure-LAX megaclub market we’re trying to capture. We actually try to reach every segment of the tourist population.

What else do these customers bring to Las Vegas? Do they shop? Eat expensively? Or are their dollars mostly funneled into the clubs? And, probably most important to the casinos, do they gamble?

Shop, eat, go to pools. Probably gamble. See shows. We see a lot of drive traffic in the summer and a lot of our customers go to pools and clubs.

But do they gamble? That’s what your leaseholders want, right?

I don’t know. I don’t know that you would consider them the big-time gaming types, but they’re in the casino. They may be more interested in slot play than table games. Where we see our customers are inside our establishments, and we don’t have gaming inside our establishments. It’s not what we do, but when you come to Las Vegas, that’s one of the things you do.

What are the biggest changes you expect to see in the club scene in the years ahead?

We’ll see more competition. There are more coming. We compete with a lot of great operators here in Las Vegas. They’re expanding. We’re expanding. So I think you’ll see some brands in Las Vegas casting a wider net and instead of compelling someone to come to one of our venues here by traditional marketing, social media and networking, you’ll actually have an experience in an another city. So, if you’re in Miami or New York, example, you can have a PMG experience and when you come to Vegas, you’ll be inclined to visit us. As time goes on, we’re going to max out. We’ll see when the plateau hits. There are still a few hotels being built and nearly every hotel has a club, so at some point, we’ll hit some kind of stasis where we will know what the playing field looks like. Right now, we’re all working toward keeping our business going with the economy coming back and the construction of CityCenter completed. Once all that is established, we may know the answer, but we may still be a couple of years away from that.

Pure is relaunching the Social House brand with a property at Crystals at CityCenter this summer. Why was the original venue shut down at Treasure Island? And what will be new and different about the property at Crystals?

We worked the situation out with Treasure Island. It wanted the space and Crystals at CityCenter had space available. We felt that we should take the Social House brand, which was created in Las Vegas, put it in a place that was not specific to one resort property — although I guess you could say it’s attached to Aria and Vdara, but it is in the mall — and make it a calling card for all tourists. We get maximum exposure and align the restaurant between the likes of Wolfgang Puck and Todd English and right across from Eva Longoria. Look where we’ve taken the brand: It went from a great hotel — and we still have Christian Audigier at Treasure Island — and put it in more of a restaurant environment. We’ve taken our local brand and put it at the forefront of some of the greatest chefs and entrepreneurs in the world. It becomes a brand that has mass exposure. And now we’re going to open two Social Houses in Mexico City. Don’t get me wrong, we love Treasure Island, and we debated if we move, what do we lose, because it was such a beautiful space and an iconic fixture. We made the decision with Mr. (Phil) Ruffin at Treasure Island and since then, they have taken the space and made a wonderful restaurant of their own, Khotan. So we’re going for it. The new Social House opens in late June or July.

The company has entered the New York club scene with a collaboration with a company you once worked with, Live Nation. Why not undertake this on your own?

We wanted to team with Live Nation. I was with them for nearly two years as executive vice president of venue operations. And I saw a space that existed in both companies. Live Nation owns, leases or manages some fabulous venues across the country. It owns the House of Blues brand. The first venture we’re going into is in New York City at Irving Plaza. It’s a wonderful venue that has been there since 1914 and has a great dance hall. Live Nation uses the venue for 100 or so concerts. Concerts usually end between 10 and 11 (p.m.) What we do starts at 11. So I picked up the phone and called some of my friends at Live Nation and said, “What would you think about putting two worlds together?” Live Nation has merged with Ticketmaster. Live Nation was the biggest. Now, it’s even bigger with all these wonderful venues and all these different avenues of marketing. So, on the back of an envelope, we kind of drafted something and said, “Why don’t you take a look at what PMG does in the space of time that you’re not doing anything in that venue? If your concert is over at 10:30, guess what? At 11, we’ll have a dance club.” In the conversations that we were having, all of us said, “That’s sounds somewhat chaotic.” And I said, “That’s right. It’s chaos.” That’s where the name came from. And Chaos has come to Irving Plaza. Chaos also will move across the country in multiple venues. It’s an entry into a market, but its an entry into a market of iconic venues that people in the cities know, but it’s not what you would think would happen at the Irving Plaza. So we are going to create this place to do other stuff.

Are there other opportunities out there for you and Live Nation?

We’re working on other opportunities in other cities. It is a wonderful boost to our company and to the energy of our colleagues to partner up with this megacompany and go into these venues around the country. And one of the great things is, we’re not just promoting PMG — we’re promoting Las Vegas. So at the Irving Plaza event, I said, “This is what you get in Las Vegas.” It won’t be the same thing as Las Vegas, but there will be great music, the whole celebrity approach, the high energy of Vegas. There are fabulous clubs in New York City.

What are the differences in the nightclub scenes in New York and Las Vegas?

There are some that are very similar. There are some that are smaller. There are some that may be a little more intimate — Pure is 40,000 square feet; LAX is 26,000 square feet. But that type of real estate in New York City is hard to sustain two to three nights a week. We’ll have some VIP areas in the Chaos concept, but it’s mostly going to be for people who want to go out for a few hours, dance, socialize, have some high-energy music, have some celebrity appearance, see some video jocks, that kind of stuff. It’s a different kind of experience for us, but we’ll be going into the epicenter of night life outside of Las Vegas. It’s not going to be an easy task, and we’re devoting a lot of effort and marketing and PR to it. It’s creating a space that we feel has not been tapped into.

Tell me about the Social House plans in Mexico City.

We are opening in conjunction with a group called Luxury Clubbing in Mexico. It has more than 15 establishments across Mexico. On visits to Las Vegas, these gentlemen found Social House and when we were making the move to Crystals out of Treasure Island, they asked, “Would you entertain the idea of moving to Mexico City?” We found that the locations they are looking at are in line with the brand and it’s a wonderful area of Mexico City. Their company is very similar to ours with family restaurants, casual dining, bars in conjunction with hotels. So the match of companies worked. The fact that they were so passionate about our brand specifically really made the relationship work. So we sent our teams down, they sent their teams in and we did some cross-training. While the first one was under construction, another opportunity came up and they asked us, “Would you mind doing two, because we found an equally good location?” So we went down and looked at that, and it was wonderful. For us, it’s a little daunting because we’re planning to open Social House-Crystals in the same two-week period that we’re trying to open Social House-Mexico. So the stars have aligned, but not in a particularly easy way. The menu will be the same and our executive chef, Joe Elevado, will oversee everything including the brand standard and the sourcing of the product.

How is PMG involved in the “Soul School” series at the Las Vegas Hilton?

From my past career in live entertainment operations, I have a love for live music and live shows. We have worked with the Las Vegas Hilton and Taurus Productions to go into the theater at the Hilton and actually promote shows, actual concerts. We started last year with Frankie Beverly and Maze and then Charlie Wilson. We had great success. We sold them out immediately. So the Las Vegas Hilton being a wonderful partner, we got together and said, “PMG wants to go to the next level to promoting shows to diversify our brand and reach out to the citizens of Las Vegas.” These are pretty much locals events because of the way we market them. If you’re staying at the Las Vegas Hilton you might be able to buy a ticket, but they’re selling them out in advance. So we saw this space in this wonderful theater that we could put together this series of iconic artists.

It’s almost like the old sports team analogy where you can buy the season ticket and you can see all six acts. We’ve got Teena Marie, the Original Time Band, the Whispers and Stephanie Mills, Al Green and Frankie Beverly and Maze and Charlie Wilson are coming back by popular demand. We called it the “Soul School Series,” because they’re all soul and R&B artists. The shows we’ve done so far have been extremely successful on many levels. They’ve been financially successful, they’ve been successful for the Las Vegas Hilton because there are 1,600 people there and they’ve been successful from the local perspective because it’s a great night out on a Friday or Saturday.

By generating this local event series and diversifying our name, we’re not just “that nightclub company.” We are an entertainment company, a marketing company, a promotions company. We have restaurants in Mexico now and Chaos in New York City. We’re dynamic, diverse and entrepreneurial. And we continue to look to innovate.

That’s where our industry has to go. It’s staying one step ahead of the innovation curve. It’s a great way to diversify the brand and who we are. We’re here. We’re not going anywhere. We started our conversation talking about the challenges of the company in the past, but we’ve moved this company — our offices, our organizational structure and our ownership structure. We’re moving toward the future. Everything we do is to drive the focus back to Las Vegas because we’re here.