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October 22, 2014

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The price we pay for a drink on the Strip

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Fun facts

Drink prices have increased 20 percent over the past five years.

The average markup for a drink on the Strip is seven times more than what it cost to make.

Drinks make up an estimated 60-70 percent of a nightlife venue’s revenue.

Premium cocktails cost 15-20 percent more on the Strip than at equivalent locations in Los Angeles or New York.

Fifteen years ago, food and beverage served as a cost-effective way to lure gamblers into casinos and keep them there. Then Steve Wynn entered the game, transforming the Strip with his ethos of glamour and decadence in the late 1990s. Rather than use drinks only as a means to support gaming, Wynn recast them as a selling point of the new, lavish Las Vegas experience — and a new means of generating revenue. The Bellagio became the first Strip property to hire a mixologist in 1998, and others quickly followed suit.

Today, nightlife and dining rival gaming as the Strip’s main lure, and markups on drinks have become just another price to pay for a piece of the Vegas experience (though comped drinks are available for gamblers while they play.)

And customers aren’t just willing to pay — they expect to. Many are more concerned with quality, and shell out an average of seven times more for a drink than what it cost the club to make it. Off the Strip, the standard markup is about five times.

“People, especially the younger generation, are more interested in what brands are available than drinking as much whiskey as possible,” said Mohsen Azizsoltani, a professor at UNLV’s Harrah College of Hotel Administration. “It’s supply and demand. People have been trained to pay, and they don’t mind, so they’re charged a higher price.”

In the wake of the recession, executives have turned to beverages as a way to offset losses from drops in room rates. And as properties shell out big bucks for extravagant nightclub setups and A-list DJs, steep markups are crucial to keeping the doors open.

The cost on the back end also has increased as customers have come to expect higher quality spirits and fresher, rarer ingredients.

“The expertise and the effort of the person creating that cocktail is significantly greater than it has been in the past,” said Brian Warrener, an associate professor of food and beverage management at Johnson and Wales University in Rhode Island. “It’s easy to crack lids off a bottle of beer or make a rum and Coke. It’s not so easy to produce a really interesting craft cocktail.”

The price of premium cocktails on the Strip is 15 to 20 percent more than at equivalent hotspots in Los Angeles and New York, said Jon Taffer, president of Nightclub & Bar Media Group and host of Spike TV’s “Bar Rescue,” in part because rent and operation costs on the Strip are higher. Still, he admits Las Vegas club operators take some liberties because customers are willing to pay higher prices.

“Las Vegas is blessed. Charging what we charge is a luxury. Even here, we couldn’t get away with this stuff 10 years ago,” he said.

Prices are expected to level out as the market for Strip nightclubs approaches saturation. Taffer concedes that he and his peers are bracing for the pendulum of Las Vegas nightlife trends to swing in another direction.

Wherever it lands, they’ll be waiting to take your drink order.

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