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December 5, 2019

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CEO McBeath: Cosmopolitan has ‘exceeded all of our forecasted numbers’


Steve Marcus

An exterior view of the Cosmopolitan Las Vegas, center, on the Las Vegas Strip Monday, Feb. 15, 2016.

“Just the right amount of wrong” is still the Cosmopolitan’s catchy slogan after almost seven years of operation on the Las Vegas Strip. After almost three years with gaming veteran Bill McBeath as CEO, a better slogan, at least internally, might be “just the right amount of what other resorts have to offer.”

That’s because while the Cosmopolitan strives to retain its hip, artsy feel, McBeath has been working to create what is still a must-have for all resorts on the Strip — a solid gaming foundation.

The resort recently added four floors of luxury penthouse suites and an exclusive private gaming lounge to better compete for lucrative high-end international players.

And it’s also added more areas dedicated to slots on the casino floor in a continuing effort to appeal to mass-market players.

These changes are in addition to others made since McBeath was hired, such as moving the sports book from the second to the first floor; adding a high-limit slot lounge; and tweaking the casino’s center bar (the Chandelier bar), adding video poker and giving it a more open layout.

McBeath spoke with the Las Vegas Sun this week and discussed the Cosmopolitan’s progression since it opened, recent changes and possible future additions, and rumors it’s about to be purchased by MGM.

From losses to profits

Even before it opened, the Cosmopolitan was different. With its relatively small footprint, the solution was to go vertical. Other Strip casinos, conversely, have hotel towers but tend to house the casino, restaurants, and other amenities in wide, flat one-story buildings.

The resort’s entertainment amenities, restaurants and decor had a decidedly artsy feel, which it highlighted in its quirky advertising campaign.

But despite the resort’s hipster cred and the fact that, generally, visitors to Las Vegas were gambling less and spending more on food and entertainment, the Cosmopolitan didn’t perform well financially. It experienced quarterly losses from when it opened until July 2015.

There’s no doubt that the Cosmopolitan was initially dealt a bad hand. It opened in 2010 in an economy battered by the Great Recession. And it faced stiff competition from existing casinos as well as CityCenter, Encore Las Vegas and the Palazzo — all of which opened during the previous three years.

But the resort also faced internal challenges, McBeath said, because it was not taking full advantage of the revenue potential of gaming.

“They had a full-blown program to lure in high-rollers and get the international customers, though they didn’t have amenities (needed) to do it,” McBeath said. “And the retail customer, the bread and butter, meat and potatoes, 25 cent, dollar-slot player was really ignored.”

McBeath describes gaming as a commodity because a slot machine at the Cosmopolitan is no different from one at the Wynn. It’s the layout of the casino floor, he says, along with customer service and the surrounding amenities that make a property different in the minds of players.

Click to enlarge photo

Bill McBeath stands in his office at the Cosmopolitan Las Vegas.

When the Cosmopolitan opened, McBeath said, the slots and other gaming offerings were essentially dropped on the casino floor with no appreciation for how they were arranged or how the layout made slot players feel.

It’s why McBeath has been tweaking the layout of the casino floor since he got there, and it’s also why his first staffing move was bringing in a person to specifically manage slots.

It seems, according to the limited data available, the changes worked.

The company no longer publicly discloses financial information. But at a recent Nevada Gaming Control Board hearing, an executive told regulators that first quarter EBITDA (earnings before interest, tax, depreciation and amortization) was up 24-25 percent compared to the prior year and that in 2017 the resort would see a 200 percent improvement.

“I think the easiest way to outline without getting specific is we have achieved and exceeded all of our forecasted numbers that we first forecasted two years ago,” McBeath said.

Is the Cosmopolitan for sale?

In recent months, rumors have floated through the gaming industry that the Cosmopolitan is about to be purchased by MGM Growth Properties.

MGM Growth is a separate corporate entity that owns the physical buildings and land underneath the Mandalay Bay, the Mirage, Monte Carlo, New York-New York, Luxor and Excalibur (and other properties) and then leases them back to MGM Resorts International, which runs them.

The rumor makes sense, in part because the Cosmopolitan is surrounded by MGM properties including the Bellagio and CityCenter.

Also fueling the fire is the fact that McBeath once worked for MGM, at CityCenter and the Bellagio, and according to industry gossip, he has been seen in the company of executives from MGM Growth Properties.

McBeath said that, yes, the Cosmopolitan will be sold at some point. But right now, a deal is not imminent.

“Yes, I had lunch one time with the CEO of MGM’s REIT (James C. Stewart) as a courtesy,” McBeath said. “He wanted to know who I was and I wanted to know he was. And yes, I also sit on the board of the American Gaming Association with Murren (CEO of MGM International Jim Murren).”

“I mean, look, it’s no secret that Blackstone (the private equity firm that owns the Cosmopolitan) buys underperforming assets, develops them, increases operating performance and then ultimately sells them,” he said.

“But I think it would be extremely premature to sell this asset any time in the near future as our trajectory is extremely strong and we have a lot of work to do. We’re in middle of remodeling all the rooms right now. And we are spending substantial amount of money, over $100 million to remodel the rooms. We wouldn’t be doing that if we were in an active mode to sell the place.”

High-rollers and coming attractions

When McBeath started at the Cosmopolitan, he said the property simply didn’t have the infrastructure needed to attract the high-rollers and keep them on property.

Today, he says, the Cosmopolitan has almost completed its plans to compete for gamblers in high-end Far East market.

In the top four floors of the hotel tower, which McBeath once described as “the best undeveloped real estate in las Vegas,” the Cosmopolitan recently opened a collection of luxury penthouse suites with 24-hour butler service and features such as gyms, massage rooms, and electronically controlled customizable toilets.

Along with the suites, the resort expanded its existing luxury gaming lounge and opened a separate private gaming lounge reserved for customers with six and seven figure gaming budgets.

That lounge has its own bar, cashier's cage and a balcony that faces north overlooking the Strip and directly above the Bellagio fountains.

McBeath is pleased with the progress and says the work, on the high end at least, is almost done.

“Our last piece (we are considering) is the development of a high-end Chinese restaurant,” McBeath said. “And then we will be a full-service facility that can cater to the high-end Far East market. We won’t have one competitive disadvantage other than not owning casino in Macau.”

“Now it’s about building the brand equity in the marketplace with this very elite customer and letting people know that we want to be the destination of choice in Las Vegas. And we don’t believe there’s any reason those gamblers wouldn’t want to stay here.”

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