Sept. 12 (Bloomberg) -- Prince Harry’s naked hotel romp in Las Vegas has turned into a marketing opportunity for casinos seeking to spotlight new nightclubs and pools for the growing ranks of tourists seeking fun away from the craps tables.
The prince, third in line to the British throne, spent an August weekend cavorting at MGM Resorts International’s Wet Republic “day club,” racing U.S. Olympic swimmer Ryan Lochte at a late-night swim party and clowning with a young woman -- minus his clothing -- at Wynn Resorts Ltd.’s Encore. People Magazine put the 27-year-old royal on its Sept. 10 cover and said his suite, equipped with a pool table, cost $5,000 a night.
Harry’s wild weekend couldn’t have come at a more opportune time for Las Vegas casinos, which face more competition from gambling in others states and have yet to see their businesses recover to pre-recession levels. To counter that, they’re spending lavishly on faster-growing non-casino operations, upgrading rooms, pools, bars and restaurants.
“Vegas and Madonna are the same, they know how to reinvent themselves and focus on the trends,” said Jonathan Segal, whose New York-based The One Group will manage the Bagatelle Beach & Nightclub opening next month at the Tropicana Las Vegas Hotel and Casino. “You can game on the Internet, game on the reservations and in lot of U.S. states. So what does Vegas do? They say, ‘OK we’re going to turn this into the greatest party city in the world.’”
Next door, MGM Grand is building Hakkasan, a five-story restaurant and disco that will be among largest nightclubs on the Strip. Caesars Entertainment Corp. is putting up Linq, an outdoor promenade with a 550-foot Ferris Wheel dubbed the High Roller. It’s one of two under construction on the Strip. Bagatelle, featuring a complex of pools and volleyball courts, will have its own entrance on Tropicana Blvd.
Nude photos of Harry from his visit appeared on the Internet, causing an international scandal that had U.K. reporters scouring the city for news, according to the Las Vegas Review Journal.
A spokeswoman for Buckingham Palace said the trip was a private holiday before the prince’s return to military duty.
The Las Vegas Convention & Visitor Authority took out an ad in USA Today and distributed others through social media, poking fun at the scandal.
“Las Vegas is a place to celebrate adult freedom, freedom that even celebrities and royals can enjoy,” Cathy Tull, the authority’s senior vice president of marketing, said in a statement.
The average Las Vegas gambler’s budget dropped to $447 last year from $652 in 2006, according to authority surveys. The number of visitors has increased 1.9 percent to 23.4 million this year through July. At the same time, gambling on the Strip has risen 3.2 percent to $3.62 billion. That includes a 28 percent rise in July sparked by volatile baccarat winnings.
Spending on shopping, eating and shows continues to grow in importance, contributing 62 percent of the Strip’s $14.5 billion in revenue last year, up from 41 percent in 1984, according to the University of Nevada Las Vegas Center for Gaming Research. Resort owners are now tracking those expenditures, calculating how to ply patrons with free meals and other promotions, as they have for years with high-rollers.
“Some of these customers are small potatoes, but there are people who come in and never gamble and drop $20,000 in a weekend,” said Roy Student, a Las Vegas-based casino consultant. “The casinos realize these are high revenue opportunities with a lot less risk.”
MGM, the largest casino operator in Las Vegas, is spending $180 million remodeling hotel rooms and other amenities at its namesake resort. Night clubs and day clubs, their daytime poolside kin, have been setting revenue records at the company this year, according to James Murren, chairman and chief executive officer.
“It’s been quite a lifestyle shift,” Murren said in an interview. “Fewer people during the day are just hanging out by the pool. They want to do something different and that’s why these day clubs have been very profitable for us.”
Las Vegas accounted for eight of the 10 top-grossing bars in the U.S. in 2011, according to the trade publication Nightclub and Bar and the consulting firm Technomic Inc. At No. 1, the Cosmopolitan of Las Vegas’s Marquee Day & Night Club, generated revenue of as much as $80 million.
“People are spending differently,” Murren said. “The $500 bottles, they’re less frequent, but the sheer volume of people that are willing to spend quite a bit of money has increased.”
MGM fell 1.3 percent to $10.78 yesterday in New York. The shares have gained 3.4 percent this year. Wynn added 1.7 percent to $104.80 and is down 5.1 percent year-to-date. Caesars added 0.4 percent to $7.13 and is off 21 percent since its February IPO. All three companies are based in Las Vegas.
The Las Vegas club scene began to grow in significance in the 2000s when venues such as Light, a now-defunct disco at MGM’s Bellagio, and Rain at the Palms Hotel began collecting cover charges and setting minimum food and beverage orders to reserve tables, according to Neil Moffitt, CEO of Angel Management Group, which will run Hakkasan.
Lately the focus is on exclusive contracts with internationally known disc jockeys. Wynn Resorts has signed agreements with 36 DJs, charging fans as much as $100 for a ticket to see Tiesto and deadmau5, who makes “more than Sinatra at his peak,” CEO Steve Wynn told Rolling Stone magazine this year.
Advanced ticketing gives club operators a sense of how many people will show up on a particular night and makes the venues more accessible to the masses, according to Sean Christie, who manages such properties at Wynn Resorts. That’s important as the size of the clubs and the number of people required to fill them has grown.
“The old days of holding the door and having a huge line to make the club look a certain way -- that drove people away,” Christie said. The beach club at Wynn’s Encore cost $70 million, including its outdoor showers with stripper poles.
No bet is bigger than Caesars’ Linq project, a $550 million dining and entertainment destination located between the company’s Flamingo and Imperial Palace hotels in the center of the Strip. Almost $20 billion in debt after a 2008 leveraged buyout, Caesars borrowed $450 million at 9.25 percent to fund Linq and a new tower at Caesars Palace across the street, according to filings.
Caesars expects as many as 4 million visitors to ride the High Roller in its first year at a price of about $25, according Jon Gray, the vice president in charge. Guests have already asked to be married in the ride’s 40-person pods. It will open in the second quarter of 2014.
“Today, it’s hard to push up room rates,” said Los Angeles mall developer Rick Caruso, a consultant to the project. “You’ve got to find other revenue streams.”
--With assistance from Nadja Brandt in Los Angeles. Editors: Rob Golum, Anthony Palazzo
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