Not just for gamblers: The Cosmopolitan Las Vegas
The Casino business, restaurants and bars
The Cosmopolitan Las Vegas is by all accounts a depiction of human consumption power, the hotel has successfully aligned it self between its operating and business model.
The Business model is dependent on consumer spending money at the hotel. The Hotel makes money as consumers use the features and amenities of the hotel to have a good time on vacation.
Amenities – The Casino opens up into the Hotel lobby, and is like walking through a glamourous (Figure 1) windowless loud room of people gaming, eating, and drinking under huge Italian chandeliers. The coffee shops, bakeries, lounges and other eateries are all located on the casino level to ensure when gamblers wanted a break they took a break within the hotel itself rather than outside it. All the fine dining options, were located on the floor above, these were restaurants that required reservations from patrons hence the more obscure location. The Hotel has a total of fourteen restaurants and 5 bars within the premises and a fully serviced spa. Gamblers that win money are encouraged to spend it on the many shops located in the hotel.
Location – The Hotel is located in the center of the Vegas strip (twenty-minute drive from downtown Las Vegas). This means that all businesses charged vacationers a premium. Visitors seldom left their hotel and as a result splurged more money dining and shopping on the strip.
Ambience – The hotel is designed keeping extreme opulence and glamour in mind. The check-in reception (Figure 3) fits right into a New York night club and the building does not look out of place in the Tokyo skyline. The Hotel created a chic ambience on the Vegas strip to differentiate itself from other hotels, and the stiff competition on the Vegas strip to fill rooms.
Gaming – This is where the Hotel makes the bulk of its money. Every game on the casino floor provided a “house edge”, for every dollar bet the casino has an expected return of more that 55% on the table games (e.g. Black Jack, Roulette, Crapes). The casino is open 24 hours a day for gambling while the table denominations change. The cheaper or lower minimum tables fill up first with amateur gamblers which forces most players to play on tables with higher stakes with each bet costing more (cycle time for each hand is less than 60 seconds).
1-4. This is like the culture Starbucks where players are expected to speak the language (e.g. Stay, Hit) which forms a part of the culture that lets frequent gamblers have a sense of camaraderie. Every time a player puts money out or leaves the table with chips more than $100 the dealer speaks aloud and the pit boss (manager of 4-8 tables) walks over and keys in the amount into a computer attached to the table. This computer keeps a live tally of the P&L of that specific table.
- On a busy table the dealer will go through over 400 bets a minute (e.g. 6 people betting 6 times each). Assuming every bet is at the table minimum 400 x (55%-45%) x $15 = $600 an hour on the cheapest $10 table.
- All the while the game is on the dealer makes small talk while encouraging the player to follow “the book” realistically a way to maximize the player’s return which still is below 45%. At the cosmopolitan the casino has employed young models to be dealers which adds to the glamour and an increased small talk while the game is on and less focus on each bet. The dealers are even encouraged to gamble their tip; this is ultimate deception. Instead of pocketing the chips in tip they will bet it which gives the player the feeling that the dealer is playing against the house on the payer’s side.
- While gambling, waitresses that wouldn’t be out of place at a night club offer players drinks “on the house”. This is ideal for the casino which makes more money by the player gambling per minute than any other amenity at the hotel.
Room Tariffs – The hotel rooms operated as the hotels loss leaders and the hotel often gave away large beautiful suites well below cost. Occasionally the rooms also included gambling credit to entice consumers to come into the casino and start splurging.
References:
https://www.pinterest.com/pin/282037995389344906/ – Figure 1
http://www.cosmopolitanlasvegas.com/taste/restaurant-collection.aspx
http://www.bain.com/publications/articles/winning-operating-models.aspx
http://snobhotel.com/2015/01/07/aria-vdara-or-cosmopolitan-which-hotel-to-choose-in-las-vegas/ Figure 3
Hi – great post. Stayed at the Cosmo last month so this was very recent for me! Really interesting to see how these Vegas hotels make money.
Couple of themes that stood out to me while I was there – Cosmo must be facing stiff competition from the many hotels that operate on the strip. How has Cosmo differentiated itself as most other hotels are offering pretty much the same services? What is the average occupancy rate at Cosmo? Is this below / above the average in Vegas? Is there anything really unique about Cosmo’s operating model or are these all standard industry practices?
The economy has been going strong as of late, but I wonder what the “fall back” plan is if there is another recession. I think that in this particular industry it’s important to have a rainy day fund because discretionary spending could decline significantly. The luxury additions are top notch and I imagine attract a lot of customers – but I wonder how often they will need to be updated to maintain the influx of customers? Also, is a lot of their business repeat customers and if so is there a loyalty program in place to help retain them?
The location and focus on elegance pair perfectly with the operating model. Also, I imagine that human capital plays a critical role in tying together the business and operating models. Luxury customers are looking for a very smooth and refined experience, which I think requires quite a bit of training to get the staff up to that high expectation level. Also, with so many hotel/casino’s in Las Vegas I would be curious to see if there is an over or under abundance of workers.