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Las Vegas: Reinventing the Sin in The City

5 Feb. 2019

Venture – or zip line - down the Vegas strip and behold the bustle surrounding its extravagant attractions. As the destination Las Vegas transcends its image of a gambler’s paradise, casino resorts and hotels are having to reinvent themselves. EHL’s Master in Global Hospitality Business students visit Las Vegas as a part of their cross-continent studies to delve into these local industry dynamics.


Today’s Vegas: Beyond Gaming

Since the legalization of gambling in 1931 by the State of Nevada, the casino business has generated remarkable investment and economic growth. The notorious “sin city” has become one of the world’s largest gaming destinations. According to the Las Vegas Convention and Visitors authority the city welcomed over 42 million visitors in 2017 and generated just short of 10 billion US dollars in gaming revenue alone.

While visitor numbers have grown by more than 7% over the past decade, gaming revenues have been anemic due to increased competition from Macau amongst other global gaming destinations. Casino meccas on the Vegas strip have seen their revenue structures evolve as a result.

Today’s Vegas, though still attractive for its casinos, emerges as a popular “non-gaming” business and leisure destination. On leisure, the city is a flourishing culinary, entertainment, and sports hotspot as it attracts chefs, music headliners, and professional sports teams alike. MICE business is also on the rise owing to the availability of rooms and convention facilities. The city welcomed 6.65 million convention delegates in 2017, a record high that exceeded pre-2008 levels.

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What does this mean for casino hotels?

Ironically, the stagnation of casino business has invoked change, as evolving market dynamics encourage Vegas’s casino-resorts to nurture alternative sources of income. Hospitality firms are both privileged and cursed as they are operate in constantly evolving environments. While these environmental changes offer hotels the opportunity to explore and take advantage of new business, the phenomenon also demands constant change and rejuvenation of products and services. Las Vegas is a case in point with the following examples.

 

Hotels leverage partnerships

Vegas hotels are creating partnerships with celebrity chefs and musicians. While the hotel-culinary partnerships have existed for some time, their abundance in Vegas is notable. Amongst many others, examples include

  • Pierre Gagnaire’s Twist at the Waldorf Astoria,
  • Wolfgang Puck’s Spago at the Bellagio,
  • Nobu at the Ceasar’s Palace,
  • Guy Savoy at the Ceasar’s Palace,
  • and the late Joël Robuchon at the MGM Grand.

Perhaps more interestingly, music headliners are taking up residency at casino-resorts. Throughout 2019, MGM will host Lady Gaga, Aerosmith, and Britney Spears for 27, 18, and 15 shows respectively.

 

 

Diversifying into alternative attractions

Wynn has plans to construct a 400,000 square foot convention space and 18-hole golf course, stressing a strategic interest in further developing non-gaming attractions. Respectively, these developments are expected to increase hotel occupancy by 4 – 6 pp and attract additional casino business from golf-trip seekers.

 

Goodbye to gaming?

The Westin Las Vegas Hotel & Spa boldly remodeled its business to other extremes in 2018. The Las Vegas Strip-adjacent resort cut out gaming facilities completely to make room for additional meeting and F&B facilities.

General Manager Lezlie Young explains in an interview with the Las Vegas Sun, “travel habits are always changing and we find there are more and more guests that want the juxtaposition here, a quiet respite in the heart of Las Vegas and all the fabulous things it offers.”

 

The challenges and opportunities ahead

Striking the balance.

Given the high investments demanded by such projects and renovations, and the resulting implications on business operations, gaming resorts must be careful not to “over-rejuvenate” and lose control over their cost structure.

Exploring further partnership models

An observable approach to balancing these elements is the popular partnership model between hotels and celebrity chefs. These collaborations provide meaningful synergies, allowing hotels to outsource rejuvenation efforts and promote the property as a destination in itself.  

Establishing the hotel as a destination

With almost 150,000 available room nights and an over saturation of tourist attractions, hotel resorts in Las Vegas are operating in a competitive landscape. The shift of attention to non-gaming revenues puts hotels in competition with the city’s attractions and facilities. Hotels may have to do more than work with renowned partners for their food and spa concepts.

 

This is an exciting yet challenging time for hotels in Las Vegas. The hospitality industry is finding its place as the focus of tourism continues to shift to non-gaming activities in line with evolving infrastructure and consumer preferences. It is with great interest that we continue to observe how hotels adjust – and perhaps innovate - their strategies, products, and services in these times. While this puts some hotels at risk to diversify in unfamiliar areas, hotels may be wise to decrease the dependency on a single source of income and create a portfolio of sustainable business opportunities.

 


 References

[1] LVCVA (2018). Visitor Statistics. Available from : www.lvcva.com [accessed 18 December 2018]

[2] Smith, A. (2018). Planning a trip to Vegas next year? Lonely Planet (Monday 10 December). Available from: www.lonelyplanet.com [accessed 18 December 2018]

[3] Velotta, R.N. (2018). Wynn Las Vegas abandoning Paradise Park lagoon project. Las Vegas Review Journal (November 7). Available from: www.reviewjournal.com [Accessed Monday 18 December 2018].

[4] Radke, B. (2018). Steps from the Strip, Westin Las Vegas upgrades by removing its casino. Las Vegas Sun (Monday 22 January). Available from: https://lasvegassun.com/news [Accessed 18 December 2018]

Hospitality_Insights_LVMH_Belmond_Acquisition
Dr. Achim Schmitt
About the author

Achim holds a PhD from the University of Geneva, obtained his Habilitation at the University of Paris-Dauphine in France, and is a Visiting Professor at the University of Geneva as well as an Associated Researcher at the University of St. Gallen in Switzerland.

Before joining the academic world, Achim has been a strategy consultant for 4 years in Germany, Austria and Switzerland. He has gained academic experience at Audencia Business School in Nantes (France), Columbia Business School (USA), HEC University of Geneva (Switzerland), and the Universidad de Los Andes in Bogota (Colombia).

Achim’s research focuses on organization theory and strategic management, with particular interest in organizational ambidexterity, organizational decline, corporate turnarounds and strategic renewal.

Samrah _AlShawi_Ecole_hoteliere_Lausanne
About the author

Samrah AlShawi – Graduate Programs Project Manager at EHLSamrah AlShawi is a Project Manager at the Ecole hôtelière de Lausanne. She holds a Bachelor in International Hospitality Management from EHL.

Her work focuses on delivering unique higher education experiences in hospitality within the context of the university’s graduate programs. She has also contributed to research studies in hospitality strategic management topics related to organizational behavior and sustainability.

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