CityCenter: Evaluating Las Vegas’ Biggest Ever Gamble (Part II)

PART II – 2009-Present

For Part I - Click Here

Opening 

The ribbon cutting ceremony for Vdara took place as originally planned, on December 1st, 2009, with Aria, the centerpiece of CityCenter, 16 days later. 

In terms of pure scale, nothing in the history of Las Vegas had ever come close. For those with an eye on casino history, standing beside CEO Jim Murren on opening day was 89-year-old Melvin Wolzinger, probably the least known giant of modern Las Vegas, but one ever-present at ringside for the previous sixty years.

Mel Wolzinger and Kirk Kerkorian had a shared history, both flying planes in World War II. 

Whereas Kerkorian made Beverley Hills home, Wolzinger came to Las Vegas, opened a slot route and local casinos, notably Ernie’s Bar on Rancho. Wolzinger was one of the first backers of Steve Wynn when he invested in The Golden Nugget. He remained a board member of Mirage Resorts and trusted confidante to Wynn until the company was acquired by MGM in 2000 to form MGM Mirage, playing a crucial role in enabling that deal. After the transaction, he joined MGM’s board, and alongside has lifelong friend, Kirk Kerkorian, was made Director Emeritus of the company.

On opening, Wolzinger told the LVRJ,

“Twenty-five years ago, if somebody came to us with this, we would have shot ’em. When they first brought it to the board, everyone was skeptical. But it’s unbelievable. Everything that Bobby Baldwin said he’d do, he did. I’m glad we did it. It will be a good thing for the city. It will put a lot of people to work.”

However outstanding the architecture and thought-provoking the art, CityCentre was not the immediate success that MGM needed.

Alan Feldman, the veteran MGM executive who had opened properties for both Wynn and MGM reflected on the period,

“Opening CityCenter was like opening any other property, things didn’t work, but things don’t work in every property. The customer response was favorable, but we missed the mark on some elements, notably with placing such an emphasis on technology. We opened without a marquee in front of the building, believing the dramatic architecture would convey the message.”

Aria eventually launched a 250ft tall, 65ft wide marquee in April 2013. The 10,000sft LED screen was the largest in the world.

The original appreciation of Las Vegas’ architecture promoted by Venturi, Brown and Izenour, brought forward the thesis that the external design of the casinos illustrated the experience that sat within; an architectural billboard, so to speak. The shining glass and modernized design promised a contemporary urbanism, found in the world’s leading global cities. However, with much of the unprecedented budget spent on design, technology and interior finishing, and the need to get the open to deadline, perhaps the offering was not as urban contemporary as the exterior suggested.

Rival casino architects were quick to offer their opinions. One privately believed that “the property was clinical, sterile and boring.” Another felt that it was “the best casino planned by people that design airports. Technically the flow and design are great; it is easy to find the exits.”

The CityCenter architects created iconic structures but may have been somewhat haughty in their failure to consider the needs of both the employees and the customers, in particular gamblers. 

Anecdotally, as MGM’s casino marketing team moved players from The Bellagio to Aria, many were uncomfortable with the new, modern offering and requested to return to the environment that they knew and liked. 

The joint venture with Dubai World also posed a problem for the casino marketing team, how to manage established customers that gambled at existing properties where MGM took 100% of their losses, versus playing at Aria where that revenue was shared with their partner. 

Another example of a misstep was that customer research showed that people preferred to stay in a corner room, so at Aria a corner was built into each room, adding significant cost to the construction budget with little tangible upside. The in-room technology was challenging for many, especially older guests, who were used to the intuitive offering of other resorts.

The restaurant offering felt generic as many of the offerings were iterations from other MGM properties, with few, if any, changing the dynamic of the market; only 5 of the original 23 at the CityCenter complex remain today. 

In Aria, The Light Group operated nightclub, Haze, was small compared to Wynn’s XS that opened in 2008, and as the nightclub boom came to town, the tighter economics precluded the big-name, big-salary DJs from performing there. 

The showroom featured Cirque du Soleil’s Viva Elvis. It failed to make its second anniversary and was replaced with Zarkana, which itself closed in 2016. The showroom was subsequently demolished to make way for additional convention space.

Crystals, once envisioned as an open aired throughfare, became an impediment to pedestrian access to the casino, with all foot traffic directed past a parade of luxury retail stores, that only a select few could afford to do more than browse. 

One of the housekeeping team, that had spent many years at Bellagio and opened Aria, explained her experience. 

“At Bellagio we all knew what we were doing, at Aria it was a mess. Because the layout was so complicated, it took a long time to find the rooms. It took a long time to understand all the technology, and the guests pulled the curtains and sheers instead of using the ipad (tablet control panel) so would break them.” After 5 years at Aria, she returned to the Bellagio.

But most pressing were the design-flaws. Who would have thought that building a south-facing 57-floor, concave glass structure in the desert would reflect the Nevada sun, causing a “solar convergence event”? As it was colloquially known, apparent evidence of the “Vdara death-ray” melting plastic cups poolside was displayed and discussed across various media platforms.

And at the Veer Towers, one resident wrote, 

“The building is subject to a loud, sustained whistling noise that occurs any time the desert wind whips past the building. This sound makes living in the apartment impossible and forces MGM… to put any resident who complains in the adjacent Vdara Hotel & Spa for a free stay.”

On December 15, 2010, an unwanted birthday present for CityCenter arrived; The Cosmopolitan of Las Vegas opened next door in direct competition to Aria. Designed by noted casino architect Brad Friedmutter and Rockwell Group, it was newer, shinier and was immediately popular with the same Gen X customers that Aria sought to attract. The F&B program featuring branded and celebrity chef inspired restaurants from major international cities, many new market entrants. TAO Group operated massive Marquee nightclub and dayclub, and the iconic chandelier bar, alongside apartment sized room product, led the Cosmopolitan to capture the zeitgeist of new Las Vegas in a way Aria did not. It was impossible not to compare the two.

Changing Course

“Everyone on the team knew that what we projected in 2005 and 2006 wasn’t going to happen, market had changed. When we opened, the recession was in full bloom, the convention business had dipped and people were spending less”, recalled Feldman.

Bill McBeath served as President of Wynn’s Treasure Island, when his peers were beginning management roles, and later The Mirage and Bellagio. McBeath’s challenge as first President and open Aria was a challenge indeed.

The first changes were at the sports book, switching out the snack bar to pizza, The Gold Lounge and Deuce, both operated by Light Group didn’t become the destination lounges as planned, and the buffet just wasn’t working.

After two years, McBeath left MGM and Aria in 2012 and was charged by Blackstone in 2014 to turn around their $1.7bn acquisition of the Cosmopolitan.

Bobby Baldwin, with a 40-year career operating at the highest level, opening The Mirage and Bellagio as President, and as development CEO and President of CityCenter, where no decision was made without passing his eyes, stepped back out of the corporate office and went back to the casino floor. Arguably, his final role was to be his most hands-on.

Avoiding the “chumminess” of other executives and with the focus of a top-level poker player, under Baldwin the property undertook great change. He resolved the operating kinks and brought in the highly acclaimed restaurant Carbone, opened Javier’s next to the casino floor, LA hotspot Catch was signed up and Mina’s American Fish made way for Bardot.  Hakkasan acquired the Light Group in 2014, and the new company oversaw the renovation of Haze to become Jewel in 2016 and the exit of Deuce and Gold lounges.

The casino floor saw change, with Alibi Ultra-Lounge assuming a prominent role at the heart of the property and VIP slots and high-limit areas enhanced. Aria took shape under the experienced hand of Baldwin and the die was cast for the property’s future success. After an unfortunate work accident, the man that had as much to do with the operational development of CityCenter and the internal structure of the modern casino as any other, Bobby Baldwin retired. 

Baldwin was succeeded by longtime MGM executive Steve Zanella, who stewarded the property through asset sale and Covid, instituting further change throughout, finally transferring to another MGM stalwart, Anton Nikodemus, who now oversees what is colloquially known as the Aria Campus, alongside recent addition, The Cosmopolitan.

Assessing CityCenter

In his recent Stanford case-study, “MGM Resorts International In 2018: Time for Another Reinvention”, former MGM executive Jordan Salmon recalls the challenges facing the company. 

Salmon notes that in 2006, when work began on CityCenter, 40% of MGM’s revenue was gaming and 60% non-gaming, which was approximate to the Las Vegas Strip average of 38% gaming, 62% non-gaming. However, by 2016, MGM’s mix was still 39% gaming, 61% non-gaming, whereas the Strip average was 27% to 73%. MGM’s customers led that change, but the company had not responded to the trend.

It was reported that MGM had believed that Gen X’ers were on their way to Las Vegas and City Center would cater for than new demographic. In 2009, as CityCenter opened, 28% of visitors were under 40 years old, with an average age of 50. In 2022, that was 53% under 40, with an average age of 40.7.

Murren saw the need to transform MGM from a gaming to entertainment company and the repositioning of the company began. Since 2018 it has been proactive in diversifying revenues, notably with the introduction of car parking charges and other revenue enhancements. But, if MGM had the foresight to adopt the wider trends, why was that thinking not integrated into the design and programming at CityCenter, thus missing the opportunity that was to present in the subsequent decade?

The property has excelled at the conventions business. The open, bright space at Aria is differentiated from many of the other resort convention spaces and the property has proved successful in booking in convention customers and today is squarely positioned for that segment. On closer inspection, in 2006 convention visitation was 6,307,961 rising only minimally to 6,310,600 in 2016 and falling post-Covid 2022 to 4,991,500. Aria’s position has proved robust.  

Aria was Las Vegas’s first LEED certified property, and resonated notably with technology firms, aligning with the modern design, quality room product and latterly, a broad range of restaurants.

If anything, CityCentre somewhat positive outcome is not just what the visionaries predicted, nor the successful adaptations made by several operating teams alone, but the structural changes within capital markets. MGM sold the real estate and went asset light. 

REITS, formed in the Cigar Excise Tax Extension of 1960, are listed vehicles that hold real estate, but are advantageous compared to traditional corporations as no tax is paid prior to dividends. 

MGM created spinoff MGM Growth REIT, which listed with nine MGM operated properties, but none within the CityCenter portfolio. MGM Resorts held a significant stake in the new company. MGM Growth was subsequently acquired by VICI, a REIT created from the Caesars restructuring after bankruptcy, for $17.2bn.

At CityCenter, Ladder Capital acquired 427 condominium units at Veer Towers for a reported $119m in 2012.

In 2016, the US’s largest retail REIT, Simon Real Estate bought Crystals for $1.13bn and in 2018 the Cherng family acquired the 389 room Mandarin Oriental Hotel for $214m. The new owners brought Hilton in to manage the property under their Waldorf Astoria flag.

In July 2021, MGM bought out Dubai World’s remaining interests for $2.12 billion, enabling the company to trade the Vdara and Aria on a sale-and-leaseback basis to Blackstone’s REIT for $3.9bn. MGM is now a tenant at Aria and Vdara, paying rent at $215m per annum. 

The company also entered an operating agreement to manage The Cosmopolitan on behalf of the new real estate owners (a consortium including, Blackstone’s REIT and the Cherng family) in 2022, paying $1.6bn for that contract. 

Whether MGM ultimately recouped their total construction and investment costs for City Center by asset sales alone is unlikely, but the new structure has made the ongoing operations of the properties more streamlined and focused. Moreover, with The Cosmopolitan now part of the company’s platform, potential exists for greater integration with neighboring assets. 

From Generation to Generation

On the 15th of June 2015, Kirk Kerkorian, who was involved with nearly every property on Las Vegas Boulevard, died aged 98. Harry Reid called their relationship “one of the special things in my life.”

Melvin Wolzinger died in June 2019, also aged 98. He was inducted into the AGA Casino Hall of Fame aged 97, the oldest recipient of this honor.

Harry Reid died in 2021 aged 82. It is appropriate that Las Vegas’s airport now bears his name, welcoming all that arrive.

If ever there was a project enabled by one generation and given to another, CityCenter is it.

Although none would have wanted it, it would be both timely and generous for MGM to commission a statue or artwork of these three leaders together for display at Aria. This would a permanent and visible recognition of their efforts in building MGM, enabling CityCenter, and more importantly, be an immortal beacon for both employees and tourists of the power of friendship and possibility.

Nearly all of the protagonists that served during the conception and development of CityCenter have departed MGM, with Baldwin retiring in 2018 and Murren stepping down as CEO in 2020. 

Open for 13 years and despite the soaring architecture, evolving programming, a new financial structure, and over $400m of annual revenues, it is premature to conclude whether the CityCentre gamble has been ultimately successful. It may prove to be when the resort turns 21 in 2030.

What we can say with confidence, is that CityCenter has had a difficult childhood. 

However, the foundations are strong and ongoing changes have taken the property to new levels, if not hitting the high notes that were expected. 

Outside The Cosmopolitan, the bar and restaurant programming is perhaps the finest in the MGM’s Las Vegas portfolio, the nightlife component has been elevated, and convention facilities are among the best in the land. 

Unlike some properties that open fully formed and have few changes, Aria’s story is one of a property that is continually evolving and improving, and with the correct guidance and nurturing, is possibly the best placed resort for growth within the next generation of Las Vegas customers. 

In 2022, the company produced nearly $6.5bn in gross profit, a number unimaginable in the lives of Kerkorian and Wolzinger.

As seen in my research of 2022, more Las Vegas visitors have stayed at Aria than anywhere else. The Cosmopolitan is second. Closer alignment between the two, under single operating ownership is a clear upside for the company and for customers.

Aria and surrounding properties, stand as a testament to what is possible in design and architecture, but also a reminder that casino development is unlike other asset classes. The most important strategic asset is not the real estate, but the customer, and within this paradigm, the design objectives should be focused to meet those customer’s needs. It is my belief that as a consequence of the complexities of this development, and the challenging financial environment during construction, this fact was sometimes forgotten. 

*During this period, the company was officially titled MGM Mirage and after 2010, MGM Resorts International. MGM is used interchangeably for both.

A Version of this essay first appeared in Global Gaming Business Magazine

Oliver Lovat is the CEO of The Denstone Group, that offers strategic consultancy in resort development. He was faculty at City, University of London between 2012-2020 and University College of Estate Management 2010-2015. His research topics are Las Vegas Customer Behavior and The Evolution of Competitive Strategy Within Las Vegas Casino Resorts.