In With the New

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CATHY BOOTH Las VegasSheldon Adelson, son of a Boston cabbie, is strolling down the loggia of the Doges Palace, Venice's famous landmark. Across the way he can see the city's other famous sites--the Clock Tower and the Campanile, the Bridge of Sighs and the Ca D'Oro. He stops to marvel at the craftsmanship of a carved quatrefoil atop one arch. A chiseled demon leers down at him. The 65-year-old Adelson mirrors the expression as he waves his arms at the surroundings. You feel you're standing in the middle of St. Mark's Square, don't you? he exclaims. You are in Italy, in Venice!Oh, no, you're not.You're in Las Vegas, in the middle of the desert, and the beaming madman next to you is risking $1.2 billion--including, he says, $320 million of his personal bankroll--on a 35-story hotel/casino/convention center replete with canals, singing gondoliers and white doves that take wing five times a day.What's even crazier is that there are several other madmen up and down the Las Vegas Strip today building billion-dollar pleasure palaces like so many Starbucks. The Hilton Paris is re-creating the City of Light, while Circus Circus' Mandalay Bay is evoking the South Pacific, just down the street from the Venetian's Adriatic. And, most spectacular of all, there's Steve Wynn's modern-art museum and homage to Italy's Lake Como, the $1.6 billion Bellagio.Never mind that Wall Street is wobbly, that Asia's gamblers are currency-shocked or that most Americans are already no more than a tank of gas away from the nearest blackjack table. Las Vegas is on a $7 billion building jag, with 18 major hotel and casino projects scheduled to open before 2000. By the millennium, Vegas will have more rooms than New York City, Paris or Los Angeles.PAGE 1  |    |    |    |  
 
Once again, the Mob's former desert stopover is on the remake. This joint once prospered as a venue for naughty, even dangerous diversion. Then in the 1980s, Las Vegas tried to go mainstream, transforming itself into a desert Disneyland--the Rat Pack gone to the rug rats. Up went casino hotels with exploding volcanoes, battling galleons and amusement parks. Alas, the folks who showed up with their kids had the audacity to spend time with them instead of gambling away the college funds. The casinos compounded their marketing error by offering cheap rooms and cheaper food.This time Las Vegas is going upmarket, trading showgirl pasties for showy Picassos, $3.99 buffets for $20 entrees at Wolfgang Puck's and neon glitz for European glamour. Soon you will be able to ride a gondola through Venice, dine atop a 50-story Eiffel Tower and surf in the ocean. And you'll be happy to pay up for it, or there will be some very unhappy investors. The driving feature of Vegas will always be gambling, but the days of giving away rooms to gamblers are over, says Stephen Bollenbach, chief executive officer of Hilton, which is building the $760 million re-creation of Paris. The idea now is to command better room rates, more on a par with resort or European vacation destinations, by offering comparable accommodations. A discounted room on the Strip now goes for $49 to $99. To sleep in Hilton's Paris will probably cost double that.All of this is big news for Asia. Las Vegas is one of the primo destinations for Asian travelers who venture outside the region. The Asian financial crisis has damped the numbers somewhat, but the figures are still impressive. Last year Las Vegas attracted nearly 800,000 visitors from Asia, more than half from Japan (the No. 1 overseas source of Vegas travelers). Greater China accounted for more than 160,000 visitors, while South Korea sent more than 100,000. Of course many, if not most, of the Asian travelers are lured to what is popularly perceived as the world's most exciting gambling spot. The baccarat tables, in particular, are crowded with Asian gamers. For the upscale Vegas to succeed, it will need to win over many of these high-rollers from Asia to its new vision in the desert.That's the big gamble: Can Las Vegas buy some class and still attract the gaming classes? Or is this one crapshoot Sin City can't win? Las Vegas has no choice but to take the wager. It can no longer afford to be a casino-centric town, although the numbers seem to indicate otherwise. Last year some 30.5 million visitors spent $25 billion in Las Vegas and Clark County, including $6.2 billion on gambling, which was up from $5.7 billion two years before. But the gaming take along the Strip has gone from 58% of total revenues 10 years ago to 53% today. That's the official figure. Major hoteliers, however, put casino revenues at 40% of the mix, or even 25% if retail sales are included in the total. (Gamblers spend an average of only four hours a day in the casinos, after all.) Gamblers who used to make an average of 11 trips to Las Vegas over a five-year period now make only seven. So the city of Lost Wages is repositioning itself in the leisure market. We're no longer a gaming resort but a destination resort, says Chamber of Commerce senior vice president Kara Kelley.Want to bet?  |  2  |    |    |  
 
Steve Wynn sure does--with his Bellagio. The Medicis would have been at home here, stabbing each other by the pool, shopping for leather at Prada or dining on caviar at Petrossian. No detail has escaped Wynn's notice. New hotels are always a blessing and a curse, but if well done, they stimulate the public's interest in Vegas, says Wynn, chief executive officer of Mirage Resorts Inc. and the son of a gambler who came to Las Vegas in the 1960s. The biggest stimulus at the Bellagio is Wynn's $300 million collection of works by, among others, Miro, Picasso, Matisse, Leger, Modigliani, Lichtenstein, Warhol, Pollock, de Kooning and Jasper Johns, and sculptures by Giacometti and Brancusi.On Wall Street, investors have a word for such a collection: overhead. Even before the market tanked, analysts were marking down casino stocks on the fundamentals--too much capacity--and they are worried that this latest building boom will crap out. The Vegas Valley, for instance, is heading into a glut of 127,000 hotel rooms--up a scary 20% from the current level. That's one reason gaming stocks such as Mirage's have lost one-third to one-half of their value in the past year. The weakening global economy is also taking its toll. At the Mirage and MGM Grand, both popular with the big-money crowd, second-quarter earnings were down 31% and 56% respectively.The new casinos won't help those numbers. The Bellagio will do great, but we have had to downgrade all casino stocks in the past quarter, says analyst Jason Ader of Bear Stearns. We doubt the new construction will earn the returns of the last wave--18% to 22%. We're forecasting 13% to 16%.The higher costs of the fancier hotels will make breaking even a bit more daunting. Wynn needs to take in a record $2.5 million a day to make the new Bellagio pay for itself. Lot of money, eh? he says, winking. Guess how much the Mirage made a day last year? $1.7 million. He shrugs at the idea that he might end up cannibalizing his own ranks of gamblers at the Mirage. We're just going to change the pecking order. The other casinos will just move down a notch, he says.Real pessimists predict a three-year bloodbath, especially if upper-crust vacationers don't show up in the predicted numbers, leaving half-empty high-cost hotels. The Strip's bread-and-butter visitor isn't likely to trade up to $150-a-night rooms from $49 ones, even if there's a mint on the pillow. Hilton chief Bollenbach (who is also on the board at Time Warner, the parent company of TIME) is predicting 18 months of bruising battles, with older, smaller properties taking a hit from big outfits like his.  |    |  3  |    |  
 
And what ever happened to that family-friendly Las Vegas? Demographics. The target audience is now 50 and ready to travel without the kids. Imagine, says Circus Circus president Glenn Schaeffer, somebody will turn 49 every 13 seconds for the next 15 years, and they have the highest household income and the fastest spending rate. Circus pioneered the low-end family concept during the late 1970s and made it work for more than a decade. But Schaeffer was brought in after a management shakeup to arrest declining numbers.The company is now building the $1 billion Mandalay Bay development, to open in March 1999. The casino hotel, with a separate Four Seasons hotel on top and a monorail connecting it to the company's other properties, Excalibur and Luxor, will be set in a 5-hectare park with a wavemaking machine in the lagoon. Says Schaeffer: Nobody anywhere in the world is building resorts like Las Vegas is.Where Schaeffer sees the 50-plus crowd, Adelson sees thousands of free-spending conventioneers in his Venetian. The initial $1.2 billion phase, set to open next April, will feature 3,000 luxury suites, a convention center second only to Chicago's in size, and a pricey shopping mall with a 365-m canal running through it--on the site of Frank Sinatra's old haunt, the Sands.Adelson made a fortune in the trade-show business, and he financed some of the Venetian's construction by selling Comdex, the world's biggest trade show, for $900 million. Although Las Vegas does plenty of convention business, Adelson wants to compete for the monster shows that now go to Chicago's McCormick Place or to Orlando's Orange County Center, in Florida.The Venetian is a study in duplication. Everything from the Doges Palace to the Campanile was built virtually to scale of the original. Craftsmen labored at a workshop in suburban Las Vegas, turning out hand-chiseled columns and marble floors to the exact specifications of an architectural historian imported from Venice. (This isn't some box with slots in it, says Wynn respectfully of his rivals' projects.)  |    |    |  4  |  
 
Adelson is trying to bring a new ingredient to the basic Las Vegas hotel rooms: comfort. The bathrooms in the all-suite Venetian are the size of standard hotel rooms. He spent $9 million just to create step-down living rooms in each suite, to impart the feeling of luxury. Las Vegas' yesterday thinking was casino-centric. The idea was to deprive guests of creature comforts to keep them in casinos, he says--no minibars, no snacks in the room, no safe-deposit boxes, no fax machines and certainly no computer hookups. Says he: If you were hungry, they imagined you'd wake up at 2 a.m. and remember to put your $10,000 to $20,000 in your pocket so that you'd stop in the casino and lose some money.The casino owners are still hoping that will happen on occasion, but they aren't planning on it. By the same token, they don't believe the predictions that high-cost rooms and overcapacity will catch up with the industry. But then again, casino owners are optimistic by nature. Las Vegas has defied all predictions of its demise before, says Wynn, who likes to throw dice when he bets. If you give people what they're after, they'll make their way to you without fail. And that's the secret, regardless of what Wall Street tells you.OPENED Last week
COST $1.6 billion
ROOMS 3,000
WHAT'S IN THE CARDS Gallery of fine arts; Cirque du Soleil's new water show, O; a glass-domed conservatory; a 5-hectare replica of Italy's Lake Como with dancing-water show; gourmet restaurants and designer shops like Tiffany and Chanel; a 9-m-by-20-m lobby chandelier
THE BETTING In the moneyOPENING March 1999
COST $1 billion
ROOMS 3,700
WHAT'S IN THE CARDS 5-hectare South Seas tropical water environment with beach and 2-m-wave machine for surfing competitions; Sea of Predators exhibit includes sharks and crocodiles; a monorail to Luxor and Excalibur; celebrity chefs; Rumjungle and Red Square vodka palace
THE BETTING Boomer paradise, but poor location raises stakesOPENING Fall 1999
COST $760 million
ROOMS 2,900
WHAT'S IN THE CARDS 50-story half-scale Eiffel Tower overlooking replicas of the Paris Opera House, the Louvre, the Arc de Triomphe and the Hotel de Ville; cobblestoned Rue de la Paix shopping; Eiffel Tower restaurant, with the best views of the Bellagio water show
THE BETTING Great location makes it a good playOPENING April 1999
COST $1.2 billion
ROOMS 3,000 suites
WHAT'S IN THE CARDS Venice in the desert, with replicas of the Doges Palace, the Rialto and the Campanile; a canal with gondolas; the SpaClub by Canyon Ranch; large suites with marble baths; restaurants from chefs such as Emeril Lagasse and Wolfgang Puck
THE BETTING Conventioneers' haven; longer odds on the casinoWith reporting by Shirley Brady/Hong Kong and Richard Woodbury/Las Vegas  |    |    |    |  5