66°F
weather icon Drizzle

A year after Blackstone purchase, Cosmopolitan has turned the corner

Bill McBeath never viewed The Cosmopolitan of Las Vegas as a quick fix.

He was schooled by his gaming mentors, Steve Wynn and Michael Gaughan, that time is needed to understand your customers and your business.

When McBeath, 52, walked into the Cosmopolitan a year ago as CEO after a division of the multi-national Blackstone Group took control of the stylish Strip resort, he began asking questions of his workforce and the property’s clientele.

Sure, McBeath could have made a few easy adjustments, such as re-configuring under-performing areas of the casino or changing out nongaming amenities that weren’t drawing business.

But he wasn’t interested in short-term results.

Neither was Blackstone Real Estate Partners, which paid $1.73 billion to Deutsche Bank to acquire the Cosmopolitan.

The nearly 3,000-room hotel-casino — tucked into an 8.7-acre parcel between Bellagio and CityCenter — had never reported a quarterly profit following its December 2010 opening. The property’s unveiling followed the apex of the recession that decimated the Las Vegas casino industry.

Deutsche Bank, which took control of the Cosmopolitan through a foreclosure, spent nearly $4 billion to finish and open the resort. The German bank, however, hung out the “for sale sign” on Day 1.

Blackstone brought in McBeath, whose 20-year gaming career included stints as the president of The Mirage, Treasure Island, Bellagio, and CityCenter, to turn the Cosmopolitan profitable.

“We began by asking ‘Why?'” McBeath said. “‘Why do we this?’ and ‘Why don’t we do this?’ We needed to develop a strategic plan that identified who we were in the past, the personality of the business, and what were our successes and failures.”

What developed following six weeks of asking and answering questions was a 165-page business plan that takes the property “from yesterday to 2020.”

A $200 million investment

Blackstone executives signed off on the ideas, which will cost up to $200 million over the next three years. Blackstone Real Estate Group controls more than $81 billion in investments, so McBeath knew he needed to be thorough.

“Jon Gray (Blackstone’s head of global real estate) closed his book and said, ‘Let’s rock and roll,’ ” McBeath said during an interview in his 15th floor office that overlooks the Bellagio fountains.

“These are very sophisticated and very intelligent people,” McBeath said. “(Gray) has a simple philosophy; hire the best in class management, put them into the game and support them.”

Initial changes spurred the Cosmopolitan to its first-ever quarterly profit of $15.3 million for the three-month period that ended June 30. The September quarter brought in net income of $4.7 million.

As the Cosmopolitan marks its five-year anniversary, the property is getting a make-over. Some $35 million in changes are underway, including a new high-limit slot area, a lounge and nightlife spot, several restaurants, and room upgrades. Next year, the Cosmopolitan will move the sports book from the second floor to an under-performing space on the ground level, that will include a Starbucks with access along the Strip.

“We’re just like Disneyland. If you don’t put in new rides, you’re not addressing your customers,” McBeath said. “Millennials and baby boomers are immediate gratification consumers. When you think about and how fast people consume your product, you have to evolve and be on top of your game.”

The biggest change comes with the holidays. Work crews tore out part of the casino and an under-used bar to create a 3,000-square-foot high limit slot machine area and CliQue, a cocktail lounge at the center of the resort.

Since its opening, the property operated high limit slot machines — games that take wagers up to $1,500 per spin — in the high limit tables area.

Kevin Sweet, the Cosmopolitan’s vice president of slot operations and marketing, said slot customers needed their own space, and the property created a high-limit slot area with 65 games.

“The area offers us a much better way to treat our slot players,” Sweet said.

The construction crews also came in handy after a July 25 fire in the resort’s pool area caused $2 million in damage and made headlines because of the spectacular nature of the blaze, which ignited fake palm trees and other flammable foliage.

Once the fire was out, McBeath sent the demolition crews working on the casino up to the pool to wall off the fire-damaged area. The pool was reopened in 24 hours.

“It was important to send a message for us and for Las Vegas that we were open for business,” McBeath said.

Moving the race and sports book

In the coming months the Cosmopolitan will move its race and sports book, which is operated by CG Technology, to a 6,000-square-foot space near the property’s Strip entrance. The slot machines in the location under-performed the floor average by 20 percent, McBeath said.

“I could have sold pencils over there and made more money,” he said. “Plus, we had a sports book on the second floor that was more of a nuisance. It didn’t fit. The 23 video poker machines in the bar will make more money than the 120 machines I took out of there.

Moving the sports book to a more prominent location serves two purposes. The Cosmopolitan can charge CG more rent and it gives an immediate lift to the area.

“You have to do something to draw people in,” McBeath said.

It’s been an eventful first year for McBeath and the Cosmopolitan. Earlier this month, the property ended is much publicized labor hostility when it reached agreement with Culinary Workers Local 226 on a four-year contract covering some 2,000 noncasino employees.

Gray, during a welcoming ceremony in February, committed that the labor contract would be signed by the end of the year.

“I actually lost a little leverage by Jon saying that,” McBeath said. “I’ve been negotiating with D. Taylor (Unite Here President) for over 20 years. We both had a vested interest in the process.”

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Find @howardstutz on Twitter.

Don't miss the big stories. Like us on Facebook.
Business Videos
How much do Las Vegas casino CEOs make?
Las Vegas gaming CEOs made anywhere between $1 million and $24 million last year, according to company filings with the U.S. Securities and Exchange Commission. ((Las Vegas Review-Journal)
30-year-old Rio needs a little TLC
Nearly 30 years after the Rio opened, the red and blue jewel that helped catapult Las Vegas to a new level with its buffet and nightclub has lost its status along with its shine.
The latest on the Drew Las Vegas - VIDEO
Eli Segall recounts his tour of the Drew Las Vegas, formerly the Fontainebleau, on the Las Vegas Strip. (Michael Quine/Las Vegas Review-Journal)
Pinball Hall of Fame to move near south Strip
Operators of the Pinball Hall of Fame have been approved to build a new, larger arcade near the south edge of the Strip on Las Vegas Boulevard near Russel Road. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
National Hardware Show underway Las Vegas
The National Hardware Show kicked off Tuesday at the Las Vegas Convention Center (Mat Luschek / Review-Journal)
Caesars for sale?
Caesars Entertainment Corp. has been swept up in takeover speculation since the company’s share price tumbled last year amid disappointing earnings and concerns over a recession. Amid the decline, hedge funds scooped up shares. Billionaire activist investor Carl Icahn began buying shares of Caesars as early as January. Icahn acquired nearly 18 percent by mid-March. In February Icahn called on the Caesars board to study a sale as a way to boost shareholder value.
Las Vegas home prices
Las Vegas home prices grew fastest among major markets in February for the ninth straight month. But amid affordability concerns, the growth rate has slowed down. Southern Nevada prices in February were up 9.7% from a year earlier, according to the latest S&P CoreLogic Case-Shiller index. The last time Las Vegas' price growth fell below 10% was in September 2017, S&P Dow Jones Indices reported.
Free Parking Coming To Wynn
Free parking will come to the Wynn and Encore resorts on May 1, 2019. (Mat Luschek / Review-Journal)
Founding Venetian employees talk about 20 years at the Strip resort
The Venetian, which opened May 3, 1999, is celebrating 20 years on the Las Vegas Strip. Seven original employees talk about opening the luxury resort and working there for two decades. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Circa aiming for December 2020 opening
The 1.25-million-square-foot property will have 44-stories and 777-rooms. It will also have a separate nine-story, 1,201-space parking garage.
Boxabl official explains the building concept
Boxabl business development manager Galiano Tiramani shows off a room built by his company. (Blake Apgar/Las Vegas Review-Journal)
TI/Mirage Tram reopens
The tram that shuttles guests between TI and Mirage reopened this week after being closed for much of 2018.
Las Vegas Convention Center expansion taking shape
Renderings and actual footage show how the Las Vegas Convention Center is evolving.
Former Starbucks CEO Howard Schultz at Las Vegas convention
Former Starbucks CEO and potential presidential candidate Howard Schultz spoke at the Epicor Insights user conference at Mandalay Bay Convention Center Wednesday, April 17, 2019. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Drew Las Vegas to open in the second quarter of 2022
The 67-story Drew Las Vegas is slated to open in the second quarter of 2022 at the north end of the Las Vegas Strip. (Michael Quine/Las Vegas Review-Journal)
NAB Day 1 (Time Lapse)
NAB kicked off at the Las Vegas Convention Center on Monday, April 8, 2019. (Mat Luschek / Review-Journal)
National Association of Broadcasters Show shows 1mm thick 8K TV with 22.2 channel digital sound
Japan’s NHK Science & Technology Research Laboratories booth featured a 1mm thick 8K TV system used in conjunction with a 22.2 channel digital sound system at the National Association of Broadcasters Show at the Las Vegas Convention Center. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Nevada shoppers react to Smith’s no longer accepting Visa credit cards
On March 1, Smith’s announced that it would no longer be accepting Visa credit cards at any of its 142 supermarkets, including the 45 in Nevada.
Massachusetts Gaming Commission asks how long Wynn executives knew about misconduct
Business reporter Rick Velotta gives an update on the adjudicatory hearing on the suitability of Wynn Resorts to retain its gaming license in Massachusetts.
Henderson app developer part of Startup in Residence
Henderson based developers of the app On Point Barricade are taking part in Startup in Residence, a North America program dedicated to pairing tech companies with governments. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Sam's Town employees and customers talk of their love for the iconic casino
Longtime Sam's Town employees and customers love each other and love their casino. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Las Vegas apartments rents
Las Vegas’ apartment market has accelerated in recent years. Developers are packing the suburbs with projects, landlords are on a buying spree, and tenants have filled buildings.
William Boyd talks about the birth of Sam's Town
On the eve of the 40th anniversary of Sam's Town, William Boyd, executive chairman of Boyd Gaming and son of hotel namesake Sam Boyd, talks about how the casino became one of the first local properties in Las Vegas. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
High Roller observation wheel turns five
The world’s tallest observation wheel celebrates it’s fifth year on Sunday, March 31, 2019. (Michael Quine/Las Vegas Review-Journal) @Vegas88s
Escape Room Industry Growing In Las Vegas
Escapology employees discuss the growing escape room industry in the U.S. and Las Vegas. (Bailey Schulz/Las Vegas Review-Journal)
Impact of parking fees on visiting the Las Vegas Strip
There are no data showing a relationship between Strip resort and parking fees and the number of out-of-state visitors to Las Vegas. But there are data showing a relationship between Strip parking fees and the number of local visitors to the the Strip. ‘’As a local, I find myself picking hotels I visit for dinner or entertainment, based on whether they charge for parking or not,”’ said David Perisset, the owner of Exotics Racing. ‘’It is not a matter of money, more of principle.’’ A 2018 survey by the Las Vegas Global Economic Alliance found 36.9 percent of Clark County residents reported avoiding parking at Strip casinos that charge for parking. 29.1 percent reported avoiding using any services from a Strip casino that charges for parking.
MGM's sports betting deals
MGM Resorts International signed a sports betting sponsorship agreement with the NBA in July It was the first professional sports league to have official ties with a legal sports betting house. The deal came just two months after the U.S. Supreme Court overturned a law prohibiting sports betting in most states. In October, MGM became the first gaming company to sign a sports betting partnership with the NHL. In November, MGM became the first gaming company to sign a sports betting partnership with the MLB. Financial terms of Tuesday’s deal and earlier partnerships have not been announced.
Faraday puts Las Vegas land on the market
Nearly two years after Faraday Future bailed on its North Las Vegas auto factory, the company has put its land up for sale. (Michael Quine/Las Vegas Review-Journal)
El Cortez owner Kenny Epstein on running the iconic property
Kenny Epstein, owner of the El Cortez Hotel in downtown Las Vegas, talks about Jackie Gaughan mentorship and answers rumors about bodies in the basement at the mob-era casino. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
LVCVA recommends construction of underground people mover
The Las Vegas Convention and Visitors Authority announced the recommendation for an underground people mover for the convention center. The system would have the potential to expand and connect Downtown and the resort corridor all the way to McCarran. (Michael Quine/ Las Vegas Review-Journal)
THE LATEST
Lucky Dragon’s foreign investors demand refund

The Lucky Dragon’s developers and prior management are facing lawsuits from Chinese investors, the project’s main lender and a Canadian high-roller who paid a $400,000 deposit to lease the casino just one month before it abruptly closed.