weather icon Clear

Kaos closure may signal challenges for Las Vegas club scene

Updated November 7, 2019 - 11:30 am

No party lasts forever.

The sudden shutdown of Kaos nightclub and dayclub could be pointing to a broader slowdown of Las Vegas’ club scene, according to experts.

On Tuesday, Red Rock Resorts executives revealed the company was shutting down the Palms’ nightclub and dayclub, effective immediately. While experts say the Palms’ venue faced some unique challenges, its closure comes as the nightlife industry in Las Vegas faces major challenges, with shifts in profitability and customer demand.

“Customer demand has seemingly peaked in recent years and competition has only proliferated,” said Deutsche Bank gaming analyst Carlo Santarelli.

‘Stop the bleeding’ and regroup

What was once viewed as the anchor to the renovated Palms resort-casino ended up sinking its parent company’s earnings. On Tuesday, Red Rock Resorts reported a net loss of $26.8 million in the third quarter, a 207 percent decrease from the same period last year.

Santarelli said a number of factors made Kaos unprofitable, primarily its inability to lessen the costs of contracted talent. In turn, the company quickly pulled the plug on the venue.

“The ability of the property to overcome the losses being generated in the venue made waiting to see if things started to improve very expensive,” Santarelli said.

Additionally, Red Rock executives mentioned Tuesday that Kaos’ clientele did not spend money on other areas at the Palms — like food and beverage or gaming — as much as they had hoped.

“They essentially overestimated its crossover with the more profitable casino segment and underestimated the direct profitability of the club given the rising costs of entertainment talent,” said SunTrust Robinson Humphrey analyst Barry Jonas. “I think it’s a difficult but admirable decision to shut down the club — stop the bleeding early on and regroup.”

Following a trend

Santarelli doesn’t expect other properties to replicate Kaos’ rapid shutdown. Unlike larger venues, he said, it’s harder for a 700-room property like Palms to mask the losses of one of its venues. Additionally, he expects other venues to welcome back some of the customers who had been taking their money to Kaos.

Still, Kaos’ lack of success could indicate larger trends in the Las Vegas nightlife industry. Santarelli said the cost of entertainment for clubs has “exploded” over the last five to 10 years. In September, it was reported that the DJ Marshmello signed a two-year, $60 million contract to perform at Kaos before the Palms negotiated his departure.

Kaos’ shutdown is “undoubtedly indicative of how expensive it has become to compete in the Las Vegas nightlife arena,” Santarelli said.

As for the club scene’s potential customers, many are looking for more intimate, economical ways to spend their money, according to Ryan Dahlstrom, president of the Nightclub Hall of Fame.

The club scene “is not as much a novelty as it was before,” he said. “I don’t think it’s what it was five, six, 10 years ago (as a revenue generator) because it’s played out.”

Operations not sustainable

According to a 2018 report from the Las Vegas Convention and Visitors Authority, the number of visitors who said they had visited a hotel nightclub with a cover dropped from 13 percent to 7 percent between 2017 and 2018.

Additionally, the report showed bars and lounges showed to be more popular than nightclubs in the valley. While 7 percent of respondents said they went to a hotel nightclub, 52 percent made a stop at a hotel bar or lounge.

Dahlstrom said that instead of paying hundreds of dollars to drink and see their favorite DJ at a dayclub or nightclub, many customers are opting to find that experience elsewhere, such as at a smaller, multipurpose venue or festival.

While Dahlstrom doesn’t envision the major clubs in Las Vegas and other markets having to shut down in light of these changes, he said they’ll have to make some major changes. He expects to see clubs open fewer nights during the week, spend less on entertainers and offer more corporate and private events.

“It’s just not sustainable, the way they’ve been operating,” he said.

Contact Bailey Schulz at bschulz@reviewjournal.com or 702-383-0233. Follow @bailey_schulz on Twitter.

Don't miss the big stories. Like us on Facebook.
Business Videos
Vegas Changes Everything: Grandma - LVCVA ad
"Grandma" is a new television spot from the Las Vegas Convention and Visitors Authority prepared to entice visitors to come during the Thanksgiving and Christmas holidays. (Visit Las Vegas/YouTube)
Vegas Changes Everything: Chaos - LVCVA ad
"Chaos" is a new television spot from the Las Vegas Convention and Visitors Authority prepared to entice visitors to come during the Thanksgiving and Christmas holidays. (Visit Las Vegas/YouTube)
New allegations involved Steve, Elaine Wynn - VIDEO
The new allegations were presented Friday in a motion that included a 2018 affidavit, alleging former hairstylist Jorgen Nielsen tried to convince a friend to say Steve Wynn raped her and that she bore his son. The affidavit also included new allegations suggesting Elaine Wynn and Nielson orchestrated the assault scandal. (Renee Summerour/Las Vegas Review-Journal)
Fitness chain Life Time acquires former Sullivan Square site
Fitness chain Life Time has acquired the former Sullivan Square site in Las Vegas for $14 million. The southwest valley property, across the street from Ikea, is little more than a giant hole in the ground. (Bizuayehu Tesfaye/Las Vegas Review-Journal) @bizutesfaye
Fashion Outlets of Las Vegas in Primm outlet mall changing its name - VIDEO
Chad Dillow, co-owner of Step Right Up, is building his attraction at Prizm Outlets, which recently changed it name from Fashion Outlets of Las Vegas, in Primm. It will include 3D trick art, ax throwing, escape rooms and carnival-themed games. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
O.J. Simpson files lawsuit against The Cosmopolitan over TMZ story - VIDEO
A lawsuit filed Thursday alleges that The Cosmopolitan of Las Vegas defamed O.J. Simpson when hotel employees told TMZ he was kicked out of the casino “for belligerence” in November 2017. (James Schaeffer / Las Vegas Review-Journal)
Phil Maloof on selling his Palms Place penthouse.
Phil Maloof sold his 59th-floor penthouse at Palms Place. (Eli Segall/Las Vegas Review-Journal)
Bleutech announces Las Vegas land purchase deal
Bleutech Park Properties reached a purchase agreement for 210 acres at Las Vegas Boulevard and Cactus Avenue, project spokesman Tom Letizia announced Tuesday, Nov. 5, 2019 at a news conference at the M Resort. (Elizabeth Brumley/Las Vegas Review-Journal)
Stolen Dodge Challenger found, suspect arrested - VIDEO
A $250,000 custom-built Dodge Challenger was stolen on Oct. 30, 2019, just before it was to be displayed at the Specialty Equipment Market Association trade show in Las Vegas this week. The thief was found by an Nevada Highway Patrol trooper, who rammed the trooper's car with the Challenger and got away. The suspect was ultimately arrested and the car recovered. (Las Vegas Review-Journal)
Terbine's, a tech firm, decision to relocate business from Bay Area to Las Vegas
Terbine's, a tech firm, decision to relocate business from Bay Area to Las Vegas. (Bizuayehu Tesfaye/Las Vegas Review-Journal) @bizutesfaye
A walk through the historic Huntridge Theater in Las Vegas - VIDEO
The Huntridge Theater became a musical venue in 1992 and was a staging ground for groups on the rise and alternative superstars, from Smashing Pumpkins to Sarah McLachlan, the Deftones, Nine Inch Nails, Green Day and Fugazi. The venue has been closed since 2004. This video, taken on Oct. 31, 2019, shows what's left of the theater after 15 years. (David Guzman/Las Vegas Review-Journal)
MGM Resorts International looking to sell another property
MGM Resorts International is working to sell its MGM Grand property on the Las Vegas Strip. (Renee Summerour/Las Vegas Review-Journal)
Developer Sam Cherry reveals plans for shareDOWNTOWN.
Mayor Carolyn Goodman and Councilwoman Olivia Diaz will attend this event where plans are revealed for a future apartment complex in the Arts District. (Shea Johnson/Las Vegas Review-Journal)
Las Vegas Convention Center expansion update - VIDEO
Take a drive outside of the new Las Vegas Convention Center expansion project. (Severiano Galvan/Las Vegas Review-Journal)
Binion's debuts a spinning bar overlooking Fremont Street Experience - VIDEO
Binion's debuted its spinning bar inside the Whiskey Licker Up Saloon. The Rotating bar only goes at one full rotation per 15 minutes overlooking the Fremont Street Experience. (James Schaeffer/Las Vegas Review-Journal)
Day 3 of the 2019 Global Gaming Expo
Day 3 of the 2019 Global Gaming Expo took place at the Sands Expo and Convention Center in Las Vegas Wednesday, Oct. 16, 2019. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Southern Nevada could set a new resale-price record in coming months.
The median sales price of previously owned single-family homes – the bulk of the market – was $310,000 in September. Before the economy crashed last decade, prices peaked in June 2006 at $315,000, according to the Greater Las Vegas Association of Realtors.(Bizuayehu Tesfaye/Las Vegas Review-Journal) @bizutesfaye
Walmart container park in Henderson - VIDEO
Henderson could be home to a container park associated with a Walmart Inc. initiative. (Las Vegas Review-Journal)
Recession lessons could help Las Vegas face next slump - VIDEO
While the last economic downturn had a dramatic impact on local casinos, most experts expect the industry will be better able to weather the storm during the next recession. (Mat Luschek / Las Vegas Review-Journal)
St. Rose Parkway Construction - Video
St. Rose Parkway continues to have construction along the six-and-a-half mile road. Review-Journal studio host Aaron Drawhorn and business reporter Eli Segall go over the construction projects that are coming to Henderson.
MGM and victims of Oct. 1 reach settlement agreement - VIDEO
MGM Resorts International and lawyers representing potentially thousands of victims of the Oct. 1, 2017, mass shooting on the Las Vegas Strip have reached a tentative settlement of between $735 million and $800 million. (Mat Luschek /Las Vegas Review-Journal)
Live music and EDM dominate the night on day 2 of A’Le’Innstock
After sunset bands rocked the crowds at A’Le’Innstock in Rachel, Nevada on the second night of the event.
iPhone 11 Release
Local Las Vegas long time Apple product consumer shares her excitement for the new iPhone 11 release Downtown Summerlin. (Elizabeth Page Brumley/Las Vegas Review-Journal)
Lihi Levin talks about a mobil app Dropit - VIDEO
Lihi Levin, regional manager at Dropit Shopping, talks about a mobil app Dropit. The app lets customers leave their shopping bags at a store then have them delivered the same day to their home or hotel so they can shop without carrying multiple bags all day. (Bizuayehu Tesfaye Las Vegas Review-Journal) @bizutesfaye
North Las Vegas company prepares for Mars - VIDEO
Robert Bigelow and his Bigelow Aerospace manufacturing facility played host to eight NASA astronauts and 60 engineers this week getting to know the company’s B330 autonomous, expandable space station. (Elizabeth Brumley/Las Vegas Review-Journal)
Las Vegas developer talks about a new apartment complex called “the yoU”
Frank Marretti lll, founder of G2 Capital Development, talks about his new apartment complex called “the yoU” near UNLV. (Bizuayehu Tesfaye/Las Vegas Review-Journal) @bizutesfaye
Steel cables will hoist roof at Allegiant Stadium - VIDEO
Stainless steel cables are being put into place at Allegiant Stadium to begin the process of putting the roof on the 65,000-seat stadium in Las Vegas. Stadium Chief Operating Officer Don Webb explains how the cables will be used to get the roof put on the future home of the Raiders and UNLV football. (Heidi Fang/Las Vegas Review-Journal)
The last remaining Sigma Derby game in Las Vegas
Derek Stevens, owner of the D Las Vegas, talks about the last remaining Sigma Derby horse racing game in Las Vegas inside his casino floor. (Erik Verduzco/Las Vegas Review-Journal)
Popeyes Spicy Chicken Sandwich Review
Janine Blake of Las Vegas gives her review of the new Popeyes Spicy Chicken Sandwich at the restaurant’s location on west Bonanza Road on Thursday, Aug. 22, 2019,
SuperZoo 2019 takes over Mandalay Bay in Las Vegas
SuperZoo 2019 show for pet retailers brought pet products of all description to the Mandalay Bay Convention Center in Las Vegas. (Heidi Knapp Rinella/Las Vegas Review-Journal)