Back in May of 2014 it was announced that Blackstone Capital had struck an agreement with Deutsche Bank to buy the Cosmopolitan Hotel in Las Vegas for a tidy sum of $1.7 Billion – a bargain when you consider Deutsche Bank “spent” close to $4 Billion building the property which opened in 2010. What started as a financing arrangement for the bank turned into a purchase when the developers who originally started the projected defaulted on their loans.
The development was originally slated to be a collection of high end condos with a prime location on the strip, but with the recession and pull out from the original investors, the bank decided to turn it into a hotel. Everything seemed great at first, excellent location, beautiful decor, great restaurants and nightclubs, but as the financials started rolling out it was clear that the Cosmo was in some serious trouble in generating a profitable operation.
There’s lots of speculation as to why the hotel with everything going for it couldn’t make a profit in the midst of other cash cow properties like The Bellagio, Aria and Planet Hollywood all within a stones throw of the property. Popular opinion suggests that the main culprit for the fledgling financials of the Cosmo had everything to do with their casino which uses a non-traditional design, doesn’t offer as favorable terms as competitors and has lower limits.
This combined with the fact that Deutsche Bank had no experience running casinos in Vegas was a recipe for disaster and led to the eventual decision to put the property up for sale. Enter Blackstone Group, an investment conglomerate that owns both residential and commercial property in Las Vegas and wanted to have a go at turning this hotel with so much potential into a profitable and viable business. Make no mistake, this will be an uphill battle and is the absolute largest single investment that Blackstone has ever made into any of their ventures.
In February of 2015, the Wall Street Journal ran a great piece on the strategy that Blackstone is hoping to use to ensure the longevity of the Cosmo, and it also highlighted some of the troubling management decisions of the past that likely contributed to its less than stellar performance thus far.
At the top of the list is a massive revamp of hotel amenities to attract the Asian high roller clientele which seems to have been neglected since the beginning. In order to do this, the group is planning to add new VIP rooms to the casino with more privacy and exclusivity as well as developing the previously undeveloped top 4 floors of the hotel into Sky Villas for their players.
Another key step that the group has taken was bringing on board Bill McBeath as the hotels CEO who has years of experience in casino operations (ran both the Bellagio and Mirage) and understands what it takes to make players happy. In speaking about the changes McBeath said, “There are high-end clients coming to Las Vegas from China and Southeast Asia, but the Cosmopolitan hasn’t targeted those individuals. We are going to change amenities, the gaming space and suite product to bring them here.”
Other additions on the plate for the Cosmo facelift include riding all of the under performing restaurants from the property and further developing the first 3 floors of retail space with a mix of new dining options, bars and shopping. Only time will tell what’s in store for the Cosmopolitan but Blackstone is definitely taking a step in the right direction and we hope they can turn it around as it really is one of the best hotels Vegas has ever seen.