MGM Resorts International officially took over the operations of The Cosmopolitan of Las Vegas Tuesday, setting the stage to lure more millennials and younger visitors to its brand.
MGM announced Tuesday afternoon it closed on the $1.625 billion purchase from the Blackstone Group for the Cosmo operations, part of a larger $5.65 billion deal in which investors own the real estate and MGM pays $200 million in a year in rent as part of a 30-year contract.
“This is a big moment for our company and for the Las Vegas Strip,” MGM Resorts CEO Bill Hornbuckle said in a statement. “The Cosmopolitan of Las Vegas has already established itself as one of the Strip’s premier resorts with an iconic brand, well-curated experiences, and a loyal customer base. We look forward to offering their customers access to the extensive and exclusive amenities and other benefits only MGM Resorts can provide.”
MGM takes over a property with 3,000 hotel rooms that opened in December 2010, one year after the adjacent CityCenter and its Aria Resort and Casino opened. It’s sandwiched between Bellagio on the north and CityCenter on the south.
“Most average visitors thought Cosmo was part of CityCenter and not a stand-alone property,” said casino consultant Brendan Bussmann, managing partner of B Global. “MGM Resorts will now fully integrate this into the Bellagio and CityCenter campus and the larger Strip offering to allow guests another offering in the portfolio.”
That’s what MGM executives have been echoing when it comes to the importance of adding The Cosmo to their properties.
“It’s a market niche that we don’t necessarily cater to,” Hornbuckle said. “It’s a younger demographic with a high retail spend. Given what they’ve created, combined with some of our amenities, [this deal] will be additive to not only the Cosmopolitan, but Las Vegas as a destination in general.”
MGM said during the 12-month period that ended March 31, the Cosmopolitan generated $1.1 billion of net revenue and $416 million of adjusted EBITDAR.
Casino consultant Josh Swissman, founding partner of The Strategy Organization, agreed that it’s a great asset for MGM to add to its portfolio, especially with the proximity of CityCenter and Bellagio. The demographic addition is also vital, he said.
“There’s definitely some synergistic reasons why it’s good to have that asset so close,” Swissman said. “The other big benefit is Cosmo is a really cool property and they’ve done a great job of attracting a demographic that is younger and spends well. MGM has some properties that do attract that kind of demographic, but none of them seem to draw that younger crowd as well as the Cosmopolitan has. For that reason, it’s a great feather in MGM’s cap.”
The benefits include the usual savings on purchasing power and combining back-office functions, but also the benefit of linking the Cosmo into the MGM loyalty program, Swissman said.
“I think what MGM has in mind is to cross-market all the amenities of their other properties on the Strip, so they grow the share of wallet these Cosmo guests are generating,” Swissman said. “The Cosmo was a one-ownership property and anytime anybody left, it was losing that share of the wallet. Now that MGM owns it, they will do everything they can to incentivize those people to visit other resort properties, so that when that money leaves the Cosmo, it stays within the family.”
MGM COO Corey Sanders said it will take some time to integrate Cosmo’s rewards program with MGM, but customers of both brands will see benefits. Cosmo customers will be introduced to MGM amenities, showrooms, and arenas and the exclusive Shadow Creek golf course. MGM customers can pursue Cosmo’s amenities, including the 3,200-seat Chelsea concert venue, Sanders said. “We think it’s exciting for both of our customer bases,” Sanders said.
In the end, Swissman said, attracting mid-20s through the 30s (Millennials range in age from 26 to 41) is important to MGM, which hasn’t done as good a job of luring that group. While Cosmo guests gamble, they’re attracted to the property’s food and beverage offerings that are unlike most others on the Strip.
The Cosmo has 26 on-trend food and beverage offerings, with 19 new concepts introduced in the last four years. “They’ve been pioneers of the eclectic, skewing younger with fun food and beverage offerings,” Swissman said. “Others have tried to replicate what the Cosmo has done, but I don’t think anyone has done it at quite the same level. Cosmo is attracting younger people from Southern California and all over the world. It’s not the gambling that drives them, but the dining and nightlife. This younger and hipper crowd is willing to spend more on a bottle of liquor in a nightclub or at a high-end steak environment.”
Swissman highlighted restaurants like STK, a steakhouse that features food, but also music and entertainment in which the environment is just as important as the food. There’s China Poblano, a celebrity-chef José Andrés restaurant, and Jaleo, a tapas establishment. Superfrico is branded as Italian American psychedelic restaurant inside a Las Vegas house party. That all fits into the irreverent branding that dates from the grand opening, “Just the Right Amount of Wrong,” Swissman said.
“Those types of irreverent food and beverage offerings put Cosmo on the map early on and helped sustain its position as a resort of choice when people come to Vegas.
The pool entertainment also generated a following after opening. The Marquee nightclub and dayclub attract DJs from all over the world. The Cosmo even has a compact podium-style gaming floor, measuring 110,000 square feet, with food and beverage outlets on the second and third floors that continue to benefit it today, Swissman said.
“It’s another smart move to make The Cosmo feel like a special place even when it’s a smaller footprint than you would see on the Las Vegas Strip,” Swissman said. “Their irreverent brand positioning was something that was often imitated, but never very successful.”
As it enters the next chapter on the Strip, Bussmann said Cosmo’s continued resilience will need to be held as it becomes part of the MGM Resorts portfolio. It’s a property that survived the Great Recession and stood on its own island for over a decade, he said.
“Cosmopolitan has seen its ups and down over the years, from its original development under David Friedman to now becoming part of the MGM Resorts family,” Bussmann said. “It has been the epitome of the challenges that the economy has faced during that same time period. It’s sold itself as not the norm and hopefully that will hold in the years to come.”
MGM Resorts entered into a 30-year lease agreement, with three 10-year renewal options, with a partnership among Stonepeak, Cherng Family Trust, and Blackstone Real Estate Income Trust, Inc., which acquired The Cosmopolitan’s real estate assets. MGM Resorts will pay an initial annual rent of $200 million, escalating annually at 2% for the first 15 years and the greater of 2% or the CPI increase (capped at 3%) thereafter, MGM announced.
The Cosmo will remain part of Marriott International’s Autograph Collection, with access to Marriott’s reservation and rewards system. The existing William Hill sportsbook at the property will be transitioned later this summer to a BetMGM sportsbook.
