Cosmopolitan loses $56.8 million in first quarter
Facebook
Fark
Digg
Reddit
Stumble
Friday
13 May 2011
2:14 p.m.
Updated
13 May 2011 3:37 p.m.
The Cosmopolitan casino resort on the Las Vegas Strip lost $56.8 million during its first full quarter of operation as it continued to spend heavily on promotions and marketing to build brand awareness.
For the first quarter ended March 31, the resort expensed some $22.5 million for complementary rooms, food, drinks and other services.
"We expect this level of promotional allowance expense to continue in the short-term, but decline to industry norms as the initial ramp up period passes,’’ the Deutsche Bank-owned resort said in its quarterly financial report Friday.
Net revenue totaled $105 million for the resort, which opened Dec. 15 with 1,998 hotel rooms.
The first quarter results included $31 million in gross gaming revenue and the company said its focus on hosted table games customers "yielded solid results.’’
Room revenue of $34.4 million was achieved with a high average daily rate of $241, and occupancy of 85.7 percent. That compares to $201 and 86 percent at the nearby Aria resort at CityCenter.
Food and beverage revenue was $57.6 million, with the Cosmopolitan citing strong demand in its Marquee nightclub and high volumes at its restaurants.
The Cosmopolitan said it sold 15 condominium units for a gain of $7.5 million during the quarter. As of March 31 there were 199 condominium-hotel units under sales contracts, but given litigation over those deals and market conditions it’s unknown how many sales will close.
Some 286 hotel rooms were completed and added to the room inventory in late March and 682 more are under construction and due to open by August, the company said.
Despite the loss, Cosmopolitan CEO John Unwin said the property’s numbers exhibited "upward momentum.’’
“We are pleased with the key performance indicators: high room rates, strong hotel occupancy and our prominent position in the luxury tier,’’ Unwin said in a statement. "Guests continue to respond well to the Cosmopolitan which is reflected in our leisure and convention bookings, food and beverage revenues and positive trajectory in gaming.
"This upward momentum is a good sign for the resort and the Las Vegas market as a whole," Unwin said.
Share
Discussion 6 comments
Comments are moderated by VegasInc editors. Our goal is not to limit the discussion, but rather to elevate it. Comments should be relevant and contain no abusive language. Comments that are off-topic, vulgar, profane or include personal attacks will be removed. Full comments policy.
Additionally, we now display comments from trusted commenters by default. Those wishing to become a trusted commenter need to verify their identity or sign in with Facebook Connect to tie their Facebook account to their VEGAS INC account. For more on this change, read our story about how it works and why we did it.
Only trusted comments are displayed on this page. Untrusted comments have expired from this story.
Post a comment
Commenting requires registration.
If you have a LasVegasSun.com account, you are already registered.
Most Popular
- Viewed
- Discussed
- E-mailed
- Live from Billboard Music Awards: Stevie Wonder closes with ‘Superstition’; Adele wins 12 awards
- Firefighters extinguish blaze in east valley
- Travel business rebounding as agents adapt to tech-savvy generation
- Cancer claims life of Bee Gees co-founder Robin Gibb, 62
- In remembering Dr. Clarissa Engstrom, friends and family will mobilize efforts against suicide
Las Vegas just never learns. City Center is a a big expensive spectacle that the owners/builders thought were gonna change the way the world plays in Vegas. It is just another casino with shopping and todays savvy traveler knows this...I know this and I am not even in the hospitality business. Why do we keep putting up the same failing business models?
Las Vegas amateur economists just love to Monday morning quarterback. Of course they have no solution or constructive suggestion whatsoever. Same old crapola.
Of course it lost money. Was there even any doubt? This property was doomed to failure from the get go and will be sold for scrap before it gets a chance to complete its first year of operation.
I'll be there this weekend!! Love the Cosmo!
Jerry ................... Your a fool. U better enjoy the Cosmo before it gets sold. Deutsche bank is just a temporary owner . What makes the Cosmo so exceptional? Is it the beautiful women? U have them at all the class Casinos ( WYNN/ENCORE,VENETIAN/PALLAZO, Bellagio)
They're just building up reputation to sell to someone like Penn Gaming.
Gotta hand it to them, too. The place has a buzz to it not seen in Vegas in a long while. Maybe the opening of Hard Rock.
Hopefully brighter days ahead for all of us. Even the message board doomsday trolls.
Just for my own curiosity, I went on MGM's investor relations site to see what revenues at their properties were...The Cosmopolitan did $100MM in revenues in Q1 compared to $251MM at the Bellagio, $224MM at MGM, $178MM at Mandalay Bay, and $148MM at The Mirage. So, it did a little better than the Luxor, which was at $80MM.
Net, I don't think Unwin's comments that they are clearly at the top of the luxury chain are correct - perhaps in room rates and F&B/nightlife dollars, but certainly not in the gaming aspect, which drives the overall revenue number. Given they don't have an established player database, I don't think it's going to put up huge numbers anytime soon.
So Deutsche Bank's Foreclosurepolitan lost $56.8 million Q1 2011 on top of losing $139.5 million Q4 2010. Could it be:
* Bad publicity caused by revelations from an insider / whistleblower who is spilling the beans on how Cosmopolitan allegedly deceived and ripped-off people that invested $250 million in deposits to buy condos at the property that they never intended to deliver?
http://www.lvrj.com/business/unhappy-con...
https://docs.google.com/viewer?a=v&p...
* Bad karma caused by a Federal lawsuit, in which the Justice Dept. alleges that "the bank committed fraud and padded its pockets with undeserved income as it repeatedly lied so it could benefit from a government program that insured mortgages"?
http://finance.yahoo.com/news/Feds-sue-D...
* Or could it be caused be people reading all of those awful reviews of Foreclosurepolitan on TripAdvisor.com?
http://www.tripadvisor.com/Hotel_Review-...
Bank has a lot of bad image problemsand litigation, yet people and the press repeat what their "gaming analyst" says like its gospel.
Las Vegas is overrated. What a bad time to open a new but dated casino. This might have been the rage in the last decade, but certainly not now.
Its always so weird to see the vitriolic comments follow these Casino Resort performance articles. I had a buddy of mine that got passed over for a job at a newer resort here in Las Vegas and all he could do was hate on everything/every aspect of the property. You all sound like angry/bitter old farts whose wives left you for the younger/nicer guy. Squeeze your grapes and move along angry guy.
If the "classic" business model of cheap rooms, cheap food, and lose machines was SO profitable why is Downtown still struggling? Why isn't The Riviera a flourishing hot spot? Why is the Sahara shuttering itself? Why did the Tropicana just change its business model to something more modern and pare its losses last quarter? Again, I ask you angry guys......Why you mad though?
@sevenfoot it's too late to cry about failing business models. They can't exactly tear down the hotel and start over. These numbers just show that the Cosmo is spending a lot of time and money in all the wrong areas. Millions of dollars spent on brand awareness that don't seem to be paying off seems to be the issue. Why not go big or go home? Their type of marketing is very subtle: attending culture events such as the South Beach Wine and Food Festival and sponsoring ,in part, the US OPEN 2010. That's great for a small-medium sized business or a business that is already in its stride, but that isn't how a new Strip casino gains new gamblers. Sometimes the path that is worn, is the path that should be walked. If the Cosmo wants to ante up their profitability they are going to have to start acting like a major Strip casino. They need to take a risk on a marketing campaign that is a little edgier and sells the consumer on what the Cosmo can be and not what it is.
Major Strip casinos didn't get to be as big as they are because they attended craft fairs and held concerts for up and coming artists. They think people are going to flock to them because they have renown acts such as Lauren Hill and Mumford and Sons. Those concert goers go straight from the car to the venue and back again and judging by the F & B numbers, may stop off at a bar or restaurant. Casinos make most of their money on gambling, not on these ancillary events. I'd suggest the Casino ramp up their promos for gambling. They may have to lower their nose a little and get dirty with the big boys like Harrahs and MGM, lest they end up bankrupt like Station. Take a risk Cosmo what do you have to lose? You've already lost $56 million dollars on what you've been doing. No capital mgmt company wants to buy you bleeding money like you are.
THAT ADDS UP TO LOSING ABOUT A MILLION BUCK$ A FLOOR, DOESN'T IT...???
This is the most expensive casino ever and all they could come up with was something that's as interesting as a Citibank office building? Why didn't they put in a Starbucks, an Apple Computer store, a Pizza Hut, or a Barnes and Noble bookstore? Or how about a video games arcade? The new Tropicana is way better than the Cosmo.
The performance from one quarter, a start-up quarter, is meaningless. The numbers from the second and third-quarters should better reveal how this place will do financially.
They spent some money to start-up, we will see what sort of return they will get for it.
@turrialba - $56 million is "meaningless"? I doubt the investors think that. And when they comp rooms and F&B they are expensing their costs not what we pay, so that number really could be 3-4x the $56 million they're showing. Still "meaningless"?