A new era: How Las Vegas became cool…again

When Frank, Sammy and Dean decamped from Los Angeles to Las Vegas to film 1960’s Ocean’s 11, smoking cigars, shooting craps and entertaining beautiful women were among the evening’s activities, the city became the epitome of cool elegance and glamour.

Decades later, with Liberace and Elvis having come and gone, marketing campaigns from the period featured somewhat older versions of The Rat Packers, joined by a menagerie of wild animals, magicians and astonishing production shows, where acrobats performed death-defying stunts (twice-nightly) and record levels of visitation witnessed the finest chefs plating gourmet meals to hundreds of eager diners.

The Castaways, Hacienda, Marina and Dunes made way for the wonders of The Mirage, the spectacle of The Luxor, the scale of The MGM Grand, followed by the grandeur of The Bellagio. The casino resorts were making record profits and Las Vegas was once again the gaming capital of the world.

There was just one problem; Las Vegas simply wasn’t cool.

A demographic challenge

In 2000, 74% of visitors were aged over 40, with 44% aged 40-59. 87% were from the USA; the LVCVA marketing campaigns promised “The American Way To Play” and, to a large extent, older Americans were the customers playing.The casino operators had succeeded in their mission of shifting from the post-war generation to attracting the Baby Boomer demographic to town, and as a consequence of building and staffing these new properties, the city had grown in population, finally reaching 1 million in 1996.

The UNLV had stepped up, preparing many of the new generation of hospitality employees for the workplace, bemoaned in the final sequence in the movie Casino, with “kids” taking the place of older employees to meet the needs of the Megaresorts.

On the edge of the college campus, Peter Morton’s Hard Rock Hotel opened in 1995. With the anti-establishment rockand-roll theme pervasive, the resort was initially programmed for the boomer generation that were seeking to relive their wilder sides. Joining them at the party were many of the 20-somethings working in the industry, completing their college degrees, or just wanting to hang out in a more interesting environment.

The same year, just down the street from The Hard Rock, Michael Morton (half-brother to Peter), Scott DeGraff and Andy Belmonti, who led Chicago’s N9NE Group, sought to emulate their operating success in the windy city by opening a standalone nightspot called The Drink.

Not associated with any casino operator, who were wary with inserting nightclubs into their resorts, the club became an immediate success, dominating the scant nightlife scene. Limousines from the city’s casinos dropped off celebrities and VIPs who wanted to party, whether to Boogie Nights on a Thursday or DJ Hollywood over the weekend.Among the customers was George Maloof, who had graduated from the UNLV before opening the Fiesta Rancho Casino in North Las Vegas. His vision for the market was developing a lifestyle orientated casino resort serving both locals and the younger Gen X customer, like him.

His new resort, backed by a group of local minority owners, including Station Casinos, was to be called Palms, and it opened in November 2001, just months after events on the East Coast had brought a pause to national travel.

By then, a lounge scene had warily started to emerge in the city, notably at The V Bar at Venetian, Voodoo Lounge at Rio, and The Foundation Room at Mandalay Bay, but nothing made an impact to wider consciousness until Maloof’s resort. By day it was a favorite of local slot players, but by night it truly came alive, thanks to his partnership with The N9NE Group, who operated their Chicago concepts N9NE Steakhouse and the Ghostbar, alongside Rain nightclub and Skin Pool Lounge, inventing the Las Vegas pool party in the process.

Unlike other casino owners, Maloof was younger than his peers and firmly ensconced in the celebrity red-carpeted zeitgeist of the moment. The popular MTV reality show The Real World filmed a season at the hotel which, paired with the arrival of the internet, sent the gossip-filled goings-on at Palms on to TVs and computer screens of millions of escapist hungry voyeurs cross the nation.

The property became a star and it was accessible to anyone that wanted it. All you needed to do was go to Las Vegas.

What happens there, comes here

Recalling the period, Belmonti observed that in major cities, nightclub openings were challenging, with restrictive liquor licensing laws, but Las Vegas was wide open. Morton had originally considered opening a club in LA, but after visiting Las Vegas, he believed there was clearly unmet demand in the market, which was proved by the success of Drink. By the time Palms opened, the customer now had both appetite and finance to consume.

Without the sole purpose of driving players to the casino tables (who still came) The N9NE Group’s mission was to create a memorable and enjoyable hospitality experience for tourists and locals alike. This focused on not just the food or the service but creating a vibe for customers to enjoy. The template was innovative for the city but, more importantly, it was executed with discipline and panache, and brought successful practices found in top-level nightlife into the casino industry.

One of the critical success factors was that the group operated multiple destinations in the same property, each feeding each other, from daytime until the small hours. And it wasn’t always formulaic; the DJ in the steakhouse (a novelty that is now ubiquitous in every restaurant opening) would continue playing for guests, long after the food service stopped. Ownership and management joined the patrons for late-night conversations and drinks at the bar. N9NE Group executive, Bronson Olimpieri, was dispatched across the country to meet tastemakers and see what was trending in major markets, bringing potential customers and ideas directly to the Nevadan desert.

The customer development ethos employed had not been seen outside casino VIPS and, with a team of lifestyle hosts who maintained the customer database, relationships were developed, both with celebrities that would feature in the pop-culture tabloids and repeat guests; allowing special patrons to skip lines, secure bookings and receive elevated treatment. The first ‘online’ Las Vegas influencers were found at “the” Palms.

The introduction of “bottle-service” saw the bars and nightclubs generate significant revenues from non-gambling customers that had not been seen inside casinos before; the N9NE Steakhouse was one of the most expensive places to dine in town, and the music played in the nightclubs alternated between traditional Top-40 music, hip-hop by DJ AM and the arrival of “soon-to-be-superstar” European DJs.

Michael Fuller, a Las Vegas native that had led the city’s dance music scene, was part of the team. Described as the creative genius behind the Palms’ nightlife programming, Fuller promoted the UK DJ, Paul Oakenfold’s Perfecto show, which successfully introduced the headline performer residency into nightlife; using the DJ as nightclub differentiator, enticing dance music fans to come to Las Vegas from across the US and, more importantly, internationally.

The combination of enthusiastic, passionate and cool employees, engaged management, a meticulous design atheistic, expertly curated offering, and a young, affluent and experience hungry customercame together.

In 2003, The LVCVA launched the campaign, “What Happens Here, Stays Here” to reflect the new appreciation that Las Vegas was about more than gambling, hinting that adult empowerment and personal (re)invention could be found under the desert stars. The reimagining of Las Vegas struck a chord.

Many visitors came to Las Vegas for the weekend… and many never went back, beginning the transition of a record period of growth within the local economy, as the city became the fastest-growing in America. Young people met other young people and joined the wider community.

If you can’t beat them…

By 2005, the visitor demographic had shifted, with 33% of visitors now under 40, rising from 26% only five years previously. Quickly, Palms faced competition as the market identified the profitability of non-gaming customers to the revenue mix. In 2000, 46% of revenues on The Strip were generated from gaming. By 2005, this was 41%, despite a $500m increase in gaming revenues.

Citywide, MGM ditched the family-friendly theme, rebranding Treasure Island as TI, and opened the Tangerine Lounge. MGM Grand introduced Tabu, targeting the younger crowd. Shadow Bar, Pussycat Dolls Lounge, Pure Nightclub and a selection of celebrity chefs, many known from TV, opened at Caesars Palace. Specialist nightlife operators from the UK, LA and NYC all entered Las Vegas, notably TAO at The Venetian in September of 2005.

When Wynn opened in 2005, La Bete nightclub, (which became Tryst and now Intrigue) featured prominently, Morton recalled, “It was one thing competing against other independent operators, but when Steve Wynn competes against you, it becomes a different story.” Later, Morton was invited to launch a concept in Wynn’s property; La Cave was the only externally operated F+B outlet in the entire resort. Palms raised its game by opening the second “Fantasy” Tower in 2006, with N9NE-operated Playboy Club, Nove and Moon Nightclub on the 53rd floor.

As the financial crisis of 2008/2009 took hold, and visitation and gaming revenues dropped, the nightlife market also slowed but was not affected to the extent of the casino. The challenge to Palms was that the unique offer that had been created by The N9NE Group was being replicated. Key employees were being poached by rival operators to newly created executive positions, with higher salaries and formal structures.

Indeed, The N9NE Group’s own planned market expansion was further stalled by litigation, as Maloof and his partners clashed. But this was moot; competitive pressures were emerging, as their strategy of focusing on an identified unserved segment had gone mainstream, and the economics of the once-dominant N9NE Group and Palms partnership were being eroded.

Whereas in 2002, a modest five-figure sum could book you the top DJs in the world, just years later the same talent was commanding multi-million-dollar multi-year contracts; the DJ arms race had begun, which was to transform Las Vegas into the EDM nightclub capital of the world over the next 15 years.

Where once $1,000 nightclub patrons were prized, the bar bills were also to increase multi-fold. By 2010, 22 of the top-grossing 100 bars and clubs were in Vegas, and those in the top 20 generated revenues estimated at over $500m. Every major nightlife category in the Nightclub & Bar Awards was won by a Las Vegas operator. The scale of the newer nightclubs, such as XS, which opened on the eve of 2009, with 40,000 square feet and a 3,000 capacity, challenged anything that was possible at Palms.

In December of 2010, The Cosmopolitan opened as the first specifically built, lifestyle-focused megaresort for Gen Xers, in a prime location on the Strip, lifting heavily from the experiential nature and programming at Palms. The game was all but over for the outside challengers, and after the litigation ended in 2011, The N9NE Group and Palms parted ways.

By 2012, gaming revenue was 37% of the revenue mix, 43% of visitors were under 40, 17% were international and Las Vegas was one of the coolest cities on the planet.

A nine-year run

In the nine years from the opening of the Palms in 2001 to The Cosmopolitan in 2010, there are important insights that remain valuable to those of us in the wider hospitality and casino industries. The most obvious lesson is that there is an immediate prize for meeting unmet demand in an identified customer segment. In the case of Las Vegas customers, there was both unmet demand – and shortage of appetite to supply – the younger demographic. When that supply was increased, not just at Palms, but across the entire marketplace, a new market was established.

Although tactical competitive can be obtained – and used effectively to benefit the business – translating this to strategic competitive advantage, particularly in a highly competitive environment is challenging. The arrival of competitors led The N9NE Group to have to step up its game. But as one Wynn executive remarked, “we won’t be the first, but we will be the best.” Wynn’s strategic position, to be the market leader, rather than innovator, implied that the tactical advantage in targeting a specific customer segment could be eroded over time.

At least for a short time, there are great competitive advantages that can be obtained through innovation, before others have time to adjust and emulate.

Many reflect on the early 2000s, where Las Vegas had new experiences appearing monthly. Today, risk-taking in the major resorts is more considered (perhaps due to the increased capital costs and changes in ownership/operating model) with a frequent observation that the offer is more homogenous today than 25 years ago. For many major operators, it is a safer option is to recycle a successful concept or brand.

An oft-repeated phrase within the casino world at this time was capturing customer share of wallet. The lesson from Palms was that this is achieved by capturing share of customer time. The seamless transition from room to pool, to lounge to restaurant, to club to casino, was an innovation that was on display at Palms, whereas today it is commonplace.

Then, moving thousands of people through venues was a logistical challenge, particularly with the restrictions of legacy casino design. Casino operators didn’t want young people loitering around their properties or standing in long lines down hallways. In some cases, adjustments in casino design and offer became apparent; however, it remains a curious omission that in even the newer resorts, space for customer staging outside larger venues is not fully considered – or managed effectively.

Finally, the 1990s proved that by increasing non-gaming amenities, resorts were able to grow gaming revenues. By the 2000s, non-gaming revenues were significant enough to operate successfully independent of gaming and, as a destination market, what Las Vegas could offer was far more than the casino.

As we noted, in the 2000s, as nongaming customers came to Las Vegas and the revenue mix adjusted, the city was able to invest and expand across non-gaming amenities. It is undoubted that this enabled Las Vegas’ economy to diversify from leisure to broader tourism, notably business, conventions, entertainment and culinary tourism, thus shifting perceptions to the present iteration as a sporting and cultural center. Subsequently, many recent large capital projects have focused on adding and improving non-gaming elements of resorts, rather than gaming.

Customarily cool

Reflecting on the period, Morton spoke fondly of the culture created and the friendships made.

“If you looked around the venues, there were people in their 20s, 30s, 40s, 50s and older. We created places that people of all ages enjoyed coming to. That is unique to Las Vegas.”

Belmonti remarked, “everything we achieved at The N9NE Group was because of the characters in the business. It was a great team.”

Olimpieri added, “The success of the moment was due to the people. From George Maloof and Michael Morton down, the culture that was created was unique in Las Vegas at the time. It was hands-on, no ego, customer-first and fun. We were challenging the dynamic of Las Vegas.”

In the most recent analysis of Las Vegas’ Strip casino revenues, 32% was from gaming (at near record levels) with around one quarter coming from food-and-beverage sales. Today, the strategies developed by The N9NE Group at Palms 25 years ago are so commonplace that their origination is often forgotten, and the recognition that is due to these pioneers is unknown to those new to the city.

Palms was acquired by original minority owner Station Casinos in 2016, which sought to recreate the property’s success at the turn of the century and embarked on a full renovation. The Covid-19 Pandemic saw the doors close and a new ownership emerge; The San Manuel Band of Mission Indians, owner of Yaamava’ Resort & Casino, reopened the property in 2022, but with amore low-key feel.

For those seeking to understand what the future of Las Vegas may be, one can find several former members N9NE Group team working in Downtown Las Vegas, where that market is younger, more vibrant and amiable for entrepreneurial decisions. Fingerprints of other Palms and N9NE executives can be found in nearly every Strip property.

Today, Las Vegas is firmly a home for innovation in hospitality, with many interesting spots emerging in unexpected corners, far away from the tourist corridor; Morton’s latest restaurant is scheduled to open in Southern Highlands, an area that was raw desert when The Drink opened 30 years ago. Perhaps the greatest legacy of The N9NE group and Palms was not the memories created, or changes in programming, but bringing a generation of hospitality entrepreneurs to the city, many of whom now call it home.

It is this that has continued to allow Las Vegas to grow, and remain such an interesting – and indeed cool – place to be.

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