In the pre-Mirage era, a casino-hotel that relied upon room revenue to make ends meet would have quickly gone out of business. Back then, rooms were "loss leaders," priced cheaply in order to get people in the doors and onto the casino floor. At the turn of the 21st century, when Starwood Resorts (briefly) owned Caesars Palace and the Desert Inn, it drew attention for trying to make profit centers of its rooms – but it was a trend that was well underway. Already, Sheldon Adelson had been using the Venetian’s promixity to the Sands Expo Center, as well as the suite-like quality of his rooms themselves, to sustain prices that were often in the $269/night range.
But while the high-cost, resort-like Vegas casinos that Steve Wynn pioneered in 1989 with The Mirage, drove up room rates, they also cost a fortune to run. Many of them are now the property of MGM Resorts International. In 2010, rooms represented $1.4 billion of the company’s $6.7 billion in revenue. Last year, it was $1.55 billion (or 20%) out of $7.85 billion. Company expenses were $7.1 billion in 2010 and $3.9 billion in 2011, so room revenues wouldn’t come close to balancing the ledger. By comparison, gambling revenues in those two years were $2.5 billion and $4 billion, respectively.
An unintentional (?) exception to the casino-is-king rule is the $4 billion Cosmopolitan of Las Vegas, which only derives about 20% of its revenue from the casino floor, with rooms, restaurants, and nightclubs accounting for the other 80%. It’s also losing money hand over fist, to the point where owner Deutsche Bank wants to de-list the property, sparing it from the quarterly humiliation of having to report all that red.
