It is said that 14%-20% of new restaurants go out of business in their first year and as many as 60% go under within three years. Would you say that restaurants opening in Vegas casinos or adjacent to them face better or worse odds?
Your numbers are in the ballpark, but they depend on what you mean by "go out of business."
The old claim is that "90% of restaurants fail in their first year," but that's been thoroughly debunked. Deeper analysis has shown that the picture is much less dire, but still challenging for sure.
Here's what we found in general. In the first year, 17%-25% close. Within three years, that range jumps to 50%-60% cumulative. And in five years, the upper end rises to 65%.
Restaurants don't necessarily lost money and go bankrupt in those times. Many do, of course, but some close when the owners retire or divorce. Others are sold to new owners, are converted into another concept, or are absorbed into a larger business.
A surprising number of restaurants close for personal reasons, even while remaining economically viable.
In terms of Las Vegas casino restaurants, we'd say it depends on the type of restaurant.
We believe that restaurants inside major hotel-casino have better-than-average odds of surviving. In their favor are: The casino acts as a sort of "anchor tenant" that attracts upwards of millions of visitors every year; hotels spend enormous sums marketing the property; comps play a crucial role in catering to first-time and repeat business; convention traffic creates a steady weekday customer base; and ordinary guests often don't want to leave the resort to eat.
All that said, survival isn't guaranteed. Casino management can be ruthless about replacing concepts that don't perform. Thus, the restaurant may "fail" simply because it doesn't meet the casino's expectations, rather than sustain a knock-out blow financially.
On the other hand, a casino may be perfectly happy if a restaurant earns only modest profits. It also helps keep guests on property, encourages longer visits, supports hotel occupancy, can cater to convention attendees, and enhance the property's image. To be sure, we occasionally see restaurants survive in casinos that might not survive as standalone businesses.
A subset of that category is the celebrity-chef restaurant. These probably have better odds than independent casino restaurants. After all, they begin with established brands and built-in publicity, experienced management, sophisticated purchasing, and strong reservation systems. The flip side is that their costs are enormous—rent, labor, décor, licensing fees, and expectations are all higher. (A parenthetical is that scandals involving the celebrity chef have caused more than one Vegas casino restaurant to close in disgrace.)
Independent restaurants near the Strip no doubt face some of the toughest odds. They're competing against all of the above: a critical mass of casino restaurants, celebrity chefs, casino marketing budgets, comped patrons, casino marketing budgets, and out-of-towners who often don't know they exist plus locals who don't want to tangle with Strip-adjacent traffic.
Finally, we have independent restaurants aimed primarily at locals. They too have what we would consider healthier long-term prospects than average. First, neighborhood restaurants don't depend on the ups and downs of tourism. Second, they cater to an urban crowd that goes out to eat more than in other similarly sized cities. Third, they can take advantage of delivery platforms like Uber Eats and Door Dash. And fourth, the longer they survive, the most they can cultivate repeat customers. Naturally, they face a lot of competition, with restaurants opening every day of the year all around the valley, but the cream of a good neighborhood restaurant usually rises to the top of the heap.
We should note that the casino's philosophy about dining has changed dramatically over the decades. When we first got here in the 1980s, many if not most casino restaurants were essentially loss leaders designed to keep gamblers happy. In part, they inspired us to launch the Las Vegas Advisor. Today, many restaurants are expected to be profit centers in their own right, with some generating more revenue per square foot than parts of the casino floor. It's one of the clearest illustrations of Las Vegas's evolution from a gambling town that served food into a full-fledged hospitality and entertainment destination that happens to have casinos.
