Two Way Hard Three | Las Vegas Casino & Design Blog

August 6, 2010

Open Topic Discussion - August, 2010

Posted by detroit1051

Morgans Hotel Group reported that Hard Rock Hotel in Vegas saw earnings decline by 35% in the 2nd Quarter. The link to the Las Vegas Sun article is below, but the earnings reminded me of a nagging question I have on the Hard Rock brand. Does the brand still have the importance it did in the late 20th Century? Hard Rock's website says:
"Since its inception, Hard Rock has remained extraordinarily faithful to its original intentions. Its rock 'n roll sensibility - an HRC birthright - remains at the very center of all Hard Rock restaurants and all expansion efforts undertaken by Hard Rock International."

As we enter the second decade of the 21st Century, how many people, especially those younger than Baby Boomers, are still passionately interested in rock 'n roll and the memorabilia associated with it?

Hard Rock International is owned by the Seminole Tribe of Florida and operates the only two full casinos in the state, in Hollywood and Tampa. They are both well run resorts, but with limited gaming in Florida, they are on a par with the better locals casinos in Las Vegas.

Ten years from now, will the Hard Rock brand still be relevant? Since many readers here are younger than I, how do you see Hard Rock's future?

Las Vegas Sun on Hard Rock's Q2 Earnings

Hard Rock's History on Corporate Website

Seminole Hard Rock Hollywood


Read archived comments (16 so far)
August 6, 2010 9:41 AM Posted by parchedearth

The HRH "brand" hasn't changed and if it has lost any luster it is because a number of other properties have retargeted to an overlapping demographic (e.g. Palms, Rio, Luxor, MGM, Mirage). HRH's biggest problem is its location. Personally, I like the HRH and the new additions are great. I view the HRH as a standalone property divorced from the Seminole casinos, Macau hotel, and restaurants (although the new strip location seems like a match). Unfortunately I don't think they will ever get out from under the construction debt, so their long-term future looks bleak to me (see Rio back in Marnell days).

August 6, 2010 9:52 AM Posted by Nick Lembesis

I occasionally walk through the Hard Rock restaurant attached to the Taj Mahal Casino in AC. The restaurant is usually empty. The only person I've seen looking at the souvenirs was a man in his 60's.

You don't see too many people wearing Hard Rock t-shirts anymore.

August 6, 2010 11:55 AM Posted by DavidF

Detroit you hit the nail on the head in that the main problem is the Hard Rock has aged along with its original audience and while it’s laudable to remain faithful to your core concepts – what was fashionable yesterday is not going to appeal to today’s generation for at least 20 years, when it will then be ‘retro’ :-)

The other problem is dilution of both the brand and the theme restaurant concept. In its heyday when people did get the t-shirt (or jacket in my instance) it was a destination place because there were so few and it was so different. Right now there are 150 HRC open/scheduled to open in 54 countries, with a further 49 that have closed.

Yes the HRH was the “party” hotel/casino with Rehab etc. but would say that was in spite of the Brand, not because of it, after all you hardly associate Wynn/MGM with today’s Party Generation and look how well the Day/Night clubs in their Casinos are doing.

August 6, 2010 2:40 PM Posted by mike_ch

The Hard Rock restaurant chain is aging, although in better shape than Planet Hollywood is. The hotel brand is slowly wearing that image off, though, I see a lot less of the old Hard Rock logo, and a lot more "HRH" in the past two years.

People complain about HRH's location but aside from the rather low-rent quality of the surrounding neighbourhood I do think there's a little bit of genius in it.

They're close enough to the Strip that the kind of people who would want to go to their hotel (parties) won't find it too difficult to be worth it. They're far away enough from the Strip that people who aren't interested in what they offer (family tourists, just people wandering around from casino to casino like yours truly) will largely avoid it. And they're right smack-dab from UNLV, which makes them a ground zero (or pretty close to it) for "whoops forgot to card" alcoholism. Now I'm not saying that's a policy there of that, but I'm sure it's happened quite a bit and made them some pretty good money. That said, I'm sure most students gravitate to other bars in the area, but hey, there it is. It didn't dawn on me until last November how close the HRH is to the pool.

I mean, just speaking honestly from having met a student or two at the university. It may be a college campus, but there's quite a few teenagers there who have had more beers than I do. :b

August 6, 2010 2:41 PM Posted by mike_ch

I wrote "close to the pool" when I intended to write "close to the school."

Pardon me while I hit my head with something hard.

August 6, 2010 5:40 PM Posted by mike_ch

Here's a question I'm posing openly to the assembled crowd:

Does the fact that the Cosmo is the ownership's sole casino really mean anything to you?

I ask because over on VegasTripping, there seems to be a lot of gushing about Cosmopolitan. And at first I thought it was the sorta "future designed by hipsters" motif that the place is sporting, but everyone keeps happily talking about how great it is that it is "independent." Whatever that is supposed to mean. The place is being run by the bank that foreclosed on it.

To me, the "independent" owners on the Strip are people like Phil Ruffin, who have no shareholders or board to answer to. There's only a few of those left on the Strip, and most of them don't have very fancy digs to speak of. Honestly, I find the idea of a casino owned by Deutsche Bank, granted a gaming license in a rather casual fashion by the state due to the need to get the place running, to be rather amusing and perhaps one of the more embarrassing elements of the whole Cosmo story.

August 7, 2010 6:03 AM Posted by detroit1051

Mike_ch, I'm one of those gushing about Cosmopolitan. The reasons are rather nebulous and somewhat based on hope. We won't know whether I'm right until it opens and operates for a while.

Unlike Aria and CC, Cosmo hasn't hidden behind corporate-speak press releases even though it is, as you noted, owned by Deutsche Bank. To its credit, DB is staying in the shadows while the face of Cosmo is the CEO, John Unwin, formerly of Caesars Palace. He and his staff have been very smart in using social media to generate buzz about the place. Frequent Twitter tweets are a stroke of marketing genius, imo. The fact that Unwin tweets photos of his dogs, grilling hamburgers, fishing trips to Alaska, etc, makes one believe that he is his own man, independently controlling Cosmo's development leading up to the December opening. This image of independence is reinforced by the many seemingly off-topic tweets from his staff about art and culture. They all enhance the image that this place is going to be something new, exciting and different. Altrhough there's only one Steve Wynn, Cosmo is exhibiting some of the same knack of generating interest. This approach was totally lacking in the months leading up to Aria and CC. I can't imagine Jim Murren or MGM Resorts Int'l management being as visible and down to earth as Cosmo's team has been.

The real test will be in 2011. Can Cosmo live up to the hype? Can Deutsche Bank keep its mitts off running the place? Will the reality be as good as the image I have in my head right now? Tweets are well and good, but employees and the customer service they provide will make or break the place. Finally, how will Cosmo balance the interests of young clubbers and older guests wanting an upscale, contemporary resort? They've got me hooked. That's why I've got flight reservations for December, first time in four years.

August 7, 2010 6:16 AM Posted by detroit1051

A quick reading of my examples of tweet photos could lead one to infer that Unwin posted a pic of his dogs grilling hamburgers, although that would have been a guaranteed attention grabber.

August 7, 2010 8:21 AM Posted by parchedearth

Actually the Cosmo exuberance fits nicely into the topic of the HRH. From a design (and to a lesser extent, ownership) perspective, I view the Cosmo as similar to an on-strip HRH. Young, hip, upscale clientele with a little independent streak. None of us know what Cosmo will actually be like, but as of now I like what they have shown us. It is very surprising that the design has remained fresh given the number of people who have had a chance to scale it down.

The positive buzz stems from the fact that it is independent (which can alternatively be read as not MGM and not Harrah's). This means there is hope we can avoid 6:5, lowered paytables, homogenized design, and poor service. There is a growing frustration with the consolidation and growing homogeneity of the Harrah's and MGM properties. I would like to see a lot more (design) diversity between properties.

Hopefully, DB will be a silent owner like DLJ at the HRH. Of course, the big downside to independence is the lack of a feeder network to ensure occupancy. This is where a partnership with Hilton, Hyatt, or Starwoods would have been nice. My guess is that DB's plan is to get the doors open and then sell as soon as possible. I suspect they have one or two buyers already lined up.

August 7, 2010 3:33 PM Posted by Jeff in OKC

I hope this come out right, because I certainly don't mean for it to be insulting to either of the Murrens. Is it possible that how Jim Murren conducts himself as CEO is affected, or even compromised, by his being the second smartest person in his own home. I think Heather Murren is one of the smartest people in Nevada and, in the few interviews I've seen with her, she has an amazing ability to be direct without being offensive. I think she is as smart as anyone in the casino business and I wonder if that has an effect on how Jim Murren makes decisions.

August 7, 2010 7:34 PM Posted by howardpark

I can't remember the last time I saw anyone wearing a Hard Rock T-shirt but I see Jim Morrison, John Lennon, Jimi Hendrix and the Grateful Dead all the time. Personally, I'd like to see occasional live music at the Hard Rock and not at the Joint. With all the extra space they have, why not a live band? Why not some hard rock, rap or hip-hop at the Hard Rock?

August 7, 2010 9:59 PM Posted by briguyx

While personally I think people used to trust the Hard Rock Cafe for the food even more than then ambiance, that time is gone. It's a lot easier to find a chain restaurant in a big city now than it was 20 years ago.

In Vegas, the Hard Rock's real problem is so many other places are selling what they are. It's just not as special in Vegas, while I know in San Diego the HRH is the hottest place around.

Also I wanted to point out the wonderful job the Seminole tribe did with the HRH in Ft. Lauderdale. It's far away from the beach, but they surrounded the hotel with a wonderful pedestrian mall with great shops and restaurants that's worth the trip.

August 10, 2010 1:13 PM Posted by jinx

Good topics, on the Hard Rock, I definitely think the brand could be in trouble from a casino perspective, they've managed to water down the brand a bit, albeit by different companies which certainly removes some of the uniqueness of the Vegas property that they had going for it for so long. I do think that property itself in Vegas will push along for awhile if not by the current owners then by new ones, as indicated above it has a lot of positives to the location and size, that can be utilized.

On Cosmo, I'm in the same boat as Mike_ch, I don't get the hype beyond a design standpoint, and since I'm not a huge design guy it's lost on me a bit as well. I like that they aren't one of the conglomerates but based on current ownership (aren't they still looking for an operator of the casino), I have little confidence that they are going to make a run of this resort. Especially considering their target audience is high end, which is fine if you aren't stuck on the LV strip with high end properties that are well versed in the game. This assumes they are shooting for high end that's not the high end gamblers. While I know casino revenues are more on par with amenities over the last few years, let's not forget that it's still close to 50/50, I have no confidence that Cosmo is going to be able to pull any/many high end players away from Wynn, LVS, Palms, MGM, or HR and if they do I'm not sure they'll be able to keep them.

All it takes is a failure to attract the players they want, or the crowd they want to pay full price, or screwing up their gaming offers (i.e Westin Causarina's disaster promotions, or GN under T&T) and you could be talking about a serious collapse. Good luck to them, but if I'm predicting, Cosmo starts out with all the high end hype, gets their lunch handed to them, starts moving their price point down and if they are lucky hold onto the property while they adjust to that base and write it off.

August 11, 2010 10:56 AM Posted by Phil

Something for you old schoolers out there. In reference to the discussion of the need for fresh, independent owners in Vegas, we could use a little more like the guy shown in this video. A brief video describing a particular owner of Caesars Palace and how his leadership of it, changed Las Vegas.

August 11, 2010 11:04 AM Posted by David McKee

HRH is not just lumbered w. construction costs but was bought at a premium price ($760M). Morgans didn't have the deep pockets to pay off the deal but didn't go looking for JV partners until they'd already bought, which left them in a poor bargaining position.
Ed Scheetz said they'd improve EBITDA by no longer having to pay salaries to Peter Morton and his wastrel son -- then MHGC went and paid itself "management fees," and there went the ostensible cash-flow improvement. Although MHGC/DLJ have the rights to franchising the Hard Rock brand from the Mississippi River to California, they've only closed two such deals, IIRC.

August 11, 2010 1:56 PM Posted by Amy Sites

I really enjoyed this article as well as all the comments, people have posted really good points here.

What I am concerned with as are many I am sure in Vegas, when I was dealing with prospective buyers for casino purchases in Vegas back in 2008 it was a scary situation then, with the decline of revenue and the overall real estate market going in the dumps but I wonder, since I have been out of the loop, if it has remained the same over the past couple of years or is the market getting worse out there?

I am a real estate agent in the east and since the market declined have not kept up to speed as I was on the strip as a whole and I am not sure you can blame the Hard Rock's decline in numbers solely on it losing it's appeal to people, I think just the opposite, I think the Hard Rock is a great brand and the decline does not mean Hard Rock Cafe is on its way out, I think the economy has everything to do with what is happening every where.

Spending more of my time training agents with great courses on how to land the listing etc., I have had my nose in the books so to speak and hope the market is at least stabilizing a bit in Vegas, but I also fear the worst is far from over.