Why do casinos have shops? After all, every dollar that's spent buying stuff is money that's not spent in the casino. Prompted by a recently-announced closure, I share a few thoughts about what casino shops should do for the rest of the operation...after the jump.
Although you'll find some "experts" who will say that casino retail is a recent phenomenon, casinos and shopping go back a long way. The El Rancho Vegas, the first Strip resort, had a few small shops, including a men's and women's clothes stores and the House of Enchantment gift shop. So, going back to the beginning, if you wanted to buy stuff while you were on vacation, you could do so in the casino.
That makes a lot of sense because people will often bring less with them on vacation than they need, and you don't want them spending hours away from the tables while they tromp around town. So most casinos had at least small retail selections.
As casinos got larger in the 1960s and 1970s, their retail component got larger as well. But it wasn't until 1992, under the direction of Terry Lanni, that a Strip casino went into retail in a big way. The Forum Shops were more than the usual men's store/women's store/jewelry store/sundries store assortment: they were a complete shopping mall and a destination in their own right.
By way of comparison, let's look at Bally's Las Vegas, which opened in 1973 as the MGM Grand and was the final major casino hotel (I'm excepting smaller projects like the Holiday, Barbary Coast, Treasury/San Remo/Hooters here) of the pre-Mirage era. I'd say Bally's is representative of the older model for casino shopping, and it pushes that model to its limits. There's a nice range of shops in that semi-subterranean corridor of "Avenue Shoppes." You've got a magnet store, a Harley Davidson store, shoe store, Marshall Rousso (the ubiquitous casino women's store), leather store, Bijoux Terner (luxury at $10) accessories store, and a nut shop. Because you can never know when you're going to transition from a hot session at the craps table to a yen for some hot honey-roasted peanuts.
You wouldn't mind browsing those shops for a few minutes while waiting for someone to finish gambling (although after a few hours you would), and if you urgently needed a new handbag or pair of shoes, you'd be pretty grateful for them. But nobody, unless they are a completely depraved shopaholic, would make a trip to Bally's Las Vegas for the shopping.
Contrast that with the Forum Shops. More than 160 stores and boutiques along with more than a dozen restaurants. While many of the shops there are ones you can find in virtually any mall in the United States (Abercrombie & Fitch, Gap, The Walking Company), others are harder to find (Ted Baker, James Perse, Judith Lieber). But having that concentration of shopping in one place makes the Forum Shops a destination--it's easy to spend a few hours there.
That boosts the retail component of the casino from an amenity to an attraction. And while not every casino to open since 1992 has focused on retail as an attraction, most have given it some thought. Even when there aren't dozens of shops (Bellagio, Wynn), those shops are chosen with care and designed to add something to the property.
We've all heard that Caesars Palace is, by sales per square foot, the most profitable mall in the country. But it's hard to get accurate statistics that measure retail's financial impact on casinos. The Gaming Control Board lumps retail and entertainment revenues into the "other" category. On the Strip, "other" has risen, since 1999, from 13% to nearly 16% of all casino revenue.
Retail's place in the casino comes most sharply into focus when it fails. In a recent Review-Journal story, we learned that Droog, the Cosmopolitan's oddball furniture store, is closing soon.
Droog (which is Russian for friend, if that makes any sense) sells wildly impractical furniture like a chair you can make yourself by banging out a metal box. It's obscenely expensive (over $7k for a chair made out of rags) and not exactly the kind of thing that you'd expect people to be loading up on as they amble from Bellagio to New York-New York.
If the store was paying its rent, it really didn't matter what they were selling. The effect on the Cosmopolitan's bottom line would be the same. Or would it? As Terry Lanni demonstrated with the Forum Shops, retail can be an attraction in and of itself. You could argue that funky, overpriced, impractical furniture fits in with the hipster art beat vibe the property was shooting for, but, unlike the Art-o-Mat machines, this was both inaccessible and out of reach for 99% of the people who would visit the property, and the one percent who might be able to afford a bookcase that couldn't hold books wouldn't be walking by outside. So outside of filling space with stuff that was mildly amusing to look at, it didn't do anything outside of generate rental income for the property.
It makes sense, when margins are lower across the industry, retail is going to be asked to do more than just pay the rent. I'd say the lack of destination shopping that's within the reach of the average Vegas visitor is also why Crystals doesn't do much for Aria.
What's Droog going to be replaced with? I've already put a few chips on "gourmet popcorn store" (those things are turning up everywhere here), but I could also see it being an Apple Store. Even though they have outlets at the Forum Shops and Town Square, that's a great Strip-front location (provided you open it up), and there's nothing antithetical about iStuff and the curious class that the Cosmopolitan's shooting for. Except for charging $15 a day for wifi, but I digress.