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Gaming Guru

Jeff Simpson

Bellagio Hopes Tower Brings Power

3 December 2003

LAS VEGAS -- The 928-room tower now under construction at the Bellagio should help the Strip property cement its position as one of the top draws for premium players in Las Vegas, the megaresort's hotel boss said recently.

The scheduled December 2004 completion date for the $375 million Spa Tower project is just in time for a revitalized Bellagio to face an expected challenge for Strip supremacy from Steve Wynn's $2 billion Wynn Las Vegas, set to open in April 2005.

Randy Morton, a 20-year Four Seasons executive lured to Bellagio three years ago as hotel operations vice president, doesn't mention Wynn by name, but the Bellagio boss's goal clashes directly with Wynn's.

"Our goal is to stay on top forever," Morton said. "We want to be the top casino resort in the world and that's something we're working on every day."

Dave Ehlers of Las Vegas Investment Advisors said that in pure return-on-invested-capital terms Bellagio ranks behind a number of casinos in less competitive, relatively underserved markets.

"But by Las Vegas standards, Bellagio is very good," Ehlers said. "And, as a single property, Bellagio is unquestionably considered the best by premium players."

Since it opened in October 1998, Bellagio's bosses have relocated and changed the focus of the Gallery of Fine Art, rethemed one nightclub and opened another, added a wedding venue and introduced new seasonal displays in the conservatory and botanical gardens.

The changes have helped make Bellagio the biggest AAA Five Diamond resort, with two Five Diamond restaurants under its roof, Picasso and Le Cirque.

Still, Morton said employee training and attitude are key when it comes to providing top-flight customer service.

"It's not the size or the number of rooms," Morton said. "It's about servicing the customer one at a time."

Its new tower project will continue to remake the Strip resort to help it retain its top status.

Bellagio's hotel rooms and suites are getting a makeover, and Morton said the existing 3,005 rooms will be the same as the new rooms and suites in the Spa Tower, with marble entries, flat-panel televisions, high-tech minibars and automatic drapes.

The tower addition will also include a new restaurant, Sensi, which will have a kitchen in the middle of diners seated around its edge. Morton expects the casually elegant restaurant, which will serve lunch and dinner, to have prices similar to those at Olives.

The spa and salon expansion will be a big plus for Bellagio, Morton said, noting that resort guests have developed a much stronger interest in spa treatments and services over the past five years.

"Now we'll have a real destination spa, a place that can stand on its own as a spa rather than as a hotel spa," Morton said.

The spa will have a much larger space, new treatment rooms and a bigger and better salon, he said.

The pool deck is also being expanded and 28 new cabanas are being added to ensure Bellagio's pool can easily accommodate guests from the new rooms.

The gallery will host an exhibit of works by Claude Monet, and Morton said he expects it to drive additional business by big-spending free-and-independent travelers, the coveted market segment that keeps weekend room rates high.

The new hotel rooms and suites, the Sensi restaurant and the spa expansion are all expected to contribute to Bellagio's status as one of the few casino properties that generates more cash from nongaming offerings than from gaming.

"Gaming's less than 50 percent because of the enormous success of our restaurants and our entertainment," Morton said.

Bellagio was the biggest cash-flow producer among American non-tribal casinos last year, generating $336.3 million.

MGM Mirage executives have proven savvy when it comes to reinvesting in their existing properties, and Ehlers expects Bellagio's Spa Tower to be another good investment.

"They have strong demand for their room product, and they'll fill the rooms," he said.

The new tower will also help MGM Mirage reduce its overhead costs at the resort, pulling the average cost per room down to $495,000, a 7 percent cut from the original $533,000 per room cost.

Morton said he expects room rates will remain high after the new rooms add to the property's supply.

Average third-quarter room rates at the Bellagio were $219; occupancy was 96.7 percent. The refurbishing of rooms reduced room supply by about 9 percent, artificially increasing rates a bit, Morton said.

The third-quarter numbers compared with rates of $206 and occupancy of 93.1 percent during 2002's third quarter.