The growing importance of bar tabs and nightlife was on display one recent Tuesday evening at Drai’s Nightclub atop the Cromwell hotel, a newly refurbished Las Vegas Strip property owned by Caesars.
Dance music was thumping. Women in bikinis and sailor caps gyrated on platforms, while young people played volleyball in the pool. At the center of it all was Victor Drai, a 67-year-old, Moroccan-born bar owner who has moved literally from the basement to the penthouse in Sin City’s burgeoning nightclub business.
His club, opened in May, stands to gross as much as $60 million in
its first year of operation, with a profit margin of 50 percent, according to his business partner, Michael Gruber. The money is so good that Caesars, which is struggling to remain solvent, may refinance a $185 million loan taken out two years ago to remodel the hotel and build the club, he said.
Drai’s ascent, and the hotel’s good fortunes, show the growing importance of sales from places other than slot machines and blackjack tables in Las Vegas, where food and beverage sales, at $3.6 billion, exceeded the $2.9 billion taken in by slot machines last year, according to the University of Nevada’s Center for Gaming Research. Las Vegas visitors, poised to reach a record 40 million-plus this year, are looking for more social, and less sedentary, entertainment.
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Mitch Garber, chief executive officer of Caesars Growth Partners, the Caesars unit that owns the Cromwell, declined to comment on the nightclub’s profits or a refinancing. Garber sang Drai’s praises though, calling him “an awesome club operator -- he’s just got this great gift for creating a vibe and a mood.”Caesars, the largest U.S. owner of casinos, is struggling to cope with a slow recovery in gambling spending nationally and the debt it took on in a 2008 leveraged buyout. The company, which is in restructuring talks with lenders, is scheduled to report earnings today.
Vegas clubs make money several ways, starting with the cover charges, typically $35 for men and $25 for women. There’s often a liquor mandate, compelling a customer who wants to reserve a table or cabana to buy anywhere from several hundred to several thousand dollars of booze -- deposits required.
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Spraying Champagne
At Drai’s, a 10-seat booth just off the dance floor on a Saturday night has a $4,000 minimum for food and beverage spending. A 750 milliliter bottle of Belvedere vodka, about $30 in a store, is $595. Packages of Champagne intended for spraying, not drinking, begin at $2,000 for 10 bottles. One customer, Drai’s staffers won’t say who, bought 700 bottles on a visit in September.Drai doesn’t follow the lead of clubs such as MGM Resorts International (MGM)’s Hakkasan and Wynn Resorts Ltd. (WYNN)’s Surrender that hire superstar DJs -- Tiesto and Calvin Harris were recently in town -- to draw crowds. He’s been booking mostly lesser-knowns. Instead, it’s the setting that’s supposed to be the attraction, including views of the Bellagio’s fountains and the Paris hotel’s faux Eiffel Tower down the street
“It’s the aesthetics,” Drai said. “If you build a beautiful place, people find it.”
Plunge Pools
His club, which cost $75 million, has a dance floor that opens up to a swimming pool, which is lined with 35-foot palm trees. Some of the 25 private cabanas have plunge pools and their own bathrooms. Drai spent $5 million on the lighting and sound systems. He leases the space from the Cromwell in exchange for a cut of profit.A key to Drai’s success is his 35-member team of club hosts, said Marco Benvenuti, co-founder of Duetto, a company that helps casinos monitor non-gambling spending and crafts promotions for customers. These employees work waiters, bellmen, cab drivers, social media and other sources to find club-goers willing to spend big.
“They have the right connections and channels,” Benvenuti said. “They just know all the right places to tap.”
Hosts even chat up store clerks, said Ryan Craig, a former Wynn Resorts employee who manages Drai’s club. The reward for referrals is free admission and drinks.
The battle to get the best employees has gotten so fierce that Wynn Resorts founder Steve Wynn called Drai earlier this year and told him not come by any of his properties because he didn’t want him poaching his staff, according to Drai, who said he told his people not to let Wynn in his place. Wynn, through a spokesman, declined to comment.
Afterhours Lounge
Drai, who is known locally as the “King of Clubs,” has been a fixture in the bar scene since opening his first in 1999 in the basement of the Barbary Coast -- in the building that’s now the Cromwell.He joined Wynn Resorts in 2007, parting ways with the company over a management dispute. Tryst and XS, venues Drai created and ran for Wynn, are still popular.
Drai’s After Hours, which operated for a while inside Bally’s, is back in the Cromwell basement. People can start at the rooftop pool party during the day, hit the adjacent disco at night and go downstairs at 1 a.m. to After Hours, where, if they have the stamina, they could stay until 10 a.m.
In keeping with the recent Tuesday night’s Yacht Club theme, Dan Kish, 26, and Jaron Washington, 25, swimming instructors from Chicago, wore board shorts and oxford shirts. Washington said he’d spend “three digits,” sharing bottle service costs with friends.
Sperrys, Fairies
“All I want to do is wear my Sperrys and talk to some fairies,” he said, referring to his boat shoes and the women he was soon chatting up.Just how long this party can last is anyone’s guess.
“The club business is a growing segment on the Strip but is also very competitive,” said Alex Bumazhny, an analyst at Fitch Ratings in New York. “It is only good until the next guy builds something bigger.”
Drai, said he’s just getting started, predicting he’ll double his business in a few years, making his perhaps the top-grossing bar in the nation.
“I could do $120 million,” he said.
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