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Are Young Night Clubbers worth more to Las Vegas than Casino Gamblers?

Caesars Entertainment Corp. (formerly Harrah’s Entertainment 1995-2010) is the most recognizable brand in the casino gambling world. With over three dozen properties throughout the United States and 14 more in international locations, Caesars controls a substantial portion of the worldwide gambling industry, catering to the whims of slots lovers and blackjack fans all over the globe. In the company’s home base of Las Vegas, Nevada, however, Caesars is learning that the gambling business may no longer be as productive as the nightclub scene.

The Center for Gaming Research at the University of Nevada published findings from last year that showed Las Vegas’ the food and beverage industry brought in $3.6 billion in 2013, while slot machines generated just $2.9 billion. The case was made that today’s Strip tourists, especially the younger crowd, are more inclined to visit restaurants and nightclubs, spending the majority of their dollars on fine foods and expensive alcoholic beverages.

It’s been projected that over 40 million tourists will pour into Las Vegas before this year is over. Analyst for the city’s Union Gaming Group, Robert Shore said, “The market is becoming younger, increasingly international, more affluent, and spending more on food and drink. These are clearly not slots players.”

This new trend could actually bode well for Caesars Entertainment, which is currently $24 billion in debt, but recently acquired a new business on the Las Vegas Strip. Caesars is the proud new owner of Drai’s Nightclub, a very popular bar located atop the Cromwell Hotel. After an affluent refurbishment of the hotel, Victor Drai leased the top of the hotel from Caesars in exchange for a percentage of the profits. The doors opened in May and is already expected to bring in as much as $60 million in its first year, 50% of that being sheer profit.

While casinos rely almost solely on the house edge of their slots, blackjack tables and other gambling amusements to bring in money, there are many more avenues for generating revenue at a nightclub. The cover charge alone for a Las Vegas nightclub can be steep, with $35 for men, $25 for women being on the low end of the average. Patrons who come in groups, such as bachelor/bachelorette parties, generally want a table, which requires a reservation for food and bottle service that can run anywhere from a few hundred to a few thousand dollars with a deposit up front. Single drinks often start at $15 for basic mixes, more for specialties, and a bottle of good vodka that might cost $30 at the liquor store down the street will run around $600 at a Vegas club.

Drai’s has been packed with visitors this year. Even on a Tuesday the club is teeming with customers, playing volleyball in the pool and filling the dance floor long into the night. To reserve a 10-seat table on a Saturday night, there is a $4,000 minimum food and beverage purchase required, and no lack of interested parties to fill those seats.

Caesar’s couldn’t be more pleased with the production as it could easily cover the company’s $185 million loan. Two years ago, the casino corporation received financing to revamp the Cromwell and build the new nightclub at its peak. The fact that Caesars is so far in debt to begin with shows just how difficult it can be to pay back these exorbitant loans in such a short matter of time, as looks to be the case with Drai’s.

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