Parties are now at the center of Las Vegas and Wynn Las Vegas is the biggest game in town. Image: Wynn Resorts.
The casino floor used to be the center of attention in Las Vegas. Cheap hotel rooms and buffets were just a way to get people onto the casino floor and the formula worked for decades.
But in the last decade Las Vegas has transitioned from a gambling town to an entertainment mecca that happens to have gambling. The past few months have shown investors and visitors that the DJs whose faces grace the side of casinos are now more important than the pit bosses who run the casino.
The decline of gaming in Las Vegas Las Vegas peaked as a gambling town long ago, something that isn't advertised by the gaming industry. In the past 12 months, gaming revenue is down 7.3% from it annual peak in 2007 and there's no indication that gambling is going to grow significantly in the future.
Data from Nevada Gaming Control Board Gaming Commission. Image by author.
The results in recent months have even been bad because Asian gamblers who play baccarat -- the most lucrative game in Las Vegas -- have slowed their gambling just as they've done in Asia.
It may seem like the loss of gaming revenue would be a death knell for casinos, but innovative companies have found ways to adapt to a changing market. Today, young travelers to Las Vegas are willing to spend money like their parents or grandparents did, but they don't want to gamble -- they want to party.
DJs begin their reign in Las Vegas To be successful in Las Vegas today you have to be able to attract non-gaming revenue. That means extravagant shows, beautiful restaurants, and clubs with big name DJs. And there's big money in the party scene. Late last year I estimated that Wynn Resorts and MGM Resorts get over 10% of total revenue from day and nightclubs.
You can see below that food, beverage, and entertainment has become a huge revenue driver for casinos. In Wynn's case, it's the driver of profits and as the most profitable resort in Las Vegas Wynn Las Vegas knows something about making money.
Source: Company earnings releases.
This brings us to the DJ, who has become the center of entertainment in Las Vegas and the numbers above show that they're extremely valuable to casinos. With $100 million or more coming in from the high end nightclubs, casinos have raced to sign the biggest names in EDM. Calvin Harris got $400,000 per show to play at Hakkasan, Tiesto is making $250,000 per night, and deadmau5 has commanded as much as $425,000.
The reason they can command such high prices comes down to the value they bring into Las Vegas resorts. Sure, Hakkasan in MGM Grand may make $100 million in revenue per year, but those guests also pay for hotel rooms, food, and may even gamble a little. That makes spending tens of millions of dollars on DJs every year worthwhile.
How long can the party last? If there's one thing we know about Las Vegas it's that the city will reinvent itself sometime in the future. The EDM craze won't last forever, just like ultra lounges didn't last, and themed resorts eventually went out of style.
For now, having a great DJ on the billboard in front of your casino is a sure fire way to boost revenue, even if the cost is extremely high. It's big business while the party lasts.
The article How DJs Became the Hottest Draw in Las Vegas originally appeared on Fool.com.
Travis Hoium owns shares of Wynn Resorts, Limited. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.