Is innovation a necessary ingredient for success? Nope. An innovative company might succeed beyond anyone's expectation, but for every true pioneer, there are dozens who successfully draft behind them, making evolutionary steps that build upon revolutionary ones.
The Cosmopolitan of Las Vegas is a case in point. Its innovations provided a rare success story in that town during the dark years that followed the economic downturn of 2008, and there are indicators that replication of its contrarian strategy might help in Vegas' continuing recovery.
Paradoxically, prior to its opening, it seemed that the Cosmopolitan was born under a bad sign. Even before the recession, it faced a trademark infringement lawsuit in 2008 brought by Cosmopolitan magazine owner Hearst Corp. Later that year, in midconstruction, it was foreclosed upon by Deutsche Bank and seemed destined to join the ill-fated (and never completed) Echelon Place or end up in limbo and lawsuits like the (never completed) Harmon.
The bank did see it through to completion, but when it opened in December 2010, Las Vegas was awash in new inventory and excess capacity. The original plan had called for about three-quarters of the property to be sold as condos, but with the housing market dead, the residential units -- far overbuilt by hotel standards -- became yet additional hotel suites.
To complete the picture, it was an independent product in a city dominated by a handful of big players who had significant advantages of scale (Caesars Entertainment has about 40 properties globally, MGM Resorts International more than 20). And the Cosmopolitan had a tiny footprint: 8.5 acres in a town where Strip resorts are typically in the range of 100 to 150 acres.
Despite all that -- or with hindsight, perhaps because of all that -- today the Cosmopolitan often outbuzzes the competition. More importantly, according to its CEO, John Unwin, it is at or above the average occupancy among luxury properties and has the highest average daily rates.
Success, of course, is relative: Last year, Las Vegas attracted a record number of visitors, exceeding even 2007 levels, but because 27,000-plus rooms had been added since then, its occupancy rates are 6% lower, and room tax collection, an indicator of collective rates, is down 10% despite the additional inventory.
To say the past five years in Vegas have been difficult doesn't begin to address the pain that resort owners have felt. Still, as former Continental Airlines CEO Gordon Bethune once observed, a race with three-legged horses isn't pretty to watch, but one is going to win. And by many measures, the Cosmopolitan has performed exceedingly well.
So the question arises: Are the innovations behind the Cosmopolitan's success exportable to other properties?
On the surface, it seems unlikely that competitors could adopt the Cosmopolitan's uber strategy, which Unwin makes clear is designed to set itself in opposition to existing resort profiles.
For example, its multiproperty competitors tend to ask their celebrity chefs to come up with variant restaurant concepts for each new property opened, while the Cosmopolitan made sure that none of its chefs has another presence in Las Vegas.
Likewise, it searched the nation for boutiques without existing outlets in town so they could contribute something new to the shopping scene.
The property made a point to be different, but now that development capital is once again flowing into Las Vegas, one sees activity from competitors that could well have been encouraged by the Cosmopolitan's "be different" attitude. Its lifestyle hotel ambience (despite its 3,000 rooms) likely instilled confidence at Caesars Entertainment to go forward with a Nobu Hotel at Caesars Palace and to replace Bill's Gamblin' Hall and Saloon with a Gansevoort (to open early next year).
Similarly, MGM Resorts must feel more confident in its decision to put a Delano within Mandalay Bay and were likely heartened by the mighty success of Cosmopolitan's Marquee nightclub when it was developing Hakkasan and Light.
Although the Gansevoort and Delano are proven concepts, and Nobu has great brand recognition, they have much more in common with the Cosmopolitan than with other Caesars or MGM properties.
If the past is a predictor of the future, lifestyle hotels will begin to proliferate in Las Vegas until they, like destination-themed resorts, become commonplace.
And then another entrepreneur, inspired by circumstances or wit, will write the opening lines of Las Vegas' next chapter.
Email Arnie Weissmann at [email protected] and follow him on Twitter @awtravelweekly.
Correction: Strip resorts are typically in the range of 100 to 150 acres.