Las Vegas, NV, June 30--The Venetian's new 1,013-room Venezia tower, which opened this week, is expected to cut the Strip resort's overhead cost per room by as much as 12 percent, an analyst predicted.
The megaresort rolled out the red carpet for a "very soft opening" of its $275 million addition, with the first guests checking in Thursday.
The new tower should boost business at The Venetian's casino operations while cutting overhead per room.
"Because The Venetian historically has been a convention hotel and secondarily a casino hotel, they've had difficulty getting the casino play from hotel guests to make their gaming operation as efficient as some other operators," Deutsche Bank analyst Andrew Zarnett said.
"If this expansion allows them to generate significant added revenue at very high incremental margins, they'll generate above average returns on investment," he said.
By adding 1,013 suites to its room count, The Venetian will also cut the average cost per room of the resort by an estimated 12 percent and increase cash at the same time.
Hotel operations "are the most efficient department in terms of margin," said Brad Stone, executive vice president of Las Vegas Sands, the parent company of The Venetian, as final work on the new tower was wrapping up.
"When we can amortize 1,000 rooms over the same overhead, we will obviously have a higher return," he said.
The original $1.5 billion price for all of The Venetian's 3,036 suites, its casino and the Grand Canal Shoppes, came to almost $500,000 a room. The $275 million for the added 1,013 suites brings the total cost per unit, including overhead, down to $440,000.
"Obviously, there are some variable costs of room clerks, housekeepers and reservations agents, but fixed costs really don't expand at all," Stone said.
Besides the added suites, the new Venezia hotel tower features a pool deck, The Venetian's first wedding chapel, an concierge-level featuring a private lounge, and a restaurant by Thomas Keller which is scheduled to open later this year.
The Venezia soft opening coincided with the debut of The Venetian Congress Center 150,000-square-foot expansion which included three ballrooms, 64 meeting rooms and three permanent boardrooms.
Zarnett said the convention expansion also is significant since The Venetian "is the strongest player in the convention market because of its size, longevity in the business and its focus. The expansion helps keep The Venetian true to its original business model by focusing on the needs of conventioneers."
The Venetian model calls for filling rooms midweek with group and trade show visitors and on weekends with independent-travel visitors.
To accommodate the tandem expansion, The Venetian has also added 1,000 parking spaces.
"We are excited about the premier of Venezia and all it has to offer our guests," Stone said. "This will be the only place in the world where guests can encounter 18 fine dining restaurants, the world's largest convention center, and a world-renowned art museum all under one roof."
The newly expanded 650,000-square-foot Venetian Congress Center and the 1.2 million-square-foot Sands Expo & Convention Center offer up to 174 flexible individual meeting rooms.