It’s about time a billionaire got brave and set his sights on the Cosmopolitan.
The $4 billion resort, owned by Deutsche Bank, has been on the market for much of its tenure on the Strip, where casinos fight to stay relevant in a country where you can drive to one within three hours of any point on the map.
A report in the Brisbane Times last week that Australian billionaire James Packer’s company — Crown Resorts — is ready to make an offer gives hope a buyer will swoop in and turn things around. Worth $6.5 billion, Packer inherited Consolidated Media Holdings in 2005 from his late father, Kerry Packer, before selling the company to News Corp.
The Cosmopolitan has failed to be profitable since opening in 2010 — notching nearly $60 million in net losses over the past two years. Critics have highlighted its business model and lopsided equation. The resort has struggled to draw younger gamblers to the casino floor but has done well in other areas. Last year, it logged hotel revenues of $267 million and food and beverage revenues of $313 million. That’s twice as much as gaming revenue, which stalled at $155 million.
But analysts say this could be a ripe opportunity for an investor like Packer to launch a new vision and shake up the equation to transform the Cosmopolitan into a dangerous competitor.
“It’s not really great for other Strip operators,” said Chad Beynon, an analyst with Maquarie Capital. “If you bring in an investor who understands the casino business, that should take some market share from other properties.”
What would make Crown such an interesting player in Las Vegas is that it has been making most of its money in Macau, Australia and Manila.
American companies have been reliant on domestic properties. Those companies have enough U.S. exposure.
So if you’re making your dough in China, why come to Las Vegas? Because you can.
“Crown still has a strong balance sheet to invest globally,” Beynon said.
Beynon also chalked it up to second chances. Many international investors missed opportunities to crack the Vegas market before the recession.
Crown first tried to in the early 2000s — until the Federal Aviation Administration rejected its plans to build Crown Las Vegas. Then, in 2009, the company pulled out of negotiations to buy Cannery Casino Resorts for almost $2 billion.
If Crown pulls off the Cosmo deal, Beynon said Packer wouldn’t have to spend much more money, because the resort’s design is established. If that’s true, this just might be the deal of the century.