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\t(Bloomberg) \u2014 Caesars Entertainment Corp., the casino owner saddled with $24 billion in debt, has a new source of income \u2014 from a nightclub on the Strip \u2014 to help refinance a loan.<\/p>\n
\tThe growing importance of bar tabs and nightlife was on display one recent Tuesday evening at Drai\u2019s Nightclub atop the Cromwell hotel, a newly refurbished Las Vegas Strip property owned by Caesars.<\/p>\n
\tDance music was thumping. Women in bikinis and sailor caps gyrated on platforms, while young people played volleyball in the pool. At the center of it all was Victor Drai, a 67-year- old, Moroccan-born bar owner who has moved literally from the basement to the penthouse in Sin City\u2019s burgeoning nightclub business.<\/p>\n
\tHis club, opened in May, stands to gross as much as $60 million in its first year of operation, with a profit margin of 50 percent, according to his business partner, Michael Gruber. The money is so good that Caesars, which is struggling to remain solvent, may refinance a $185 million loan taken out two years ago to remodel the hotel and build the club, he said.<\/p>\n
\tDrai\u2019s ascent, and the hotel\u2019s good fortunes, show the growing importance of sales from places other than slot machines and blackjack tables in Las Vegas, where food and beverage sales, at $3.6 billion, exceeded the $2.9 billion taken in by slot machines last year, according to the University of Nevada\u2019s Center for Gaming Research. Las Vegas visitors, poised to reach a record 40 million-plus this year, are looking for more social, and less sedentary, entertainment.<\/p>\n
\t\u201cThe market is becoming younger, increasingly international, more affluent, and spending more on food and drink,\u201d said Robert Shore an analyst at Union Gaming Group in Las Vegas. \u201cThese are clearly not slots players.\u201d<\/p>\n
\tNo Slots<\/p>\n
\tMitch Garber, chief executive officer of Caesars Growth Partners, the Caesars unit that owns the Cromwell, declined to comment on the nightclub\u2019s profits or a refinancing. Garber sang Drai\u2019s praises though, calling him \u201can awesome club operator \u2014 he\u2019s just got this great gift for creating a vibe and a mood.\u201d<\/p>\n
\tCaesars, the largest U.S. owner of casinos, is struggling to cope with a slow recovery in gambling spending nationally and the debt it took on in a 2008 leveraged buyout. The company, which is in restructuring talks with lenders, reported a wider third-quarter loss today after markets closed.<\/p>\n
\tCaesars declined 7.6 percent to $10.66 in extended trading after the results. The shares fell 4.6 percent to $11.54 at the close in New York, and have lost 46 percent this year.<\/p>\n
\tVegas clubs make money several ways, starting with the cover charges, typically $35 for men and $25 for women. There\u2019s often a liquor mandate, compelling a customer who wants to reserve a table or cabana to buy anywhere from several hundred to several thousand dollars of booze \u2014 deposits required.<\/p>\n
\tSpraying Champagne<\/p>\n
\tAt Drai\u2019s, a 10-seat booth just off the dance floor on a Saturday night has a $4,000 minimum for food and beverage spending. A 750 milliliter bottle of Belvedere vodka, about $30 in a store, is $595. Packages of Champagne intended for spraying, not drinking, begin at $2,000 for 10 bottles. One customer, Drai\u2019s staffers won\u2019t say who, bought 700 bottles on a visit in September.<\/p>\n
\tDrai doesn\u2019t follow the lead of clubs such as MGM Resorts International\u2019s Hakkasan and Wynn Resorts Ltd.\u2019s Surrender that hire superstar DJs \u2014 Tiesto and Calvin Harris were recently in town \u2014 to draw crowds. He\u2019s been booking mostly lesser-knowns. Instead, it\u2019s the setting that\u2019s supposed to be the attraction, including views of the Bellagio\u2019s fountains and the Paris hotel\u2019s faux Eiffel Tower down the street<\/p>\n
\t\u201cIt\u2019s the aesthetics,\u201d Drai said. \u201cIf you build a beautiful place, people find it.\u201d<\/p>\n
\tPlunge Pools<\/p>\n
\tHis club, which cost $75 million, has a dance floor that opens up to a swimming pool, which is lined with 35-foot palm trees. Some of the 25 private cabanas have plunge pools and their own bathrooms. Drai spent $5 million on the lighting and sound systems. He leases the space from the Cromwell in exchange for a cut of profit.<\/p>\n
\tA key to Drai\u2019s success is his 35-member team of club hosts, said Marco Benvenuti, co-founder of Duetto, a company that helps casinos monitor non-gambling spending and crafts promotions for customers. These employees work waiters, bellmen, cab drivers, social media and other sources to find club-goers willing to spend big.<\/p>\n
\t\u201cThey have the right connections and channels,\u201d Benvenuti said. \u201cThey just know all the right places to tap.\u201d<\/p>\n
\tHosts even chat up store clerks, said Ryan Craig, a former Wynn Resorts employee who manages Drai\u2019s club. The reward for referrals is free admission and drinks.<\/p>\n
\tThe battle to get the best employees has gotten so fierce that Wynn Resorts founder Steve Wynn called Drai earlier this year and told him not come by any of his properties because he didn\u2019t want him poaching his staff, according to Drai, who said he told his people not to let Wynn in his place. Wynn, through a spokesman, declined to comment.<\/p>\n
\tAfterhours Lounge<\/p>\n
\tDrai, who is known locally as the \u201cKing of Clubs,\u201d has been a fixture in the bar scene since opening his first in 1999 in the basement of the Barbary Coast \u2014 in the building that\u2019s now the Cromwell.<\/p>\n
\tHe joined Wynn Resorts in 2007, parting ways with the company over a management dispute. Tryst and XS, venues Drai created and ran for Wynn, are still popular.<\/p>\n
\tDrai\u2019s After Hours, which operated for a while inside Bally\u2019s, is back in the Cromwell basement. People can start at the rooftop pool party during the day, hit the adjacent disco at night and go downstairs at 1 a.m. to After Hours, where, if they have the stamina, they could stay until 10 a.m.<\/p>\n
\tIn keeping with the recent Tuesday night\u2019s Yacht Club theme, Dan Kish, 26, and Jaron Washington, 25, swimming instructors from Chicago, wore board shorts and oxford shirts. Washington said he\u2019d spend \u201cthree digits,\u201d sharing bottle service costs with friends.<\/p>\n
\tSperrys, Fairies<\/p>\n
\t\u201cAll I want to do is wear my Sperrys and talk to some fairies,\u201d he said, referring to his boat shoes and the women he was soon chatting up.<\/p>\n
\tJust how long this party can last is anyone\u2019s guess.<\/p>\n
\t\u201cThe club business is a growing segment on the Strip but is also very competitive,\u201d said Alex Bumazhny, an analyst at Fitch Ratings in New York. \u201cIt is only good until the next guy builds something bigger.\u201d<\/p>\n
\tDrai, said he\u2019s just getting started, predicting he\u2019ll double his business in a few years, making his perhaps the top- grossing bar in the nation.<\/p>\n
\t\u201cI could do $120 million,\u201d he said.<\/p>\n
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