Phil Ruffin can’t wait for the detonator charges to go off in December. That’s when he plans to level the New Frontier and begin work on Montreux, an upscale resort designed by architect Paul Steelman.
With a cost in excess of $2 billion, Montreux is due to open in early 2009. It’s a 2,750-room Swiss-lakefront-themed hotel with a 104,000-square-foot casino, a massive shopping mall, an array of restaurants, bars and nightclubs, and a 465-foot-tall observation wheel, similar to the London Eye, that scoops riders from the floor above the casino.
Ruffin, a self-made billionaire who owns racetracks in the Midwest, bought the New Frontier for $325 million in 1998. Today it’s worth perhaps $1 billion, but the 41-acre property makes only $18 million in annual operating cash flow, one of the lousiest performers in town.
Steve Wynn’s new place across the street made $293 million in the 11 months after it opened in April 2005.
With dreams of drawing the free-spending masses his neighbor attracts, Ruffin hired Steelman as his architect in 2004. Known for his off-the-wall, innovative designs, Steelman is wiser than most when it comes to the logistics of moving gamblers through the casinos.
He worked on Wynn’s Mirage, which, when it opened in 1989, became the first Strip hotel to emphasize eating and entertainment as well as crap tables.
Steelman brought American casino innovations to Asia in 2004 with the Sands Macao, a $240 million project that went from blueprint to opening in 600 days. That casino made back owner Sheldon Adelson’s entire investment in its first year, thanks in part to Steelman’s bright, airy design.
Back in the heyday of the Flamingo, Tropicana and Desert Inn, moguls enticed gamblers with free rooms and cheap buffets — and then left them isolated at tables with no distractions. The casinos were dark, cluttered and hard to get out of. Keep a customer stuck, the thinking went, and he’ll play until he’s out of money. Gambling made up more than 90 percent of revenue.
The Montreux’s casino and retail zones will dovetail to induce visitors to gamble, take a short two-minute walk, perhaps have a drink at a bar, then start spending again in the shops. The retail area will open right onto the Strip in order to encourage walk-in traffic. That is rather ordinary anywhere else in the country but something of a novel idea in Las Vegas.
Steelman has also designed a sleek ballroom that can be transformed in under two hours. Hold a fashion show in the morning, a poker tournament in the afternoon and a boxing match at night. The ideal length for any spectacle in a casino is less than 90 minutes — otherwise, he says, "you are dipping into time people would use spending money in other parts of the casino."
Ruffin plans to build Montreux on the cheap side, "cheap" being a relative term in Vegas, budgeting $1.9 billion for construction, compared with Wynn Las Vegas’ $2.7 billion. Ruffin is raising $400 million from bonds, $1.5 billion from bank loans. No equity for the public.
Ruffin also wants to price his hotel rooms at $200 a night, 30 percent lower than Wynn’s average room rate, but still generate a similar or better return on his investment as the Wynn. Ruffin forecasts $290 million a year in pretax profits after Montreux opens. At that rate he’ll be earning 15 percent annually. The Wynn returned 11 percent in its first 11 months.