Vegas Nightclub Boom Ends With $28 Million Palms Bar Writeoff
The closing is a setback for the Fertitta brothers, Frank and Lorenzo, who control the Las Vegas casino company.
(Bloomberg) -- Red Rock Resorts Inc. is closing the Kaos nightclub at the Palms casino, effective immediately, and will take tens of millions of dollars in charges on canceled contracts with performers and other expenses.
The closing is a setback for the Fertitta brothers, Frank and Lorenzo, who control the Las Vegas casino company started by their father. They bought the off-the-Strip Palms three years ago for $313 million and spent some $679 million on renovations, adding high-end restaurants and artwork, such as Damien Hirst’s shark in formaldehyde, which sits above a bar.
The club’s customers weren’t spending enough money to justify the cost and may have even discouraged other guests from coming to the resort, Chief Executive Officer Frank Fertitta said Tuesday on a call with investors.
Nightclub patrons “did not have spendable money, we didn’t see the crossover into the casino,” Fertitta said on the call.
The nightclub market in Las Vegas, which is known for its superstar DJs and pricey bottle service at private tables and cabanas, has gotten extremely competitive, he said.
“It doesn’t appear that the market has grown enough for the amount of supply,” Fertitta said. “The cost of entertainment is excessively high and we just made the decision to focus where the fish are.”
The Palms, which opened in 2001, helped establish Las Vegas as a nightclub destination with its rooftop Ghostbar. The resort was the setting for the MTV reality show “The Real World: Las Vegas.” It also was a popular hangout for celebrities such as Paris Hilton.
The 73,000-square-foot Kaos, which featured a pool for daytime parties, also included a 60-foot-tall bronze sculpture by Hirst called Demon with Bowl. The club officially opened in April with performances by DJs Marshmello and Kaskade.
The company said it was taking a $28.2 million charge related to the closing and additional expenses of $16 million to $22 million over the next two quarters. Fertitta said other parts of the Palms business, including a new Tim Ho Wan dim sum restaurant, were performing according to plan. Casino revenue there increased 30% in the quarter.
To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net
To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Rob Golum
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