Setting a New Benchmark
With the mortgage crisis in full swing, a recession looming and fuel and food costs skyrocketing, it’s not exactly the ideal climate to be bringing on a $1 billion casino-resort.
But those economic realities don’t faze Anthony A Marnell III, chairman and chief executive officer of M Resort, Spa and Casino.
In fact, Marnell is opening the resort, which is located at the far south end of Las Vegas, months earlier than initially planned – in March instead of the projected opening of May 1. That move saves Marnell interest payments and keeps the resort, which has funding from the Bank of Scotland, under budget. MGM Mirage also has a part ownership of the property.
“The sooner we get open and establish ourselves in the market, the better, the way I see it,” Marnell said in an interview at the Las Vegas offices of TRIRIGA, a software company he founded in 2000.
That’s not to say that Marnell isn’t cognizant of the economic realities out there. “It’s a tough economy; it’s a tough world out there. Unfortunately and fortunately, there is nothing I can do about that, and that’s good because I’m not really thinking about it anymore,” he said. “I’m planning for it to be like it is today.”
Still, Marnell said he does not see a culture of doom and gloom around the casinos.
“I go visit these casinos at night and on the weekends, and they’re full of people. People are not going to just shut off. They might not spend as much money, but they’re still going to do the things they find entertainment and value in,” Marnell said. “People need that and so we’re going to try to provide as good as an experience as we can down there.”
Family mattersAlthough only 34, Marnell is no gaming neophyte. He is the son of Tony Marnell, founder of Marnell Corrao Associates, which built the Rio as well as many other casino-resorts and is the general contractor on M Resort, and operates casinos in Parump and Laughlin in a partnership with Sher Gaming.
He remembers accompanying his dad as a youngster on trips to the Maxim (which later became the Westin Causerina. His first job came at age 8, as a summertime laborer cleaning up trash around the Desert Inn spa construction site. Later, he worked at the Rio, a Marnell property until it was sold to Harrah’s Entertainment in 1999.
Marnell, for a time, also was a catcher playing minor league baseball in the San Diego Padres organization, and in the off season would squeeze in classes at the University of Nevada Las Vegas College of Hotel Administration and work at the Rio. But it wasn’t until two shoulder injuries cut short his professional baseball career that the casino industry really took hold. “I loved everything about it. I couldn’t learn enough about it,” Marnell said. “There would be times where I wouldn’t even go home and take a shower, I’d stay right there and work right through. Dad would walk in and say, ‘What are you doing? Go home.’”
At the Rio, Marnell did a little bit of everything. “I dealt, sold change back in the days when they sold change, worked in a slot carousel, worked in the coin booth for a long time, held different jobs in the casino, hotel, food and beverage, etcetera,” he said.
“And then after I did that, my father made me spend a year with just him in every meeting that he had, but I wasn’t allowed to say anything, just listen. And when the meetings were over, I would talk to him about what I saw, what I heard and what I thought. And that was how it went for a year, and then at the end of the year, he said, ‘OK, what do you really want to do? What piece of the business do you really like?’And I really loved the casino marketing and the casino side.”
Marnell was given the responsibility for international marketing and them domestic marketing, “and as time went on I took on more, all of the marketing for the hotel and casino operations for the hotel.”
When the Rio was sold to Harrah’s Entertainment, Marnell stayed on for about a year before deciding to start a software company in January 2000.
Learning experienceTRIRIGA, an enterprise workplace management software solutions company, gave him valuable experience in understanding what it takes to build a company from the ground up, he said.
“You have no product, you have no customers and you have no money. You have an idea and yourself, and now you have to go make it work and figure out a way to get it going. Go raise money, flesh out the idea, develop a product make sure it’s viable, and then sell it and actually turn it in to a viable business,” he said.
There are very few people who work in the gaming industry who understand what it takes to create a company, “not a property, but a company from person number one and taking an idea and come all the way to fruition,” Marnell said.
And very few industries have the cash flow margins of casinos “so you get real spoiled about what you really need to have to run a successful business versus what you do have,” Marnell said.
But coming from the software solutions business, Marnell said, he had a different outlook. “It really changes your thinking about the inefficiencies that are still in the casino business regardless of how much money you make, so that was good.”
Marnell has since turned the business’ operations, which had grown significantly, over to a seasoned team of professionals, but remains chairman of that company.
The legacy of his work there has been learning to plan better, he said.
“It definitely taught me how to prepare for the worst,” Marnell said.
“You plan for the best, and you design things so hopefully that they’ll all be great, but it really allowed me to sit back and say, ‘OK, if all these things don’t go as planned, which they never do, and Murphy’s Law shows up, and it always does, what are you going to do about it? Are you going to sit there like a deer in the headlights, or are you going to make the changes you need to make both on the cost side and on the revenue side? You can only cut costs so much; eventually you have to find a way to drive revenue.”
In the current economy, he said, smart casinos are getting more creative with ideas and products customers will find value in.
“The easy buck, I think in town everybody’s realized, is gone. You’re going to have to give the customer something more,” Marnell said.
But, he also noted that the issue isn’t that players are unwilling to part with gaming dollars. “What’s killing the gaming industry right now is we’ve taken on, as an industry, too much debt. That’s the problem. It’s the leveraged buyouts and the things that have happened that are bringing a lot of negativity.”
In touchOne casino-hotel property that Marnell keeps an eye on is just a couple miles up the road from where M Resort is taking shape. It’s the South Point Hotel Casino, and Marnell is an admirer of its proprietor, Michael Gaughan, a veteran locals-casino operator. The casino-hotel is the farthest south casino property now open.
“The South Point is doing quite well despite the economy, he said, noting it delivers a fun experience at a reasonable price, with good food and service.
Gaughan, Marnell said, walks around his hotel wearing a little red button that reads, “I’m glad you came.”
“That, to me, says it all,” Marnell said. “I go in there a lot, and seven out of 10 times, I’ll run into Michael or see Michael. He’s shaking his customers’ hands. He’s talking to people. He’s got the pulse of the market. He knows what he can do, and he knows what he can’t do. And I think he’s doing a lot of things right.”
One of the reasons Marnell can afford to be somewhat optimistic is that M Resort sits at a potential nexus of opportunity once the economy turns around. “I think at the beginning that we’re going to have, because of the economy, a little bit of a market share battle,” among M Resort, South Point, Green Valley Ranch and Silverton casinos.
But, “when this town grows again, it’s going to happen at Inspirada,” a master-planned housing area not too far from M Resort. “It’s got all the infrastructure. It’s got an approved master plan. It’s titled. It’s got all the sewer water storm drains. All the work has been done,” he said.
“When somebody wants to start building new homes again, are you going to take a two-year development cycle on a piece of BLM ground? Probably not. You’re going to start off on pads and you’re going to start building homes.”
And once banks the banks begin to loan money again, Marnell said he believes entrepreneurs will seek to develop out there. “The goal of the M is not to take market from [any] of these casinos, even though it will take some; it’s to grow the market and drive what’s going on out there.”
Shades of RioIn the end, however, if any property is to succeed, it must deliver on its promise, and Marnell is keenly aware of that fact.
“I don’t think a lot of people expected to see what’s being built out there. I get that feedback a lot – the ‘we thought this was going to be the typical local casino.’ I think they’re now seeing something architecturally that’s dramatically different than that,” he said. “And that was part of the goal was to bring of the strip architecture and pizzazz to the locals.”
The modern Italian design of M Resort, however, is also timeless, Marnell stressed. “That architecture will not age,” he said.
Then, the property was laid out to position it for two “very clear” makets for the phase one product,” he said. “One is the local market, and I expect 80 percent of our business will come from that. And we tried to give the locals all the things that the local is looking for in the proximity and relationship of space that was extraordinary convenient for them.”
That means providing convenient, covered parking and access into the casino and popular offerings for the locals, including the buffet, the 24-hour restaurant, the poker room, deli, sports book, and slot machines.
“There’s a gas station so they can get gas there. I have a pharmacy so they can buy their prescription drugs with their slot points,” he said. “This whole things was designed around here’s the consumer and what are all their needs and try to give it to them in one package on that side of the casino.” The other side was designed for the out-of-town guests, of which he said there are two types – the FIT (the free and independent traveler) and the meeting/conference visitor.
That customer wants the destination resort experience and is willing to pay a little more for a nicer room “so we built them that room.” It’s a 550-square-foot, five-fixture room that has a view of Las Vegas.
The other group consists of meeting planners for smaller conferences and meetings. Historically, those groups weren’t big enough to get much, if any, consideration from Strip hotel operators. “We’re going after those meeting planners who are seeking to want to come to the hotel and make it their hotel and their experience, and we’re doing very well with it,” Marnell said.
A key for M, he said, was the ability to design the hotel and conference space to make it easy on the guests. “You don’t have to walk far. From the hotel elevator to the check in at the convention center is less than 80 feet. From the front desk to the hotel elevator is 100 feet. So those spaces were laid out for them, and they don’t have to walk miles to accomplish things.”
That’s just the beginning. “I think we’ll bring a lot to both of those markets. I think they’ll be very pleased, and then we’ll assess where that goes over the first six months and we’ve got a ton of land and we can add more things as we go down the line.”
The M Resort sits on more than 90 acres of land – an assemblage of 28 different parcels acquired over two years, he said.
A joint venture with Taubman Centers was announced earlier this year that will bring a regional shopping mall with 1 million square feet of retail anchored by a department store to M Resort by late 2011 or early 2012. That leaves plenty of land for future development.
His father’s resort, the Rio, also started in phases and grew as demand warranted. Along the way, the resort was credited with many firsts in the industry, including the first all-suite casino-hotel, the first nightclub in a casino, and with raising the bar on food and beverage with fine restaurants including one of the first celebrity chef-run restaurants – Napa with chef Jean-Louis Palladin.
But all that carries only so much weight these days. “I think with some people there’s still a Marnell brand and Rio awareness in all the things the Rio did. [But] for the people who never experienced it for what it was back then, they have nothing to compare it to and the town’s evolved a lot since then,” Marnell said.
M Resort will have to create its own brand from scratch. Great service and great value will be core values for the property, he said.
M Resort is also going to be looking for a certain type of employee who will provide the right level of service. “Our team members are our most valuable asset,” he said. “The 10 year resume is no different to me than the one year resume. This is about who they are as people, what they live by and how they believe they should approach their job. We can teach a lot of people to deal. We can teach a lot of people to serve cocktails. We can teach a lot of those things, but what we can’t teach somebody is to show up with a great positive attitude every day and have service on the forefront,” Marnell said.
One thing the economic downturn does is refocus more attention on service, he said.
“You could see the service in this town going one way because the supply and demand was so out of whack. There was so much demand for the product and not enough supply. When that happens, you don’t have to give as good of service,” he said. “Now, you’ve got all this supply and the demand has dwindled or you’ve got this sensitivity to price has gone through the roof, and so those things have to come back into play.”
That means “you’re not going to make as much money on every dollar that comes in the door, and you’re going to have to reestablish yourself as adding more value.”
For M Resort, it also means starting out from scratch in terms of developing a following. “We don’t have one name in our database today,” Marnell said. “Now we’re doing lots of things to drive names and I’m not worried about that because we’ve done that before.”
And unlike the enterprise software business where it could take a year to convince someone to use your software, “when we open the door we’re going to have thousands of customers come through the door to see it,” Marnell said. “And our job is going to be to capture them, educate them and then bring them back, and we know how to do that… but it’s going to be very expensive. There’s going to be a lot of good deals for those customers while we’re trying to capture their names and figure out who they are,” he said.
Marnell noted that in many ways casinos have a difficult time differentiating themselves.
“There’s nothing that other casinos can promote that I can’t,” he said, from cash back to free play to giving away cars or houses, offering in-house progressives, showcasing the same slots. “You can earn these customers, but you’re going to earn them one at a time. And that’s in our plan. Our plan accounts for a lengthy period of time to develop a relationship with a customer.”
Some of the differentiation is clear, he said.
“If you can go sit in a dark restaurant with no sunlight and view and pay x amount of dollars for a New York steak, or you can go to the m and sit in the same restaurant, but now you can view all of Las Vegas for the same product at the same price, which one are you going to go to?” he said.
The state-of-the-art buffet also will be an attraction, with its live filming station on site. “The buffet value is going to mesmerize people on not only what they can get, the entertainment value they can get while they’re in there, but the product that will be put out and the value that they’re going to get it at.”
M Resort is aiming for the Baby Boomer and the late Generation X as its primary market. But the market is not done off of a demographic; it’s done off of a psychographic plan that focuses on the premise people want to be around people like themselves, regardless of age, he said.
“The Rio had that. People used to come in there and go, “Man, this place feels like there is electricity running through it,” Marnell said, citing it as an example of a psychographic that worked.
“And that had everything from 80-year-old people playing slot machines to 21-year-old people going to a nightclub and the energy was from one door to the other.”
M Resort will have that same energy, Marnell said.
“It’s going to be fun. It’s going to be exciting. And that doesn’t mean nightclubs and all that stuff; it’s just going to have liveliness to it.”