Inside the new Vegas: Sin City's recent renaissance is more than just a tale of glitz, gambling and girls

Sin City's recent renaissance is more than just a tale of glitz, gambling and girls. It's about smart marketing, too

Look to the left from the balcony at Ghostbar, a lounge perched atop the Palms Casino Resort in Las Vegas, and the view of Sin City's famed Strip explodes in front of you, a glowing mass of bright lights and billion-dollar buildings. Look to the right, and the barren mountains of Nevada's desert take over, shrouded in a darkness that extends for miles. The vistas are dramatic. But, on this unseasonably cool Saturday night, the hip, fashionable crowd milling about the popular nightspot won't be distracted by the view. What's going on inside Ghostbar–a place where people line up to see and be seen–is clearly the main attraction.

Mike Gallo, a buff blond pitcher with the Houston Astros, settles comfortably into a low leather couch, clearly pleased that his pro athlete status allowed him to jump the hour-long queue outside Ghostbar. Four fraternity brothers from Saint Mary's College of California knock back shooters at the long glass bar, describing the club as their “favourite Las Vegas hangout.” Meanwhile, three buddies in their mid-30s who work at Ace Hardware in Chicago are gaping at a parade of waitresses clad in white pleather miniskirts and matching thigh-high boots. Music pounds. Liquor flows. Cash trades hands. The Las Vegas tourism authority's marketing slogan, “What happens here, stays here,” starts to make sense.

The Ghostbar is now one of the hottest hangouts in Vegas, and the Palms its hottest hotel. Gavin Maloof, billionaire co-owner of the Palms Casino Resort, boasts that since it opened just off the Strip, in November 2001, “every single A-lister, everybody who is anybody in the entire country, has been through this casino.” He's not kidding. With customers like Bill Clinton, Janet Jackson, Barry Bonds and Leonardo DiCaprio, the Palms' hipster quotient couldn't be higher. But while the hotel may be on the cutting edge, it's only one sign of a new worldwide wave of popularity both for casinos and for gambling in general, a wave propelled by the kind of savvy marketing of which the Maloof brothers–Joe, Gavin, George and Phil–are masters.

Now consider any number of casinos in frosty Canada, and it's clear that Canadian casino operators, usually considered novices at promotion, could learn a thing or two from guys like the Maloofs. After all, not a single Canadian casino can boast of buzz the way the Palms can. That wasn't a problem in the early years. As Ivan Sack, editor of Canadian Gaming News, points out, “Initially the casinos didn't have to market. There were so few of them, people just rushed in.” Casino Nova Scotia, which has locations in Halifax and Sydney, welcomed customers for nine entire years before recently hiring a director of communications; Casino Windsor, in southwestern Ontario, had essentially zero marketing budget in its first year, 1994, but was still flooded with patrons. A decade later, however, competition is fierce, and revenue is flat at many of Canada's older casinos. Operators are waking up to the fact that merely providing a place to gamble isn't enough to sustain the business over the long term. As Jeff Craik, director of marketing at Ontario's Casino Rama says, “You need incentives to encourage repeat visitation. I am selling a brand.”

Establishing a brand–that's something the four Maloof brothers know how to do. (Their sister and mother are partners in all the Maloof businesses, too.) Under their management, the Palms has grabbed the spotlight in one of the most competitive gaming markets in the world, taking on mammoth public corporations like MGM Mirage and Harrah's Entertainment Inc., whose large coffers dwarf the Maloofs' reserves.

It's not as if the Palms started out with throngs of people lining up at its doors. While the red-carpet opening for the US$270-million resort was well attended, it took place just a month and a half after 9/11, when Las Vegas was nearly empty. “It was desolate, decimated,” recalls Gavin Maloof. By then, the brothers were experienced casino operators: one of their early successes was the Fiesta Casino, which they built in North Las Vegas in 1991 for US$20 million, then sold for US$185 million seven years later. But in late 2001, they were scared. Most of the family's savings was invested in the Palms, which had no brand identity, and no customers. The Maloofs needed more than just loose slots to turn their gamble into a jackpot.

The answer was smart marketing. Just after the resort opened, George Maloof, who holds a degree in hotel management from the University of Nevada-Las Vegas, and is responsible for day-to-day operations at the Palms, convinced the producers and directors of MTV's The Real World, one of North America's first reality television shows, to film their 12th season inside the Palms. The Maloofs coughed up US$1.5 million to renovate the 28th floor of the hotel, setting up suite No. 28101 as a swanky three-bedroom home–complete with hot tub, pool table and leopard-print comforters–for the show's seven-person cast of twentysomethings to live in. The shows' film crew took over the rest of the rooms on the floor. Filming took eight months, but from the moment The Real World started broadcasting in 2002 “it was like a light switch went on,” says Gavin. “As soon as it started airing–bam! It was amazing. It turned things around.”

What really happened was that the Maloofs had tapped into a severely under-served market in Vegas: youth. While the rest of the industry was busy pitching to families and older folks, the Palms beat a path straight to the hearts of the younger generation–a generation that largely views gambling as a fun social pastime and, unburdened by mortgages, children or retirement plans, has disposable income to, well, dispose of at the gaming tables. According to the local convention and visitors authority, the average age of a tourist to Las Vegas is 59. The average Palms hotel guest, according to management, is under 35. “Our target is young, hip, cool,” says Gavin. So the philosophy that makes advertisers pay top dollar for spots on young-adult-oriented TV shows seems to apply at the Palms, too: get customers while they're young, and you'll commit them to your brand for life.

Wooing the 21-to-40-year-old set requires the Maloofs to devote substantial energy to keeping up the resort's Hollywood connections. For example, Bravo TV's Celebrity Poker Showdown (hosted by ex-Kids in the Hall comic Dave Foley) is filmed at the Palms, and Fox Sports's Best Damn Sports Show Period broadcast from the Palms for a week in November. Even more important is attracting celebrities to the casino. “Whatever they need, we're there,” says Gavin. “We're at their beck and call.” The star-studded marketing means the Palms is now party central for the young, rich, famous and beautiful–and that helps pull in celebrity-obsessed customers.

Cross-promotion also plays a role. The Maloofs own the Sacramento Kings of the NBA and are the distributors for Coors beer in New Mexico. So the Palms advertises heavily at Arco Arena, the Kings' home base, and the casino is often featured along with Coors products in bars across the Southwest. The Maloofs also cut a deal with Universal to hold concerts at the Palms. “Everything we do, we're thinking about how we're going to cross-promote,” says Gavin. “That's our marketing strategy.”

This, of course, is all by way of getting customers onto the casino floor, where the resort's real business takes place. The Palms earns 80% of its revenue from gaming–and 60% of that comes from slot machines alone. Although the attitude inside the resort is far more Britney Spears than Bugsy Siegel, taking care of local gamblers is essential. Locals account for about 70% of the Palms' clientele, and almost 100% of the casino's daytime traffic.

The commitment to small-time players may stem from the twin facts that the Maloofs still consider themselves locals–and that the Palms itself is not very big. In fact, despite all the hype surrounding the resort, beside the city's other major casinos it looks downright tiny–only 425 hotel rooms, compared to an average of about 4,000 at the large hotels on the Strip, and a casino floor that is only 95,000 square feet, compared to 129,000 square feet at the Bellagio and 120,000 square feet at the Venetian.

The Palms won't be small for long, however. Capitalizing on its early success, construction will soon be underway on 599 condominium units adjacent to the property. What's more, an additional 340-room hotel tower is already going up. The new tower's main attraction will be a Playboy Lounge–“a casino on the top floor with the bunnies and the whole works,” says Gavin. (His brother George, who he says “is real close to Hugh and Christie Hefner,” closed the deal.)

The Maloofs don't have to cope with some of the regulatory issues that crop up for casino operators in Canada. For one thing, casinos in Canada can't comp alcohol; in Vegas, the minute you sit down at a table there is a waitress delivering a free drink. Another difference: while operators in Canada are typically required to implement programs to deal with problem gambling, owners Gavin and Joe Maloof aren't aware of any such initiatives at the Palms. Not that they are oblivious to the danger of addiction. Having lived in Las Vegas for more than 20 years, Gavin, who loves to gamble, is quick to comment that it “is a great city, but if you have addictions it is not necessarily the best city to live in. You've got to be careful. You have to respect this city, because things can get away from you if you don't.”

The Maloofs have an estimated net worth of well over US$1 billion, and they do not plan to take their company public anytime soon. “We've had offers,” says Gavin. “We've thought about it. But then you have to report to shareholders, and then you may have to do things that may not be in the best interest of the franchise. You don't have the leeway you do when you're private.” What's more, the siblings are having fun. “We're all enjoying the success together,” says Joe. In fact, the family is so committed to the concept of family-run business that it's rumoured their next television project–a series for Spike TV–will be a takeoff on Donald Trump's The Apprentice, with the Maloofs seeking out the next great American family business.

At a private party in the Palms' Real World suite (the room commands up to US$10,000 a night from hotel clients), the DJ spins, the drinks flow, the buffet table is crammed with tuna carpaccio and other gourmet treats. Singer-songwriter John Mayer casually sprawls across the hot tub, sipping a beer, relaxing before his show at the Palms the following night. The shindig is classy, but frivolous, too–party favours consist of plastic Superman loot bags filled with candy, condoms, cheap necklaces and Wet-Naps. It is trademark Las Vegas–incredibly decadent, yet somehow not upscale at all.

For now, the Palms brand–backed by a crew of boys who have made their fortune from gambling, beer and basketball–has secured a spot in America's heart as the epitome of Vegas's new culture. But can the Palms magic last? Nothing stays cool forever, and there's no telling when another casino will take its place in the youth market. (There is already buzz in Vegas that the Hard Rock Hotel & Casino's club, Body English, is even hipper than Ghostbar.)

But the Maloofs' careful crafting of the Palms image means momentum is still strong. In China last October for an exhibition NBA game between the Kings and the Houston Rockets, Gavin spoke excitedly about growing brand awareness for Maloof properties all across the globe. Considering the Palms took on Vegas and won, plans to export the brand across the United States, and eventually around the world, are not that far-fetched.