Cosmopolitan of Las Vegas will be adding a $25 resort fee per night for hotel reservations beginning 2013. This resort fee is approximately a 10% hike on hotel rooms that cost an average of $257 per night. The hotel runs at about 86% capacity on any given night so, there’s a definitely demand for rooms at the Cosmo.
We know gaming is not the strong point at the Cosmopolitan. In fact, casino revenue fell 5.5% in the last quarter. An increase of room rates is really all that Cosmo management can do to stop the bleeding.
While food and beverage do well, they don’t own 100% of the restaurants or Marquee so they don’t make 100% of the revenue. They may own the bars (I don’t know if they do or don’t), but there’s only so much money they’ll see from 10% drink price increases.
However, they do own 100% the hotel revenue. Travel sites like Expedia take a portion of room fees and NOT resort fees so it makes sense that the Cosmo add a resort fee as opposed to normal rate increase. At these rates the Cosmopolitan stands to make approximately $4.5 million dollars per quarter ($25 x 2,000 rooms x 90 days). For comparison that would cover their $1.3 million loss in casino revenue 3-fold.
Most casino/hotels in Las Vegas that are on the same level of luxury as the Cosmopolitan charge a resort fee. So, if you want to take your vacation elsewhere you’ll still have to pay a resort fee and similar room rates. This just keeps the Cosmo in line with their competition.
Nobody likes price increases but it’s understandable why the Cosmopolitan changed their mind and added a resort fee after looking at these numbers and competitive factors.
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