Image: The Cosmopolitan
Isaac Brekken  /  AP
The Cosmopolitan of Las Vegas opens Dec. 15. The Cosmopolitan, with nearly 3,000 rooms and a 100,000 square foot casino floor, is the newest addition to the Las Vegas Strip.
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updated 12/13/2010 8:35:33 PM ET 2010-12-14T01:35:33

The last major Las Vegas resort approved before the Great Recession will have to lure thousands of gamblers from established neighbors to survive after it opens Wednesday.

The $3.9 billion Cosmopolitan of Las Vegas, built by a German investment bank after its original developer defaulted, may have the hippest-ever TV commercials: Over a garage rock soundtrack with a jazzy interlude, guests with crafty smiles stray across a landscape of shiny dance floors, soothing guest rooms and tables laden with food and drink.

But the 2,995-room Cosmopolitan is entering a market that's struggling. And analysts say that just to cover its debt, it will need to do better than even the top-performing Bellagio, its neighbor to the north with 3,933 rooms and the same amount of casino space as Cosmopolitan.

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The Bellagio generated $122.9 million in operating income the first nine months of 2010 for casino giant MGM Resorts International. Caesars Palace, almost as big, is owned by privately held Caesars Entertainment Corp., formerly Harrah's, so its financial information isn't broken out. During the nine-month time frame, Las Vegas Sands Corp.'s Venetian and Palazzo had combined operating income of $67.6 million, and Wynn Resorts Ltd. saw a $67.9 million operating loss at its nearby Wynn and Encore Las Vegas, including one-time costs.

"If you take a look at everything that's opened in recent years, these properties have all struggled out of the gate," said Bill Lerner, an analyst with Union Gaming Group. "I'm not sure why this will be different."

The year-old CityCenter, Cosmopolitan's other neighbor and an MGM Resorts joint venture, generated an operating loss of $1.27 billion the first nine months of this year. It's now worth about one-third of the $8.7 billion it cost to build, according to MGM financial filings. And Wynn's two-year-old Encore bumped the company's Vegas gambling revenue up only 5.4 percent in 2009 despite adding a huge new casino.

Looking to hit the jackpot
Tourism to Las Vegas has increased from the woeful days of 2008 and 2009, though not at the rate developers have added rooms and casino space. And Lerner says the Cosmopolitan will get significant help from being owned by Deutsche Bank, which gave the project far lower interest rates and better terms than usual for commercial loans.

The Cosmopolitan is in a better position than it might have been, says CEO John Unwin — adding he's not an economist but an optimist.

"Once the consumers get confidence, I think once they see the numbers and see the growth, I think it'll pick up," Unwin told The Associated Press. "I'm happy to be opening this year and not last year."

The Cosmopolitan's insides are designed to make people gawk. Video-screen columns cycling moving art greet visitors in the lobby. Across the resort, guests can sip cocktails inside a three-story chandelier. And its 13 restaurants (including an unmarked pizza joint) will offer world-class cuisine to please any New York foodie. But the Cosmopolitan's biggest trump on the competition might be its rooms, most of which offer spacious terraces with incomparable views of Las Vegas. Most were planned as condominiums — big and with kitchenettes.

The resort has enough gambling space to fill almost two football fields, with some spots offering slot-side bottle service. It'll have just a handful of baccarat tables to start, even though the generally high-stakes game has held its popularity through the recession; Unwin said the Cosmopolitan's gambling business will adapt to its customers.

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Deutsche Bank hasn't disclosed its long-range plan for the Cosmopolitan, which landed in its lap in August 2008. But its goal is to sell the resort, according to a November regulatory filing. A spokesman declined comment except to say the bank is convinced the resort will serve the bank's shareholders as well as possible.

Analyst Lerner called Deutsche Bank's approach "pragmatic."

"It's going into a difficult economic environment," Lerner said. "My sense is there will be some cushion for some flexibility afforded to this project."

But Kansas billionaire Phil Ruffin — who bought the nearby Treasure Island hotel-casino from MGM Resorts two years ago for $775 million and is in the market for another big resort — says the Cosmopolitan doesn't pencil out and isn't worth buying.

It's too expensively built, the land is too small at 8.5 acres and it lacks a headline show or a database of regular customers, Ruffin said.

"They would have to take such a tremendous hit before anybody would get interested, I would imagine," Ruffin said. "Their strategy probably is to see what kind of profits the thing can generate, and then they'll know what they can sell it for."

Partnership with Marriott
That's where the Cosmopolitan's marketing comes in. Unwin and his 5,000 employees are seeking customers who either aren't interested in Las Vegas or feel they've been there and experienced all it offers.

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The hotel has a partnership with Marriott International Inc. that lets loyalists earn and redeem points at the resort. And the Cosmopolitan has sponsored events like the New York City Wine & Food Festival, the U.S. Open tennis tournament and Lollapalooza.

Customers will get loyalty points for everything they do in the resort, not just gambling as at other Sin City resorts, and they'll earn a free night's stay for every eight they pay for, Unwin said.

Competitors, including Ruffin, are concerned that as the swankest hotels lower prices to fill vacancies, the discounts will ripple through the market and push older resorts' prices to rock-bottom. But that's not worrying Unwin.

"I might say the same thing if I was in their position, but I think the market's in a condition that it can absorb the rooms, and I think we'll help bring some new business to Las Vegas," Unwin said.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Photos: What's new in Las Vegas

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  1. 50 years of Danke Schoen

    Fifty years ago, a young Wayne Newton played his first gig in Las Vegas. Now, he tells the story of his iconic career over the ensuing half-century in a new show called “Once Before I Go.” Playing Tuesdays through Saturdays at the Tropicana, the show features a full orchestra, video clips and reminiscences from the man rightfully called “Mr. Las Vegas.” Show tickets are $88 and $110, with VIP packages, including a meet and greet session and photo op, available for $165, plus service fees. (Ethan Miller / Getty Images for Tropicana) Back to slideshow navigation
  2. City on the Strip

    If you build it, will they come? As the largest privately developed project in U.S. history, the new CityCenter complex on the Strip is part destination resort, part urban enclave -- and a major roll of the dice for its owners, MGM Mirage and Dubai World. Its size and style -- four hotels, two residential towers and a 500,000-square-foot "retail district," all designed by world-class architects -- are like nothing else in Vegas and may serve as a sign of the next step in the city's evolution. (Ethan Miller / Getty Images for CityCenter) Back to slideshow navigation
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  4. Up, up and (hopefully not) away

    Looking for a new perspective on the Strip? If so, then climb aboard the new Cloud Nine Balloon, which offers tethered balloon rides to a height of 500 feet above the ground. Eleven stories high, the balloon carries up to 30 people in a circular gondola and provides a 15-minute panoramic “flight” before being winched back to earth. Daytime rides are $22.50 for adults and $17.50 for children ages 5–12; evening rides are $27.50 and $17.50. Children 4 and younger fly free. (Cloud9vegas) Back to slideshow navigation
  5. Plush planet

    Apparently, CityCenter didn’t use up all the window glass on the planet: just across the Strip, the Planet Hollywood Resort & Casino will open its own skyscraping hotel in early 2010. Managed by Westgate Resorts, the 52-storyPH Towers will feature 1,200 timeshare units along with a health club, meeting facilities and a tropical pool complex with its own sandy beach. As a vacation-ownership resort, it will also offer easy access to the dining, gaming and entertainment facilities at Planet Hollywood. (PR Newswire) Back to slideshow navigation
  6. Ruck and roll

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  7. From Music City to Sin City

    Alas, it took all of five hours for Garth Brooks’ un-retirement concert series at Wynn Las Vegas to sell out, but country music fans can still get their boot-scootin’ boogie on this winter. This month, Trace Adkins plays The Pearl at the Palms Casino Resort on Dec. 9; three days later, Randy Travis takes the stage at Monte Carlo. Then, on Feb. 6, George Strait (aka “The King of Country”) and Reba McEntire (aka “The Queen of Country”) will hold court at the Grand Garden Arena at MGM Grand, with Lee Ann Womack opening. (Tami Chappell / Reuters) Back to slideshow navigation
  8. Downtown goes upscale

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  9. Making an impression

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  10. Exclusive enclave

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  11. Take the leap

    Leave it to the folks at the Stratosphere Hotel & Casino to find yet another way for adrenaline junkies to scare themselves silly. Already famous for its sky-high thrill rides, the resort is adding a new one called a Sky Jump that essentially lets guests throw themselves off the 108th floor — fortunately, while being attached to a harness/cable system that stops them before they hit the deck 107 stories below. The ride is modeled after one in Auckland, N.Z., but alas, you’ll have to wait to take the plunge since the Vegas version won’t open until April. (Ethan Miller / Getty Images) Back to slideshow navigation
  12. He writes the songs

    Who? Barry Manilow, of course, who will end his current show at the Las Vegas Hilton on Dec. 30 and open a two-year run at Paris Las Vegas on March 5. While the former show was billed as a collection of his greatest hits, the new gig is expected to highlight classic love songs, many of which will appear on his next album, “The Greatest Love Songs of All Time,” which is set to drop Jan. 26. Shows are Friday–Sunday; tickets are $95–$299, plus service charge. (Paris Las Vegas via AP) Back to slideshow navigation
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  1. Image: Opening Of Wayne Newton's "Once Before I Go" - Show
    Ethan Miller / Getty Images for Tropicana
    Above: Slideshow (12) What's new in Las Vegas
  2. Las Vegas Strip Exteriors
    Ethan Miller / Getty Images
    Slideshow (23) Viva Las Vegas!

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