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Could Kaos Closure Signal Downturn Of Las Vegas Nightclubs?

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Facebook/KAOS Vegas

Red Rock Resorts announced last week it was immediately closing its newest nightclub. 

Kaos had been open less than a year and was part of a $690 million renovation of the Palms Casino. 

The announcement was sudden, and company executives said it was because of a $26.8 million revenue loss. 

Industry watchers are now wary of a potential slowdown in one of Las Vegas’ most lucrative industries.

One of those industry watchers is Scott Roeben. He runs the blog Vital Vegas. He told KNPR's State of Nevada that KAOS had its own problems, including the fact that it was off the Strip and was paying astronomical amounts of money for talent like star DJ Marshmello.

"At various times, there has been a huge payoff," Roeben said, "But if you break this out over the number of performances just for this one DJ alone, it was about $600,000 a performance."

He said hip-hop artist Cardi B got $300,000 for her 15-minute performances at the club.

"You're talking about a huge investment in talent that a venue like this - an off-Strip nightclub - has almost no chance of recouping and that's what KAOS encountered," he said.

Roeben said some megaclubs bring in customers who spent money on gambling, rooms, and restaurants but KAOS was not able to do that.

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He doesn't believe nightclubs in Las Vegas are a thing of the past but he believes the industry is going through a "re-alignment" with resort properties looking at "quirkier" offerings that have a combination of entertainment, restaurant and nightlife.

Roeben pointed to the venue that will be replacing Hyde at Bellagio. The new place will be a supper club. 

"What I think this is, is the next iteration of nightlife," he said, "It's not a traditional nightclub. There's other things involved. There's an entertainment aspect. There's going to be literally supper - dinner - food served. So, it's a mixture of restaurant, nightclub."

However, he said there are still plans for big nightclubs in projects underway on the Strip right now, including Resorts World and the Drew, which is the new name for the old Fountainebleau project.

For years the idea behind the clubs was to get people in and get them to buy drinks, which can be upwards of $20 per beverage, and ultimately, to get them to buy a table with bottle service, which can cost hundreds of dollars depending on the alcohol that is purchased.

Roeben said people, both regular folks who saved up their money and high rollers, paid for the VIP service up clubs. The question going forward is whether that is a business model that will last.

"The issue now is whether that is kind of a reliable business model and that's why there's a red flag related to KAOS," he said, "They were not able to draw those players. They couldn't get them to gamble. A lot of places like Resorts World and the Drew have seen this business model work at other places and I think they're still committed to doing it but I think there are a lot of questions being raised now as to what those players are doing, where they're doing it and how much they're spending to do it."

Guests

Scott Roeben, Vital Vegas

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