The Stage

Viva Las Vegas?

Published Friday 29 January 2010 at 16:05

Las Vegas, the largest theatre city after London and New York, has been hit hard by the recession, with falling audiences and pressure to offer deals and discounts. But the tide seems to be turning - business is coming back and Cirque du Soleil has just opened a $50 million show in a new theatre. Alistair Smith reports on the downturn’s impact and the latest developments

As the West End reports yet another year of record attendances and Broadway breaks the $1 billion gross barrier for the first time, it would be tempting to think that theatre across the globe is booming, despite the recession.

Not so in Las Vegas - the world’s third largest theatre city and its global leader when measured in terms of ticketed events.

That position, and its title as the “Broadway of the West”, are under threat following two disastrous years of falling audiences and plummeting ticket prices.

As one senior entertainment executive put it: “Vegas had been going to the dogs since the recession started. Soon it may just be sand again.

“Every show has fallen badly and few have made any running profits in the last 12 months.”

That’s a pretty bleak picture for a city which only three years ago was seen as the great hope for shows leaving the Great White Way. More and more UK producers had also begun to get in on the act, with productions of The Phantom of the Opera, Mamma Mia! and We Will Rock You all making the trip to the city of lights. Only one of them - all still fixtures in the West End - remains.

Now, even Cirque du Soleil, the market leader in Las Vegas with seven high-end shows in casinos on the Strip, admits that it’s tough going.

“It’s been a rough year,” explains Jerry Nadal, Cirque’s senior vice-president. “We’ve had a challenging year, as have a lot of people, but I think, compared to a lot of the other business lines in the city, we’ve actually come out much better than most.”

The figures back him up. Overall, revenue in Vegas is down more than 20% since the recession first hit. Entertainment revenues over the same period appear to have only fallen by around half that amount. For the MGM Mirage group, for example, where many of Cirque’s shows play, the first nine months of 2009 were down 9% on the equivalent in 2008 and 11.7% on the equivalent in 2007. Comparatively, overall revenue was down 17.5% and 20%.

The final quarter of 2009, according to Nadal, was flat for entertainment at MGM Mirage and, as he dryly remarks, in Vegas, “flat is the new up”.

This has meant that after years of huge expansion in the entertainment market, things are finally starting to contract or at least plateau.

“There are over 100 shows out here. There are more shows here than New York. There are just too many shows, too many restaurants, too many nightclubs, too many everything,” reckons Andy Walmsey, a British producer and set designer, now based out in Las Vegas. “So the recession, I think, is fantastic because it’s going to recalibrate everything. A ton of shows are going to close, which is always sad for the people who lose their jobs, but it’s better for the consumer. Only the good shows will survive.”

The problem is that following the collapse in the US economy, the lucrative convention business in Vegas completely disappeared, leading to a fall in group bookings. Meanwhile, single leisure travellers have been booking later and later in the hope of getting a better deal - aware that shows are now struggling to fill their theatres.

“This has been a year that has been unlike any other,” continues Nadal. “If we took our sales figures for this year and compared the trends on a week by week basis to previous years, nothing matches.

“Because of the financial crisis, it wasn’t cool for companies to be seen in places like Las Vegas. A lot of the convention business dried up - I think it was off 30% to 33%. This year, our group sales dropped by 10%. And, with the single ticket sales, we’ve had to really work hard at packaging the shows with hotels, with restaurants. People are looking for value now, making very last-minute decisions - very, very late buying decisions. The day of shows, I can be sat there in the morning looking at sales reports and some shows are sitting at 30% occupancy and by show time, we’re up to 85/90% occupancy.”

Those views are echoed by David Schrader, managing director of Disney Theatricals, which in 2009 opened its first Vegas musical production - The Lion King - at Mandalay Bay. “The difficulty in the market is that nobody makes advanced plans,” says Schrader. “Everyone makes plans at the last minute. It’s an extremely competitive atmosphere and Las Vegas has been really challenged in the last year as the economy shifted.

“There was a huge convention business there and that has just really tapered off. But it’s starting to come back now. It seems like Vegas has managed to get through the difficult period and it is now starting to come back.”

Indeed, both Schrader and Nadal are relatively upbeat about a future recovery, even if some others in the industry are muttering that it could take as long as three to four years to get back to where it was before the recession.

Schrader says that The Lion King has proved to be pretty “resilient”, despite opening bang in the middle of the economic slump and, over Christmas, it set a new box office record, grossing $1,314,161 in a week.

Cirque, meanwhile, has just opened its latest Las Vegas resident show - Viva Elvis. Taken with its other productions, it means the company now has 120,000 tickets on sale every week up and down the Strip.

The show has a production budget of $50 million and its theatre in the Aria resort and casino cost a cool $140 million to build. So, it would seem, both Cirque and MGM Mirage - its partners on the project - clearly believe that entertainment is still worth investing in. Elsewhere in Vegas, big name acts such as Cher and country star Garth Brooks continue to shift tickets for their shows.

“The one thing we’ve got going for us - all live entertainment - is that if you look at any great downturn period, people are always looking for entertainment,” says Nadal. “So the entertainment business always seems to be the last to be hit and the first to come out of recession.

“2009 was a rough year, we think that 2010 will be equally rough in the United States, but we think that then we’ll start to see a turn around - towards the middle to end of 2010.”

Perhaps the greater problem will not be convincing people to come back to Vegas and see the shows, but rather convincing audiences to pay the same prices they were happy to shell out at the peak of the Las Vegas bubble. Some of the high-end Vegas productions were hovering around the $200 mark for top-price tickets back in 2007/8. More recently, cut-price booths have been doing a roaring business in the city, as more frugal visitors hunt for bargains. You can count on one hand the number of shows which aren’t offering regular discounts.

But producers have one big factor in their favour. Unlike on Broadway and in the West End, a show’s value is not exclusively down to the number of tickets it can shift and, in an increasingly competitive market, casino operators are looking for big name productions and stars to help market their resort. So it makes sense for them to prop up less profitable shows that aren’t selling well, but still bring something of a cache to their properties.

It’s a telling fact that many of the senior programmers for Vegas casinos are not entertainment experts but marketing professionals.

One such - Jason Gastwirth, vice-president for casino marketing and corporate entertainment for the Venetian Resort Hotel and Casino - spoke at Las Vegas’ leading conference on the gambling industry, the Global Gaming Expo, late last year.

Resorts such as the Venetian - which hosts shows such as Phantom, Jersey Boys and Blue Man Group - look to entertainment to give them a “competitive advantage” in a tough market, he said. “One of the big things is, how do you differentiate yourself? If you look at gaming [gambling] incentives, any other property can match you or look to beat you. But if you’ve got entertainment content that no one else has, then the fans of that content are going to want to visit you.”

It’s a model that was first launched in Vegas in 1989, when Steve Wynn opened the Mirage with Siegfried and Roy - Las Vegas’ first mega- production show. Since then, Cirque and its partner MGM Mirage have become past masters at this kind of branded entertainment and they are looking to repeat their previous successes with Viva Elvis.

“The Bellagio opened its hotel with O [the Cirque du Soleil show]. Now it’s just hit its 11th anniversary and the show is running at 99% capacity,” explains Nadal. “When they opened, they wrapped the hotel in the show. It was a must-see show - you had to stay at the hotel to get a ticket. The marketing was so well done in the beginning that it has carried it through all these years. When you think of O, you think of the Bellagio and vice versa. We think that Viva Elvis has the same potential to bring people into the Aria.”

Only time will tell, of course. The production is currently in previews and many will see its success or failure as a wider yardstick of whether multimillion pound production shows can still thrive in this desert.

But you wouldn’t bet against Cirque to succeed. It’s an incredible fact that the company has now opened a total of seven shows in Las Vegas since Mystere first brought the troupe’s unique brand of circus entertainment to the city in 1993. Every single one of those productions is still running.