Viva Las Vegas
Published: 09 June, 2011
The development of world-class shopping malls has been a major plank of Las Vegas’ plan to widen its appeal from the old ‘Sin City’ clientele. But now that the city is the grip of a major downturn how is the strategy working?
During the first decade of the new millennium Las Vegas was the fastest-growing city in the US, with its population growing by 20 per cent from 478,434 to 583,756. But the economic boom that drew so many hopefuls from across the US, and indeed from across the world, to seek a new life in the Mojave Desert hit the buffers.
It is a symbol of the shattered dreams of many that the city now has one of the highest home foreclosure rates in the country. Unemployment stands at 14 per cent against a US average of 9 per cent, and that in a country that lacks the social safety net that Europeans enjoy.
The Las Vegas economy was predicated on a belief that the leisure industry – the casinos, hotels, restaurants and bars that line the Strip – would continue to grow exponentially. And construction was a major source of employment building homes for the new arrivals as well as new resort casinos like the massive City Center complex.
But data from the Las Vegas Convention and Visitors Authority shows that this was a false assumption. Visits to Vegas peaked in 2007 at 39.2m, and by 2009 they had slumped to 36.3m before recovering in 2010 slightly to 37.3m. But at that level they are still running below 2004’s levels.
So what does this mean for the city’s shopping malls? Recent years have seen the construction of four major shopping malls on the Strip – Miracle Mile; The Forum Shops at Caesars Palace; the Grand Canal Shoppes at the Venetian and the Fashion Show Mall – with two Premium Outlet properties bookending the Strip to the north and south.
Remarkably, they are holding up well and that’s down in part to a shift in the nature of visits to Las Vegas. It’s the hardcore gamblers and the visitors to corporate conventions that have stayed away during the downturn. Leisure visitor numbers have proved far more robust, and that is the group that is most prone to go shopping while in Vegas.
According to the Las Vegas Convention and Visitors Authority 2010 was the first time that more than half of visitors described the primary purpose of their visit as “vacation or pleasure.”
According to Maureen Crampton, Simon Property Group’s marketing director at the Forum Shops at Caesars Palace, this is good news, because the average tourist visitor has three times the disposable income of a local shopper.
The 636,000-sq ft Forum Shops is ranked by ICSC as the most productive mall in the US, with the highest sales densities of any US centre. Yet it has no anchor department store and its layout is idiosyncratic, basically leading to a dead-end.
So why does it perform so well? Crampton says the art has been to turn the mall itself into an attraction, with its signature statues and spiral escalators. And it’s closely integrated with the Caesar’s Palace resort and casino. “We consider Caesars to be our anchor,” she says, “But there’s cross-fertilisation. We’re each driving traffic both ways.”
Early indications are that the good times are back at The Forum Shops, with the first two months of 2011 seeing double-digit year-on-year increases in footfall meaning traffic is now up on the previous record years of 2007/8. According to Crampton this not only reflects a bounceback in visitor numbers to Vegas as a whole, but it specifically relates to work Simon has done on the mall.
A new extension has created a prominent entrance on the Strip, and in addition it has created a three-storey trading space that has proved attractive to some interesting new brands like Mark Jacobs, Harry Winston, Ted Baker, Agent Provocateur, Ugg and Californian favourite Chrome Hearts.
“Some major new brands like Gucci, Versace and Burberry took the opportunity to upsize last year,” she adds. And the biggest vote of confidence came in December 2010 when H&M opened its biggest store anywhere in the world in the 60,000-sq ft space formerly occupied by the toy store FAO Schwartz.
At the same time Tournel has also just opened the world’s biggest watch store, specialising in luxury brands to appeal to the high rollers. And for Crampton these two openings epitomise the breadth of the Forum Shops’ offer. “We can appeal to the masses as well as the high end,” she says.
Since it opened 20 years ago The Forum Shops has seen a string of rival openings, the latest being Crystals at City Center. “Every time another mall opens we grit our teeth, but it just seems to bring more business to Vegas,” Crampton says.
In terms of size at least, The Forum Shops biggest rival is Fashion Show Mall. At 1.89m sq ft it is one of the world’s largest malls and it is anchored by no less than seven major department stores.
Jim McMichael, senior marketing manager for General Growth Properties, agrees that the growth in leisure visitors to Las Vegas has helped the city’s malls. But he points to a specific sub-set, the international visitors, as being key. “International shoppers spend more and dwell longer,” he says. “They only make up 18 per cent of Vegas visitors but they certainly form a higher proportion of Fashion Show’s customers.”
With this in mind GGP has been targeting its tenant mix at this group. It brought Desigual from Spain and Superdry has chosen Fashion Show to open only its fifth US store.
But the biggest retail draw is the unrivalled range of department stores. One is currently dark following Macy’s takeover of Robinsons-May but Forever 21 has just opened its biggest US store and it effectively functions as the seventh anchor.
The stores run the whole gamut of US retail from Macy’s and Bloomingdales in the mid-market to Nordstrom and Nieman Marcus at the high end.
To European eyes one of the standout elements of the Fashion Show Mall is the intense commercialisation activity. More than 50 carts and kiosks line the malls and although there are a lot of them McMichael insists it can be justified because of an intense focus on merchandising and service standards.
And sightlines are dominated by massive poster sites suspended from the mall ceilings. The Sky Murals, as they are called, are managed by Clear Channel, which also handles the huge display screens beneath The Cloud, Fashion Show’s impressive entrance statement on the Strip.
Despite all this activity, McMichael says non rental income is still running at less than 5 per cent of revenue.
But what makes Fashion Show stand out are the fashion shows themselves, taking place during peak hours on Fridays, Saturdays and Sundays. “We’re competing with the Pirate Shows at Treasure Island and the Bellagio Fountains,” McMichael says, “But we wanted to do something that wasn’t tacky.”
The shows take place on a purpose-built runway which rises out of the mall floor and they showcase the merchandise of mall retailers. Retailers don’t pay to be involved – and running a fully specified production studio is a massive cost for the landlord – but according to McMichael the show can drive sales increases of as much as 40 per cent when a store is featured
