Located on 4455 Paradise Road, a full two blocks off the Las Vegas Strip, The Hard Rock Hotel in Las Vegas opened in 1995.  For an entire generation, it changed both Las Vegas and the wider casino industry. In 2021, it reopened as The Virgin Hotel and, with an innovative business model, it sought to rewrite the rulebook of the modern casino resort, again. 

Don’t bother knocking

Since the Mirage’s opening in 1989, Excalibur, Treasure Island, Luxor and The MGM Grand had been added to The Strip by the end of 1993, adding nearly 10,000 guestrooms to what seemed a crowded market. These resorts promised something for everyone, with a focus on size and scale. Hard Rock was different. The house was certainly rocking on March 10, 1995, when doors opened to the sounds of legendary artists that wouldn’t be seen at the megaresorts. 

The resort was a joint venture between the listed, northern-Nevada casino operator, Harvey’s and Peter Morton’s restaurant brand, launching as Las Vegas’ first rock and roll themed casino; adopting the restaurant’s hallmark of displaying memorabilia in a contemporary, edgy environment. The 11-storey structure featured 339 guestrooms, a 1,200-seat venue, built specifically for live music, and a vibe that permeated throughout the resort. 

Leading casino historian, David Schwartz, in his history of Las Vegas, “Something For Your Money” cites The Hard Rock Hotel as one of the handful of properties that changed Las Vegas’ trajectory: “It was small in an era when megaresorts were the norm; it catered to twenty-somethings when the average Las Vegas visitor was in his fifties; it had no family attractions at a time when casinos were opening with theme parks and indoor rides; it put everything but gambling front and center… Most of what’s happened on the Strip since the end of the 1990s resonates with Morton’s break-the-mold concept: a resort that catered to a younger and more affluent visitor, one who – and here’s the revolutionary change – wasn’t necessarily a gambler.”

A rock star strategy From a strategic perspective, The Hard Rock Hotel in Las Vegas is the case study of perfect alignment in the Las Vegas hospitality experience.

Prior to the advent of data-driven decision-making, the positioning was customer centric and top-down. The creative visionary, Peter Morton, knew the customer, understood their needs, both physical and emotional and implemented loyalty drivers accordingly; thus, when developing a casino resort, could format a product that would meet those needs. Customers loved the experience they could get at Hard Rock and sought to repeat it on every Las Vegas trip.

Although Morton sold his interest in The Hard Rock business (except from the Las Vegas resort) in 1996, the brand retained significant awareness, not just in the Las Vegas market, but globally, thanks to the presence of its restaurants in major cities. In a casino, the name above the door serves multiple purposes, but most importantly serves as a rare marketing differentiator, with the intent of attracting the customer that you want into your building. Representing inclusion, energy, freedom, passion and a tinge of nostalgia, and with the motto, “Love All Serve All” the customer and experience were clearly defined at Hard Rock.

Circular casinos had been around since the 1960s, with bars and restaurants at the periphery, concentrating the “action” at the 
center. At Hard Rock, the bar was at the center, with the casino surrounding it. Evenings began and ended at the elevated spot, a great location for conducting conversations and commencing (and sometimes consummating) relationships.

With Morton in full control of the property from late 1997, the hotel doubled in size, adding appropriately aligned amenities, including Baby’s nightclub, one of the first to feature in a casino resort. The strategy was innovative, offering many “firsts” to the market, with the confidence that the additions would further meet their customer’s needs.

The Palms opened in 2001 as a challenger, and the LVCVA’s “What Happens Here” campaign in 2003 perfectly reflected the move to a younger customer demographic who were experiencing excess and escapism in entirely new ways. In 2004, Rehab was launched at The Hard Rock, taking the concept of a day-time pool party to new, infamous levels. Although located off-Strip, it remained popular with the younger demographic and, as noted in a previous column, mainstream resort development of the 2000s borrowed copiously from the Hard Rock and The Palms, with elevated “vibe dining,” nightclubs, pool parties and using the “center bar” concept as a design focus.

A leading executive once commented to me that every casino needs a beating heart. At the Hard Rock, the Center Bar was the biggest, loudest beating heart in the entire town. Competitors in the market coveted both the Hard Rock’s customers and their revenues, and the property remained the go-to place for a guaranteed good time throughout the 2000s.

Morton was to sell the property to Morgans Hotel Group in February 2007 for $770m, and the resort was expanded again, with two new towers added, bringing the total room count to over 1,500 and further amenities. However, the 2008 financial crisis caused a decline in visitation across Las Vegas, and the appetite for excess that was all too common in preceding years was to sharply decline. Morgans ultimately reduced its equity and as the lenders took control of the asset, Warner Gaming operated the property on its behalf.

The niche position that Hard Rock once owned was now seen across the city; nearly every property had nightclubs, day clubs, cool bars and restaurants – and with the 2010 opening of The Cosmopolitan on The Strip, what was once a challenger strategy became mainstream. The resort pushed on, but in 2018 the property was acquired by a consortium of investors and shut its doors on February 3, 2020. The house rocked no more. 

Virgin confidence

Richard “Boz” Bosworth, CEO of JC Hospitality, opened the newly rebranded Virgin Hotel as CEO and President, implementing a novel strategy he had advocated for some time, formulated in his time spent in investment management. The casino was run by Mohegan, restaurants were leased (by as many as eight different operators), Virgin Hotels and Hilton operated the rooms as part of the Curio Collection, entertainment was part of the AEG network; even the gift stores and coffee shops were run externally, much like an airport or shopping mall. Bosworth had correctly identified the theory that loyalty was 
an important driver of competitive advantage, and with affiliation to both Hilton and Virgin brands (and their extensive databases with a noted redemption pattern in Las Vegas) achieving loyalty through the redemption of points from across two proven networks could be assured for solid bookings.

To many Las Vegas customers, the Virgin brand has limited resonance, however to Brits that came of age in the 1980s and 1990s (of which I am one) there is considerable positivity towards the company. It would not be unreasonable to state that I spent a significant proportion of time and disposable income at Virgin Megastores – for many years. The brand signified challenging authority, whether established business groups (stores, phones, banking, airlines, cruises, trains, record labels, wine… and now the hotel and casino industry) and seeking to be do business the “right” way.

Indeed, having read founder Richard Branson’s biography in my teenage years, it was about being positive, fair and daring… if slightly edgy. The brand was for people like me, almost perfectly aligned demographically and in terms of psychographics, more so than Hard Rock, where the brands shared characteristics. Even as a professional working in casino development, I was an eager consumer.

As The Virgin Hotel opened in March 2021, Las Vegas was still in Covid-19 pandemic recovery mode. The customers were younger, seeking fun, engagement and experiences… “meat and drink” to the Virgin brand, however the launch was worlds apart from that of Hard Rock a generation ago.

The renovations had kept some of the previous elements and discarded others. Despite evidence that newer properties to market had borrowed liberally from The Hard Rock, including featuring ever more ornate and spectacular center bars at the heart of their properties, in a desire to prove that The Virgin was to be different from its predecessor, Bosworth removed the center bar feature entirely from the property. This was either incredibly brave, or incredibly stupid. Either way, it was a big gamble.

Across the programming, it was difficult to ascertain who the target customer was. Hilton customers were certainly not the same as Virgin customers. Casino operator Mohegan’s database was nearly exclusively based in the north-east, thus providing little gaming value. The “Magic Mike” show had decided to relocate to The Sahara. The “party” crowd had better options elsewhere. For foodies, Nobu, which opened in the Hard Rock in 1999 as a signature restaurant, faced competition from two other Nobu restaurants in the market – and a Nobu Hotel at Caesars Palace. Betfred was selected as sportsbook partner – it wasn’t yet licensed and would take two years to do so.

What remained was a misaligned collection of outlets, with little differentiation or “draw” for the curious customer. And the famed center bar, which was a draw even in the final days of the old property, had been replaced with several banks of slot machines. Bosworth stepped down in March 2023.

Experience prevails

Virgin is not the first property to have a challenging opening in Las Vegas; however, it was the first to launch with such an idiosyncratic strategy in place. Other properties, notably The Cosmopolitan or even Venetian, emphasized doing thing differently as part of their mission statemen. However, for those of us that have committed time and resource to studying strategic positioning of casino resorts, and translating these theories into practice, the transition from Hard Rock to Virgin has proved a valuable case study, and one that must be fully analyzed and discussed. 

In 2021, prior to The Virgin Hotel’s opening, I set out in the predecessor to this magazine, the three strategic verticals that any new owner needs to address when opening a new casino resort: the customer strategy, the competitor strategy and developing internal capabilities required to succeed. I closed, somewhat ominously, with the conclusion: “Having read this column, you will be in a position to analyze both new and existing properties in the market. Watch carefully. You will see how successful properties capture customer loyalty because they are positioned to do so, and when some owners/operators screw it up, the reasons will now be obvious.”

There is little doubt the opportunity that was bequeathed to the current owners was neither acknowledged nor augmented. Rather, management has retroactively had to reposition to find the correct orientation for commercial stability… whether that is related to the brand above the door… or not.

Subsequently, property leadership has taken control of several of the aspects that had been outsourced, notably the casino, and the customer experience is certainly more integrated than before; but the resort remains a shapeshifter by necessity, thanks to the lack of holistic alignment for customer segmentation. By balancing a diverse range of conventions (competing against every other facility in market for business) and with actively managed and well marketed programmatic elements to drive footfall (which was clearly not the intended strategy of the new ownership group) there is a potential pathway to sustainability. However, when a resort has to replace strategy with tactics, the opportunities for competitive advantage are severely diminished.

The Hard Rock lesson tells us that... with a clearly recognized brand, or resonant sub-brands, with strong equity, finding unmet demand within a clearly defined customer segment, and developing a product and experiences to meet the needs of the 
customer... loyalty can be achieved and outsized returns can be made, despite location. 

Conversely, the Virgin experiment tells us that... developing and operating a casino resort in a highly competitive market, not aligning the brand with experience, with little consideration of managing customers as a strategic asset, without developing internal capabilities and outsourcing loyalty drivers... not only flies in the face of the considerable research and experience found in the discipline of strategic positioning of casino resorts, but when located in a secondary location, will clearly challenge the viability of a project. 

Sometimes it is good to challenge the strategic orthodoxy of an industry. Sometimes it isn’t.

Oliver Lovat is the CEO of the Denstone Group. He advises on development and the strategic positioning of casino resorts.