July 17, 2008

Trump-atross? The mogul’s Strip tower is loaded with question marks

By STEVE FRIESS

I'm sitting at the lobby bar of the undeniably pretty Trump International Hotel on a Sunday evening about to tuck into a $21 burger and sip from an $8 pink-grapefruit soda. I didn’t mean to splurge on dinner here, but I popped in to take a look-see and realized that this was the only thing for me to do.

Which is, of course, the big problem here. The slender gold tower with the most famous name in real estate emblazoned atop it is a bafflement to all who consider its existence. It is also, by a large measure, the very last place most Las Vegas tourists should ever feel comfortable visiting.

In fact, I’m going to go out on a limb here and suggest that not only will the planned second tower never be built, but we in the media will also be writing many stories in coming years about the struggle of this property. It is the best-executed version of the worst-considered idea in Vegas today.

I’ll explain that in a moment, but consider the exchange I had when I pulled up. There’s no self-parking, and the valet woman looked me up and down when I stepped out of my vehicle. I was unshaven, wearing a gray T-shirt, ratty painter’s shorts and sandals, and I felt immediately as though I was violating some standard of decency. She was pleasant enough, but she also grilled me with a smile.

“Are you checking in?” she asked.

No.

“Are you meeting someone?”

No.

“Are you going to the spa?”

No. I assume she knew I wasn’t going to the fancy restaurant in those duds. “Just here to look around,” I said cheerily.

“You know there’s no casino here, right?”

Uh, yes. Can I have my valet ticket? Please?

Once inside, I was certainly impressed by the polished lobby with all its sparkly things and comfy sofas. But I was struck by how anti-Vegas the entire place is.

I know, I know. Exclusivity is this joint’s big selling point. But it doesn’t seem like they’re doing a whole lot of selling here. I met a Norwegian at the bar who was in on business and usually stays at the Wynn but decided to give the Trump a go because the room rates were more than a quarter lower than Wynn’s. He’s enjoyed himself here, he said, because “there’s almost nobody here, so the service is great, and it’s a lot quieter.”

That’s an endorsement, but an odd one. There are very few people who come to Las Vegas to get away from the hustle and bustle. Some come here for work and prefer to be shielded from it, true, but as Sheldon Adelson has so successfully proved, you must appeal to both conventioneers and vacation travelers in order to keep a steady occupancy level throughout the week and year.

Instead, what we have is a hotel-condo property that seems to actively discourage the casual visitor, which is, dare I say it, un-Vegasian. The charm of Las Vegas for so many is its democratic nature, the notion that you may not be able to afford to stay at the Bellagio, but you’re invited nonetheless to behold its Chihuly and Conservatory, to gawk at Cartier’s windows. Trump has a well-regarded spa and an extremely well-regarded eatery, DJT, which KNPR’s food critic John Curtas recently declared among the best restaurants in the city, if not the best.

But walking into the Trump lobby felt like walking into the lobby of some fine Chicago hotel where I’m not staying. It’s not for me. I’m not really welcome, barely tolerated. It’s odd for me to be “just looking around.”

As I said, I get that that’s not the purpose of this place; I just wonder about the premise and the business concept behind it. If he had wanted the dirty people to stop by, Trump would have included a casino, some shopping, a bunch of dining options, maybe an ultralounge.

But that’s where he gets into his biggest bit of trouble. Trump has gone all the way on the gamble that some people will want to actually live on the Las Vegas Strip. The only way he makes any significant amount of money off the deal is if he sells every one of those condos at a premium. The money he’ll take in from renting those units out as hotel rooms can’t possibly, on its own, cover the expenses of such a high-end place with so many employees and such high property taxes. And remember, he’s not getting Wynn-like prices. In fact, per Hotels.com, he’s barely getting Mirage prices. And neither Wynn nor Mirage could be profitable if that was all they were getting.

So here’s the other rub: There is absolutely, positively no evidence that people want to live on Las Vegas Boulevard. Every other condo project—CityCenter, Signature at MGM, Westgate at Planet Hollywood, whatever they’re plopping atop Barneys at the Palazzo—provides the real Vegas within a reasonable proximity to offset the prospect that this may not turn out to be the case.

Trump’s closing numbers prove me right. According to Deutsche Bank’s Bill Lerner, only 15 percent of the units had closed by mid-June, a tiny number compared with Palms Place, Signature and Panorama. (Disclosure: I am an investor in a Panorama unit.)

You might blame it on the mortgage crisis. But don’t, since Trump doesn’t. Back in March, I asked The Apprentice champ Stefanie Schaeffer, whose prize (?) for winning the reality show was becoming marketing veep for Trump’s Vegas project, whether they were seeing any troubles because of the credit crunch.

“We’re in the process of closing right now, and thus far we haven’t really had a problem,” she told me. “Everything’s been going pretty smoothly. Then again, when you talk about Cosmo and you talk about some of these other projects that stopped mid-construction or even pre-construction, you’re not talking about the Trump product, and the Trump brand carries again the Trump name, which pretty much says it all. People know they’re getting a level of excellence that is not only unsurpassed anywhere in the world but is something that speaks for itself. So even in a poor market, we’ve really been relatively unaffected.”

If they’re unaffected by the mortgage market problems, then I guess that means lots and lots of folks are having second thoughts, huh?

Schaeffer’s comment is loaded with the trademark Trump arrogance, complete with a dig at the troubled Cosmopolitan project. That air of superiority seems to will many of his projects to success, but this time, it’s a bit hard to see how that will work.

Trump has a beautiful place that nobody is going to stop in at, nobody’s going to pay Wynn prices to stay at, nobody’s going to live in. I fear a Vegas resort cannot survive on spa treatments, dinner checks and room rates alone.

My Norwegian friend said he’ll be back “until the place becomes really popular.” Which, I suspect, means he’ll be back a lot.

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