The newest hotel-casino on the Las Vegas Strip has been open for almost a year, and it has yet to turn a profit. In fact, the SLS Las Vegas is losing millions of dollars.
It isn't unusual for new resorts to lose money while trying to gain a foothold, but the SLS Las Vegas is hemorrhaging money.
The property has switched restaurants, closed the buffet and changed entertainment options, but their biggest problem is years away from being fixed.
The SLS opened in Aug. 2014. Stockbridge Capital and SBE Entertainment spent $415 million turning the old Sahara hotel and casino into something stylish and new.
There was a great celebration on opening night and the place was packed, but since then the SLS has had trouble attracting customers. It has also faced a series of setbacks.
Sam Nazarian, the driving force behind the SLS brand, gave up day-to-day operations of the hotel after flunking a drug test with the Gaming Control Board and admitted he paid millions of dollars in extortion money to a convicted felon.
His hotel has been bleeding money ever since.
Hoping to get a boost from Rock in Rio, a music festival held across the street in May, the property still lost $48.6 million in the second quarter compared to a $35 million dollar loss in the first quarter.
SLS lost $5 million on food and beverages alone. The property is getting squeezed by mounting debt. It paid $8.9 million in interest in the second quarter compared to $5.7 million a year earlier.
"They definitely seemed to have struggled out of the gate and they are still struggling so it's taking them time to find traction in this marketplace," said David Schwartz, UNLV gaming research director.
He says the SLS's biggest problem is its location. It is somewhat isolated on the north end of the Las Vegas Strip and it's too far away from the heart of the action.
Unfortunately for the owners of the SLS, it will be years before the neighborhood builds out.
A half-mile down the Strip, the World Resorts property isn't expected to open until 2018, the Las Vegas Convention Center won't finish converting the Riviera until in 2019. In addition, the unfinished eyesore that is the Fountainbleu remains the biggest question mark in town.
"I guess that the directors of Stockbridge would have a very tough decision to make," Schwartz said. Do they cut their losses, or do they put more money in? Especially if it's very close to when these other properties are opening and you're going to see a turnaround. You suddenly, if you've got so many more people coming to that neighborhood, you'd look pretty stupid if you closed. So they'll have a tough decision o make if they're not breaking even by around that time."
Stockbridge Capital said it would contribute as much as $40 million through the end of the year to pay the bills, but what about after that?
8 News NOW submitted questions to SLS President Scott Kreeger about whether the SLS would hold on for a few more years and wait for the increased foot traffic? He was also asked about whether the $40 million from Stockbridge was enough and if there were any plans to close the property.
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