Venetian museum deals called ‘overwhelmingly significant’

David Strow

Monday, Oct. 23, 2000 | 11:13 a.m.

Last week's announcement that the world-famed Guggenheim Foundation of New York and State Hermitage Museum of St. Petersburg, Russia, would set up shop at the Venetian was viewed as a quantum leap forward for the culture of Las Vegas and the Las Vegas Strip.

"This is overwhelmingly significant," said Steve Wynn, who began the trend toward fine art on the Strip when he opened the Bellagio with its art gallery in 1998. "This probably is one of the most fundamental developments in the history of Las Vegas. This cannot be underestimated."

But beyond the visions of new cultural life lies another incentive for the Venetian and its new partners -- the promise of new cash flow for the resort and the two museums. As many as 1.4 million tourists per year are expected to tour the unique new museums -- and it is that kind of new visitor count that could help propel Venetian officials' goals of adding as many as 5,000 rooms to the resort in the coming years.

"There are millions of upscale individuals who don't think that Las Vegas is for them," said Bill Weidner, president of Venetian owner Las Vegas Sands Inc. "It takes something like this to attract them. This is something they can identify with.

"By adding an entirely new market segment, you have to have space to house these people."

Venetian officials are saying little about how revenues from the project will be divvied up, so it's difficult to say what the Venetian will net directly from the museums' operations. The Venetian, which is building the museums at its own cost, will collect lease payments from the Guggenheim and the Hermitage, and will also be entitled to a portion of ticket sales.

The costs for building the two museums are coming from the Venetian's cash flow. Rob Goldstein, president of the Venetian, wouldn't say how much will be spent, saying only that "it will be expensive."

"The final numbers haven't been calculated," Goldstein said. "Unfortunately, costs are going up, not down."

The Guggenheim museum will be located directly between the Venetian and the main parking garage. The two-story structure will span two floors and nearly 64,000 square feet, and will be topped by a retracting skylight featuring a replica of "Last Judgment," a mural by Michelangelo. "Guggenheim Las Vegas," as it's been named, will open in summer 2001 with an exhibit entitled "The Art of the Motorcycle."

Across the casino floor, near the main entrance of the Venetian, will lie the steel-faced Hermitage museum, with 7,600 square feet of space. The Hermitage-Guggenheim, scheduled to open in the spring, will initially feature a selection of masterpieces from the two museums.

"It was something extreme for Sheldon (Adelson, owner of the Venetian) to rip out his VIP lounge and replace it with a steel box," joked Thomas Krens, director of the Guggenheim.

But it's a significant improvement over the cost required to house the Bellagio's original collection, Krens noted. Where Mirage Resorts Inc. and Wynn spent hundreds of millions of dollars on art -- and would have had to have spent hundreds of millions more to keep rotating the exhibits -- the Venetian will get a new collection of world-famed art every six months at no extra cost, Krens said. For example, the two museums own 88 Picasso paintings between them, all of which could be exhibited in Las Vegas.

A final ticket price hasn't been set, but is now being estimated at $15 for each museum, though children will be admitted for free. A package ticket is anticipated, though no details have been worked out yet.

Both Guggenheim and Hermitage officials say Las Vegas was a logical choice for their first-ever collaboration because of the 35 million visitors that come through the city annually. Few cities could host museums that could draw from that many potential visitors, they say.

For the Guggenheim, that means a chance to extend its mission of bringing art to the world; for the Hermitage, it means a new step in Russian-American relations. Russian President Vladimir Putin has personally endorsed the opening of the first permanent Hermitage museum outside of Russia, though Mikhail Shwydkoi, minister of culture for the Russian Federation, still expects the decision could draw flak in his native land.

"This project is very risky for us," Shwydkoi said. "Our high-brow critics will criticize me ... (asking,) 'Why are you putting the Hermitage in the gambling capital of the world?' But Las Vegas is now a place of family entertainment."

Though both organizations are non-profit entities, cash flow is still important -- and that should be coming in buckets for the two museums. That's particularly important for Russia, which has been suffering through a financial crisis for the last several years.

"It's not unrealistic to think that we'll make some serious money here," Krens said.

Like the Bellagio, the Venetian-based museums will likely qualify for the state's controversial "art tax" break. Since the museums already own the paintings, the 2 percent break in sales tax wouldn't be applicable.

But what about the state's 1 percent personal property tax? Even though each art collection will stay in Las Vegas just six months, the state is entitled to collect taxes on it.

Mark Schofield, Clark County assessor, said the same question came up when the Rio displayed an exhibit of Russian historical art two years ago. At that time, the Clark County district attorney determined that the art was tax-exempt.

"I'm reasonably certain, because of the last opinion, that this will in fact be exempt," Schofield said. "In either case, I'm going to revisit it with the district attorney. I want to make sure the law is followed to the letter."

Beyond direct revenue benefits from the Venetian, the resort should also benefit from increased visitor traffic and new marketing prestige. And that has Venetian officials already plotting new expansions to the 3,000-room resort.

When the Venetian opened in 1999, Adelson envisioned building a second, 3,000-room tower at the site. Those plans have apparently now been expanded to a total of 5,000 new rooms -- which would give the Venetian 3,000 more than the massive MGM Grand, now holder of the title of the Strip's largest resort. The huge Venetian resort contemplated would encompass 2 million square feet of meeting space, 800,000 square feet of retail and 30 restaurants.

Business was already strong enough to make expansion of the Venetian a logical step, Adelson said.

"We've turned away more than enough (room reservation requests in the last seven months) to fill another 3,000 room tower to 100 percent capacity for an entire year," Adelson said.

Step one in that expansion, Weidner said, will probably be a 1,000-room tower, placed on top of the Venetian's parking garage. That project could begin in eight to nine months, he said, and could give the Venetian 4,000 rooms by mid-2002 -- though difficulties in the construction of tower one have Weidner vowing this project won't be rushed.

At an unspecified date in the future, the Venetian could begin construction of the second tower. That project would include a second parking garage, and that parking garage would be built to allow the construction of another 1,000-room tower, Weidner said.

"We believe the demand is there (for more rooms)," Weidner said. "But we're not at the point where we're ready to formally announce (the second tower).

"It's conceived to be a separate destination resort, with its own meeting space."

Whether the Guggenheim and Hermitage will help make those visions reality remains to be seen. But Wynn believes a fundamental shift in the business model of hotel-casinos in Las Vegas has already been made.

"Never again will a (Las Vegas) hotel developer be able to ignore this (an art element)," Wynn said. Other museums and other people will be here."

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