Q&A: Bill McBeath

By Richard N. Velotta

Friday, Dec. 11, 2009 | 3 a.m.

If you build a resort with the lofty expectations associated with CityCenter, you can’t hand over the keys to just anybody.

When it came time to choose a president and chief operating officer of the Aria hotel and casino, the centerpiece of CityCenter, MGM Mirage turned to Bill McBeath, who has held key management positions with some of Las Vegas’ most successful properties — Mirage, Treasure Island and Bellagio.

McBeath, a UNLV graduate and the university hotel school’s alumnus of the year in 2004, joined MGM Mirage in 1987.

In his newest position, he not only oversees Aria, which opens Dec. 16, but also Vdara, the nongaming condo-hotel that began the phased opening of the $8.5 billion development Dec. 1.

McBeath talked with In Business Las Vegas about Aria, CityCenter and what they’ll mean to Las Vegas.

IBLV: It’s almost go time for the opening of Aria. What still has to be done before the doors open?

McBeath: Right now, it’s the final finishing touches on the construction. It’s about 99 percent done. It has to be cleaned. Then, the (furniture, fixtures and equipment) load in and the last of the (operating supplies and equipment) load in. Most important, though, is bringing the people in. We started this process roughly 15 months ago by creating a rich, diverse, qualified applicant pool. We generated 175,000 applicants, interviewed 55,000 potential employees and we are ultimately going to employ over 12,000. Right now, we have the load in of the employees being introduced to the new facility and starting the process to bring these buildings from construction and development to operating businesses. We had 1,400 new employees arrive at Aria, our first day, Dec. 1. It was our first big load of new employees. That continued for the next couple of days. Last week, 7,000 new employees were introduced to Aria.

So that’s the most significant right now, getting the people in. They’ve gone through, they’ve been hired, they’ve been processed, they’ve been fitted for their uniforms. Now, it’s the introduction to the facility, their bosses into the entities in which they’ll work in, whether it’s a food-and-beverage outlet or housekeeping or gaming and developing the core service standards and training. So when we open the doors on the 16th, it will be as seamless as possible.

What keeps you up at night when you think about the opening on Dec. 16?

(Laughs) Everything. There’s 91 separate IT applications on this campus and a lot of them are first generation. Innovation was a key development principle for us and we looked at it really simply. Innovation had to do one of two things: increase operating efficiencies or enhance the guest experience. We have systems and processes and IT support that are first of a kind.

Can you give me an example?

Server-based gaming. We’re going to be the first server-based gaming floor in Nevada. Our in-room entertainment system control that manages the guests’ experience from the time they walk in the room, the curtains come back on a reveal, the temperature is preset, the TV turns on and welcomes you. And then you manage the room through the icons on that TV through one remote control or a touch-pad screen next to your bed. Using (radio frequency) technology, you could never put dimmers in standard rooms — you could never afford it. We’ve always put dimmers in suites to allow the guest to manage the room environment in terms of lighting, sound and ambience. Through this new technology that we developed with Controlled Floor, we’re going to be able to manage the room.

How did you first hear about the CityCenter concept and what was your first impression when you heard it?

We were in a very powerful growth mode and the company was struggling with where we should invest next. Should we buy another company? Should we build something? And we had this incredible acreage, this 67 acres with 1,700 linear feet of Strip frontage. And there had been a lot of talk: Should this be a Gen-X? Should it be this or that? What are we going to build on this? And when Jim (Murren, MGM Mirage CEO) went to the board of directors, he said, “I think we should develop a mixed-use development here.” So it was probably midway through 2004.

What did you think about it then?

Being a gaming resort operator at that time, I thought, “Well, you know we probably don’t need another casino-hotel.” We had 10 or 11 of them at that time. But this sounds exciting, this sounds unique. We needed to create a different product. Wynn’s resort hadn’t even opened yet and we were anticipating, “What is Steve (Wynn) going to do?” and how are we going to react to that? Is he going to build a better product than Bellagio? And he built a wonderful product. But we already had the most iconic, luxury destination-resort casino-hotel in the world in Bellagio. I didn’t know if we were going to improve on that, but we had to differentiate it and create a unique experience and provide the same levels of service and choices that we did at Bellagio in a different setting. At CityCenter, combining all these elements of pedestrian circulation and vehicular circulation and the public art program and the strikingly unique architecture and designs that had been incorporated was just fascinating. We traveled around the world to look at all the great developments and all the great architecture, which gave us perspective. We didn’t want to do something that had been done before. And that’s how the process started.

How has that initial impression changed over time?

I don’t know that my initial impression has changed. Obviously, the residential market kind of flattened out when the credit markets took a leave. Luxury retail was questionable a year ago, all things that you would expect in recessionary times, let alone in the most severe recessionary times any of us have ever experienced. So it did galvanize my perspective that when the economy comes back, when people start traveling again, when people start spending again, people want to be entertained, people want something new, something fresh, something innovative. I truly believe that we were going down that road, that we had created something that fit all those prerequisites. It was just getting the opportunity to execute it. And it’s been very gratifying.

What was going through your mind when you first learned that your joint-venture partner, Dubai World, had sued MGM Mirage last spring?

For me, I ran parallel on the development. I was running Bellagio at the same time I was spending 30 to 40 percent of my day in development meetings at CityCenter. I had offices in both places, obviously, and had been there since Day 1 when the board approved Jim Murren’s concept to develop this property.

Really, for me when that happened, it was a very defining moment in my life in that I wasn’t worried about myself, but I was worried about the people who had confidence and trusted me and trusted Bobby (Baldwin) and trusted Jim. They left their jobs at Bellagio, Mirage, MGM Grand and Mandalay Bay to come here and be a part of the development team to be a part of the preopening and operating team because there are big decisions to be made when opening one of these facilities. It was my concern for them and their families and it was a very difficult time for me emotionally.

And as Jim said at the opening of Vdara, we never wavered. I had a belief that Jim and our board of directors would see this through. I kept thinking, “Man, we’re so close and this is going to be so spectacular and we’ve worked so hard and integrated all these things.”

I’ve had the opportunity to be the president of Treasure Island, Mirage, Bellagio. I knew everything that worked and I knew everything that didn’t work and I got to take all of that and incorporate it from the back of the house in, from inside out. And I thought, “God, the world is never going to see what we did.”

But that all changed. From that point forward, we could see the light at the end of the tunnel. But interestingly, we spent about 2 1/2 months dealing with that issue, dealing with the banks, dealing with our partner. And we lost that time to prepare for the opening. From that point forward, it was a race to the finish line.

How was the relationship with Dubai World repaired?

It took a lot of dedicated people, a tremendous amount of focus, a tremendous amount of energy. But we ultimately righted the ship because financially the ship was righted, but operationally, all of our timelines, the decisions we had to make to order (the furniture, fixtures and equipment), to order (the operating supplies and equipment), the whole hiring process, were off.

So how do you do that, with sit-down meetings?

Yeah, you sit down and obviously the old playbook that you worked diligently on, doesn’t work. Every division, every department with a critical path with timelines and milestones for everything, from this table to this carpet to that napkin to that piece of silverware, every single decision had to be considered. We don’t just say, “OK, we’ll just go buy that stuff.” Every single decision, every single product you see that touches a customer, there was a tremendous amount of debate. What is the best product? What is the best look? How will it hold up? Will it withstand the cleaning?

We just stepped back and reorganized. We told everybody that we had been given a second life here, let’s not waste it. We had to work harder and more intelligently than we ever had, but I think the collective sigh of relief that we were actually going to get to execute this and show the world what we were capable of with all this incredible talent of design, architects, interior designers, engineers, construction management and Perini (Building Co.) to bring this to its fruition.

What do you think will be the biggest surprise awaiting guests and visitors to CityCenter?

It’s a great question and I get asked that a lot, and I still haven’t been able to define any one aspect of it. The thoughtful integration of all the elements that you can move so seamlessly from space to space and enjoy so many culturally relevant things, whether it’s the art program or architectural relevance in the buildings or interior-design relevance in terms of the public spaces. There are so many “wow” factors that it will take people … I have taken people on tours of four hours through the building and they say, “I can’t wait until it opens so I can spend more time.” You can walk through these spaces, especially Aria, and it’s 8 1/2 million square feet of some of the most finely detailed space.

But again, it wasn’t about heavy layers of interior design, just like the architecture next to it. We tried to use the architecture to drive into the interior to create the sense of space and place. But the volumes in Aria and the moments and the natural light that we’ve introduced and welcomed into the casino, the finishes, the colors, the palette are almost antithetical to the exterior with this shimmering glass building. They’re very warm and very organic in nature.

There are some critics out there who say no matter how well designed or pretty the new buildings are that there’s no substitute for providing a better version of what made Las Vegas famous — its casinos. Explain why you think those critics are wrong.

Well, we have a casino. We didn’t build a mixed-use development without a casino. The casino is the centerpiece. In layman’s terms, it’s the anchor tenant of the whole development and, I believe, the most spectacular resort casino ever built. Time will tell. I opened the Mirage with Bobby Baldwin as director of marketing and I heard the same comments — we were told we had to make a million dollars a day to break even and no one could ever achieve that. Mirage was a paradigm shift — an overused phrase, but it was a true paradigm shift. We made money in retail. We made money in food and beverage. We made money in entertainment. The fact that we made a million dollars a day in the casino on top of all the other revenue, obviously, Bellagio did $200 million in cash flow its first year. Again, having left Bellagio, I wouldn’t have left Bellagio unless we were truly creating what was going to maybe not be better, but be different and be spectacular. For all those people, when they see the building and when they see the people who want to enjoy these buildings and enjoy these environments, it is going to make … our sister properties get to benefit from the association with the newest MGM brands. Our competitors don’t. Our sister publication, the Las Vegas Sun, reported that Aria’s casino floor will be the first to network slot machines from different manufacturers. Why is this advantageous and how did the company get the manufacturers to buy into that?

Part of my MGM Mirage responsibility was always to be the gaming guy. I run the race and sports book operation for the collective company. I’ve always driven our development on the slot and table games operation side. And I met with the then-chairman of (International Game Technology), T.J. Mathews, and they made this grand presentation about server-based gaming, the next new big thing. I told them what my concerns were: We’re opening in three years — is server-based gaming going to be ready? I was promised it was going to be ready, I was promised that they were committing the resources to develop it. Obviously, other manufacturers were running parallel with their server-based gaming platform. IGT provided MGM Mirage with its infrastructure support on its player-management system, accounting for our slot system. So we were kind of already committed to that program. And, at that time, they were the furthest ahead in server-based gaming. So we developed it with them.

They wanted to have this broad thing and server-based gaming was going to do 10,000 things. And I told them, “It’s been my experience in rolling out new technology that we should focus on what’s really important where we’re going to get the greatest payback.” And I listed the following items: an accounting system and player interface that works, give me access to dynamic content, i.e. I can change out the machine without having to do a conversion kit and, as important, give me dynamic pricing, because on a video monitor top box and belly glass and video reel presentations, I can change a nickel to a quarter to a dollar to a $5 machine based on supply and demand. We’ve always had that ability to do that on table games.

If you have a fixed number of units, and as demand goes up, you can charge more for sitting at that seat. We’ve never been able to do that. The slot floor was static in terms of its content and, more importantly, because of its pricing. So I can provide more video poker product or lower denomination access during slower periods or times or when I have a different customer: summertime midweek versus peak season on the weekend and during special-event periods when the town is at max capacity. People don’t stop coming to Vegas because the rooms are sold out, it’s just that more people go in the rooms. Even though we run at 93 percent, you see the difference between Super Bowl or a big fight weekend or New Year’s Eve, the amount of people. Where are all these people staying?

So having that flexibility to provide the options for those people from a customer-service perspective and to maximize the revenue potential, because it is a different customer, from a pricing standpoint, I believe was the most significant benefit and that was the focus Now, obviously, to get the manufacturers together, it was just very simple and I met with all the CEOs. Brian Gamache (chairman and CEO of the company) has been a great partner with WMS Gaming, Dick Hadrill at Bally and Patti Hart, the new CEO at IGT. We’ve had our conference calls, we’ve had our issues, we’ve had our battles. And although we’re not opening up a 100 percent server-based gaming floor, 100 percent of the IGT product is going to be server-based gaming, most of the WMS product, hopefully within the next 30 days, and then the Bally’s, Aristocrat and Konami by the end of the first quarter. I think it took the weight of MGM Mirage as a customer to pull these guys together or server-based gaming would have never come to fruition at Aria

Some are saying we should expect a traffic nightmare when CityCenter opens. But a lot of them don’t know about the underground access network. Give us some details about what’s under there and how the traffic flow will stay manageable.

One of the great stories that people don’t realize is that you don’t see any service vehicles on grade in CityCenter. I think the true engineering innovation of CityCenter is what goes on subterranean here. Every single trash stop, loading dock, warehouse and access point is below grade. When you create this very dense urban atmosphere that you’re trying to replicate New York or Fifth Avenue, what we were able to do is take off all the service vehicles on Fifth Avenue. We were able to take all the cabs off in the porte-cochere of Aria. All cabs come up from underground. All limos come up from underground. So the only vehicles coming up to the porte-cochere are valet parking or drop-off with no service vehicles.

It’s a very important thing that we spent a lot of time on the traffic studies. People say, “Well wait until you load in all of those employees.” Well, the employees are replacing 10,000 construction workers, and we have had no more than two lanes on Frank Sinatra Boulevard for five years. We’re going to have the whole benefit of Frank Sinatra Boulevard. When people keep asking me about the traffic, I say traffic is good, congestion is bad. I think we’re going to have a lot of traffic, positive traffic, both vehicular and pedestrian, and CityCenter is going to move the epicenter of the Las Vegas Strip to the benefit of MGM Mirage because of its proximity to the rest of our properties.

Although MGM Mirage has played up the LEED gold certification on the buildings, some critics say the fact that smoking is permitted in the casino makes this a somewhat hollow honor. Explain why you think those critics are wrong.

What some of the critics don’t know about the casino is the air system in the casino. We have an air displacement system in the casino which, when you spend this kind of money and if 30 percent of the population smokes and you omit them from your casino, you’re giving a competitive advantage to someone else. We have nonsmoking areas in the casino. We have a nonsmoking poker room. We provided a nonsmoking, nongaming experience in Vdara that has direct access to Aria. But the air-displacement system is very expensive, very complicated and had never been done in Nevada on this scale. We had to reengineer slot machines and slot machine bases.

If you think about it in simple terms, cold air, when delivered, drops to its lowest point. So instead of sending air at 700 feet per minute in terms of velocity, you do radial diffusers in an overhead system which mixes the air. You have to deliver that air at 50 degrees to have it at 72 degrees at human scale. And you’re spending this energy and it’s circulating and it’s mixing the air — it’s a mixing system. With mixing systems, you’re mixing all the pollutants — smoke, dust, pollen, whatever, with smoke being the primary culprit in a casino. But with an air displacement system, you’re delivering the air to have it at 72 degrees at human scale, it comes out at 69 degrees. Its velocity coming out because of all the vending you provide, is 50 feet per minute — fairly perceptible to touch. But cold air is heavier than warm air and displaces the next heaviest air and it stratifies going up. So you’re delivering that air at 72 degrees at human scale and no one cares that it’s 85 degrees other than the guy changing the lights in the ceiling.

But you’re then leveraging physics. As the warm air rises, it takes with it all the pollutants. We tested this in a lab in Sussex, Ky. It was really fascinating. They put these big galvanized steel drums in there with 200-watt bulbs and we had the actual slot machines and their thermal load and the people. And then we had everybody in the room smoking with the air-displacement system working and you just watched the plumes of smoke go straight up in the air.

I’ll go back to solidify my point. In a mixing system, you turn the air over roughly six times an hour. In an air-displacement system with the kind of cubic displacement we’re providing — about 10 percent greater cubic displacement per square foot than Bellagio — we turn the air over 60 times an hour. It’s much more sophisticated. Plus at Bellagio, we tried the air screens around the blackjack game, so every table game other than dice has an air screen that vents and protects the dealers as well and helps lift the air out.

You sound like some kind of physics expert.

Well, I had to take charge of the air-displacement thing. No one wanted to take ownership of it, and Bobby (Baldwin) said, “Well, it’s your casino, you better figure it out,” so I became an expert on air displacement.

Has a worst-case scenario even been contemplated by MGM Mirage executives regarding the success of CityCenter? If they have, what is it?

Because of the equity contributions to CityCenter, you’re going to have this $8.5 billion product that’s only going to have $1.8 billion in debt. The power of these businesses, the quality of these businesses and what we believe the consumer demand for them will be, we haven’t spent a lot of time on that.

How is Crystals going to be different from other high-end retail outlets on the Strip?

Crystals’ architecture, its interior spaces — the (David) Libeskind exterior design and the David Rockwell interior design, the Wet (Design) features that are inside, people are going to come see the architecture and the interiors no different than seeing fine works of art in a museum. The building itself is the draw. If there were not the greatest luxury brands in retail — all of them really being the flagship properties — Louis Vuitton, the flagship property in the world — and most of the other retailers, the flagship properties west of the Mississippi — even if they weren’t here, even if there wasn’t the all-star lineup,the interior, the architecture, the building itself is so magnificent, so spectacular, it is a must-see attraction.

Many people don’t realize how powerful the Mandarin Oriental brand is worldwide. Why is it a big deal for that company to be here?

We looked at all the high-end luxury hotel brands. We already had the Four Seasons at the Mandalay Bay. Everybody wanted to partner with us. We just felt the power of the brand, the sophistication of the brand and the affluency associated with them — especially combining the hotel component with the residential — that they were the best fit to maximize that component of the development.

Much has been said about whether CityCenter would cannibalize other Las Vegas properties and Aria is being marketed as a very high-end property. How can Aria not take away loyal customers from Bellagio?

Loyal customers at Bellagio will want to see Aria. It won’t be for all the Bellagio customers. Bellagio has taken on all comers. It’s taken on Wynn, it’s taken on Venetian, it’s taken on Encore and guess what? It makes more money than all of them, and it will continue to do so because of the quality of its design, the quality of the physical spaces, the quality of the restaurants, the people, the location and the absolute power of the brand. So, we believe, that instead of looking at cannibalization — and I shared this with both the state Gaming Control Board and the Nevada Gaming Commission, they both asked me the same question — in modern Las Vegas history — my definition being the Mirage opening forward and the last 20 years — any time that we have added truly innovative capacity to the marketplace, not just adding rooms onto existing boxes, but truly innovative capacity, unique developments, unique product that were highly communicated and anticipated that when they opened, visitation and gaming revenue on a percentage basis far exceeded the additional capacity that went into the marketplace. It grew the marketplace. “The rising tide lifts all boats.”

Some of my good friends told me that when Wynn opened, when I was president of Bellagio, I was going to get my clock cleaned. And I laughed. I said, “We’ll see.” They got the easy part done, if you think that’s what’s going to happen. We’re not going to just roll over. Wynn’s opening was great for the market. It grew the market. Baccarat drop went up 35 percent that year. We enjoyed the best year Bellagio ever had, did $406 million in cash flow. And we backed it up to next year and increased by 20 percent. We did $480 million in cash flow. So that kind of opening grew the market.

When you build an addition next to that, combined with a very, very, very severe recession, we didn’t see that effect. The timing of the economy stabilizing and hopefully having some green shoots going forward and the anticipation … a lot of people have saved up, a lot of people haven’t traveled and they’re looking for a reason to travel and we believe CityCenter is going to be the catalyst that revitalizes Las Vegas visitation. When it was designed, we anticipated being at 42 million to 43 million people this year. And we knew that our competitors were building other products, whether it was Wynn or Encore or Echelon or Fontainebleau, but we felt we would succeed with our understanding of the business, our understanding of design and understanding what the customer wanted.

Because the design, the development and construction process takes so long, we were designing things that we believed were going to be relevant and impactful in 2025, not 2010. I think you will see the interiors of these spaces that we did not build Bellagio.

Because MGM Mirage owns only half of CityCenter, but all of Bellagio, MGM Grand and Mirage, isn’t it better for MGM Mirage if those properties’ customers remain where they are?

Unfortunately, customers make the decision where they go for the most part. And if you don’t provide them options, if you don’t provide them opportunities for a new experience, you lose them anyway. Our company’s always been about creating new experiences, whether it be in our existing portfolio of properties with our restaurants, nightclubs, room remodels, pools, we’ve always tried so that when the customer came back, there would be something new for them, another reason for them to come back. CityCenter is in its grandest scale. I personally work for the joint venture board of directors. My only responsibility is to that board of directors. Jim Murren is the chairman of that board of directors. So it’s my responsibility and my team’s responsibility. Jim has never wavered on that. We’re going to give 100 percent to CityCenter. I have had the most incredible support from the MGM Mirage family. My colleagues, the presidents of the other properties and their executive teams and their staffs, have been nothing but supportive of us. In the end, they realize that it’s better for a customer to go to Aria or Vdara than it is to go to Wynn or Venetian.