Anthony Marnell III, M Resort developer

By Richard N. Velotta

Friday, Feb. 27, 2009 | 2 a.m.

Anthony Marnell III is hoping longtime Las Vegans will fondly remember the early days of the Rio.

Marnell will open M Resort on March 1 and he thinks the vibe will be reminiscent of what the Rio was when his father opened it and he worked as its vice president of corporate marketing. The father-son team collaborated on the design of M, but now the direction of the new property is in the hands of the younger Marnell.

Perched atop the high ground at the southern end of the Las Vegas Valley on the southeast corner of St. Rose Parkway and Las Vegas Boulevard, M guests will have spectacular views of the Strip and, Marnell hopes, a similarly satisfying experience at the 400-room hotel.

Marnell talked with In Business Las Vegas about the pending opening, some of M’s best features and what’s ahead for him.

IBLV: Your $700 million M Resort opens this weekend. Are you ready?

Marnell: Oh, yeah. We’re getting there. It’s around the clock now, getting ready to open, but the property’s coming together. It’s been a real fun time. All the team members are here now, so the energy is just coming up in this building. You walk it every day and see it grow and see it get bigger, but all the great smiley faces that are here now and the energy they have to get the property open is what really brings it all together.

How many did you end up hiring?

We have 1,800 people here now. They are on and going through training and walking the property and getting to their spaces and getting it cleaned up and ready to go.

What makes M different from other local resort properties?

I don’t know if anything makes it necessarily different. I think what we’re going to do, that I think customers are going to appreciate, is that we’ve built an unbelievable food and beverage program here. We’re going to deliver that with extraordinary value, which I don’t think has been seen in Las Vegas for a long time. I think Vegas had a really good run and the value curve got far away from where the customers’ expectations were at, and it went there because it could. It was unbridled capitalism at full throttle. Now you’re seeing a major pullback from that, and it’s always been a part of our strategy to deliver great products at great prices and, on top of that, do it with the most friendly, most service-oriented team in Las Vegas. That’s the two consistent things I pitched to the team, pitched to the outside world and continually talk about. It’s a mandate for that.

One of the other big things that this property is truly different is the architecture of the building and how it lays out — the interior design and how the spaces were designed, the openness of the building, the natural light, the terraces, the decks, the patios. Everything is open versus a closed and dark casino, and a lot of people who have come through it say, “Wow, I’ve never looked at a casino this way, but this is really cool,” and people like it. So far — and our fingers are crossed — so good.

What are the advantages of M’s location? What are the disadvantages?

Some of the advantages are we’re the first stop in from Los Angeles into Las Vegas and the last stop out.

We have some very, very good residential neighborhoods in our immediate radius — Southern Highlands, Anthem, Sun City Anthem and Seven Hills and all of the different communities to the north of us. The downside is that we just don’t have quite as many homes as the traditional local hotel-casino in our immediate couple of miles radius. I think we offset that with another positive that we have St. Rose Parkway and Las Vegas Boulevard, which is a huge, huge thoroughfare for people ... into the residences that they live in. It alleviates a tremendous amount of pressure off Eastern and St. Rose, which has always been a very compacted, congested area. So we have a lot of traffic and great immediate residential neighborhoods, but we’re a little light on homes and we’re probably going to be a little light on homes. Our business plan was never based on the growth in homes to get the building built. Over the 10-year plan, it was based on that, but right now, we’re right where we thought we would be on homes, which is what we have around us.

You’ve described M as being for locals, but also attracting Southern California traffic because it will be the first resort you see coming into Las Vegas on Interstate 15. Do you expect M to be predominantly locals or tourists and what are the advantages and disadvantages of wooing those markets?

I’m following a model — I didn’t invent this model, I learned it from my dad at the Rio when it was 400 rooms and then 800 rooms — and it became a local favorite after the first year. Then, it built a secondary market of business in Southern California. This hotel as a physical building is actually almost the Rio all over again, but it’s got a couple more slot machines and a couple of additional food and beverage outlets. The advantage is that locals are used to the casinos, they go to the casinos, it’s entertainment for them. (With) the 400 rooms we have here (we will looking at) the California market as well as the small-meeting-space market. We’re not going after the big conventions because we don’t have the rooms, and that’s a good thing because they’re canceling left and right in town. We’re keeping ourselves in that 30- to 50-person niche and that’s the way I believe was the right way to start the hotel and then we’ll master-plan it over time. It’s a predominantly local hotel.

You have said that you’re opening this resort in what is arguably the worst economy most businesspeople have ever seen. What are you doing to offset the effects of the bad economy?

Well, I don’t think it’s arguably the worst time. I think it is absolutely the worst time in the history of many generations. I think you can only do what you can do. This is a real test moving forward, not only for my generation — I think it’s the first real test that Gen X and the Gen Y have had. Our grandparents had World War II and then there was the Vietnam era and all these different eras and different recessions, but we haven’t seen one of those in a long time. The only things we really saw were 9/11 and the dot-com crash, but that did not affect as many people as this has. A lot of it’s going to depend on who your partners are. Who’s your banker? Who’s your partner? What are their long-term motives? And how are those things put together and structured? I think — knock on wood — we have fantastic partners on all fronts who have expressed nothing but absolute commitment to the success of the project, no matter how long it takes. That’s a whole different conversation than what’s going on in a number of different companies right now, where you have debt-holders trying to climb into the driver’s seat of every gaming company out there. So that’s one of the things that we are optimistic about, that if things get too tough for us, we have a good partner. We also have a lot of liquidity in the company. It’s a private company and has the ability to stay alive for a long time. I think that a lot of that is going to be overcome.

Our job is to just go out and do what I’ve been talking about for the last 2 1/2 years. We need to take care of the customer, not to keep taking things away from the customer. Give the players more time on a device. We’re going to give them a great food value. We’re going to give them the best slot club in Las Vegas. It’s a volume game now and I think we have created a lot of unique things here that we are going to draw a majority of that market up here.

But there’s no doubt that there are unbelievably tough waters ahead for everybody involved. In my position, you juggle them all. I try to juggle the best interests of my shareholders, who are a small group, my bankers, my team members and keep all of that in balance going forward. It’s a daily juggling act. But you can only do what you can do. You be honest and straightforward with people, and they respect that. You get 1,800 fabulous people like we have and they’re going to come out of the gate charging and excited and try to make it happen.

One of the things you did was delay construction of 1 million square feet of retail space. When do you expect that to get on track?

It’s hard to say right now. Every day in the paper I read something else about another what I would call big-box retailer on the verge of bankruptcy. Without those guys, it’s very, very hard to build a retail center of that magnitude. They are the anchor tenants. I think there’s still a lot of interest and I know there’s a lot of interest from Taubman Centers and we have a huge interest in doing that with them. I think that we would be one of the first retail centers up on the drawing board when the timing is right. But based on where this economy is now and where it seems like it’s going to stay for a while, it could be five years away.

Do you have any prospective tenants for the retail space?

We have a lot of expression of interest and a lot of prospects for the site with some of the biggest names in retail. But one of the things that I think will evolve over the next five years is the spending habits of the consumer. And I think the retailers of today are not going to be the retailers of tomorrow, and there will be a whole new group of retailers that adjust to the consumer spending habits that are changing as we speak. They’re changing daily. I don’t know if the parties that expressed interest will be the parties that will be the parties tomorrow that will take retail to the next level.

There has been a lot said about you working with your father, who designed the Rio, for the development of M. How did that work out for you?

It worked really well. It worked a lot better than I expected. He’s been an unbelievable partner, friend, architect and contractor through this. When I went to him, I said, “You’re the architect and I’m not going to try to be an architect, but here’s what I want to create and here’s what I want it to feel like and this is what I think I see.” I didn’t put any restrictions on him and let him go be the creative guy that he is. Ninety-five percent of this building is the people of Marnell Corrao and my father. They did a fantastic job of keeping us in the loop. And that was the great part of it. We could work together, hourly if necessary. So there was no delay and it was, “Here’s what I think.” “What do you want to do?” “I like A.” “Fine, go.” Those decisions were made in 30 minutes. Some of them took longer, but some of them were literally that fast. So there was no delay in the process. That’s how this building got built 60 days short of what we said it was going to get built. It was supposed to open May 1 and now it’s going to open March 1. It’s going to come in under the budget. I don’t know of a project in this town that is going to come in ahead of the schedule and ahead of the budget. That was the relationship that kept that in check and on time and on budget. No matter how bad it gets, there’s nothing that can ever replace the experience of doing that with him, so they are never going to take that away from us.

Did you have any differences of opinion with your father in the development of M?

Oh, sure. But the differences of opinion were never in the “I’m wrong and you’re right” attitude. They were always in the best interests of the project. It was really more of brainstorming and beating the idea up for the good of the building and the development and the customer. We questioned and requestioned a lot of stuff. But I can only think of one time where it even got above a dull roar.

What was that about?

To be honest with you, I don’t even remember. It might have been about some chandeliers or something. We’re smart enough now to know that the best thing for him and me to do is to disengage, and five minutes later we’re right back to where we were five minutes prior. It goes well. It’s been a great, great time.

You also have a number of executives who used to work at the Rio. How much of the “Rio feel” are we going to see at M?

I think design and architecturally, you’re going to see none. But with service, attitude, the food and beverage programs — all those things that were created there — I just looked at it and ... saw what was going on: People were dying for what that building used to give them. You heard it all over the place, “I wish the Rio was here, I wish that service and value were back.” These were people who I had developed a relationship with there, some of them I worked for, some of them I worked with. The ones I thought could bring to light this vision again and repeat it … there’s no reason to reinvent the wheel. That wheel rolled really good for a long time and a lot of people enjoyed it. So we brought that back and we brought those people back, and we put a couple of minor twists on things, made it a little more modern, a little more next-generation, but still the same great stuff, the same great value and fantastic people giving (those things) to the customer.

The Rio had a hip and youthful vibe — at least before Harrah’s bought it. Are you expecting to have a similar vibe at M?

I think we’ll have that vibe. I think it may be a little more dulled down. I think a lot of people remember the Rio and its last three years that we were there versus the prior seven. That last three years were when the hotel really crossed the line and went to the 2,500 rooms. You had Club Rio, you had the Voodoo on the top, you had the first seafood buffet in town and it really got to the scale of a Strip property right off the Strip. I think we’ll be of a vibe and a nature that was the first seven years of the Rio, which was still a great place with great attitudes and great people. But we’re not going after the Gen Y market. We’re going to be sitting in the Gen X and the Baby Boomer market, but it’s more of a psychographic the way I look at it. People want to come out and really have a good time, and this place is not a dull place. When you walk around and see it, it’s pretty exciting. It’s got a lot of really cool details and I think the energy will be a really good one. It’s a solid vibe, but not a nightclub.

If you have that youthful vibe and hip feel, won’t that upset your core audience from Seven Hills and Anthem who may not appreciate the loud environment?

I think it’s going to turn them on. I know it’s going to turn them on. It turned them on at the Rio. As we all start to get a little older, we always like to be around people who are a little younger. We love that energy and we love that excitement. And you know, these buildings transform throughout the day. From 7 a.m. to 5 p.m., it’s a much calmer facility than it is at dinner time. From dinner time to midnight, these buildings always transform into a different crowd. So no, I don’t think we’re going to turn them off at all. But there’s a fine line there. If you go too far to one side, you’re in trouble, but if you stay on the line or go to the other side, I think you keep a really nice mix of people in your hotel, and the people who want to be around people like that have a really good time.

Anything in the building that you’re particularly proud of?

There’s a couple of places in this building that are really unique. The buffet, by far and away, has never been seen anywhere in the world. And I’ve had three different owners who are in my competitive group who have walked through the building and said, “My gosh, what did you do here?” It’s amazing. The buffet takes people’s breath away when they walk in with the huge TV wall that it’s got and the live filming studio and all the views of Las Vegas. The food line is gorgeous, the presentation is phenomenal and the things that we can do in there from a multimedia perspective are entertaining. It’s almost like a showroom. We can entertain the customers, educate the customers. It’s cozy and it’s personal, but yet it’s at a scale where it truly hits the senses when the people walk in.

On the first day when all the team members walked in there, they didn’t even rush to eat. They were all walking around with their cell phones taking pictures of it because they had never seen anything quite like it. So that’s a venue that’s definitely a must-see. And then, the restaurant on the top, the Veloce Cibo, is really cool. It means “fast food” in Italian. It’s a really cool restaurant. You have a great view of Las Vegas. It’s not a nightclub and it’s not a restaurant, it sits somewhere in the middle. It’s kind of a place where you just kind of go get some food, get it quick, it’s at a great price, but you’re not getting the boom, boom, boom. It’s more upbeat, but it’s not going to blow you out of the place. It’s got a cool vibe, so I think that’s going to be a really neat restaurant.

The other big architectural piece I think the hotel has, when you walk into the lobby and you look down at the pool and the scale of all of the decks and the terraces and the wine cellar down in the basement that comes out of the pool. Just looking at that with the concerts and the venues, you just see people walk through it and they just kind of get lost. They’re stuck. “Wow! Am I looking at what I think I’m looking at or is that really how that’s going to work?”

So those are probably the proudest points of the building that I think are different.

One of the features that regulators applauded is your on-property pharmacy. Who can use it and why do you have it?

We were trying to put together a one-stop shop and that was what came to light was putting the pharmacy in. We’ve got a couple of other venues that I’m not going to talk about yet that are coming, just little tiny details that help people have an easier day. Maybe I need to stop at the pharmacy, then go to the gas station, then I want to go eat, then maybe I want to go gamble for a little while. It’s all right here. We’ve got our own gas station, our own carwash, our own pharmacy and a couple of other little things that we’re going to put in here just trying to make it more convenient. There’s not a lot of services out here. You have to go a couple of miles either way to get to those types of things. So that was what that’s about. I think it’s going to be a huge value to the team members because they can now get a prescription, come to work, drop it off and when they leave, pick it up. It’s also for all the customers to use and they can use their slot points to pay for it. So it’s another amenity in the slot club that allows them to get more value out of their investment in the M.

Where did that idea come from?

It was mine. It was one of the few in this hotel that was mine (laughs).

MGM Mirage is an investor in M. How did that come about and what’s the current relationship with MGM Mirage? What will MGM get out of the investment?

We showed MGM (executives) the project 2 1/2 years ago and I think that they love the project, they love the location. It was not considered, and I don’t think it still is, competitive to anything MGM has. It was an entrance into the local market with a group that had been in the local market and done well with it. The project style fit where MGM as a brand is going with CityCenter and the way it has renovated a lot of its properties. The M fits the type of property that it would want to be associated with. The relationship has been nothing short of absolute A-plus from Day 1 all the way to now. They’ve been supportive. They invested their capital, they put some parameters around us on what we need to deliver and what we need to do and they’ve let us do our job. We keep them informed and when we need help, they’ve been a big brother, so to speak, if we need help with things, they’ve been right there at every step and they’ve been fantastic.

What do they get out of the investment?

They have the ability to own half the company. So that’s a big chunk of the equity in the business. They’ve positioned that as a debt instrument, so they’re in front of the equity, which is a smart way to do it in the event things don’t go as well as we’ve all planned. And then if they go as good as we’ve all planned, then they can convert and share in the upside.

How will you gauge whether the property is a success?

If I’m alive in 12 months (laughs). Success to me right now is absolutely about survival. That’s it. There’s no other measure for success right now and it doesn’t have anything to do with the casino. For a car company or a construction company or a retail company, it’s all about survival. And if you can do that and get through this time, then, to me, this is a very big win. It’s a very big win. I didn’t want to do this for the next 12 months. This is a 20-year ride in this building to be a small, private gaming company in an area that will grow over time. It’s not about as much money as I can make right out of the gate. It’s just about staying alive, getting a great team in place, getting the customers’ mind share that the M is my place, and we build a business over a long period of time.

What kind of room rates are you expecting to get?

Right now, they’re below $100. For a lot of the upcoming weeks as we open, the whole market is so down on room rates right now. There are some weeks we have that we’re sold out that we’ve had some meeting groups take the whole hotel. And then there are other times where it’s going to be a low- to mid-$100s rate from what I can see now. I don’t see any major movement in those rates for some time to come. I think that you might see some really high rates for the property when it has some of its big concerts that you’re going to have people from Southern California who are going to want to stay at the property for that particular concert. The event center we’ve built can hold 6,000 to 7,000 people so will we fill the 390 rooms we have on those weekends for a much higher rate? I’m assuming so. I think the demand will be very high, but that’s eight times a year. But after that, though, that’s where midweek’s going to be below $100 and weekends, hopefully, will be above that.

Do you have any big concerts lined up?

We have a lot of offers out right now that we’ve gotten verbal yeses on, but I don’t have anything inked yet, so I don’t want to open my mouth too soon. But we have some really good stuff, and we’re doing all kinds of different stuff. It’s for all different genres of music for different demographics, so we’re going to try a lot of stuff. You’ll see a lot of different things here.

While M is your immediate focus right now, your company has been involved in other casino projects in Pahrump and Laughlin. Give us an update on those properties.

They’re doing OK. They’re fighting through it. It’s a hard time. They’re definitely down like everybody’s down. But they’re holding their own. It’s really choppy waters right now. Some weekends you see, like President’s Day, the town was full. Laughlin was full. Pahrump was full. And then you come into it the next week and it’s very, very slow. And then the next weekend, maybe it’s half of what it was the prior week. And then the next week, it’s full again. There’s really no forecasting in the business at all now. Basically, it’s “OK, I woke up this morning and today’s here. Let’s deal with today.” Because there’s no foresight into what the weekend will bring. You kind of get an idea. We used to be off by maybe 2 or 3 percentage points on occupancy. There are weekends now that we could be off on our forecast by 20 (percent) because who knows what the next wave of bad news is that comes out on Friday and people say, “I’m not going” and they cancel or they don’t show up. Or, they say, “I’m going,” and they just start driving and they don’t even have a reservation yet. So it goes both ways. But they’re hanging in there. My definition of success is survival, so they’re surviving.

What’s next for you? Will you be doing more with the rural properties, concentrating on expanding M or do you have other ambitions to acquire or build something new?

I’ve got a couple of different things I’ve looked at. This will be the fourth or fifth company that I’ve built. And I think that on a company side, I’m not going to say never, but I think this is good. I don’t need to do anymore. And I really want to focus on this and those properties and make them as good as they can. I have another company, which is a small software company that I have that’s getting bigger and bigger all the time. I really have good people there, and I want to stay focused on that. Then, I don’t know. I don’t know what happens after gaming for me. I don’t see myself doing much more gaming. This is where I want to be on the business side. I might look at doing other things down the road, but I don’t think there will be any more big buildings or big operations.

Do your goals include developing a property on the Las Vegas Strip?

No. No, they don’t. We always wanted to get to the Strip, but, frankly, I just could never find our way into the Strip. But I think that there is still great business to be had outside of the Strip. The Strip is not what it’s always cracked up to be and there’s always a market looking for that hideaway, that little place off to the side. That’s what the Rio became over time and I think that’s what the M will become over time. I don’t have any desire to go down into that. I really don’t want this property to ever get above a couple thousand rooms max. I’d like to see it at that 1,500 level. That’s when the Rio was great, at that 1,500 rooms. The service was great, the size was just right, the staff was dialed in, but once it crossed that mark to that 2,500 rooms, it is just so terribly difficult to keep that standard on a consistent basis. You’ve got a lot of guys down on the Strip who do a great job with it. It’s not an easy environment down there. It’s a very tough world. And I think CityCenter is going to be another game-changer on that. Between Steve (Wynn) and Sheldon (Adelson) and CityCenter and the Bellagio, there’s plenty of those guys doing that down there.