The New Money Machine Driving Las Vegas: Club Life

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2012 iHeartRadio Music Festival - Day 2 - Show
Bryan Steffy/Clear Channel/Getty ImagesCalvin Harris at work in Las Vegas.
The drive east out of Los Angeles on Interstate 15 is not very scenic. Once you pass the desert towns of Victorville and Barstow, a 360-degree panorama of sand, sagebrush and unimpressive beige mountains emerges, broken only intermittently by a boarded-up motel or burned-out diner.

As you approach the Nevada line, this is contrasted by an increasingly colorful and complex array of billboards. Once solely advertising all-you-can-eat buffets and 50-cent craps tables, they now tell the story of a relatively new industry –- one more profitable than gambling -- changing the way money is made in Las Vegas.

It's Party Time

Adorning these billboards are the faces of superstar DJs like Calvin Harris, David Guetta, Steve Aoki and Tiesto. As giants in the electronic dance music scene, they can command as much as $400,000 a night for pumping convulsive rhythms out to packed rooms of twenty-somethings. Last year the top ten DJs made a combined income of $268 million, with Harris topping even big-name entertainers like Toby Keith and Jay Z.

The premium nightclubs that host these EDM events are becoming increasingly more important to the bottom line of the companies that own them. The Cosmopolitan Hotel, for example, reports that up to 13 percent of its total revenue now comes from its club Marquee.

Wynn Resorts (WYNN), the epicenter for nightlife on The Strip, boasts three of the top 13 clubs in the country with its XS, Tryst and Surrender nightclubs combining for an estimate $170 million in revenues -- more than 10 percent of total company income.

EDM events are driving profits outside the casinos as well. This year, the annual three-day Electric Daisy Carnival -- 10 stages, 200 performers and 400,000 attendees -- pumped more than $322 million in to the local economy.

Pay to Play, Starting with a $10,000 Table

The roots of the EDM explosion in Vegas stretch back to 2005 when entrepreneurs Jason Strauss and Noah Tepperberg opened Tao, the city's first ultra-high-end nightclub.

As veteran Manhattan promoters, Strauss and Tepperberg knew that the normal procedure at hot clubs was to give VIPs easy access and premium service, while keeping the general public waiting outside for hours. With Tao, they changed the rules, ushering in the "pay to play" era -- meaning you no longer had to be cool or famous to get VIP service -- all you had to do was be able to pay for it.

That can run up to $10,000 for a prime table next to the dance floor on a Friday or Saturday night -- and that's before you add in the alcohol. Bottle service -- a bottle of the spirit of your choice, various mixers and ice -- is $750 to $1,200 a pop.

Though that may sound like a lot of money, it doesn't deter thousands of young people each year from making the pilgrimage to Sin City to experience what it's like to be a rock star. Whereas 10 or 20 years ago, a group of friends might go an annual gambling trip, today such groups are partying at mega-clubs like the five-story Hakkasan at the MGM Grand (MGM).

Nightlife Capital

The city's new economic engine doesn't show any signs of slowing, and there are plans for at least five clubs to open in the next 18 months.

"Here's what I think the driving force behind Vegas is," Tepperberg told GQ in 2012. "The people who go there, very few are from New York or L.A. or even Miami, where they have great clubs. Where do they have clubs like the ones they have in Vegas? They have mini versions of them in New York and L.A. But those don't exist in the other 46 states. You can find it, but you have to go to Vegas. That's what's happened to Vegas. It's become kind of the nightlife capital of the world."

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