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Inside the SLS Las Vegas: An LA club guru bets big

Vegas is back.

Mostly.

Tourism through the first half of the year is up more than 4 percent. Sin City is on track to top 41 million visitors in 2014.

Hanging above the "Center Bar," a Pepsi-branded LED display with 2.1 million pixels.
Harriet Taylor | CNBC
Hanging above the "Center Bar," a Pepsi-branded LED display with 2.1 million pixels.

However, this isn't your prerecession Las Vegas. The Strip is more heavily reliant on international visitors, who spend on average $400 more per trip than Americans do, according to Union Gaming Group. Also, young millennials visiting from major feeder markets like Los Angeles are less interested in gambling and more interested in partying.

In the midst of all this, the SLS Las Vegas opens this weekend—the first major casino hotel on the Strip in five years. The development is owned by legendary Los Angeles club and restaurant entrepreneur Sam Nazarian, who expanded into boutique hotels through his company, SBE. The 1,600-room SLS Las Vegas contains several of Nazarian's signature restaurants (Umami Burger, Katsuya, Bazaar from Jose Andres), and it is Nazarian's largest development ever.

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It's a big bet that looked like a bad one not too long ago.

SBE bought the old Sahara property in 2007 for a reported $345 million. The timing could not have been worse. The site's location on the north end of the Strip was in the worst possible spot. Projects on surrounding property stalled or went under.

The hipster millennials the SLS targets prefer clubbing to gaming.
Harriet Taylor | CNBC
The hipster millennials the SLS targets prefer clubbing to gaming.

"We pride ourselves on being fighters. We've never given back an asset," said Sam Bakhshandehpour, SBE president. "We persevered through the downturn, we bought back our debt, we raised financing when there wasn't a dollar of financing available for a casino development."

Two years ago, SBE finally broke ground. "We decided this is the time you begin construction, you get ahead of the curve, because we knew for a fact that investments would come into this territory," said Bakhshandehpour, who noted that altogether, the company has spent "$800 to $900 million" in Vegas, including $550 million in debt.

Read MoreVegas real estate: Sin City emerging from distress

The hotel was built relatively economically, despite having names attached to it like designer Philippe Starck and musician Lenny Kravitz. For example, ornate wall coverings in hotel rooms are actually hanging canvases that can be easily changed out.

Inside the Foxtail Club guests can gamble poolside.
Harriet Taylor | CNBC
Inside the Foxtail Club guests can gamble poolside.

Most importantly, The SLS may benefit from two changes in Sin City. The first is the changing spending habits of the next generation of visitors.

"Millennials right now, when you look at nightlife in general, they're spending at levels that are astronomical," said Bakhshandehpour. But they're not spending as much on gambling. The SLS expects only a third of its revenue to come from gambling, with the other two-thirds coming from food and entertainment.

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It's a complete reversal of the traditional Vegas business model.

"We're seeing growth away from gaming," said Robert Shore, analyst at Union Gaming. "Las Vegas is becoming much less gaming-centric and much more dependent on fine dining ... the growth in the market has been led by a younger, affluent, international crowd, and the SLS has really programmed itself to go after that market."

The SLS expects just a third of its revenue to come from gaming.
Harriet Taylor | CNBC
The SLS expects just a third of its revenue to come from gaming.

The second change is location. Being on the deserted northern part of the Strip could prove fortuitous for the SLS. Billions of dollars have now been invested by Malaysian and Australian developers taking over disbanded projects in the area. Even further north, in the long-neglected downtown area of Las Vegas, Zappos CEO Tony Hsieh is leading a major renaissance.

"The north can really be the new south in the next three to four years in Las Vegas," said Shore.

—By CNBC's Jane Wells