The Most Profitable Restaurant in America

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With nearly $60 million a year in revenue, Tao Las Vegas at the Venetian Resort Hotel Casino isn't just the highest-grossing restaurant in America. It's also the most profitable. The difference between money made and money kept is key when you consider that Tavern on the Green, the second-highest earning restaurant in the country, went bankrupt despite pulling in $27 million in 2009.

What's Tao's secret, besides the out-sized portions? It's three-fold, writes author Joel Stein. First, it's in Las Vegas, where people flat out come to spend. Second, it's wicked boozy. Most restaurants hope to make 30 percent of their revenue from alcohol, whereas Tao Las Vegas takes in 75 percent in price-gouged cocktails. Third, it's mastered the elusive art of appealing to both partiers and grannies. During the week, Tao markets aggressively to conventioneers, families, and theater-goers looking for a manageably ostentatious evening. Come late-night and weekends, it's a magnet for celebrities, celebrity-gawkers, and young people too drunk to know whom they're gawking at in the first place.

Stein on the art of creating a TGIFriday+Vegas night-club vibe:

While most restaurants aim to make about 30 percent of their revenue from alcohol, Tao Las Vegas takes in about 75 percent. "When we buy vodka, we buy it by the pallet," says Rich Wolf, one of four partners in Tao Group, which owns 12 restaurants and seven clubs in Vegas and New York. "We have a different model. We're throwing a party with a restaurant," he says. Thirteen-dollar Tao-tinis and Tao-hitos might be profitable, but it's hard to sell alcohol over the long haul. "You get a bottle for $10 and sell it for $400," says partner Paul Goldstein. "But how do I get 400 people in a nightclub every single night?"

The answer, it turns out, is more complicated than merely hiring scantily clad women to bathe in a tub with roses--or calling Kim Kardashian's agent. When Tao Las Vegas opened at the Venetian, a hotel built largely to accommodate the huge convention center attached to it, many predicted failure. Remembers Wolf: "They said, 'There's no vibe at the Venetian. It's all conventioneers. It's dead after 10 p.m.' " So the restaurant adjusted by marketing to the conventioneers during the week before letting in the club kids. As a result, both contingents can say they partied at Tao Las Vegas without knowing the other did. The models don't have to see the Midwestern salespeople, and the Midwestern salespeople don't have to fret about being rejected by models.

Read the full story at Bloomberg BusinessWeek.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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