Steve Wynn Opens First New Las Vegas Strip Casino in 5 Years

Today, Steve Wynn opens a new casino in Las Vegas, the first the booming city's Strip has seen in five years. The casino has 10,000 jobs to fill, but it had 108,700 applicants. With 2,700 rooms and 111,000 square feet, it's about a third smaller than competitors like the Bellagio and the MGM Grand. Mr. Wynn's reputation has been "bigger is better." So the change must mean something -- perhaps, richer gamblers are better.

There is a restructuring of the gambling business underway. MGM is merging with the Mandalay Resort Group. At the same time, Harrah's Entertainment is buying Caesar's Entertainment. This gives Mr. Wynn a pool of talent as they personnel are merged that he would otherwise not get. More than that, though, Mr. Wynn has been advertising on a global scale. He ran ads during the Super Bowl and the Oscars, but he's also got 13 sales offices around the world, including several in Asia and a deal with Societe des Bains de Mer, which runs casinos in Monaco. He wants the guys who play baccarat at $10,000 a hand.

Mr. Wynn is quoted as saying, "When you're close to perfect, why wouldn't you try for perfect?" He once noted a split infinitive on page 23 of an annual report and fixed it at a cost of $9,000. Shareholders probably wouldn't care, but he did. (And the split infinitive in English is perfectly acceptable since it is the only language around that requires two words to denote an infinitive -- Sir Stafford Northcote was plain wrong). It was thinking like that that cost him control of Mirage Resort. He blew $685 million on Beau Rivage Hotel and Casino in Biloxi, Mississippi, and $200 million on a corporate art collection (whether the Mississippi money was wasted is hard to say, but $200 million will buy a great many reproductions).

This time around, he and Kazuo Okada have almost half the stock, so Mr. Wynn won't be forced out for over-spending. And he has a few other irons in the fire. He's got a $700 million casino opening in Macao (a market that makes Las Vegas look like Salt Lake City), and a $1.4 billion Las Vegas casino called Encore on the way. Investors think he's onto something. The stock is up 500% or so since its October 2002 IPO.

But price cometh before a fall. UBS Securities put out a report on the gaming industry last year that made a rather unfortunate point. Las Vegas Strip casinos returned around 13% on average on capital. This is about what Mr. Wynn expects for his property in 2006. But Mandalay's Excalibur and MGM's New York-New York brought in more than 20%. These relatively lower budget properties is where the real profits lie.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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