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Best of Liz Benston

Gaming Guru

Liz Benston
 

Attracting High Rollers a Luxury for Wynn

28 April 2005

LAS VEGAS -- Wynn Las Vegas is positioned as the pre-eminent luxury resort in a town where high-end properties such as the Bellagio, Venetian and Mandalay Bay have proved to be the most profitable in recent years.

Steve Wynn's $2.7 billion gamble on the luxury market couldn't have come at a better time, analysts say. Room rates reached historic levels last year, driven in part by conventioneers wielding corporate charge cards and willing to pay more for rooms during slower periods in the middle of the week.

So far this year, some companies already are reporting record rates.

But Wynn isn't just banking on the occasional high-end tourist or conventioneer willing to shell out $300 or more for a room.

His resort aims to attract the world's wealthiest travelers -- people who avoid big Las Vegas casinos for the likes of a Four Seasons or a Ritz Carlton. Another key customer segment will be Asian high rollers who prefer the comfort of private gambling halls.

The opening of resorts has historically helped boost tourism across the board by creating more attractions, operators say.

Case in point: The opening of the Bellagio, Venetian, Paris and Mandalay Bay resorts in 1998 and 1999 flooded the market with thousands of rooms, yet visitors to Las Vegas grew 10 percent in 1999 and 6 percent in 2000. Visitation grew less than 1 percent from 1997 to 1998. The Las Vegas Convention and Visitors Authority expects 38.2 million visitors this year, a 2 percent increase from 2004.

But some believe Wynn Las Vegas will do more than attract returning visitors.

"Steve's going to bring new people" to Las Vegas, MGM Mirage Chief Executive Terry Lanni said. "That benefits all of us. On average, people visit two to three other casinos when they're here."

"When people just add new capacity without adding excitement that becomes a problem," Lanni said. "That's not his (Wynn's) style and that's not his history."

With 2,700 rooms, the resort is the 15th largest Strip resort and smaller than high-end competitors such as Bellagio, Mandalay Bay and the Venetian. Customers will be paying in the high $200s and up for a standard room that is about 620 square feet.

A key resort feature will be at least three private gaming salons that allow high rollers who otherwise wouldn't play in public to gamble behind closed doors.

To lure big-money international players, Wynn has opened marketing offices in Vancouver, British Columbia; Tokyo; Taipei, Taiwan; Singapore and Hong Kong and expects to open others in mainland China -- a huge and untapped tourism market.

Wynn has a history of raising the bar and drawing high rollers from other properties, Goldman Sachs analyst Steven Kent said in a research note to investors.

When the Mirage opened in 1989 it assumed the high-end market leader position from Caesars Palace. The same was true for Bellagio, which stole market share from the MGM Grand, Kent said.

In a separate research report, Legg Mason stock analyst Rod Petrik said Wynn Las Vegas could capture up to 30 percent of the Strip's high-end gambling market. On the downside, high-roller perks can get expensive and gamblers on a lucky streak can take a casino for millions, he said.

"With a large portion of gaming revenues coming from Macau, Wynn Resorts will need to attract certain players by offering casino credit and markers," which can be more difficult to collect outside of the United States, he said.

Las Vegas Sands President William Weidner said Wynn Las Vegas will help business at the Venetian and vice versa.

"We will both benefit" from partnerships with Macau resorts, Weidner said.

Helping Wynn draw Asian gamblers will be a team of executives including Linda Chen, who served as executive vice president of international marketing for MGM Mirage from 1997 to 2002. Wynn has boasted that Chen, head of international marketing and chief operating officer for Wynn's Macau subsidiary, knows just about every high roller in Asia.

Wall Street has been salivating over prospects in Macau, which is 40 miles from Hong Kong and within a few hours of 100 million citizens in mainland China. Many of them are experiencing improving standards of living and a desire to travel.

While its political and regulatory climate is far less certain than Nevada's, Macau is projected to handily eclipse Las Vegas Strip revenue in the future. Last year Macau's gambling revenue was $5 billion, up from $3.5 billion in 2003. By comparison, Strip casinos generated $4.9 billion last year.

With only 15 casinos in operation and about 700 table games combined, that amounts to a staggering per-table revenue of about $19,000 a day -- nine times the Strip's average win-per-table of about $2,100, according to Petrik. He said he projects Macau's gaming market could grow from $9 billion to $12 billion in the next five years as more Chinese visit the region and more resorts are built.

The door opened for Wynn and Las Vegas Sands in 2002 when Macau granted the companies concessions to run casinos, breaking billionaire Stanley Ho's decades-old monopoly on that lucrative gaming market.

Executives at MGM Mirage, which already controlled the majority of the high-end market in Las Vegas before its purchase of Mandalay Resort Group, say they are prepared for new competition.

At Bellagio, Wynn's crowning achievement in luxury taste, MGM Mirage invested $325 million in a new tower that opened in December and remodeled existing guest rooms. The company also has revamped many of its restaurants and other amenities at the Bellagio, MGM Grand and Mirage -- a trinity that now competes in the high end, Lanni said.

"We're going to be extremely competitive and at the top of our game," Lanni said. Having multiple upscale properties to Wynn's single resort will give the company a competitive advantage, he said.

MGM Grand President Gamal Aziz said "it's hard to be at all concerned" that Wynn will siphon business from his company.

"They add a very small percentage of rooms to the huge market we already have," Aziz said. "I think that a property of this magnitude can only grow and extend the market for all."

MGM Grand's high-roller villas, known as the Mansion, would be "nearly impossible to duplicate" and remains a "preferred destination for high-end customers," he said.

"This doesn't mean that we will just sit by the phone and wait for the customers," Aziz said. "We'll continue to market to those customers, continue to surround them with great service and a great product -- we love competition."

Wynn has another ace in the hole for high rollers, analysts say. The resort features the Strip's only golf course -- an attraction that can't easily be built elsewhere and can help lure international gamblers, they say.

"The popularity of golf has risen worldwide and scheduling tee times in some foreign countries can be extremely difficult," Petrik said in a research note.

The resort's largest suites, some with private massage rooms, face the golf course with a waterfall over the 18th hole.