Las Vegas Business Press :: News : 'Wynn'-ing ways

'Wynn'-ing ways

BY STEVEN MIHAILOVICH

BUSINESS PRESS

Just as you FedEx a package and Xerox a copy, the city's quintessential industry this week will deliver the first casino megaresort on the Strip in more than three years to find that it's a Wynn.

Analysts are expecting a boom with the latest resort opening.

After more than two years under construction and costing a record $1 million per room, much is riding on the latest manifestation of the Steve Wynn touch as some Wall Street analysts get nervous but the biggest gamble in the independent casino operator's career is likely to carry as much risk as wildcatting on the Arabian peninsula.

Perhaps some of the apprehension but certainly most of the anticipation is based on the fact that many of the casino resort's features and all of its details are being kept under wraps, even though Wynn is blitzing media outlets, especially television, in targeted markets like Los Angeles. Although the secrecy is the other Wynn signature on the building, the new Wynn Las Vegas is taking the marketing strategy to new levels.

With the latest Wynn resort and thousands of invited guests expected for Thursday's unveiling, the city's visitor volumes, already on another record-breaking pace, are expected to get a boost by the grand opening while the successful project spurs the next phase of development on the Strip, all of which will eventually lead the city to find that it's a win.

"If the property doesn't live up to expectations, it would be a major letdown," says Brian Gordon, principal at local market research firm Applied Analysis. "Given the name and developer, it's highly unlikely. Steve Wynn has one of the most recognizable brand names in the industry. When you think of Steve Wynn, you think of Las Vegas. If there is anyone out there who didn't know who Steve Wynn is, they clearly do now. He has been an innovator in the past and has proven to be successful at those efforts. This is the pinnacle of his imprint [on the industry]."

Built on the site of the old Desert Inn Hotel and Casino, the $2.7 billion Wynn Las Vegas will have 2,700 rooms, 111,000 square feet of casino floor and 200,000 square feet of convention and meeting space.

Although the exterior convex brown building standing 50 stories tall has been clear since being topped off last year, few details have been made public about the interior. That hush has not only been deliberate, it has been effective.

"He is building suspense about what the property will be like," says Dale Erquiaga, vice president of strategic planning for marketing firm R&R Partners. "Wynn has the brand equity to do it and people know he will deliver a quality product. A smaller hotelier probably couldn't get away with this. If it was not this developer (Wynn), the strategy would be ill-advised. People expect a show in Las Vegas and he's giving it to them. This is not the opening of a Doubletree Inn in Fargo, North Dakota."

According to Erquiaga, Wynn used a similar marketing strategy for the openings of his other Strip casinos, such as the Mirage and the Bellagio, although not to the extent of the latest effort. As with those properties, the apparent exclusivity resonates with the high-end target audience.

"If you open a Paris or Luxor, you want people to know what you have there," says Erquiaga. "[The Wynn clientele] are looking for the next big experience that has quality and is different. They will not go to Wynn by booking through Travelocity."

The mystery-oriented marketing combined with the invitation-only opening provides a festive and exclusive environment that will attract free media coverage from around the country, like an Academy Award ceremony, further enhancing the product's appeal among consumers as well as guaranteeing a strong show the first night.

"Steve Wynn builds events around these happenings," says Erquiaga. "Otherwise, why go? You'd wait until the crowds thin out in June."

While the approach has some potential hazards because it depends on a rebuffed media to carry the message once it is launched, consumer interest should force media to meet that demand with news about the casino resort once it opens. Considering the scope of the project, the marketing planner argues that the main threat was leaks and will pass with the opening, reinforcing the impression of Wynn's tight management style to investors and consumers alike.

"The message discipline at this scale is very admirable," Erquiaga says. "Most political campaigns dream of this kind of discipline."

With the genie about to be released out of the bottle, it's no magic that large crowds are projected to descend upon the occasion. Gordon contends that many properties should benefit because new properties don't eat into others' market share as much as generate appetite for the overall product, thereby not imposing competitive pricing battles.

"All operators benefit from these mega-resort openings," he notes. "Historically, new supply creates its own demand. You don't see any drop-offs on room rates and occupancy rates."

This bodes well for properties catering to all the different income segments, especially those visitors who want to see Wynn but can't stay. Erquiaga maintains those casinos should be advertising heavily to the middle and upper-middle bracket, although not necessarily pointing out their price advantage compared to Wynn.

"The consumer picks and chooses and every property should be talking to different people," he adds. "I would be advertising promotions and specials but I wouldn't include the other guy in my message. [The other casinos] have to remind customers what they have. They have to keep their share of the voice because there's a new player on the market."

While consumers and operators gear up for the action, investors and analysts have become jittery, in part because they are still not accustomed to the Las Vegas style of business which includes betting the pot. Share prices of Wynn Resorts have tumbled about 25 percent in the past month and Merrill Lynch analyst David Anders last week downgraded Wynn's rating from "neutral" to "sell."

Although actual results won't be determined for some time, particularly the financial performance, Gordon points out that Wynn's historical success has always been preceded by doubts and notes that the overall casino stocks will offer plenty of opportunity over the course, especially in light of record earnings for operators like MGM Mirage during the 2005 first quarter.

"The increased interest [resulting from the Wynn opening] impacts all operators, although it is all dependent on how they perform financially," he says. "The industry is still extremely hot for investors as the market continues to evolve and operators operate at or above expectations."

For the city, the true impact of Wynn Las Vegas has been the refocus of development on the middle and north end of the Strip. The expected renovation of nearby properties such as the Riviera and Boyd Gaming's Stardust along with numerous hotel/condominiums are estimated to total $20 billion over the 4-5 years.

"Wynn is the start of the next phase of development on the Las Vegas Strip and will be the catalyst to kick-off development on the mid- and north end," Gordon says. "The ripple effect through the economy will continue in non-gaming industries. These developments spur demand for housing and services in Southern Nevada."

That long-term is linked in part to the results of Thursday's opening of Wynn Las Vegas. While there is no crystal ball, the rear view mirror suggests that the fast lane is open.

"If they pull back the curtain and it's a little old man from Kansas, there will be disappointment, but if they pull back the curtain and it really is a wizard, there will be success," Erquiaga says. "The only possible pitfall is if there's no 'there' there. Obviously, with Steve Wynn, that's not going to happen."

stevenm@lvpress.com | 702-871-6780 x340

GRAND OPENING

TIME: Thursday, April 28

COST: $2.7 billion

ROOMS: 2,700

EMPLOYEES: Approximately 10,000

CASINO FLOOR: 111,000 square feet

CONVENTION AND MEETING SPACE: 200,000 square feet

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