Two Way Hard Three | Las Vegas Casino & Design Blog

Another great show, as usual. The question I would like to ask before I forget is for Hunter.
What would you change about Wynn/Encore and how would it be better for the company in the near and long term?

Posted by Hunter

I'm a believer in the concept that if you do the right thing for the customer - create a compelling product or experience that they like - that's good for your business in both the near and long-term.

The prescription is simple and they already have the playbook for this because they wrote it themselves. De-emphasize the Rehab-esque, all-decisions-flow-from-a-nightclub sensibility and return to providing luxury in a way that's so superior that no one can argue you're the top operator in your market.

Every meeting that's about finding ways to pack more people into the cesspool that is the Encore Beach Club is a meeting that's not about innovating as a hotel operator on service, luxury or guest experience.

Or to put more simply:

Get rid of this: http://instagram.com/p/OM8NZqoUAu/

Bring back this: http://www.flickr.com/photos/pdesign/386412696/

Hunter, your reply to Jeff in OKC is good, but I think if you and Steve Wynn were having a private conversation, he would say:

"I'd love to return to the days of Bellagio and the opening of Wynn Las Vegas & Encore, but I can't afford to now. Times are tougher in Vegas than they have ever been. I'm using the clubs as placeholders only until business improves. I need to use the clubs with their DJs and EDM to pay the bills. If I didn't capitalize on this era of free spending douchebags, I wouldn't be able to maintain the golf course and have spent $100 million on renovating the guestrooms. IF business had stayed as it was in '06 and '07, I would have kept Wynncore on a pedestal as the ultimate luxury resort in the world. It breaks my heart to be forced to have a new site, Wynn Social, to advertise to the world the desperate steps I've had to take in the past three years."

Hunter, am I just fooling myself with these thoughts?

Posted by Hunter

Wynn Resorts has a ton of money in the bank, they don't really *have* to do anything. They could operate the way they were before if they wanted to, even at a loss, and no one is coming to turn off the lights.

Now, when most people say that, what they really mean is that Wall Street would go insane if the company did something like that. And they might. So?

The oft-repeated tenant that everything is in service to the shareholders is sometimes just a shield against being bold. A convenient excuse. I'm no big Facebook fan but in their prospectus, Mark Zuckerburg flat out states that their company is playing for the long term and notes it may be a bumpy road.

Now, if that strategy ultimately failed to deliver shareholder value over the long-term, it would be hard not to call that a failure... but all of these changes to me always seem like just riding a wave of trendy bullshit.

The market treats technology companies and hospitality companies differently so I'd expect less latitude there but I remember a Steve Wynn that didn't give a fuck about what the market wanted back in 1998. He did what he thought he had to do to build the most impressive thing he and his team could dream up. He lost his company but built the best hotel in Las Vegas. Even despite that, he ended up okay (and the way the new company is setup, it'd be almost impossible to de-throne him).

Be bold, Steve, be bold. Doing a nicer version of the 2006 Hard Rock is not bold.

Lastly, any evidence that any of this stuff is temporary, other than the fact that the trend will probably run out of steam at some point? This set of managers will just go on to the next crappy idea... I wish there were signs that they regretted doing any of this crap but I don't see them.

A couple stream of consciousness thoughts:

- The situation at Wynncore reminds me of going to a house party in high school when somebody's parents were out of town. I can remember standing around in someone's beautiful home thinking, "Wow, this place is about to get trashed. I can't believe these people are letting this happen."

- I wonder if Steve would wake up to what's going on if his hotels started getting downgraded. I don't know what the criteria is for such things, but I can't imagine turning fine dining restaurants into night clubs and pizza and taco stands helps. Similarly, I wouldn't think packs of heavily intoxicated, barefooted girls in trashy attire roaming your property would help score points. Would Steve take notice if 5 Stars suddenly became 4 Stars?

- I'd like to have a better understanding of how these 20-somethings are paying for these nightlife experiences, if only so I could have a better idea whether we'll ever see an end to this club-ification. In other words, what are the demographics? Are these people of modest means who are overextending themselves for one carefree night? Or are these clubs largely populated with the Rich Kids of Instagram, who have endless resources?

- I'll confess to sometimes feeling like a hypocrite when talking about how douchey Wynn has gotten, because I enjoy Cosmo so much (Cosmo being douchey in its own right). I rationalize it insofar as Cosmo is what it is, and has been since day one. Wynn, on the other hand, has sold itself as the pinnacle of luxury and opulence, and its backslide is therefore hard to watch.

Posted by Hunter

I do think Cosmo is different for exactly that reason... and it's why while I might not like the Hard Rock, I don't give it the same kind of grief - it's what the place was built to do.

My take on the guidebook and rating industry is that it's really all about the money - I seriously doubt we'd see a downgrade for a place like Wynn, they're too connected. I'd love to be proven wrong on that.

As far as how these kids pay for stuff, I don't have a good answer to that one.

Posted by mike_ch

"Now, when most people say that, what they really mean is that Wall Street would go insane if the company did something like that. And they might. So?"

Wynn executives own so many shares (even if a significant chunk is held in judicial limbo) that they have a pretty defacto hold over what they do. Being a public company means they have to issue statements about how they're doing now and then, but it was deliberately arranged to avert shareholder revolts after Mirage.

You don't invest in Wynn to influence the company and whine about how you deserve more as a shareholder, you invest in Wynn because you think they're going to make bank and want a seat on that ride.

What do you think the chances are that Steve breaks ground on a new Vegas resort in the next three years, especially if Romney/Ryan win in November?

Posted by Hunter

The political stuff is a smokescreen. That's completely clear given his love affair with the Chinese government. If he thought he had a solid in with a good ROI, he'd build the Obama Hotel & Casino. It's all just money.

If you said two years, I'd say zero percent but three years seems just long enough that something could change. That said... break ground? Even if they started ramping up planning, that'd probably be a ways off.

Hunter, this is a 100% sincere question for you and the Gangsters: What is your favorite hotel/casino in Las Vegas and who do you think is the best owner/operator in Las Vegas?

Posted by Hunter

This used to be the easiest question in the world for me to answer but as you've probably noticed, I don't have the same feelings for Steve that I used to. Break-ups can be tough.

I'd probably answer this question in different ways - there are physical aspects to certain buildings that I'll always love. I still think Bellagio is a marvel. The Mirage holds a special place in my heart.

But I have no love for Jim Murren. He's less of a hypocrite than Steve is but he's about 10,000 times more boring.

If I had my way, we'd go back to smaller casino enterprises - one, two or three places each, or thereabouts. It feels like The Strip was at the height of competitive greatness when we had Steve Wynn, Kirk, Glenn Schaefer, and Sheldon all battling at once at the end of the 90s.

Ever since we interviewed him, Tony Marnell has struck me as a top notch guy. I wish he was running a company like MGM.

I'm sick of being bored.

Ditto Hunter's comments.

I'd have to say that I'm hot on the Landry's Golden Nugget brand as a potential platform. Gaming is Tilman Fertitta's birthright, and unlike his brothers he seems to have a spectacular understanding of how to build, grow, finance and protect a brand. Landry's managed to improve on the GN Vegas and the AC outpost is truly spectacular. I would expect Biloxi will be more of the same - spectacular, classy, modern, affordable luxury. The key to the new GN's success is that they owns the guest experience from check in to check out. They haven't subcontracted out hotel ops, or rent the restaurant spaces to whomever pays the rent (except for Starbucks), or given a contract for the sports book or nightclubs to the highest bidder. Landry's comes from the hospitality/restaurant world and is applying the lessons learned in guest satisfaction on the macro resort level.

MGM on the other hand is slowly dismantling itself into a landlord/real estate play with casino attached. The result is that nobody is truly responsible in the larger structure, offloading risk and caring onto the tenants and fragmenting standards of the guest experience. Murren is a do-do. He's great with dealing with the finances, but his vision is virtually non-existant.

Wynn has lost its focus. The property used to feel like a serene home away home where you didn't feel like you needed to wash your hands every fifteen minutes or change your clothes. Service was active, I mean ACTIVE in making sure you were taken care of. When things went awry.... shit.... they NEVER went awry. It was perfection.

After my recent stay I've become an advocate for Caesars Palace. Management there is actively shaking out the old and upgrading positively, while not cow towing to trends. Hotel operations were a reminder to me of why I loved Wynn so much... incredible service and ops which left no openings which had to be patched by empty excuses. Dave reminded us on Twitter, in response to Blackjacker's Octavius Tower review that what we are seeing at Caesars is very possibly the fruit of their hiring Wynn VP of Hotel Ops Ramesh Sadwani.

And yes, M and Marnell, I agree wholeheartedly... he's a one of a kind. If Penn bought Cosmopolitan and gave management of the property to Anthony, we'd see a huge turnaround in that property. As the days go by, I'm starting to believe that Unwin is a pretender, as evidence by DB bringing in noted fixer Tom McCartney in.

Let's say Steve passed on the idea of any night clubs or daytime pool party venue, we would all be saying... "what's he thinking". Whatever Steve Wynn does, it's top of the line, right down to the garbage cans out front. I would love to see Steve build a smaller boutique style casino in Las Vegas, just because he could.

Here are 10 reasons Wynn is completely on track with today's Las Vegas:
1. Tiesto earned $22 million during the past year. This includes his contract at the Wynn-Encore clubs XS, Surrender, Encore Beach Club and Tryst. Forbes cites Pollstar's nightly Tiesto gross as $250,000.
2. Wynn-Encore's Skrillex earned $15 million.
3. The trio Swedish House Mafia earned $14 million. Individually, that trio (Axwell, Steve Angello and Sebastian Ingrosso) DJ at times at Wynn-Encore.
4. Wynn-Encore's David Guetta earned $13.5 million. He was at MGM's Wet Republic last year, too.
5. Wynn-Encore's Steve Aoki earned $12 million.
6. Wynn-Encore's Deadmau5 earned $11.5 million.
7. Hard Rock Hotel's DJ Pauly D earned $11 million.
8. Kaskade earned $10 million, partly for his residency at The Cosmopolitan of Las Vegas' Marquee nightclub and dayclub.
9. Wynn-Encore's Afrojack earned $9 million.
10. Wynn-Encore's Avicii earned $7 million.

Posted by Dave

I think each operators does some things right. I know there's not a lot of love for LVS around here, but I give them credit for filling (or maybe even creating) a niche in the market in Las Vegas. Sticking with Singapore when Wynn threw in the towel proved to be the right decision as well.

I really like what Derek Stevens is doing downtown. It's great to see an owner who actually takes ownership, if you know what I mean. He's walking the line between Ace Rothstein-level obsessiveness and abstentee landlordship in a way that seems to be working. Downtown is a pretty tough market right now, and a guy who's steadily increased his buy-in there during the recession is someone I want to root for.

Posted by Hunter

How do these figures say Wynn is 'on track with today's Las Vegas'? All it says is that DJs are making money.

I don't believe in the idea that as long as something is profitable, it is automatically good. I bet a McDonald's or a Taco Bell inside Wynn would make a lot of money too.

And no Jeff, if Wynn didn't do the nightclubs, I would not be calling him crazy for not doing them.

Hunter, love what you guys are doing here! No complaints... All I'm saying is WYNN'S NON-CASINO revenue is up, up, up. His nightclubs are a huge part of that formula. Casino revenue is down, so why fight what the people want. If your gonna get into the club scene, offer the best.
Non-casino revenue of $230.9 million in Wynn/Encore was up 2.6 percent driven mainly by higher revenue from nightclubs -- mainly the new Surrender club. (this number is from Feb 2011)
Wynn Resorts’ revenue from Las Vegas operations decreased 8.1% year over year to $362.8 million as net casino revenue fell 18.8% from the prior-year period to $157.7 million. However, gross non-casino revenue crept up 1.3% year over year to $252.3 million, buoyed by improved revenues from all non-gaming segments. (May 2012)
I also think the new website wynnsocial.com is fantastic!!! Don't get me wrong, not everything Wynn does is perfect. He has created the hottest nightclubs in the world, whats wrong with offering the best in the business? Saying a McDonalds would make money in Wynn is kinda like saying a mechanical bull in one of Wynn's nightclubs would make money also. That DJ list is directly from Forbes TOP TEN highest paid DJ's. I'm sure Steve Wynn would love Dean Martin, Frank Sinatra and all the gang to sign nightly at Wynn/Encore. But that's just not gonna happen...

Posted by Hunter

Hey, feel free to disagree, that's fine...

I don't believe that optimizing for cash output is always the best thing to do when it comes to providing a top-notch guest experience.

In my opinion, Wynn is quickly losing his status as the top innovator on the Strip.

Posted by mike_ch

I finally, FINALLY got around to listening to this episode, as I've been catching up on podcasts for over a month (as I keep listening to old ones, new ones keep coming out.)

The ending topic was, I don't know... There's a lot of B.S. in Vegas, particularly of the "this place is great and all is wonderful" nonsense; and if you're living there you either are immersed in that and ignoring the problems or you find the amount of baloney in the air amazing.

I think the casino companies have realized that favorable or no, the 'messangers' of niche media for this industry have a relatively small pool of listeners that they can't get by marketing directly. The revelation that Those Two Guys who were mooching all the comps had in reality a small audience of people who cared what they had to say was probably the final nail in the coffin of caring for online media. There's the people here, but we're a pretty small group.

It reminds me of how young men who liked video games used to simply making a pop-up website about video games and buy it a domain name to get media access into the E3 convention, and the reactions when the managers made the event much less of a party and tightened up it's policy on passes.