Wynn’s Las Vegas

Friday, Feb. 18, 2005 | 5:13 a.m.

Jon Ralston hosts the news discussion program Face to Face on Las Vegas ONE and publishes the Ralston Report. He can be reached at (702) 870-7997 or at ralston@vegas.com.

WEEKEND EDITION

February 19 - 20, 2005

Last week casino developer Steve Wynn, who is scheduled to open his newest property on April 28, sat down for an hourlong interview on "Face to Face," a discussion that covered a panoply of topics. He was alternately pensive, humorous and incisive.

Here are some excerpts from the interview, which includes Wynn's views on his latest resort venture, Las Vegas' future, the impact of the casino megamergers, the prospect of strip clubs in casinos, whether Las Vegas could field a major-league sports team and Donald Trump:

The impact of Wynn Las VegasJon Ralston: Terry Lanni of MGM Mirage has been quoted as saying it is good for the town that Wynn Las Vegas is opening. It creates players for them, too. Is that true?

Steve Wynn: On one level of course he has to say that. That is the proper way and he is a professional in every regard.

On the other level they are having great numbers and they are not interested in anything that interferes with their performance. They have lots of plans and they are very ambitious and capable people. And that old statement that this town is not big enough for the both of us, thank goodness that hasn't been true in the past in this city.

What has been true here is that places, the new ones when they come on line, if they are special and if they have something wonderful of their own and that is a very important phrase -- "of their own" -- then they make the market grow.

There is an impact to extra capacity demand. It is never perfectly elastic in any business, but what happens here in Las Vegas, at least what has happened historically, is that when a new and fanciful hotel comes on stream the market grows but not to the full extent of that new hotel's volume.

Part of it comes from the competition but it doesn't necessarily come from a hotel like Bellagio, although we will be in direct competition for the top end of the city. The pressure gets felt further down the food chain in the older properties that are less imaginative that were built a long time ago.

I think you have seen that over the years and so the older properties become marginal ... Las Vegas ... probably is the most violent 24/7 commercial hand-to-hand combat in the world.

Rising stock before the doors openJR: Here is what (stock analyst) Robert Baker wrote in November. He said, "Wynn Resorts' shares have more than doubled last year. Investors may be partying in fantasyland. First you look at Wynn Resorts. You'd find no evidence of them (revenues) -- in fact, there are no revenues to speak of. Since its inception, Wynn Resorts has spilled $181 million in red ink while developing its properties."

SW: (Smiling) We are going to ruin this company by opening a hotel. Gary Loveman told me he has a new strategy at Harrah's -- they are going to close all the casinos ...

The ad with Wynn on the building (Yes, he was really up there)JR: That commercial -- that ran during the Super Bowl that people here in Nevada saw and it is going to run during the Oscars -- essentially says this is the first hotel I signed my name to. Why is that significant?

SW: It is a not so subtle play. It is a suggestion that Bellagio and Mirage were practice.

JR: Exactly.

SW: Now you would never say that. It is not cool to refer to, but what you do is you get with the advertising agencies and they want to show a progression and you have to be cunning about it. ... The first version of it was me sitting on a rock out in Red Rock Canyon with the skyline behind me saying, "Hi." I have a pair of jeans on, saying "Hi," I am Steve Wynn.

I have spent my life having a ball building fanciful hotels in Las Vegas with things like volcanoes that erupt and fountains that dance and pirate ships that sink. All that experience has given me the opportunity to fulfill a dream of a lifetime.

Why Wynn Las Vegas is differentJR: You mentioned some of the things yourself -- the volcano at the Mirage when it started was trend-setting and all the stuff at the Bellagio, considered one of the finest hotels in the world soon after it opened. How can you top that? What are we going to see here?

SW: Serious question. Serious question about the city and about what we do. If I can take a second for a history lesson ... The history of the town is pretty easy to understand architecturally. It is a carnival midway. It is a promenade from the early days of the signs and the hotels in the '50s and '60s.

It was all about walking up and down the street like a carnival midway and seeing the signs and the facades and going into the one that was the most catching. Merchandising technique a little one-dimensional but effective.

Go in my place, don't go in his place. Caesars' fountains, my volcano, my pirate ship, my dancing waters, they were appropriate but they were mainstream Las Vegas history ideas.

The audience was the Strip, the sidewalk. The theater of it all was the facade of the hotel. Listen, the whole Dunes Hotel was in that water including the swimming pool. The Bellagio sits on the old Dunes golf course but the entire Dunes was in those eight and a half acres itself up on the Strip in the front.

Well, we ask ourselves, did people stay at Mirage because they got to sleep next to a volcano? Of course you laugh. It is a ludicrous question. The answer is no. Those are tourist attractions, pirate ships that sink, volcanoes that erupt, fountains that dance to music of Italian singers.

They are wonderful tourist attractions but there is no franchise in the tourist attraction. There is a franchise in a guest and a guest is something that happens inside the building usually between the staff, the people of the building and the building makes it possible.

It was my wife Elaine and I in a conversation one night in 2000 that cleared things up. I said, My God did I have this wrong all this time and could it have been this simple? The audience isn't the sidewalk. The audience is the hotel. You don't design a hotel from the outside looking in as I did with the other three.

You design a hotel from the inside looking out. I had it 180 degrees off ... Wynn Las Vegas is a completely different approach. We have hidden the hotel. The sidewalk is not the show. You have to go inside. But more importantly we didn't do it just to hide the hotel.

The mountain, the environments that encase the hotel are there as a backdrop for the theaters in each part of the hotel that make up the experiences of the hotel. It is restaurants. It is bars. It is front desk. It is shops. You look outside and you are in a world of your own. It is designed from the inside out, and that is the principal idea that sets this hotel apart and that is why it costs so much money.

Strip clubs in casinos?JR: Jack Sheehan in his book said you and your good friend and neighbor Sheldon Adelson are going to be the ones who might try to get the law changed so you can actually have gentlemen's clubs, strip clubs, nudity inside casinos. Is that going to happen?

SW: I first of all understand that sex sells. The world loves beautiful women. Beautiful women like beautiful women, not just men. But when you fool with sex in a business sense, when you start to sell it in the general term, you walk a very fine line.

The Crazy Horse and those kinds of places here in town are very successful and attract a lot of folks. You see the limousines parked there every night. OK, the thing is nobody comes to Las Vegas to go to the Crazy Horse because they got one in their own home town.

There are 16 of them in Dallas, Houston, Los Angeles, San Diego and wherever you go there are topless clubs where girls will lap dance and cheat and you can take a third of them home with you at night if you want. That is fine but no one gets on a jet plane and travels great distances and plans a vacation with their woman because of a strip club.

I want to fry bigger fish. I want women to love my hotel. The design sensibility of the interior is very female because women make the decision on where to go. And when you fool with sexual things you run the chance of offending elegant and graceful women ...

So you be careful about that. You walk fine lines.

So we are looking for ways in introducing beautiful women and sex and those kinds of things, but our way of doing it is with fashion. Elaine was in Paris last weekend and we are going to do a big thing with Christian Dior and with Carl Lagerfeld and the other people that are in our hotel.

Some of those shows are very sexy indeed, but they are high class. I don't step over the line. I can't use a girl with a g-string and have the kind of a destination resort that I am trying to build.

The future of the townJR: Where is Las Vegas going?

SW: I think that at this point it is almost impossible to duplicate the critical mass that is here. The menu of opportunity and attractions and excitement that exists, the capacities that are built into this incredible place in terms of convention and the meeting space, hotels that are first class, the food and beverage and shopping options ... are so extensive now that it would take 10 or 15 billion dollars to recreate it or 20 billion.

There is no place that can do that, actually. So I think that Las Vegas' future is very exciting. I felt very bullish about Las Vegas during the recession, which is when I broke ground, if you remember. We were the only ones out there but I thought this is not a machine that can be turned off very easily, short of a terrorist event of monumental proportions.

We saw what the vulnerability of Las Vegas is and that vulnerability is really the vulnerability of civilization, not just Las Vegas. But short of that I think that what we have got here is a very unique place that will continue to be a destination of choice for everyone else. I also think that it is very important that new projects that are fanciful and exciting keep being built.

The impact of the megamergersJR: But are these mergers good for the industry? I know they are inevitable. A lot of people say this is what happens in every industry. Are they good for the industry, Mr. Wynn?

SW: Mergers in and of themselves aren't good for anybody, except maybe the shareholders at the moment, because they allow for less competition and more synergy, which is a fancy word for cost saving. But on the other hand it is not clear that they are bad either because those expanded cash flows -- the muscle so to speak that is gained by size -- can, if it is focused, if it brought to bear like a karate chop on a single point, that kind of focus can be very powerful.

I think MGM's cash flow when the merger is finished is two billion dollars or so and their interest expense is less than half of that, which means they have a lot of free cash to invest. I don't think Kirk Kerkorian is the kind of guy that is looking to take a dividend. So where are they going? The question is, is Las Vegas able to absorb additional construction and investment? I think the answer to that is yes.

Not a major league sports townJR: What about baseball and major league sports?

SW: Probably not, because this is a city that is very unique in the sense that it is entertainment overload and this entertainment is paid for by all the same people who pay the taxes, the gaming industry with the convention bureau's room tax. Unless the gaming industry supported it, because you know you need to spend a lot of money.

All these cities that have these sports they build a venue, they build a stadium or an arena because they need it to bring people to the city. We have all the people coming here, too many as a matter of fact sometimes in some people's view.

So that the fellows who would have to pay for it, the business community, they don't think we need this. They think there are other things that are more important and they may be right. It would be wonderful to have a basketball team here. Elaine and I would freak out if we could have a pro team. I would love to invest in a pro team.

JR: You don't see it happening, though?

SW: I think we need an arena. MGM and Mandalay have arenas. They use them. The University of Nevada, Las Vegas has an arena. ... To build a new arena with all the boxes costs one hundred fifty to two hundred million dollars.

I don't think there is the kind of community commercial support for that. Not to mention the fact that the NFL or the NBA, those people in the NHL have to agree with this or the National League or American League of baseball.

The parking wars with Gondolier Numero UnoJR: Let's talk about you and Sheldon Adelson. What is going on? People have read these stories about Sheldon wanting to build this high thing but Steve wants it to be higher, etc. ... Is this just a couple of gigantic egos or is there something really going on here?

SW: He is a very gifted guy. He is a very dynamic and powerful fellow who is single-minded and that has served him very well. It is good for Las Vegas that he is next door on the Strip. He makes it better ...

We do have a slight difference of opinion. He doesn't think he needs parking and I do. He has the world's third biggest convention center in the world, the Sands Expo Center on Sands Avenue, and not one single car parking space to service it.

JR: What are you worried about, though? Are you worried people are going to park over at your place?

SW: My garage and my door and my VIP entrance are directly adjacent to the Sands Expo Center. So what we will end up with is to have a police state to stop people from taking our parking for our guests and walking across the street.

You see when someone comes to the Sands Expo Center, unlike going to a bar or a show, if they can't find a parking space they can't go somewhere else. They have to go to the Sands Expo Center if they are an exhibitor or an employee of an exhibitor or an attendee at the convention. They have come all the way to Las Vegas to go to the Sands Expo Center for business. They have no choice. They must go.

JR: How does this get resolved?

SW: He has to build more parking and he has come to that conclusion, I think reluctantly. I think they are now finally appearing to take it seriously. But they are the most grossly under-parked facility in the history of Las Vegas. He has 4,000 rooms and 4,400 cars. His requirement by law after a 30 percent variance is over 11,000 cars. If he had it without the variance it is 16,000. He has 4,400 cars.

Billions and billions a world awayJR: JR: You said the most powerful place on earth is China and ... (you are) a primary concessionaire in that market. What is going on over there? Is it just that they are all in proximity to all these people? Isn't that what this is all about?

SW: Not only in proximity to all people but prosperous people. There are one hundred million of the wealthiest Chinese within a two-and-a-half-hour drive of the hotel.

JR: And they are big gamblers. Aren't they?

SW: They sure are. Then there is another billion people who live on the edge of poverty and existing on less than two dollars a day.

The leadership of the People's Republic of China is dealing with this tremendous challenge, but as they deal with it, the vitality of that economy is a marvel to behold. You travel halfway around the world and you get off the plane and you are in San Diego. They are us. The only difference when you can walk down the street, (they) are cities the size of Chicago. There are 50 cities in China the size of Chicago and New York.

His neighbor The DonaldJR: Did you ever think you and (your) wife would wake up in the morning and look across the street and see Donald Trump's name flashing there in neon?

SW: I spoke to him this morning.

JR: And ...

SW: I tried to encourage him to come. I think he is going to be good for Las Vegas.

JR: Did you always think that?

SW: Yes.

JR: Did you?

SW: Yes, I thought that Donald Trump's pizzazz, his flair for promotion, would be a good thing for us. This is the perfect place for a guy like Donald Trump. His energy blends in. His music blends with the music of Las Vegas. This is a place of bigger than life. In other places you sort of stand alone if you are that way. Here he is an added attraction.

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