I have interviewed Steve Wynn a few times, both in person and by phone. He has always been gracious and forthcoming. Maybe I've been lucky that he has been in his Buddhist phase since we met. But another reason for our placid conversations has been that I have never profiled Wynn. The interviews have always been on a circumscribed single topic where I needed quotes from him for another story (the legacy of Siegfried & Roy, "Spamalot," the economy, the opening of Encore).
More time with Wynn runs risks; I know reporters who have battle scars from Wynn's explosive temper. Even before I moved to Vegas, I was warned of Wynn's legendary volatility by a writer-friend who once profiled Wynn for a national magazine. This writer-friend was on another assignment in rural France when he was surprised to hear his room phone ringing -- few knew his whereabouts. When he answered the phone, on the other end of the line was Steve Wynn, screaming at him. The writer's offense was including a mention of a single security detail at Wynn's house that the casino mogul did not want to see in print.
Anyway, Wynn's temper is not what has kept me from writing a more detailed profile. Rather, access to Wynn is extremely limited. At this point in his career, Wynn rarely feels the need to let reporters into his life for extended conversations. But there have been two recent exceptions. Locals will be fascinated by the lengthy interview with Wynn conducted by Jon Ralston of the Las Vegas Sun for his television show. Meanwhile, last night, Wynn's friend Charlie Rose profiled the Vegas visionary for "60 Minutes." In both interviews, Wynn admits that opening Encore in this economy would not be a choice he would make again. Other topics touched on by Rose include a candid conversation about Wynn's eye disease, something widely known in Vegas but not often discussed or written about. Rose inquires about Wynn's infamous temper, getting Wynn to either joke or admit that his doctor thinks he should be medicated for the sake of others. Rose also briefly touches on the Steve and Elaine Wynn's divorce filing. Instead, of asking them about the divorce, Rose offered a confirmation that Elaine will remain on the board of the company. That is probably all most people need to know about their private relationship. Check this out if you, like any Vegas fan, are fascinated by Steve Wynn:
I remember when Joel Stein came to Vegas to cover the opening of Wynn for Time.
His story captured the man and the situation of Vegas at that moment perfectly. In recent years the national media have gotten much more savvy
about reporting on Vegas. Stories are far less likely to read like breathless
press releases or condescending smack downs. Those were the only two type of
stories the national medial seemed interested in writing about Vegas when I
moved here in 1999.
Nowadays, thanks to reality television, the need to say new
things and lot of books on this city, media seem to approach Vegas with a far more
sophisticated eye. And, Stein's Time magazine story was one such effort.
What a disappointment therefore to read Time's latest story on Steve
Wynn's Encore. The story reads like a love letter to Wynn Resorts, which may not
be out of place, but the writer can't actually get over his elitism enough to use the word "elegant" to describe Encore, something Wynn and his public relations team so clearly want in the
story.
And,
why not use elegant? The truth is that when Wynn gathers more than a billion dollars to
sink into his vision, you can be sure that at this point he is building from
knowledge, sure, but he's also building with love. And elegance definitely is a
characteristic he has been striving for since Bellagio.
But the
most dispiriting things in the Time magazine article, as in any other market
story, are blatant factual errors. The most embarrassing one is in the final
paragraph, when perhaps running short on things to breathlessly praise at Encore, the
author tosses in "La Rêve, the impressive, water-themed Cirque du Soleil show"
for a shout out. Of course, "La Reve" is not a Cirque show at all. To be fair, a
former Cirque director was involved in its creation, but he also was involved in
Celine Dion's show. This sloppiness is typical of this puffery. This is followed
by a sentence dreamed of by every marketing executive on the Strip (and,
remember the story is on Encore): "The beauty of Wynn is that you don't ever
have to leave the grounds of the resort to enjoy yourself for a couple of days." I am sure that is how the Wynn folks see it. How nice for Time magazine to so thoroughly go along with the program.
It isn't that there is anything
bad to be said about Encore. No one can build a resort like Steve Wynn. But the
opportunity to really apply an out-of-town perspective to the newest luxury
resort in town, as Stein once did for Time, or even to see how Encore fits into this town, was not pursued in
favor of empty-reading praise and a collection of cliches.
The most powerful of power couples in Las Vegas is Steve and Elaine Wynn. I normally
do not like to comment on the private lives of even public people, but in this
case one runs two Vegas resorts (Wynn and the new Encore) and the other sits as a
director at Wynn Resorts. So, it is worth noting that Page 6 is reporting that
the Wynns separated quietly months ago. They have been married twice and have
two children. I contacted Wynn public relations to check the veracity of the
Post's story and was told: "We don’t comment on the Wynn’s personal lives."
Photo: Steve Wynn in March, 2007. Credit: Sarah Gerke).
Today is the most important day of 2008 for Las Vegas. Steve Wynn's new
property opens. Much like Eminem, Wynn is following up his last self-titled
success (Wynn Las Vegas) with Encore.
Two of the best
Vegas sites (VegasTripping.com and RateVegas.com) have combined efforts with a
site for today on EncoreOpening.com. There are Twitter updates, links to blog
posts, photos, as well as any information you could hope to find aggregated from
coverage elsewhere. I will be heading down at some point to get you my initial reactions.
Everyone on the ground seems very
optimistic about Encore. Wynn Resorts is the only company with a casino on the
Strip that has not taken a brutal stock drubbing, layoffs or other savage
economic reality lesson this year. Wynn is opening his newest reported $2.3
billion venture despite the wretched economy. A quick survey of some of his
competitors reveals problems getting financing for finishing next-generation
Strip resorts such as City Center, continuing resort construction such as Echelon
(former home of the Stardust), or just breaking ground such as Plaza (former home of
the New Frontier). Encore has from the outside been all smooth sailing, as you
would expect from resort creator Wynn. His nemesis and neighbor Sheldon Adelson's Palazzo (and, especially its mall) still feels somewhat unfinished
almost a year after opening, but one expects perfection from the moment the doors
open at Encore.
Billionaire Phil Rufffin in a recent interview with me about purchasing
Treasure Island (a resort built by Wynn) essentially made this point explaining
why he did not go forward with the more than $2 billion resort he had originally planned
to replace his New Frontier. Ruffin noted: "I knew it was not going to work
because I can't do Steve Wynn's numbers. And that's what I would have had to do
to make the deal work. It did not make economic sense to me." Ruffin, after years on the Strip, recognized there is only one Steve Wynn. So, he sold the
property to Israel-based ELAD group, which, rather than defer to the might of Wynn's reputation, planned a new $5-billion resort (more than twice what Ruffin thought he could do profitably) to be a bulked-up version of New York's Plaza hotel. That project is currently
on hold because of the credit crunch.
ELAD will
either disprove or learn painfully that only Steve Wynn gets to be Steve Wynn
in terms of attracting the high rollers, big spenders and the luxury crowd in such
a large volume. But it's not just about the dollars. Certainly the Bellagio is doing fine under
MGM-Mirage (in my opinion, the best-run company in Vegas). But if money is no
object, most people would still choose to stay at Wynn Las Vegas, and not just because it is
newer, but because it is a better property.
I am going
to make a confession now: I thought Wynn would fail when Wynn Las Vegas opened.
Wynn has always been accused of overspending. And, I thought overspending was exactly
what was happening when he bought and destroyed the Desert Inn to begin his
massive resort with a price tag that kept going upward until breaching the
$2 billion mark before Wynn Las Vegas finally opened in April 2005. That was a few months
before I began writing the Buffet. So I'm spared public embarrassment of being quoted from the time on that. Had I
been blogging back then, history would have preserved my flip reaction to friends
that Wynn Las Vegas would make a lovely resort for the next owner. In other
words, I did not see how Steve Wynn and his investors could pay down the debt
incurred to build the place in time to avoid losing control of the property.
Wynn Las Vegas was by far the most lavish resort the city had ever seen when it
opened. By the end of the first year of operations, it was clear Wynn would have no problem with the debt and the resort would be making lots of money for investors. I was totally wrong.
And, even those who knew better did not at first give Steve Wynn enough credit. At the time Wynn Las Vegas opened, most saw the new resort as essentially a remake
of the Bellagio with minor adjustments. In fact, a few years out Wynn Las Vegas
turns out to be an improvement on that previous crown jewel, built when Wynn ran
Mirage Resorts, and Wynn Las Vegas has become the model for plans for all of the next-generation resorts. The dancing fountains at the Bellagio, like the Volcano at the
Mirage and the battling ships in front of Treasure Island were all Wynn
creations. But they were outdoor spectacle for the masses: high-end carnival
barkers. With Wynn, the Strip frontage is used like a mansion in how the resort is set back from
the street inviting you to come down the walkway and explore the wonders within.
And, there are wonders within. This design approach, as much as possible depending on acreage, is now standard for every newly planned resort on the Strip.
Wynn spent his money inside the resort
instead of outside. That has paid off handsomely for the property. You cannot get a Wynn Las Vegas experience from the
exterior. Wynn Las Vegas works
the opposite way and pulls the tourists inside -- if only to wander the interior.
Of course, getting people to walk into your casino is a big part of the battle for customers. Another advantage Wynn has is that the customer service is so extraordinary at his properties that in a town that
at the high end has made an art of pampering guests, Wynn has created his
reputation doing more of that and better.
This is not to say Wynn Las
Vegas was a perfect property at opening. For example, Steve Wynn knows food, and the
property has arguably the best restaurants of any Strip resort (unless you are
on any sort of budget). But he did not get nightlife, and the lounge and
nightclub had to be revamped shortly after the resort opened. Similarly for the
man who first brought Cirque to Vegas, Wynn Las Vegas has failed at providing
much in the way of headliners or entertainment that works: "Avenue Q" and then "Spamalot" closed quickly. Le Reve was bought out by Wynn from its creator to be revamped.
The same pattern seems to be playing out at Encore. The announcement
of restaurants is generating high praise. I am especially excited to go to
Sinatra, a restaurant created in partnership with the late singer's family. Meanwhile, Wynn has made the jaw-droping choice of bringing-on the forgotten impressionist Danny Gans,
until recently at the Mirage. Gans, a remnant from family friendly Vegas, offers bland imitations of many forgotten and
dead celebrities. Gans' show at the Mirage was not merely bad, it was
painfully dull. Many nights locals could get free tickets. Perhaps Gans' new
show will cut back on the George Burns and Gracie Allen routines and try to be a
little more current; but I don't think Gans really has enough talent to
succeed on the Strip in 2008. The bar has been raised on entertainment here. Still, Wynn has learned, it seems. Danny Gans is certain to be a lot cheaper than the reported $100 million it took to launch "Criss Angel Believe" at Luxor. If Wynn can't
figure out what is going to work in entertainment as was the problem with "Avenue Q" and "Le Reve," he has learned to at least keep things cheap: an impressionist
is a lot cheaper to finance than, say, an ambitious custom water theater like "Le
Reve" or a Broadway cast making union wages.
One interesting change Wynn is
dong for Encore is dispensing with the grand opening party packed with VIP locals, media, a
red carpet and lots of free food. He is just planning to open the door and
let the public inside.
Not that reporters are being forgotten. In this time of belt-tightening in media circles, Encore is giving reporters an invite to spend a free
night at the property between Jan. 12-15 to enjoy the room, food, spa, salon and
entertainment. I am not comfortable accepting a free room and amenities at the
resort for coverage. After all, does that mean resorts that don't treat media to free rooms
don't get covered?
Anyway, early next year when you see the flurry of coverage
of Encore's rooms, spa, salon and dining you might want to ask the author or
publication if the expenses on that coverage were paid for by Encore.
But by then I will have been to the property, as
I hope to join the public today to explore Wynn's latest creation. There is nothing more
exciting in Vegas than a new resort opening. And on the top of that
list is a new Steve Wynn resort.
Last night I saw Steve Wynn on television talking about the proposed government loan bailout package. Wynn had clearly given the matter a great deal of thought, in fact, too much thought for the time constraints and confines of television. Plus, I have a limited understanding of macroeconomic theory. But I do know that Wynn has consistently been accused of borrowing too much to build his own casinos, and has consistently proved the doubters wrong. But his talk bellow shows that he has spent some time contemplating the abyss and has some sympathy and understanding (if not approval for a government handout) for those who were not so lucky as he was in this economy.
I spoke to Wynn today by phone shortly after he shot a television spot. Wynn is preparing to open Encore before the end of the year, and so it is amazing that he chose to speak on this topic now. Also, it is unusual for a casino executive to be talking politics in the first place. That is true to some extent even for Wynn rival Sheldon Adelson, a major political conservative, who within his capacity of running the Venetian and Palazzo keeps things more nonpartisan. (Each year Adelson hosts at his resort the Adult Entertainment Expo/AVN Awards, the biggest porn convention and awards show in the country).
Customers on vacation do not want to make or hear a political statement at a resort; they want to enjoy a vacation. And, so, I asked Wynn why he chose to speak out about this issue. He answered that he feels at this point the issue of the economic crisis should be less political. "I think it is time for people to speak up outside of politics to educate the public about this important matter. Let's fill the air with intelligent comment that isn't simply partisan political criticism."
As you can expect, his position is not as simple as rejecting the current bill. I sought Wynn intending to question him about the nuances in his view opposing the proposed bailout package. Instead, I discovered, as you can read below, that Wynn did not need questions from me because his thoughts were completely formed.
Richard Abowitz: I saw you on Fox News last night doing a segment on what many are calling the Wall Street bailout. In the time allotted for your segment I felt you were not given the opportunity to fully explain something you clearly have thought a lot about. So, let's start with asking why are you opposed to the bailout?
Steve Wynn: I think I understand the nature and the heart and soul of the liquidity crisis we face. I believe we got there because good business self-interest and good business sense got out of line and incorrectly focused. If you were a financial company, it became very good business to do as many deals as possible with as much volume as possible, because most of the companies were making a spread. There was a very unusual situation in our country where credit could be passed on from a lender to a third party. I am speaking of investment banks, savings and loans and regular banks. They could print paper in the form of a home mortgage or financing for the acquisition of a company and that sort of thing.
And that paper would be resold after big fees were charged to investment funds and mutual funds and all of the other pockets of money that are created in our economy by 401ks and pension plans and things of that sort. There is this huge cash flow of money every month that goes into funds that have invested in them to fulfill their charters. And in the case of home mortgages, it was the Mac and the Mae. And there was encouragement for everyone to do this. First, politically from the government, Mac and Mae were encouraged to give everybody in America a home.
Secondly, this ability to pass on a credit. The bigger the credit, the bigger your fee, the bigger your bonus. And every intelligent business person in the world did exactly what any other intelligent business person would do. They did bigger deals for more fees and more bonuses to make more money for their enterprises and themselves. They resold these things to funds or to the government until everybody was so filled and so out of cash that it started to back up on itself. When the music stopped, there weren't enough chairs for all the people holding the paper.
The liquidity crisis was exacerbated by the fact that banks and savings and loans are regulated by law in terms of the equity they have to keep in their reserves. So agencies step in and shut them down, or they are completely trapped by insolvency: The liquidity crisis takes its toll.
These were not stupid people. These were not greedy people. They were just people acting naturally. One of the groups acting naturally were all of the folks who wanted a home they could not afford. Or the folks who had a home and got a phone call from some dope telling them their home was worth twice what they paid for it (without seeing it or knowing anything about your neighborhood) followed up by another dope calling saying, based on that appraisal, "I will loan you 100% of the money." This allowed the home builders, in effect, to conduct an auction and say, "Pay $400,000 for this $250,000 home or four other people want to buy it. Why not? It's no money down."
There were no victims here. They were people caught up in a short-term explosion of unfocused self-interest. Short-term thinking. They borrowed long term and invested short term. It was the consumer public, the home buyers and the home lenders, and the politicians who encouraged everybody that prosperity was unlimited. It was a great weekend party and there was no Monday morning. Now we come to this.
Well, I hate to disagree with politicians, but it wasn't greedy, nasty, dishonest people who did this. This was anybody who borrowed from a bank for a price they could not afford. They were not greedy or dishonest. They were acting in a very instinctive and human way. Discipline had been removed from the system, and intelligence was perverted or misdirected. And now is the time to fix it, and you fix it in the same place it happened: in the communities at the root of the problem. It is too big a bundle of stuff to hand over to the government in mass by having them buy it.
Q: You mean the mortgages?
A: Yes, the mortgages. Government can't handle it. It is too complicated and it is too tricky. They will misprice it again and create another problem down the road. These things should be ironed out by people on the ground. Pretend this is a failed savings and loan association where the executives could not handle it and got confused. The government steps in with [a plan] designed to meet the minimum amount of the liquidity needed to preserve the enterprise. The equity provided by preferred stock can be leveraged at 4, 5, 6 or even 7 times to 1 and so they start lending again.
But the preferred [stock] has teeth in it. It says that all loans made hereafter will have a certain equity to loan ratio, that the loan amount must be limited to a certain percentage of the monthly established income of the lender, that there cannot be a 100% loan on an asset, and that nothing but plain operating expenses and minimal salaries are to be paid to every employee including senior management and directors, until and unless the preferred dividend is paid to the preferred shareholder.
This equity on the preferred is perpetual for a very important reason: It gives government a chance to decide how much it wants to be paid when redemption time comes around. Normal preferred carries a redemption time period of like 10 or 15 years. But this preferred is perpetual, which means the seller of the preferred, in this case Uncle Sam, the taxpayers of America, get to decide what we want.
Now, what happens is that all the loan executives have to eat the loans. They have to write them off, which means their stock goes through the floor. Then one thing will always happen: Somebody will evaluate the enterprise as a whole and understand that under a worst-case these homes are worth 2X and I can buy them for 1X and purchase the stock. He will buy this savings and loan and run it efficiently with new management and he is totally incentivized to pay off Uncle Sam. He doesn't want to have the preferred over his head. He wants to declare a dividend. He is going to make it worth enough to buy back the preferred so he can get his hands on the real money. And every one of these loans has a value. It may be 40% of what it was issued at or it may be 60% or 30% of it or maybe 20%. But there is value.
But to say that Uncle Sam can sort through hundreds of billions of dollars of these things and price them properly is one of the most immature, unsophisticated judgments anyone can make. Have I clarified my position for you?
Another element of Steve Wynn's speech to his dealers is a piece of
personal health news that he mentions in passing. One of the reasons Steven
Wynn offered for the address to his employees last Friday (as well as the
election over the weekend), according to the tape of the talk, is
that Wynn was scheduled to go to Johns Hopkins to have surgery on his eye today.
As someone who has interviewed him and seen first hand the vision struggles Steve Wynn
faces, I wish him all luck, health and success with any procedure he may be
undergoing there. I have had occasion to meet members of the Johns Hopkins staff
and the reputation of the place is well deserved: he could not be in better
hands.
"This is upside down," Steve Wynn tells the Las Vegas Sun's Jeff Simpson. "It's inverted. It's just outrageous." What is outraging the lifetime gaming executive? Is it famine, the ravages of war or some grave social injustice? Not really. Wynn is undone by the misery of knowing that dealers don't give their supervisors a share of their tips from customers. And so Steve Wynn has turned himself into an instrument of righteousness to triumph over this grievous injustice.
First off, this new age of fairness requires a brand new vocabulary. So beginning Sept. 1, floor supervisors and managers will be known as "casino service team leaders." Of course, unlike supervisors and managers, for a Casino Service Team Leader to get a share of the tips is only fitting — it is like all the animals are equal but some animals are more equal than others. Anyway, the result is that for the first time the managers formerly known as supervisors will be earning more than their team. Welcome to the team.
According to Simpson, dealers at Wynn are earning more than $100,000 a year and this could represent a $10,000-a-year pay cut. These are not small sums and the dealers are not characters from an Upton Sinclair novel. Nonetheless, imagine if you showed up to work and learned your income was being docked an estimated 10% to 20% to give your boss a raise.
Employees are furious. But interestingly, unlike so many other employees in Strip resorts, they are not unionized. There was a fight a few years ago to unionize blackjack dealers at a number of resorts that went down in flames. If memory serves, the casinos successfully argued to workers that if unions got involved, Vegas traditions regarding tipping would be jeopardized. In fairness, Wynn was the Desert Inn back then.
Michael Riedel of "The New York Post" has unloaded on Steve Wynn for his comments on "Mamma Mia!." As reported earlier on the Buffet, Wynn did an interview with local podcaster Steve Friess in which (in discussing the closing of "Avenue Q") he took some swipes at other shows, especially "Mamma Mia!." But as I mentioned and as the New York Post article points out, Wynn had his numbers all wrong on "Mamma Mia!," a show which he described as reaching Vegas "late in its life." Wynn, for example, claimed "Mamma Mia!" offered one more performance a week than it actually does (thus diluting the profitability by adding to the costs). But because of how secretive shows are on the Strip about their exact audience counts, we in Vegas were unable to do more than estimate just how far off were Wynn's numbers on "Mamma Mia!." Wynn claimed that the show based on the music of ABBA was playing to only about 800 people a performance in a theatre meant (according to the resort's website) to hold 1,600 folks. So, hats off to Riedel who reveals the actual numbers on "Mamma Mia!" writing "According to figures I obtained from the production office, the weekly capacity is around 90 percent, with the weekly gross hovering around $650,000."
In fairness to Steve Wynn, if you actually listen to the entire interview,in context, almost all of his comments about other shows are in passing and in direct response to questions by Friess. Listen to the podcast and you won't hear any grand strategy to demean the competition. Mostly, Wynn wants to talk to Friess about his plans for the Encore expansion at Wynn. Still, let's not be naive: Wynn knows how to dodge a question and surely he was aware of just how big the story would become the moment he talked trash about the other shows in town by name. I have interviewed many casino executives, and mostly you would think there was not a proper noun in Las Vegas that they didn't own. I remember one interview years ago with Harrah's honcho Gary Loveman about his Rio property just after the opening of the Palms nearby. I tried to get Loveman to comment on how he planned to compete with the flashy Palms. Yet, no matter how I asked the question, my tape recorded Loveman speaking only about the Rio. Ten direct questions from me and the word Palms never crossed the man's lips once. So, while he may not have planned to do it, Wynn just as surely didn't bad mouth "Mamma Mia!" accidentally. Once again the New York Post probably has it right noting that Wynn was likely: "Smarting from his "Q"-miliation"
"Las Vegas needs those groups like it needs cancer...The sheriff is spot on. He's quite right."
Interestingly, Wynn is following up his massive self titled casino with a more than 2,000 room expansion to be dubbed "Encore." Doesn't this sound a lot like titling a disc "The Eminem Show" (2002) and then following it up with another disc called "Encore" (2004)? I don't want to say Steve Wynn is ripping Em off, but...
