Vegas mogul bets on low rates to lure reluctant gamblers
LAS VEGAS (Reuters) - Wynn Resorts Ltd, which next week is opening the Encore casino on the Las Vegas Strip, will sacrifice high room rates, and profit, in order to boost occupancy at its Vegas resorts, according to Chief Executive Steve Wynn.
"The last couple of weeks have been the worst I have ever seen. We had 53 percent occupancy for a couple of nights," Wynn told Reuters in an interview.
He referred to the Wynn Las Vegas resort, which opened on the Strip in 2005. The $2.3 billion, 2,000-room Encore sits just north of the older property.
"We'll be in the high 80s, low 90s (occupancy percentage) right away," Wynn said.
To accomplish that, the company is offering rooms at $199 a night.
"I've always opened up hotels in boom periods. It is a fascinating moment to open a hotel in a market that's extremely tough," he said.
Reasonable rates for luxury accommodations at Wynn and Encore will put downward pressure on prices for hotel rooms all along the Strip, the CEO said.
NO LAYOFFS
"This is the first time I've said 'fill all 4,700 rooms'... I will trade profit on the hotel business for job protection."
Wynn repeated that he has never laid off employees and will do everything he can to make sure that guest satisfaction remains the company's No. 1 priority.
"We can overcome low room rates when the market goes up, but it can take years to rebuild employee morale," he said during the interview, held in the Encore's Frank Sinatra-themed Italian restaurant.
"The DNA of this place is in the details ... In the hospitality industry there is nothing left except to do but the basics better."
Wynn said the final price tag for Encore is about $40 million below its $2.3 billion budget.
He also bragged about the 3 percent interest rate on the project, which was secured before the current credit crisis dried up funding.
"Imagine that -- we raised the money before we started the project ... the alternative is ridiculous," he said.
Competitors like MGM Mirage and Las Vegas Sands have been caught short by the lack of construction financing, leaving them to raise cash through expensive debt offerings, asset sales like MGM's sale this week of the Treasure Island resort, or even cash infusions from majority owners like Sands' CEO Sheldon Adelson's recent $520 million investment in that company.
Wynn said casino operators and other developers would be forced to change their model since "nobody's gonna lend them money."
Wynn Resorts itself, which is expected to open an Encore in China's Macau a year from now, has no immediate plans for additional resorts, the CEO said.
Getting the two Encore projects up and running smoothly will take the company to mid-2010, Wynn said.
"At that point we will look at what to do with the golf course (behind Wynn Las Vegas) and (Macau's) Cotai," he said.
The CEO also said that paying down debt "will be all I'll be doing for the next couple of years -- that's our corporate strategy."
Stock buybacks are not on the agenda.
Wynn expects Vegas, driven by international demand, to continue the trend of increasingly sophisticated resorts.
"In Vegas the best-built, best-run places always do well. Historically, the bottom 25 percent of the market has been bankrupt," Wynn said.
(Reporting by Deena Beasley; Editing by Gary Hill, Toni Reinhold)
