Steve Wynn plans a half-billion dollar expansion of his 2.4 billion USD megaresort, with construction on a second tower set to begin before Wynn Las Vegas‘ scheduled April 2005 opening, industry insiders say.
In Business Las Vegas, a sister newspaper to the Las Vegas Sun, reported today that the second tower would add as many as 1,300 suites to the project’s planned 2,700 rooms.
The extra rooms could frustrate competitors‘ plans to capitalize on a Las Vegas Strip tourism surge expected to follow the new resort’s opening.
When Wynn Las Vegas adds to its room inventory, it will poach business that otherwise would go to other top-of-the-market competitors, forcing those properties to steal business from less popular properties, said Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas.
„Wynn adding 1,300 rooms may take business away from his dear friend at The Venetian (owner Sheldon Adelson), who in turn might take business away from the MGM Grand and The Mirage,“ Schwer said. „We get a lot of people beating their chests about the impact of their new hotel towers, and they do provide significant impact. But it’s more of an advantage to an individual property than it is for the economy as a whole.“
Mandalay Resort Group President and Chief Financial Officer Glenn Schaeffer said adding a new tower is a good move for Wynn Las Vegas, but won’t be a threat to the powerful hotel revenue-driven colossus his company has built at Mandalay Bay.
„It won’t change the competitive environment and it won’t reduce demand for the superior (hotel room) product on the Strip,“ Schaeffer said. „It’s a definite positive for Steve Wynn. The highest demand on the Strip is for the highest-priced, best product. It doesn’t seem to square with economic theory, but in high-class, high-end consumables a high price (can attract customers).“
Schaeffer’s Mandalay Resort Group and high-end competitors MGM MIRAGE, The Venetian and Caesars Entertainment have all said they are ready to face Wynn’s re-entry into the luxury resort business.
Each of the operators has opened or plans to open new hotel towers at their signature Strip properties, and competitors said Wynn Las Vegas and its 2,700 rooms simply didn’t have the room capacity to significantly cut into the top-end business.
With 1,300 additional rooms, Wynn will quickly be able to add to his top and bottom lines, Schaeffer predicted, noting that rooms have replaced slot machines as the market’s most powerful revenue driver.
„Strip operators have twice as many rooms as slots,“ Schaeffer succinctly explained.
MGM MIRAGE President and Chief Financial Officer Jim Murren said recently he welcomes competition with Wynn Las Vegas, noting that his company expects its trio of high-end properties, Bellagio, MGM Grand and The Mirage, to maintain their 60-percent plus share of the high-roller market despite Wynn’s re-entry into the market.
Mirage Resorts Chief Executive Bobby Baldwin said demand for high-end Strip room product is strong enough to overcome an additional 1,300 suites at Wynn Las Vegas.
The new capacity won’t threaten Bellagio revenue, he said.
„These additional rooms would not come on line for a few years, and there’s still a demand imbalance that favors new supply,“ Baldwin said. „Adding a new tower is a positive for Wynn Las Vegas, but it won’t hurt our business at MGM MIRAGE.„
Adding about 1,300 suites would give Wynn Las Vegas about 4,000 rooms and suites, just more than Bellagio’s 3,933-count after its $ 375 million, 928-room Spa Tower opens in December.
Wynn Resorts executives are said to be finalizing details of the new hotel tower, which would require the demolition of the remaining Desert Inn buildings that now house Wynn and his staff, except for the parking garage, which would be expanded and used for employee parking.
The new tower would copy the look of the chocolate-colored reflective glass of the almost topped-off main tower now under construction, extending northward and transforming the existing arc into a gentle „S“ shape.
Wynn this week declined to comment on his company’s yet-to-be-announced plans to add to the size and cost of what was already the Strip’s most expensive project, but industry insiders said to expect the new tower to have suites much bigger than those at The Venetian or at The Hotel at Mandalay Bay.
Sources expect Wynn’s bankers will finance the half-billion dollar tower and there would be no additional public stock issued to finance the project.
The main Wynn Las Vegas tower is only three floors from its eventual 50-deck height, Wynn said, and construction of the project is on-time and on-budget.
In the meantime, development opportunities around the world have been taking up a lot of the 62-year-old’s time, he said.
Wynn said he planned to fly to Chicago this week to meet with Illinois gaming regulators about his company’s bid to win the state’s 10th casino license for a Des Plaines site, a competition he said was difficult to handicap.
On Monday, Wynn flies to the United Kingdom, where the company has a strong interest given the likelihood of gaming-rule liberalization, followed by a Wednesday morning trip to Belgium to visit the studio of Franco Dragone, who is producing a $ 30 million show that Wynn is counting on to generate interest in and revenue for Wynn Las Vegas.
Wynn is scheduled to get his first „A to Z“ look at the show, tentatively called „Le Reve,“ Wynn said. Dragone and his troupe are slated to take over a 70 million USD theater at Wynn Las Vegas in September.