by Real Business - Thursday, 30th August 2007

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Neon lights. The jangle of slot machines. Sports cars on pedestals waiting to be won. You could be nowhere else but a Las Vegas casino.

Now walk into a Steve Wynn casino. Chances are, you’ll be too distracted by the 54-foot simulated volcano or the live-action pirate battle to notice the casino floor. And when you do make it to the tables, it’s hard to shake off that image of a life-size sinking British frigate or the Italian lakeside and villa. It makes an impression. And that’s why Wynn is so successful.

The Bellagio is Steve Wynn’s bid to create the most luxurious and impressive hotel on Earth. Inspired by a town in Italy, the 3,000-room hotel aims to lure the wealthy - with the promise of “good taste” - to the bright lights of Vegas. The $1.6bn hotel contains a cool $285m-worth of fine art, top-class French and Italian restaurants, and in-house retailers, such as Chanel, Armani, Hermes and Tiffany. It’s set in 122 acres, complete with its own lake surrounded by 1,200 fountains - the centrepiece for nightly music and light shows. As Wynn has said, “If you had only been to the greatest hotel in Paris, London, New York - to every great hotel in the world - you’d still have no idea of what’s coming. Bellagio will be orders of magnitude greater than anyone anticipates.”

The son of a bingo parlour operator, Wynn spent his youth watching his father run his seven-state bingo empire. When Mike Wynn went to Las Vegas in 1952 to try to open a bingo hall, he took his son along for the ride. The bid failed, but the trip gave Steve Wynn his first taste of Vegas - a taste which “altered the young boy’s world-view and left him forever changed,” according to biographer John L Smith. When his father died in 1967, Wynn took over one of his bingo halls in Maryland. But, unsatisfied with life in a gaming backwater, he soon moved his family to Vegas.

So began Wynn’s rollercoaster ride to gaming glory. His father’s gambling empire gave him a network of valuable contacts which he used to buy a three per cent stake in Vegas’s Frontier hotel-casino for $45,000. He increased his holding to five per cent with a $30,000 stock buy a few days before Howard Hughes bought the resort for $24m, making a hefty profit. In 1969, he used these profits to buy a liquor distributor. He sold that on too - yup, at a profit.

The turning point for Wynn came in 1971. The deal involved a sliver of land adjacent to the Caesar’s Palace hotel-casino. With the help of a loan arranged by a banker friend and backed by a partner, Wynn bought a 1.1-acre strip next to Caesar’s Palace for $1.1m. The land, located between Caesar’s and one of Las Vegas’s most visible intersections, was clearly worth more to Caesar’s than to Wynn and partners. In 1972, Caesar’s bought it from Wynn for $2.25m.

Wynn had long dabbled in gaming stocks. He used the profit from the Caesar’s deal to increase his ownership in the downtown Golden Nugget. Later stock buys made Wynn majority owner in the casino. He got himself appointed to the Golden Nugget board, convinced its president to quit, and formed a group of partners to buy up 25 per cent of the stock. Now firmly in control, Wynn reinvented the Golden Nugget, then built a hotel next to the casino. By 1977, profits were booming, and Wynn began to eye Atlantic City, New Jersey.

In 1978, he bought an ageing Atlantic City hotel, razed it and built the Golden Nugget Atlantic City for $160m. Opened in 1980, and financed with junk bonds arranged by Wall Street whizz-kid and later felon Michael Milken, the Golden Nugget “set the East Coast ablaze with its opulence and success,’’ according to Smith’s biography.But the best was yet to come. The Golden Nugget Atlantic City was high-end, a first for the casino industry, but “it was still a casino with not much in the way of non-casino amenities,” says Harry Curtis, financial analyst with Bank America Robertson Stevenson. So in 1986, Wynn sold it to Bally for $440m. And he turned his attention to launching the Mirage hotel-casino - a venture that changed the face of Vegas casinos forever.Wynn took a gamble when he opened the Mirage in 1989. Like the Atlantic City resort, it was financed with junk bonds arranged by Milken. That posed a problem at first - extremely high debt service requirements - which got the sceptics chattering.

The scepticism seemed justified when in the Mirage’s opening year, Wynn’s public company, Mirage Resorts Inc, lost $21.2m on revenues of $329m. Its huge debts were hitting hard.

But that changed - and quickly. In 1990, the first full year of the Mirage’s operation, profits jumped to $29.7m, while revenues more than tripled to $991.5m.

“It wasn’t luck,” says Dave Ehlers, chairman of Las Vegas Investment Advisors. “Mirage, against the background of many detractors, was able to generate cash flow of $1bn in its first five years and pay off the debt.’’

Indeed, the Mirage, which Wynn has said “is the single most successful hotel on Earth, and has been since its opening day” set the pace for the Las Vegas casino industry.

“Prior to the opening of the Mirage, gaming properties were simply commodities,’’ says Curtis. “The only entertainment within a casino was the gambling part of the equation. Steve Wynn expanded that to include much more significant non-casino entertainment. And that included higher quality hotel rooms, hotel facilities, real food and imaginative shows.’’

Wynn’s properties were the first in Las Vegas to make as much money from entertainment and hospitality as from gambling. Pre-Wynn, conventional industry wisdom was that all non-gaming products were loss-leaders to be used for one purpose only: attracting gamblers. So hotel rooms were cheap, and you could get a full meal for $1.99.

Wynn’s ground-breaking hotel-casino spawned a whole series of copy-cat ventures, including the gigantic MGM Grand with its “City of Entertainment’’ theme, and Circus Circus properties such as the King Arthur-themed Excalibur and the Egypt-themed Luxor. “Steve Wynn was instrumental in helping reshape Las Vegas in terms of the type of property or product that customers would want. When he built the Mirage... it set off a new generation of properties that other companies have followed,’’ says Jim Murren, chief financial officer of the MGM Grand.

The doubters are few. The bottom line at Mirage Resorts Inc has made everyone a believer. In 1997 Mirage made $207.6m on revenues of $1.55bn. And Mirage Resorts was ranked second in Fortune’s “America’s most admired companies.”

The $620m Mirage features four acres of lagoons, centered around a working volcano. Nightly eruptions blast steam and water 40 feet in the air, illuminating the hotel tower’s mirrored facade with shooting flames. Next door, at Wynn’s Treasure Island, actors portraying pirates defeat actors portraying the crew of a British frigate every 90 minutes. Visitors to Wynn’s Golden Nugget hotel-casino - his first gambling property - walk through a light and music show broadcast from a $70m, four-block-long canopy, featuring two million computer-controlled, four-colour lights and a 540,000-watt sound system. And when his crowning glory, the $1.6bn Bellagio, opens, visitors will have a hard time ignoring music and light shows centred around 1,200 fountains!

“There’s no question that Wynn is one of the great developers in the gaming business,” says Ehlers. “The Mirage and Treasure Island speak for themselves. They’re the best. And I would imagine that Bellagio will be about as impressive as this sort of thing can be.’’

To what does Wynn owe this phenomenal success? Wynn, who rarely grants interviews and declined to be interviewed for this article, is widely recognised as a dynamic charismatic with a violent temper.

But he also has a knack for persisting until he gets what he wants. Wynn purchased $285m-worth of fine art - including masterpieces by Renoir, Monet and Matisse - for display in Bellagio. Under tax laws designed to promote the public display of art, Wynn believes that Bellagio qualifies for $15m-worth of tax breaks during its first year of operation, and $3m annually. But he wants to charge $10 admission for the art show, part of a plan to recoup some of his losses for its operation (it is expected to lose money).

That, some say, violates the spirit of the law. In August 1998 the Nevada Tax Commission ruled against Wynn, saying that if he wants to get the tax break, the art must be displayed free to the public for at least 20 hours per week. That decision was made at the commission’s morning meeting. That evening, Wynn, the accomplished orator, thrust himself before the commission, arguing that the art was essential to the education of southern Nevada’s schoolchildren, who will be allowed to visit for free, and that admission costs for everyone else would pay for security.

Commissioners expressed concerns that the public is being charged twice for the art, once with the tax break, and once with the admission charge. But Wynn convinced the commission to reconsider the issue at its meeting ten days before the hotel opens.

One thing is out of Wynn’s control: his sight. He suffers from retinitis pigmentosa, a degenerative eye disease, and will eventually go blind. And he has not always been successful. His attempt to enter the British gambling market in the early eighties failed when New Scotland Yard produced a report alleging Wynn had links with the American mob. Wynn denied the charges, arguing that British regulators were looking for any excuse to keep American owners out. (He has also been rebuffed in attempts to build casinos in Florida, Connecticut, Canada and a variety of other locations, both in and out of the US.)

The Scotland Yard report led to a Wynn lawsuit against Las Vegas journalist John L Smith and New York publisher Lyle Stuart. In an advertisement for Smith’s 1995 Wynn biography, Running Scared, Stuart’s publishing house claimed that the Scotland Yard report exposed Wynn as a front for an American mob family. Wynn won the suit versus Stuart, and it is being appealed. Smith was dismissed as a defendant from the suit.

Wynn takes a tough line on such allegations. As he told one New York magazine reporter in February this year: “Every law-enforcement agency has always vouched for me, that any suggestion of me and organised crime is preposterous. I know one thing: if anybody says any different, they’re a f*****g defendant.”

Wynn’s stature has made him a target on other fronts. In 1993, his daughter Kevin was kidnapped by a trio of hoods looking for a big pay-off. Wynn paid $1.45m for her release. Kevin was free in hours, and the hoods were captured in California spending their booty.

The incident changed Wynn’s lifestyle. His daughters now travel with bodyguards. And the family retreated to a guarded mansion in Shadow Creek, a top golf course Wynn owns in north Las Vegas.

Still, these setbacks haven’t slowed him down. He is building a massive resort, Beau Rivage, on the seafront in Biloxi, Mississippi. And he continues to push forward with plans to re-enter Atlantic City with a 4,000-room resort.

And then, of course, there’s the Bellagio. “There is no reason why in 2000 the greatest hotel in the world can’t be the Bellagio in Las Vegas,” says Wynn. Who are we to argue?

Contacts
John Wilen is a business reporter for the Las Vegas Sun.

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