The Biggest Bet in Vegas
Impresario Steve Wynn has broken ground on a $1.95 billion hotel, Le Reve
From the Print Edition:
Steve Wynn, Jan/Feb 03
Steve Wynn is back. Steve Wynn is back. This is the hopeful drumbeat that echoes from one end of the Las Vegas Strip to the other. Nervous competitors -- hotel executives who've seen their fortunes take a post-9/11 tumble, initiated massive job cuts, and watched seemingly unbridled construction grind to a halt -- have good reason to pin their hopes on Wynn.
If history is an indicator, his return augurs well for the renewed growth of Vegas -- especially since Wynn (no bluffer when it comes to these sorts of things) vows that his next project, a $1.95 billion mega-resort called Le Reve, or The Dream, will be his greatest accomplishment yet. It's three years away from completion, and already Vegas is in a tizzy. The buzz on Wall Street isn't far behind. Wynn will use proceeds from a recent $450 million initial public offering, loans from private investors, and some of his own money to finance his newest, innovative twenty-first-century concept for Las Vegas.
The comeback mega-deal isn't bad for the son of a gambler who owned a chain of bingo parlors and died thousands of dollars in debt. It's doubly not-bad when you consider that the 60-year-old Wynn, who graduated from the University of Pennsylvania with a degree in English and married his one-and-only at age 21, originally came to Vegas in 1967 through a fluke offer to own a small piece of the Frontier Hotel.
Less than a year later, however -- following some messy business when it came to light that the Frontier's main backers were Detroit mobsters -- Wynn pleaded ignorance, cashed out and parlayed the Frontier stake into a parcel of property near Caesars Palace. He flipped the land for a cool $1 million profit and used his cut of that money to buy a 5 percent share of the Golden Nugget. By age 31, in 1973, Steve Wynn was the majority shareholder of the Nugget and the youngest casino owner in Las Vegas.
Despite years of success that followed, in 1989 -- just before Wynn's completion of the Mirage kicked off Vegas's decade-long boom of building and prosperity -- he had plenty of detractors. They mocked his ambition to open a world-class resort at a time when Las Vegas was dead, when it was little more than a city dominated by grind-joints where a high-end hotel seemed an ill-fated nightmare. "Everybody was skeptical," remembers George Maloof, owner of the recently opened Palms Casino Resort and a longtime student of Wynn. "He was spending $600 million on a resort that would need to do $1 million a day in business. Nobody had ever come close to that. People thought he wouldn't make it. But he opened his doors and never looked back."
More importantly, for the bigger picture of Vegas as a whole, Wynn tilted the playing field in an intense way. "Once Steve opened the Mirage, he put pressure on other companies to open mega-theme resorts," says Maloof.
Seemingly overnight, Vegas went from bust to boom. Wynn was the match that lit a powder keg of growth in a city that, just a year earlier, seemed hopelessly dated and written off. "People had to grow to compete with the Mirage," adds Maloof, "and suddenly Vegas became cool again."
By 1998, when he launched the greatest gambling hall of the twentieth century, the Bellagio, Wynn was a certified Vegas big shot and the head of the hottest gaming stock on Wall Street. He was lauded as a pioneer, viewed as the Nevada equivalent of his boyhood hero Harry Mufson, the man who built the Eden Rock -- a lavishly stylized, wedding cake of a hotel in Miami Beach, where Wynn and his parents spent their winters. His $1.67 billion Bellagio was as cool and idiosyncratic and stylish as Mufson's masterpiece. It also raised the bar on what a Vegas resort could provide and spawned other luxurious palaces like The Venetian and Mandalay Bay. In short, Wynn inspired the transformation of Las Vegas into America's greatest destination.
Then, in March 2000, Kirk Kerkorian smelled weakness. With Mirage Resorts' stock price declining, he swooped in and forced a purchase of the company for $4.4 billion. In one of his first moves, Kerkorian replaced Wynn with J. Terrence Lanni as chairman and chief executive officer. Edged out of his own company, Wynn cashed in his stock for $500 million, took $11.3 million in a severance package, and, suddenly, the most influential man on the Strip was without his landmarks of high-rolling hospitality.
Just one month later, however, clearly unable to stay out of the game, Wynn laid down $270 million and bought Vegas's beloved Desert Inn, a classic property that boasted the city's only remaining public 18-hole golf course, and a place where Howard Hughes had slept and Frank Sinatra had performed. Cagey about what he'd do with it, Wynn holed up with a coterie of advisers, designers and architects. He brought in Japanese pachinko king Kazuo Okada and Baron Asset Fund as investors.
Shrouded in mystery, Wynn spent two years plotting his next move. This past October, he put together the $1.95 billion stake for his hotly anticipated Le Reve, to be built on the Desert Inn property. It is named after a painting by Picasso and translates to mean "The Dream." But the bigger dream, the one that is likely to resonate for decades, bundles the fortunes of Steve Wynn with those of his adopted city.
One week after breaking ground on Le Reve, nine floors above the Strip, Wynn sits behind a big desk in his airplane hangar of an office. The walls are adorned with vintage Warhol prints, the plasma-screen TV plays muted CNBC, and a pair of German shepherds lie at Wynn's feet. Backed by picture-windowed views of the Strip and the Desert Inn's fabled golf course, he sips coffee and munches freshly made popcorn out of a silver bowl.
Following a chew and a sip, Wynn begins to verbally unfurl his new dream for Las Vegas, the city that he himself has made into a place with more sophisticated entertainment, fine art, top cuisine and spa amenities than anyone could have imagined 20 years ago. "Now, Le Reve has to come up with a package that people will perceive as newer and better than whatever the best of Las Vegas currently is," begins Wynn, dressed in a blue sport jacket, gray pants and French cuffed shirt. "People come here for excitement. That is no secret. So the resort has to be exciting -- but not in a noisy or clangy way. Not with a lot of strobe lights. It has to be exciting in a deeper way."
That deepness became Wynn's grail when plans for Le Reve began incubating. Right from the start, it went beyond simply outdoing the dancing waters that front the Bellagio or the volcano that explodes every 15 minutes in the evening at the Mirage. He didn't want to outdo himself -- he wanted to reinvent himself. "I realized that I couldn't do Bellagio again," says Wynn, jutting forward his neatly coiffed head.
His eyes squint, his face radiates the kind of intensity that makes people finance his dreams, and he suddenly transforms into the world's greatest salesman. "If I had to build another Bellagio, it wouldn't be as good as the original. Bellagio is the ultimate expression of a particular idea. I swear I took that one as far as it could go. It is exquisitely executed. Our goal with Le Reve is to give the guest an experience that cannot be gotten anywhere else. The word here is experience. Not a look, but an experience. You won't be able to bear to leave Le Reve, because the experiences here will all be so exquisite."
For starters, Wynn and his crew critically deconstructed the Mirage and Bellagio, both of which have generally been acknowledged as the best Vegas has to offer. Gazing at those two citadels of chance, they all agreed that things had gotten too big, too anonymous, too sprawling for anybody's good. Le Reve would be built high rather than wide. That decision was easy. The trickier decision involved a revolutionized perspective: "We decided to design the hotel strictly from the guest's point of view. It will be designed from the inside looking out -- the opposite of how every hotel is designed, including all of mine."
Wynn explains that in Las Vegas, the front of the hotel, facing the Strip, has always been considered the most important element. Whether it's laced with neon or an Eiffel Tower or a grand canal, it is the thing that draws people into the casino. Wynn likens the front of a casino to the barker on a carnival midway (symbolized by the Vegas Strip). "I've designed my hotels from the outside looking in," he says, sounding pained. "Everything is aimed outside. If you are in the Bellagio, you're behind the fountains, not looking in on them. Big mistake. But that's where my head was at back then."
Where is his head at these days? "I still recognize the importance of having a great invitation on the carnival midway, but I've turned it around: what's more provocative than dancing waters or erupting volcanos? Mystery. For Le Reve, I'll have a mountain on the Strip that you can't see in. It's 120 feet tall and there is no intrusion from the people across the street into my environment. It's a beautiful, complex structure that looks like hills with ridges and waterfalls cascading down."
Wynn's mountain will be a $60 million feat of special-effects engineering, magnificently lit, spelling out Le Reve behind the flowing currents, agitated by a sheer drop waterfall modeled after Angel Falls in Venezuela, and ensconcing Le Reve in a way that no hotel has ever been. "See that incredible mountain and you'll wonder what's behind it," continues Wynn. "There's the invitational dynamic. It's as strong as dancing water. But here the payoff is on the inside rather than the outside. It works -- as long as the payoff is really there. You cannot bluff."
Robert G. Goldstein, president and chief operating officer of The Venetian Resort Hotel and Casino, has little doubt about Wynn's ability to deliver. "You are talking about a guy who's a visionary," says Goldstein, adding that the Venetian's close proximity to Le Reve -- they share a corner of Las Vegas Boulevard -- can only be a plus. "My guess is that whatever Steve does, it will be a spectacular, must-see attraction. You can never discount anything he does."
Even Lanni, the man who replaced Wynn at the Mirage and Bellagio, is voicing support. "It'll be tough for Steve to outdo the Bellagio, but when it comes to building hotel-casinos, he is a creative genius," says Lanni, insisting that what's good for Wynn is good for Vegas. "He'll build a showstopper that will bring new people to Las Vegas. They'll visit our properties as well as his."
Pressed to tip his hand, Wynn explains that Le Reve's interior will be broken up into seven distinct and unique environments -- or, as he calls them, "theaters" -- that will play off the mountain.
He describes one of those stages: a Japanese restaurant built around a garden and lagoon, alongside a small, cloistered Shinto temple, complete with wind chimes and lanterns. "Now," he says, his voice building in intensity, "what did we do with that? The sidewalk is cool enough. It's beautiful." His voice momentarily drops to a whisper: "But the show's not out there."
Reverting to a normal voice, he continues, "To see anything like what's in that Japanese restaurant, you'll need to go 5,800 miles to Kyoto. This is about your experience. You feel like sushi? Goddamn it, I'm taking you to a place you haven't been before, not in this country. And that is just one moment. The hotel is a series of those layers, one on top of the other, catering to the full range of your emotions. This environment is about giving you a bigger kick when you are inside than out. We are not giving a payoff to the guy on the sidewalk. We hook him with an attraction outside, but the best is yet to come. That's a different generation from Mirage and Bellagio." He hesitates dramatically, then considers it all, as if he's thinking about this for the first time. "Who won't want to look behind the wall and see Le Reve? To paraphrase George S. Kaufman, it's the way God would do it if he had money."
That said, Wynn is quick to point out that he is not abandoning Vegas tradition altogether. He acknowledges that Le Reve couldn't exist if he had not already done the Bellagio -- and taken a type of hotel concept to the end of its limits. Certain elements of the Bellagio echo in Le Reve. The gaming floor will be heavily draped and laid with fabric, with funky light fixtures hanging from the ceilings. The rooms have a sense of modern sleekness, but the overall design effect is soft and curvy and almost feminine (at least as feminine as a richly earth-toned color scheme can be). He recently recruited his first celebrity chef -- Daniel Boulud, who will transport a copy of his Manhattan landmark to Las Vegas -- and has commissioned Cirque du Soleil creator Franco Dragone to produce a signature show, centering around a Himalayan tribe with flying children, that is designed to outdo Dragone's Mystére and "O" (which play at Treasure Island and Bellagio, respectively). Not to be outdone, Lanni recently commissioned Dragone to create two new shows for his hotels: one will be in the MGM Grand, the other in New York, New York. "Franco is a smart guy, and he'll create a successful show for Steve," Lanni coolly says. "But the people who see Steve's show will also want to see Mystére and 'O' and our two new shows."
Shopping -- which is a big lure in Vegas -- will center at Le Reve around the presence of a Ferrari/Maserati car dealership. Wynn's not yet sure what other blue-chip retailers will be at the resort, but the Ferrari/Maserati showroom is a good way to set the pace. It'll make money as a retail operation (like most dealerships of the elite automobiles, Le Reve's will sell about 30 new cars per year and traffic in secondhand vehicles as well), but Wynn is taking the showroom to the next level, employing it as an attraction that will drive business through Le Reve. "Ferraris are great to look at, but here they'll be more than that," Wynn explains, pointing out that the operation's theme will revolve around the glamour of Formula 1 racing.
"We'll sell clothing, have a Formula 1 restaurant, show racing videos, hang a damned car from the ceiling, let people sit in the cars," Wynn says. "It'll be an attraction just like sharks behind the front desk [at the Mirage] are an attraction. And the Ferrari people are completely behind it. This was an easy sell to Gianni Agnelli. In two seconds flat, he told me that he wants to do it."
Nevertheless, even as Wynn aims to redefine the Vegas resort -- and the hotel as we know it -- he still marvels over what his city has accomplished and what it has become. While he acknowledges that "some things done here are hideous and horrible beyond endurance, almost punishingly ugly," he quickly counters that Vegas at its best is equally astonishing. "The Mansion at MGM represents 29 of the most exquisitely presented accommodations in the country," he gushes (albeit, a few breaths later, Wynn describes it as "a jewel on the corner of a vast, middle-range hotel; it belonged at the Bellagio"). "Parts of the Bellagio are noteworthy: the millwork, the stone, the ceramic; they're all the best of everything and nothing there is faux" -- another swipe at some of the very faux newer hotels -- "and the Mandalay Bay has tasteful design work in some of its restaurants."
After putting down the Mandalay for having a South Pacific theme that could have been lifted from the Mirage, Wynn genuinely says, "The Hermitage and Guggenheim at the Venetian are great. The 40 canvases on display there, stretching from Velázquez and El Greco to Van Gogh and Rothko represent a history of the arts, going from the fifteenth century to the twentieth century. Any art professor could use it for a complete survey course on painting. Not bad for Las Vegas."
Wynn, the first hotelier to exhibit art, will have a gallery of his own at Le Reve -- it features a triptych of portraits that Andy Warhol had done of him -- but the hotel will contain some touches that he has copped from competitors. "Nobody does anything from scratch," acknowledges Wynn. "We all stand on each other's shoulders. Sheldon Adelson built a bigger room at Venetian and people loved it. Sheldon was the first guy to go over 600 feet with a standard room. Bellagio is 494 square feet and that's a five-star room. What's with 620 feet? Six hundred fifty? Isn't that gilding the lily? Isn't that unnecessary? I thought it was when Adelson did it. I was wrong."
Standard rooms at Le Reve (boasting high-speed computer ports and plasma-screen TVs) will outsize the Venetian's. Then, Wynn will really push the envelope with a significant upgrade for the high-roller suites. They are anything-but-standard rooms that will benefit from the exclusivity that so successfully overrides MGM's Mansion. Still in their model stages, the big, sprawling suites, with mirrored ceilings and separate massage rooms, already look as if they'll be
big-money-player magnets -- augmented by private entrances and exclusive check-in desks. Wynn describes the high-roller rooms as a 300-suite hotel within an already grand hotel, and they'll be strategically positioned to feed directly into Le Reve's baccarat pit.
But the real prize for free-spending gamblers will most likely be 18 villas lining Le Reve's new 18-hole championship golf course, which will be an additional expense on top of the $1.95 billion project. The course is situated along the Strip, directly adjacent to the hotel. While Wynn knows better than to try outdoing, or even replicating, his fabulously infamous Shadow Creek layout (with its 15,000 North Carolina pine trees in the middle of the desert), he assures that the new course, laying on 140 acres of land as compared to Shadow Creek's 250, will have plenty going for it. "We are in the middle of the city, we have surprise, we have convenience, we have tremendous elevation changes that will delight everyone," Wynn says. "It's great to be able to walk out of your room and tee up right here and now, without taking a limo for 30 minutes. Then you can finish playing and go back to your room for a drink on the patio, where you can sit and watch other guys putting out. Golfers will be able to live in the environment. You can't do that in Shadow Creek. The only one who lives in the environment of Shadow Creek is me. My house is there and nobody else lives there."
Maybe Wynn got lonely out there, all alone on the golf course, because he has immersed himself in another highly collaborative project. He is striving to be the first American to build a casino on the island of Macau, the former Portuguese colony near Hong Kong that was transferred back to the Chinese three years ago (Sheldon Adelson, the only other Westerner with a Macau license, will be building a casino there as well). Wynn plans on breaking ground in February and expects to build a Euro-themed operation that will blend in with the island's existing architecture and exude the Chinese definition of old-money class. Most importantly, it will be a synergistic dream. "Marketing will be huge," declares Wynn. "Having access to all those Chinese players will be the biggest thing that ever happened to Las Vegas. And it'll affect the other hotels as well. They'll stay with us, but find their way to the MGM and Bellagio."
That may sound like an uncharacteristically generous prediction, but it reflects the way Wynn seems to be thinking these days. He acknowledges that Wall Street's financing for his resort, even though he raised less than he had initially hoped for, is not only a positive sign for him but also a positive sign for Vegas, especially since Wynn's last parting with the Street wasn't so smooth. After the share price of his Mirage Resorts had violently dipped from $26 in the spring of 1999 to $10.88 the following February -- Wynn's casinos had failed to hit their numbers in the latest quarter -- the stage was set for Kerkorian to launch the takeover, which has generously been described as only semi-hostile. Kerkorian snatched up Mirage Resorts when it was at its most vulnerable, ultimately offering to pay $21 per share, nearly twice what the stock was trading for. He sweetened the deal for Wynn -- offering him the $11.3 million severance package -- and wound up with an unbeatable high-rolling trident: the Mirage, the Bellagio and the Mansion (at the MGM), which allows MGM/Mirage to cater to top-flight gamblers at every level.
At the time, Wynn stacked his chips and declared that he would never again head a publicly traded company. However, he now insists that the takeover was something he wanted. "When I saw a company like Palm go public, and in one day it had a bigger valuation than General Motors, I began looking for an exit," he maintains. "I wanted to opt out of the system and Kirk Kerkorian came forward with six and a half billion dollars in his jeans. [Kerkorkian took on $2 billion in debt.] I got the chance of a lifetime to jump off a train as I felt it was about to go over a cliff."
Wynn maintains that the recent downturn on Wall Street has brought the market back to being a more fundamentally sensible and alluring place; that, he says, accounts for his interest in reentering the public arena. Incontestable is that a little bit of irrational exuberance would have made life easier for Wynn when he was on the road, trying to raise money for his project. He made 44 presentations and found only 12 financial institutions willing to buy into an undertaking that will not earn a dime before 2005. "The IPO period was very nerve-racking," admits Wynn, usually the picture of confidence. "When you are out there, face-to-face with all the institutions and mutual funds, you see guys who are frightened. They want to wait [on investing]. But [he told them], 'I need the money now.' You get that 20 times from people and there is a cold breeze in the room." For Wynn, the stakes were incomprehensibly massive: "You've got all this money you invested, people who depend on you, a partner who believes in you. If that's not enough to make you think twice, then you shouldn't have the money in the first place. If that doesn't bother you, you are the wrong person to be trusted."
The miracle in all of this is that Wynn managed to put together his $1.95 billion in 30 months as mutual fund redemptions were through the roof. "Gathering this kind of capital, on the strength of an idea, requires unbelievable good timing, energy and the transfer of energy; it's like the creation of the universe," Wynn says, adding that it represents the largest casino project financing in the history of the United States. "Creating a company of this size overnight is harrowing. It's not the kind of thing you take lightly. If you do, if you are that confused going in, before you are done you are either dead or you got a lesson. You live through this by hooking up your aorta right to the project, and so do a bunch of other people. That is the heaviest thing of all: you let them down and you cause a train wreck."
But Wynn got his money, he's getting his mountain, and Le Reve seems poised to bring his dream to fruition. In Vegas, a notoriously cutthroat place where hoteliers routinely steal business and entertainers and ideas from one another, Wynn's success at raising the billions is viewed with optimism by his competitors. "It stirs the pot for Las Vegas tourism, and we all benefit from that," says Rob Goldstein, who plans on leading one of the first foursomes to play Le Reve's golf course as soon as it opens. "Additionally, Le Reve boosts the town's image and puts us on front pages for the next three years. It creates awareness, excitement and energy. Hopefully, we at the Venetian will be right behind Steve, developing phase two of our hotel."
Regardless of the optimism in Vegas, plenty of analysts on Wall Street are still hedging their bets. "I think Le Reve will be a success, but it's a question of how big a success," says Dennis Forst, an analyst with McDonald Investments. "They're investing close to 2 billion and I doubt they'll get a 20 percent return on it. When the IPO came up, the buzz was that Steve Wynn is an impressive guy who can build tremendous operations. The issue was his propensity for building the biggest and best properties without regard to cost."
Not expressing any of those doubts is Phil Ruffin, who owns the old Frontier Hotel, directly across the Strip from Le Reve. Ruffin has acknowledged that his green light to build a San Francisco-themed property hinged on Wynn raising his capital. The Mandalay Bay is expanding in the shadow of Wynn's construction and the Bellagio will be building a new restaurant for haute cuisine star Alain Ducasse and a new $375 million tower, with 300 state-of-the-art rooms (including a batch of high-rolling penthouses) that will sit atop an expanded spa. And as much as Lanni likes to discount the influence of Wynn upon his decision making, even he has to admit that the timing is more than coincidence (after all, when MGM built its ultra-lush mansion, it was in direct response to Wynn's Bellagio). "You need competition to be good at what you're doing," Lanni says, poised to illustrate precisely how Wynn's renewed activity will kick off a building boom on the Strip. "Le Reve provides an impetus for us to reinvent what we do. It also makes it easier when we go to the board and request money to expand. The competition is an impetus for us to move ahead faster than we ordinarily might have." After stating that the new Bellagio tower will open six or seven months ahead of Le Reve, Lanni adds, "Le Reve will be a good competitor, but we will be up for it."
It's a sporting sentiment that jibes well with the positive vibe that Wynn seems to be emoting these days. "God bless all the people that believe in this project and have long-term views," Wynn says, sounding genuinely grateful -- for his investors and competitors. "A lot of [the success in raising money] had to do with the city, a lot of it had to do with my track record, a lot of it had to do with salesmanship. But most of all, it had to do with the analytical ability of professional investors who can understand Las Vegas and know that someone who has experience in the town and presents his case efficiently and effectively can be trusted. It was a vote of confidence for Las Vegas from people who know the difference. They didn't have to give me my money, but they did."
Wynn takes a breath. Behind him, dusk settles over the Vegas Strip. Lights from the Frontier Hotel flicker on and throb rhythmically. Asked about the role he might play in igniting the next spate of building here, Wynn visibly relaxes for the first time all afternoon. He wheels back his chair, stretches his legs, and smiles as tension drains from his face. "This project has sort of become an icon of the future," Wynn says. "The thinking is that if Wall Street and Steve Wynn believe in the town, then its best days are yet to come. The money is here and stacked, everybody's heaved a sigh of relief, and I've been adopted by Las Vegas as a symbol. Everyone's rooting for me because they're rooting for themselves. So I've become a homeboy. At age 60, I am Las Vegas's quintessential homeboy." Steve Wynn allows this image to hang in the air for a moment, then he softly concludes, "What a lovely spot to be in."
Michael Kaplan is Cigar Aficionado's gambling columnist.
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