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The Kingpins

Las Vegas Power Brokers
Bruce Schoenfeld
From the Print Edition:
Kevin Costner, Nov/Dec 00

(continued from page 1)

"Our first year, we did $200 million in food-and-beverage income at the Bellagio alone," Elizabeth Blau, MGM Mirage's vice president of restaurant development, says over a lunch of tomatoes and mozzarella at Osteria del Circo. "All of the restaurants here are beautiful sights, but they're also all extremely profitable. People lose sight of that." Driving that business was another Wynn insight: upscale gamblers would rather pay for a great meal than get a comped $12 steak or buffet ticket. More than half of the volume at the best hotel restaurants used to be given away to heavy players. At the Bellagio, the figure holds steady at a miserly 12 percent.  

Even with that, the Bellagio's profits didn't meet shareholders' expectations. After Wynn lost their confidence by running an impetuous business too impetuously, he was forced to sell Mirage Resorts to MGM Grand majority owner Kirk Kerkorian early this year. The $6.4 billion deal includes the assumption of billions in debt.   Don't miss the irony in that. While dot-com companies with no track records and hemorrhages of red ink were amassing market caps into the tens of billions on pure potential, institutional investors were unwilling to give Wynn time for the Bellagio to mature. But then, Wynn's unconventional ideas have always been dogged by skepticism. "I was in Monte Carlo when the Mirage opened," says Bill Timmins, president and chief operating officer of the new Aladdin. "People were saying, 'He's crazy. He's never going to make the money.' But he took the bar at three feet and raised it to five feet, so to speak. He's responsible for a very, very big move beyond gaming, to other revenues."  

With no shareholders to report to, Wynn can keep his own counsel now, but gossip inevitably abounds as to the nature of his new project. Will it be a skyscraper hotel that will stand as the tallest on the Strip? Will it be a luxury property, on the order of the Four Seasons? What all agree is that it won't be yet another theme hotel. Wynn is too smart for that.  

Strategically, Las Vegas stands at yet another crossroads. For much of the past decade, it has ranked as America's fastest-growing city, and the money generated by the Strip has helped fuel the boom. The economies of the city and the country have been sizzling, and the construction crane now serves as the city's proudest symbol. But that can't last forever.   The huge theme hotels carried the city through the '90s, but the '90s are done. There's talk of someone building a hotel called City by the Bay, with a half-sized Golden Gate Bridge, and developer Bob Stupak is pushing his idea for a true-to-scale Titanic, replete with an iceberg for a casino and condos in its smokestacks. But among major players, such Disneyland renderings are yesterday's news.  

What will replace them? Whose imagination will shape the Strip in the years to come? I began to look for the answers directly beneath some of the paintings that Wynn had amassed at the Bellagio for its $400 million Gallery of Fine Art. Terry Lanni, now Kerkorian's man in Las Vegas, has a Modigliani on one wall of his office, a Rembrandt on another, a Berthe Morisot on a third. He knows he'd better enjoy them now. "They're headed for auction at Christie's at the end of the year," he says. "We've sold most of the others already and raised millions of dollars."   Kerkorian is a shrewd businessman who is convinced he can run a property better than anyone. He's almost always right. Dismantling the art collection is part of his strategy to make the Bellagio more profitable.  

"Kirk Kerkorian has guts, he has balls, and he's also a gentleman," says Goldberg, the chairman of Park Place Entertainment, which owns properties up and down the Strip. "He's going to run that place right. Steve Wynn put up some impressive buildings, but with the Bellagio he made a major mistake. There's four words you should never forget, and he forgot them: Think like a customer. Steve built his beautiful buildings like he thought they should be built. But that wasn't necessarily what his customers wanted. And he paid the price."  

The sale of the paintings will pare down the debt that Wynn had amassed. Such frugality is bound to impress the stockholders, who consider themselves in good hands. The 82-year-old Kerkorian has bought and sold MGM twice since 1969, making millions each time. But Lanni, who understands how fine art plays into the good-life mystique that drives the property, has a plan to replace the paintings. An agreement with Washington, D.C.'s Phillips Collection will provide a rotating exhibit of 20 to 30 masterpieces, most of which are currently unavailable for public viewing. That will keep even repeat customers interested--and at almost no investment cost.  

"You need variety," Lanni says. "And that's true for the business as a whole as well as the paintings. Everything is available to everyone these days. People don't want to go back to the same hotel in three years and see the same show and have the same experience that they had before. You have to keep changing, giving them something new."  

Lanni is a casino lifer, for 14 years the president of Caesars Palace. He understands the gaming business, and he knows how to run a luxury hotel. Few executives are as admired on the Strip. Lanni is also, in his way, a visionary. It was on his watch that Caesars' Forum Shops were built, and he conceived of and built the Mansion at MGM Grand, the city's most exclusive hotel (see page 153). He doesn't sell the Mansion's suites, but gives them away to a select clientele. As a result, the MGM Grand's casino is now luring many of the top players in town.  

Now he's targeting Generation X. The plan is a high-end, high-tech property, complete with a swank nightclub. "Those kids are already coming here, but they haven't been addressed," says Lanni, 57. "I'm talking about 25-, 30-year-olds, the children of my friends. They love Las Vegas, but they don't have a place to go. If you can build something for this affluent generation, it's a great area of opportunity."  

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