Chasing the dragon

Las Vegas pioneer Steve Wynn knows a business opportunity when he sees it, and he knows they don’t come much bigger than Asia’s gaming mecca. As he opens his latest venture – the sumptuous Encore Macau – Wynn speaks exclusively to Macau Business about his plans to move to the city, his belief that people are the key to success and the simple formula that makes his Oriental odyessy tick You know the market here is different from Europe or the US. It’s not exactly Monte Carlo or Vegas and can be peculiar sometimes. So, what message are you trying to send to your clients, both mass and VIP, with Encore Macau? Steve Wynn: The idea that is responsible for us being here was expressed to me by Edmund Ho when we started the process in 2001 and 2002. I said at the time, “Edmund, you know, you don’t need an American company to build a big building, you do very well in China already, look at Hong Kong, look at Macau, look at Shanghai, look at Beijing, you don’t need any Americans to tell you how to build a fancy skyscraper. As a matter of fact, the buildings of Hong Kong in many cases are more beautiful than the ones in New York. What you need is a hospitality economy”. At the millennium, you did not have one. Stanley had done a good job keeping control of the gaming industry here, but to say that this was a hospitality culture would not be accurate in my opinion. And I said, “Until you have that hospitality culture you will not get what you want because at the end of the day it is people that make people happy, not buildings. And I think I can be helpful in that regard”. At some point this idea of changing Macau got confused with Las Vegas, somehow the idea appeared that Macau was going to turn into Las Vegas and there would be a bunch of night clubs and show rooms and stuff. And of course that wasn’t accurate. Macau was going to develop based upon on its own Chinese roots. And when I got the concession he said “I’m counting on you Steve”. He helped me get this property. The government owned four of six lots and Stanley owned two. And he convinced Stanley to give them back and trade them out for the ones outback so we could have a site. The goal of the government to change this economy has been remarkably successful, partially due to our efforts, and Sheldon’s. This was not a retail capital in the Pacific Rim, Paulo, but it is today. Shopping here is as good as anywhere in the world. That has happened in five years. Not so easy to do. Go try and do it in Guangzhou, go try and do it in Fujian or Dalian, see how long it takes. This was not a culinary capital but the restaurants of Macau today have nothing to do with the restaurants of five years ago. You can eat in any restaurant in this city as good as you can anywhere else. The rooms available, the meeting rooms and bedrooms and suites in this city rival any rooms anywhere in the world, in five years. As I say, Paulo, today, the fanciest hotel building in the world is not in London, Paris, Las Vegas, Los Angeles, San Francisco, New York or Geneva, in Delhi, Mumbai or Singapore. The fanciest hotel in the world is in Macau. And that is what they wanted. Early days Having stayed at Wynn Las Vegas and at Encore, beautiful properties, what struck me most was the service, something that I still cannot see [at that level] in Macau. Las Vegas (…) has been in the market for 60 years. This one is five or six years old. Nobody got business until 2004/5. It’s five years. We opened in 2006. You come by yourself and you stay at Encore, next week, or the week after, and you tell me that there’s a noticeable difference between the service in this hotel and the one in Las Vegas. We started in 2006 with a group of kids here, who are dying to do good, who have great attitude, and we show them, and we work, and they get comfortable, and they feel safe. We didn’t cut back any salaries, we didn’t go from 48 hours to 40 hours, we didn’t take away any thirteenth month. We gave a cost of living increase of 10 percent to our line of employees when the rents got too expensive here. We don’t worry about money. We worry about making our employees safe. And that is the beginning of the culture. And I tell you it’s alive in this building Paulo. As an investor don’t you think it’s a little bit difficult to deal with the labour market with all these restrictions for instance? Naturally, when it comes to specialised people, like chefs… But this government has been understanding about it. They have given us the support that we have asked for. Every once in a while we had to beg for it but we got what we wanted. Listen, there is a lot of pressure here to keep the local citizens employed. What the hell, why not? If I were in the government I would do exactly the same thing. It’s not an unreasonable request to take care of the people who live here first. But when we made our case about needing a specialist in order to make the people who work here successful, they have been respectful of those requests. But I have to make my case, we all do. Taking time to get it right Encore Las Vegas will have Surrender, a new night club to add to others. In Macau you had that experience with Tryst and then you decided not to. Is it because the Macau crowd is more difficult to control? The late night crowd that came to Tryst frightened us a little bit. We had a couple of fights, one of my employees got beat up. I don’t think we were ready for that then. I think what’s appropriate for Macau changes here just as government policy does when necessary. And I think as we go along there’s going to be a time for that here. When I did it two years ago it was too soon. When? Macau is trying – at least some people are trying – to have more glamour, more entertainment. Yes, we do have fantastic new restaurants but when will it be possible to also educate the market to come to Macau to go to shows? Slow down with the shows. This happens in stages. First, it becomes a place that people trust they can stay at. Beautiful hotels, great service, great food and shopping. Those are the safe beginnings. And then the market (…) and people come here not just to gamble but because it’s good to be here. Instead of saying what we have not yet accomplished I think it’s very important to remind ourselves of how far we have come in so quick a time. Las Vegas took five times longer to do the same things. If you had said fifteen years ago that Las Vegas would be a shopping capital, in 1994, and the food capital, everybody would have laughed at you, including the so-called smart guys that had the other places. After I opened Mirage I wouldn’t have believed it and all of the sudden, boom. There were no night clubs in 1999. And all of the sudden, ten years later it’s a 750 million dollar industry. The days of putting baccarat tables in an office building are over in this city. This city is a destination and if you want to do business in Macau you better come with your guns loaded, with big bread, big money and big plans, because you are up against big competition and the bar goes up. Five years, it’s very fast. At the end of the day it’s also your fault. When you showed us that we can have more and more, it’s natural that people start wanting more than 100 percent. Now we want 110 percent… That’s the world we are living in. Steven Spielberg, my friend says, Steve, it is tough now. The things that would get a wow fifteen years ago wouldn’t get a yawn today. You go to make a movie and it’s terrible, the public gets spoiled, their expectations rise. The government wanted to raise expectations and the only way you raise expectations is by the truth, by showing people a better way. Headquarter move on the way Have you talked to Edmund Ho recently? I spoke to him on the phone the other day because I’m working on something I would like to do and I asked his advice. But I haven’t seen Edmund because I was sick. I’m guessing he is still happy with your projects here… Our goal has always been that after five years or six years or ten years, the people of Macau would be saying we are glad that they came, they are good neighbors. If we could do that, then our future would be happy and we would be here forever. Frankly I’ve been thinking of moving our headquarters here to Macau. How seriously are you thinking about it? Very seriously. What would the consequences of a move like that be? I would live here more than in Las Vegas. I am already a resident, I have had my card for the last two years, we are a Chinese company. There have been some government decisions, however, that from a gaming point of view could raise some eyebrows. First there was a commission cap, then a table cap, where do you see the government intervening next and is this good or should the market be a little bit more open with less interference from the government? I would not under any circumstances say that the government has interfered. They have trusted the operators to do their job. That’s why you see all these buildings, some of them standing unfinished. I know that the subject of table caps has been brought up but there is no table cap at the moment. But, a whole bunch of tables were put out in some of these casinos that were never used. So, some wanted to use the tables that they had and move to another building, they could build two more hotels. My own feeling is that everything I’ve seen from the government has been well considered and intelligent, much more so than in America. And so, if we are allowed to break ground and build our hotel in Cotai, I’m sure we will have a casino. So, I don’t consider table caps or the discussion of table caps to be a threat to us in any way, shape or form. But I don’t have as many tables as the other guys. We just make more money with the ones we have. I don’t need thousands of tables in a casino in order to build the kinds of hotels that I want people to stay at. On the 5,500 tables cap, you don’t have that many… I have 400 and change. So you will need tables for your Cotai project? I won’t need any more than I have here. Still, if the government says the industry can’t go over 5,500… Well, then we wouldn’t build the hotel. What I am saying is they are not going to tell you to build the hotel and then tell you can’t have a casino in it. If they want the jobs, if they want the taxes, if they encourage us to do a project I’m sure that they will allow us to have an appropriately sized casino. I totally trust the government to make that decision intelligently. A green plan for Cotai A company from your group has a very large piece of land already fenced off in Cotai. Yet, a real willingness doesn’t seem to exist to open at this stage. Can you confirm your commitment to invest in Cotai? We are actively in the final stages with the government. We have a warehouse on the property. We are building Cotai, unless we are told not to. We were asked to slow down and we did, because things were over heating in the market as you know. But we have been told that we are to continue and we are prepared to continue. But the point is, there is no hurry. Let Sheldon finish his buildings, let’s have an orderly development of Macau, let’s learn from one another, let’s take one step at a time. It’s happening very fast as it is, we don’t have to have a stampede here. And besides, the community can’t stand a stampede. Listen, we have 51 acres and I’m going to build one hotel, with gardens. I’m going to give the Chinese people what they don’t get usually: space, gardens, places to walk, not five hotels, not two hotels, one hotel. Do you think you will be criticised by some sectors of society for having just one hotel on such a big chunk of property? It will be an integrated resort. [City of Dreams] have 27 acres with four hotels on the property. Now they made it urban. I want it to be an integrated destination. A resort can’t be urban, it’s got to have other things: recreational spaces, entertainment, like what I did with Bellagio and what I do in Wynn [Las Vegas]. Frankly speaking, Cotai today is urban. There’s hardly any landscaping, there are no gardens, there are no outdoor recreational spaces, the kind of things I like to do. Does Wynn Resorts intend to build the Cotai project by itself or in joint ventures with partners?By myself. No joint venture. Is it true that Wynn Resorts is also looking into, or prospecting for other investments in Macau? I can’t think of any right now. Well, I can give you a couple of examples: Fisherman’s Wharf , Macau Studio City? No, we are looking for opportunities to participate in the community but not to make an investment per say, another business, no. If we do any business it will be in our property in Cotai. Dealing with the junkets How is your relationship with Macau’s junket operators? Great. Do you see any problems over what the Nevada regulators are now saying with regards to re-assessing Macau’s VIP operations? Well, they don’t have to do that in our case, because ever since 2006, when we opened this hotel, every month we have provided the state of Nevada with the report about any junket relationships we have, the investigations that we have conducted independently before we made those arrangements, the ones that we have accepted, the ones that we rejected. So, we have avoided any problems. We have an independent investigation always with an assistant director of the FBI or someone from the Hong Kong police or combinations of the two. Understanding that it’s very easy, whether you are in Macau, or you are in Monaco, or Las Vegas, to get mixed up with someone you shouldn’t get mixed up with, and you are not allowed to do that if you are in a regulated business. That was easy to anticipate, easy to see. How much imagination did it take that there had to be a way of avoiding a problem? So, we instituted the program four years ago, every month since then. So, when Nevada says they want to revisit, they are not talking about us. How does Wynn Resorts Macau implement anti-money laundering supervision mechanisms over transactions in VIP areas? It’s very easy to do it. First of all, the dead chip program is very helpful. Money laundering is where someone takes illicit game money that they cannot pay taxes on, or explain, and then turns it into money that they can pay taxes on and then uses it for investments. They take black market money and turn it into white market money that is taxable. Junket operators come to the junket players and they buy chips. They can’t cash those chips, they have to bet them. They have to play or we give them back the same money. Nothing gets washed, it gets returned to them. If someone has to buy these chips there is a difference between laundry and a garbage disposal, so with the dead chip program they can’t do it. Now, if someone comes here with cash into our program, not the junket, and says I want to buy a bunch of chips and doesn’t gamble and then goes back and tries to cash the chips, we don’t give them back a cheque, we give them back the money, because we know everybody that is gambling, because we follow them. You know, we rate them, we have people at the tables and if a junket operator does anything like that, we catch him and we throw the junket operator out of the building. Has that happened in the past? No, we have not had a money laundering problem here, it has never happened to us. First of all, it’s so obvious when they do it, it’s like putting an electric sign on your forehead. Winning with a focused business plan How do you see Macau-style VIP operations growing in the US, is baccarat really becoming relevant in your properties in Nevada? It’s a third of my business. Was Macau influential in that? We got new customers from Macau. Remember, I’m the guy from the Mirage and the Bellagio, so we have had the biggest chunk of Asian business anyway since 1980 and the mid 80’s, so I had relationships with all the Chinese players all these years, twenty years before we were in business in Macau. And incidentally, Paulo, now that you mention it, Wynn opened up in 2005 in Las Vegas, the Sands opened up in Macau in 2004, a year before Wynn in Las Vegas. In 2005 and 2006, before we opened in Macau the biggest baccarat Asian business in Las Vegas was at Wynn, not at the Venetian, so the Venetian’s role having the Sands next door did not take the Chinese players away from me and Wynn, because they were used to us, they didn’t care who owned the casino, they went to the fanciest place. You pulled your Foxwoods casino investment in Philadelphia, what didn’t make you happy? The project? The expected ROI, the potential market growth? We issued a statement when we withdrew and it was a carefully worded statement. It said, although we believed in the business opportunity in Pennsylvania and thought it was exciting for our company, this particular transaction did not meet our standards, which meant it was this particular deal. You are also not interested in Atlantic city, or at least not with Morgan Stanley’s casino… Not at all, in Atlantic city not at all. Are you living in a time where gaming investments must be outside the US, or if they are in the US, must be really very carefully planned? What’s going on over there? The answer is yes, you said it perfectly. You listen to your own question, that’s my answer. What about Asia? It’s great, gets the deals right, if the government is stable. Listen, I came here because I met Edmund Ho, and it was clear I was talking to a very serious, legitimate man. It’s always about people, whether it’s a hotel that you are staying at or a government that you are trusting, it’s about people. No, Obama can’t You’ve been very harsh obout the Obama administration lately. Is that behind your thoughts of moving to Macau? No, I’m thinking of moving to Macau because we are clearly more Chinese than we are American, but my criticism of the administration, which has Democrats and Republicans alike at the moment in the congress, is based upon a reckless, reckless squandering of money. Huge, unsustainable borrowings, they are going to attack, not me, but the working class of America. If you keep printing money and borrowing money you are going to devalue the dollar to the point where all the employees are taking a twenty five percent cut in their salaries because money won’t buy what it did before and it lowers the standard of living. What changes would a move to Macau mean for Wynn’s US operations? None. So, basically its just the big boss spending more time in Macau? And headquarters. Is that because your commitment is growing not only in Macau but also in Asia? In Macau. At this point? Yes, and likely to remain so for the next five, six or seven years… ten years and you go where you work. I’m here and I like it here, I’m comfortable here, I’m safe here, my employees are safe, I think the government of China and Macau is stable. Not so magnificent seven Wynn Macau’s VIP segment almost doubled in 2009 from the previous year and Steve Wynn considers this the result of his “very intelligent” relationship with junket operators. The gaming tycoon has revealed to Macau Business that he refused to work with seven junkets because they failed a compliance examination. “Every 90 days at our board meeting, Governor Miller, who is the head of our compliance committee, [presents] our latest report. “We conducted fifty three investigations of junket operators, forty six of those junket operators were found acceptable and seven were not,” Wynn said.