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Steve Wynn Talks Cotai With Smart Money

The master has spoken. No, I'm not talking about Bob Dylan, I'm talking about THE master. Steve Wynn.

In a quick, but typically revealing, interview with, Wynn starts the interview by threatening to end it, then proceeds to wax poetic about Venetian Macau, plans for Cotai, his fear of disconnection from the company that bears his name and the quality of room service pizza at Wynn Las Vegas. Warning, shrapnel ahead.

On The Venetian Macau:

Are you worried about overcapacity?

SW: It's interesting. We all have empty tables during the week. Now the Venetian opens in Macau, with a sports arena, convention center and casinos that are three times as big as anything in Las Vegas. This could create a critical mass that will lift the overall market. If so, it will be a wonderful season thanks to Sheldon [Adelson, chairman of Las Vegas Sands]. The new place grows the market, as we saw with the Bellagio.

Any reason why the new Venetian might not lift the Macau market?

SW: Yes. In Las Vegas you have a fresh stream of new customers. Macau gets nearly the same number of visitors, but it's a highly repetitive group. Most of your customers will visit in the first 90 days, right when a hotel is ironing out its problems. This is not a good time to see a new hotel.

The core demographic of Macau visits approximately 50 times per year, instead of the 1-3 per year for Las Vegas. Venetian and the other resorts under construction in Cotai are attempting to cast a wider net of visitor 'types' over a larger geographic area. In addition to day tripping gamblers from nearby Chinese provinces and Hong Kong, the Cotai resorts are looking to court Koreans, Thai, Japanese, Vietnamese, Australians and deeper seated Chinese mainlanders who are looking for more than a fifteen hour baccarat session. The big gamble on Cotai, of course, is whether or not the Field of Dreams principle ('if you build it, they will come') will succeed in turning Macau into a true tourist destination with gambling as opposed to a pure-play gambling destination. It took Las Vegas 40 years to figure this one out, we'll see if the lessons learned are transferrable to Macau.

If not? Can you envision the look on the faces of gaming analysts and industry executives - not to mention the legions of bickering LVS, WYNN, MGM and MPEL stockholders - when Macau, particularly Cotai, pulls a Laughlin five years from now? Imagine a sea of glistening, multi-billion dollar, five (and one six) star resorts devolving into a bayside nickel slot parlor filled to the gills with armies of blue hairs in search of HK$40 steaks and HK$500 rooms. Then, and only then, will Sheldon Adelson get his statue... in the middle of the bog across the street from the Venetian. How cool would that be?

Will it happen? Probably not to that degree if the Cotai experiment backfires. Since Macau's casinos have empty tables during the week, the 'three-deep-at-the-baccarat-tables' myth will slowly fade away as more and more tables come online. Could all this investment be a time bomb? And, if so, who's likely to get burned?

What do you expect will happen?

SW: I'm watching the market change every month. It's the damnedest thing. The outcome? I can't tell.

How much of your success is luck?

SW: It would be luck if it lasted just a quarter. We've averaged 25% [hold - what's left in the till after paying out the winners] the past year.

Wynn Macau averaged 28% hold in the first quarter of this year. Wynn also stated that non-gaming revenue, particularly occupancy, room rates and the mix of paying customers vs. comps, are an important indicator of how Wynn Macau is doing.

So what about Cotai, Mr. Wynn... do tell...

SW: I'm buying 54 acres on the Cotai Strip. I won't reveal my plans for that yet. I'll make an announcement before Christmas.

Steve then talks about how the room service pizza at Wynn Las Vegas is mushy then blows up at the reporter and pretty much ends the interview. You gotta love that guy.

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