EXECUTIVE SUMMARY Wynn Resorts Limited is a publicly traded corporation based in Paradise, Nevada that is a developer and operator of high end hotels and casinos. It was formed on October 25, 2002 by former Mirage Resorts Chairmen and CEO Stephen A. Wynn. The target client base for Wynn Resorts are affluent individuals who seek the highest quality—Wynn and its sister property Encore hold more Forbes Five Star awards than any other casino resort in the world. Recently, Steve Wynn has taken his brand global by building in Macau, China.
With the opening of the Wynn and Encore Towers, Steve Wynn has proven that upscale gambling can be accomplished outside of Las Vegas. Steve Wynn’s marketing strategy is to emphasize the quality of service provided in the most luxurious accommodations imaginable. Everything from golf to shopping to wedding ceremonies, and gambling of course, is available at Wynn Resorts. The management of Wynn Resorts Limited is lead by Chairman and CEO Stephen A. Wynn, Vice Chairman of the Board Kazuo Okada, and nine directors. The COO is Marc D. Schorr and the CFO is Matt Maddox.
Although Wynn Resorts were not immune from the recession, they were able to generate solid revenue and maintain high occupancy ratings. Stephen Wynn and Wynn Resorts continue to be an aggressive force in the hotel and casino market, especially with their recent expansion into Macau, China. INTRO Wynn Resorts is engaged in the design, development, financing, construction, and operation of hotel and casino resorts. The Company owns and operates two destination resorts: Wynn Las Vegas, on the Strip in Las Vegas, Nevada, and Wynn Macau, located in the Macau Special Administrative Region of the People’s Republic of China (Macau).
Wynn Las Vegas is located on the north-east corner of the intersection of Las Vegas Boulevard (the strip) and Sands Avenue. It offers a nightclub, an ultra-lounge, a spa and salon, a Ferrari and Maserati automobile dealership, wedding chapels, an 18-hole golf course, approximately 223,000 square feet of meeting space, brand-name retail shopping, 132 game tables and 1,974 slot machines. Wynn Las Vegas also has two showrooms: Wynn Theater and The Broadway Theater. Encore at Wynn Las Vegas offers 24-hour gaming on approximately 72,00 square feet and includes private gaming salons, luxury hotel accommodation in 2,034 ll-suite rooms, 12 food and beverage outlets, brand name retail shopping, swimming pools, private cabanas, full service spa and salon, nightclub and lounges. Wynn Macau located on the Cotai Strip, offers 600 deluxe hotel rooms and suites, approximately 205,000 square foot casino, casual and fine dining in five restaurants, brand-name retail shopping, a health club, a pool and spa. Wynn Resorts was established in 2002 and also offered its initial public offering the same year. In 2006, Wynn Resorts expanded its operation in Macau, and thus added a second integrated resort hotel with amenities.
The company opened Encore, the new signature resort at Wynn Las Vegas in December 2008. The company appointed John Strzemp as the Executive Vice President and Chief Administrative Officer in March 2008 and Russell Goldsmith as its Director in May 2008. Under the Executive Board is Steve Wynn as Chairman and Chief Executive Officer, Linda Chen is President, of Wynn International Marketing. Board of Directors include Kazuo Okada as the Vice Chairman, Elaine Wynn is Director, along with Robert Miller, John Moran, D.
Boone Wayson, Alvin Shoemaker, Allan Zeman, and Ray Irani. The senior management includes Marc Schorr as Chief Operating Officer, John Strzemp as Executive Vice President and Chief Administrative Officer and Matt Maddox as Chief Financial Officer and Treasurer. Currently, Wynn Las Vegas has over 20,600 employees. Wynn Resorts had a loss of $5. 2 million during the fourth quarter of 2009 compared to a loss of $159. 6 million for the fourth quarter of 2008. The company’s net revenue for the fourth quarter was $809. 3 million compared to $614. million for the fourth quarter in 2008. The company states that the revenue increase was driven by a 29. 6 percent revenue increase at Wynn Macau and a 35. 7 percent revenue increase in Las Vegas, which included a full quarter contribution from Encore, Las Vegas. In Macau the company’s revenue increased from $392. 2 million in the fourth quarter of 2008 to $508. 4 million in the fourth quarter of 2009. Wynn Resorts, led by the romantic and visionary leader Steve Wynn, is a leader in the gaming and casinos industry.
Following its mission statement of, “A commitment to providing an elegant environment, high-quality amenities, a superior level of service and distinctive attractions for our customers,” the company is well known for its luxury and excellence. Some major competitors in the Industry are MGM Mirage and Trump Entertainment Resorts. Fortune Magazine said that ”Wynn, which also led casino resort operators in 2009, ranked second in the hotel, casino and resort category for innovation and number 3 for people management, quality of management and quality of its products and services. Wynn Resorts management strategy is that of focused differentiation. They create products and services that are unique and valued in which customers will pay a premium and they focus on an upper class segment. The company does well in management or in parenting, by using the experience of the corporate office and the support of the corporate office. Wynn Resorts does an excellent job in branding and is a big part of the company’s core competencies. Another core competency is the company’s ability for social networking with its ability to have great relationships among employees and customers.
The company has done an excellent job in the Industry Life Cycle by creating a new product (Wynn Macau) and then incorporating its excellent parenting skills to help it grow. Steve Wynn has mentioned that he would like to move the headquarters to Macau so that he can focus on the resort and build a strong foundation in China. The company has the ability to create a product custom made to the market’s needs and offer more to the customer by being culturally sensitive. Wynn Resorts is that of a symbiosis company in which everyone benefits.
The Company is committed to giving back to the community, part of corporate social responsibility. For example, Steve Wynn recently donated $1 million to communities and schools of Nevada. As a great parenting company, Wynn Resorts can continue to grow into global markets and attain significant market growth. VISION/MISSION STATEMENT Wynn has been very successful in keeping in tune with their mission statement: “A commitment to providing an elegant environment, high-quality amenities, a superior level of service and distinctive attractions for our customers. They are one of the leaders in the hotel and casino industry, providing a level of service that is second to none. They are elegant and professional and are consistently raising the bar. Proving to their customers, year after year, that there is no experience, like the Wynn experience. All of this is made possible without a vision statement. Steve Wynn is a man with a passion for his business. He is a romantic leader, and is an excellent example for his staff. He is the visionary behind Wynn’s success, but he is not the sole reason for it.
Steve Wynn has assembled a team of individuals whom all feel the same passion for their work. He has been known to ask employees, individually, what they believe Wynn is about, and although he never gets the same response, he always gets the same idea. The enthusiasm of a visionary like Steve Wynn is contagious. Wynn Resorts is fortunate to have a team that appreciates and feeds off of this enthusiasm, overcoming the limitation of a single statement. EXTERNAL ANALYSIS In the external analysis of the company we focus on demographic, socio-cultural, political/legal, technological, economic, and global segments.
Wynn’s target demographics in Macau is the Asian community and their desire for luxurious living standards. By setting up such a luxurious destination resort in the middle of a busy populated city was key when dealing with a society who is eager and willing to follow the recent trends. Also, due to the economic downturn there has been a change in affluence. People do not have the discretionary income they used to for their leisurely activities. However, they have decreased the price of their rooms significantly so that it is affordable by the sorts.
Wynn was very conscientious when constructing their latest property, and made sure that it was suitable for the Asian culture. The ambiance of the resort is soothing and spacious which is hard to find on the strip of Macau. They have lavish spas that are appealing to woman, a beach suitable for a family, luxurious rooms and dining attracting to traveling businessmen, and a casino that the Asian culture has recently grown fond of. They are avidly working to make Wynn a brand instead of a resort name because this is a culture that is brand loyal which will expand their market into retail.
The dining in the resort is healthy which is very important to the Asian society. They focus on technology was significant when the rooms were being constructed. Since China is widely recognized for the technological advances it was important to incorporate this factor into each room. Each room large flat screens mounted on the wall, electrical curtains and lighting, cordless phones, iPod docking station, some rooms have flat screens in the restrooms as well as walk in closets, and of course wireless internet. Regardless of guest’s income, the ambiance and technological advances of the room ensures each uest leaves feeling wealthy. Also, going global with Encore was a grave decision for Wynn especially in a region that is becoming widely fascinated with the gaming industry. It went from a little hotel in the downtown area to a magnificent destination resort in a fast paced city. Encore has become the new exciting destination spot in Macau and received Forbes five star lodging, Michelin one star, and Forbes five star spas all in 2010. Porter’s five forces are also a huge asset for Wynn to analyze their external environment.
Since Wynn’s primary leisure activity is gambling they are associated with the gaming industry and focus their forces analysis upon that of other gaming facilities. There are specific buyers and suppliers; the individual customers are the buyers while the companies providing all the equipment are the suppliers. Switching costs remain minimal therefore strengthening buyer power. Increase in disposable income can also increase buyer power. Overall there is a moderate degree of buyer power. Since suppliers solely depend upon the gaming industry this weakens their power.
Due to the economic downturn, casinos replace and repair their machines less often than normal. Overall, there is a moderate degree of supplier power. New companies entering the sector need large amounts of capital. There is a high willingness for customers to switch casinos easily, and the access to the suppliers is also easy. Overall, there is a moderate degree of threat to new entrants. Since any leisure activity can be substituted for gambling and there are minimal switching costs this causes threats of substitutes to be strong.
Some companies, such as Wynn, offer a diverse offering which weakens rivalry and makes it easy to exit sector. Casinos are made into more leisure activities like hotels with entertainment, restaurants, and spas; causing rivalry within the sector to be moderate. All these segments have geared Wynn’s approach to conquering their external environment and competition. INTERNAL ANALYSIS VALUE PROPOSITION Wynn’s extensive experience in the hotel and casino industry has earned the reputation of being amongst the most luxurious and elegant resorts to visit and discover.
Wynn provides more than just an exciting day of gambling, gulfing and fine dining; they provide customers with the opportunity to indulge in life. Their exemplary service and gorgeous, techno savvy rooms effortlessly afford Wynn’s customers to spend money outside of their hotel and in their retail stores and casinos. Wynn’s continued success provides steady employment for their entire team of over 25,000 and generous dividend payouts to stockholders. STRATEGIC ALTERNATIVES Steve Wynn is a visionary leader and can establish his brand power with the experience he has attained in the hotel and casino industry.
He has already broken into the Chinese market and his leadership qualities have proven that move to be successful. The company is successful because of its ability to target a specific market and customize a product based on the markets needs. The company is also culturally sensitive in the sense that once the specific product is built they allow it to grow to their specific culture. The fact that the company uses a focused differentiation strategy gives the company a competitive advantage.
The experience and support of the corporate office gives the company positive contributions to new businesses and gives the company an advantage in the industry. As an alternative strategy the company could possibly take a business level strategy, and take on an overall cost leadership approach and use a competitive advantage based on low cost. The company would have to “learn” how to lower costs from experience and tighten costs and overhead control, cheapening the value of the company and allowing for imitation, leading the company on a downward spiral. Therefore we would not recommend this strategy.
Another alternative strategy could be at the corporate-level; one in which involves backward integration to which the company could bypass the entertainment and food industry and secure the supply themselves. Some benefits of this would include protection of and control over valuable assets, and access to new business opportunities. The risks associated with this strategy would increase costs and expenses that could take away the uniqueness of the company’s properties and services. We would not recommend this strategy because we feel that the negatives would outweigh the positives.
Another opportunity would be to pursue an international strategy that focuses on expansion into new markets with a multicultural structure. An outcome of this strategy would be that Wynn Resorts could better capitalize on these new markets by adapting to new cultural aspects while applying the majority of their core competencies. Risks might include political and economical instability and possibly lead to losses in major future investments. RECOMMENDED STRATEGY Currently there is a great opportunity for Wynn to take on an international strategy by entering into new and expanding markets to further its reach and grow its revenue base.
With a multi-domestic strategy Wynn will be able to support these new regions with a few of the core competencies that it has used to create long standing value for the company, and helped to build prosperity and strength for its brand. Wynn’s exceptional parenting expertise of upper-management and its ability to maintain a high level of cultural sensitivity for both its guests and employees are what we would like to base our strategy on from this point forward. Wynn has made an initial push into the global market, but is operating in just that fashion.
With an “international strategy” they are held to an incredibly large amount of centrally based control, and originally a small amount of adaptation to new locations. Pressures to reduce cost are very low for this company because of the perceived value that they provide to the customer, who is willing to pay a premium for the brand and its services. We recommend a focused differentiation approach where there is a particular segment targeted in the market, but also will use a large amount of customization and adaptation for new regional operations.
There will be some grey areas when it comes to operating in a multi-domestic structure and will at times have a slight push of direction back towards an international approach, and at other times more of a global approach where there is more of a focus on lowering costs to its clients. However, there should be strong emphasis when expanding into new markets to focus on a purely adaptive strategy before anything else. Our strategy recommends that Wynn Resorts open and operate all future properties as wholly owned subsidiaries in order have a strong amount of quality control over the Wynn Resorts brand.
Wynn will be better able to control its cultural interactions both politically and socially, and will also be able to sustain its brand image by insuring that the properties are marketing and offering the proper services to the correct target segment; its upper-middle and high class customers. IMPLEMENTATION Initially Wynn Resorts made a very large personal investment for the construction of its original property, Wynn Las Vegas, and was entirely funded by the sale of Steve Wynn’s previous properties.
The debt free investment and the successful start of the company allowed Wynn to gain the confidence of many investors worldwide and ultimately led to the largest construction loan in U. S. history for the creation of Wynn’s second property Wynn Encore, adjacent to Wynn Las Vegas. From a long term perspective the company has been able to maintain a strong amount of confidence from its investors that would more than likely allow for any future operations to be funded primarily by debt, but we would like to recommend that this be supplemented by the sale of its original property in Macau.
This property will soon be one of three Wynn establishments in Macau, and we see that for all intensive purposes was primarily used to test the market and government in a newly emerging China. Now that there will be two “resorts” operating in this region a hotel simply does not fit the mold of what customers are accustomed to experiencing when visiting a Wynn Resorts property. The hotel property offers the same prices and rooms without the supporting amenities of the nearby resorts, and we believe will steadily see its room occupancy rates decline due to its other locations.
This will cause it to become less profitable and more than likely make more revenue if it were to be sold in the near future, than it could make in the remaining years that it can perform at an acceptable capacity. The trained employees that have already become proven ambassadors of the brand that work at the Macau Hotel will be moved to the new resort property in Macau which will allow for a smoother opening and operation of the new facility. We recommend that the company expand into regions that have large populations and a growing amount of wealth.
We believe that Wynn should also pursue markets that have some cultural similarities in order to create a basic understanding of basic cultural requirements, but will also need to have many other adaptations because these are new markets. One region in particular is Southeast Asia; this region is home to nearly a fifth of the world’s population which is projected to experience GDP growth as high as 15%. Johor Bahru (J. B. ), Malaysia is the second most economically successful ity in the country and is a popular destination area for tourists in the region; primarily from neighboring Singapore that is home to about 5 million people, and the world’s fourth largest GDP per capita. J. B. has all of this wealth located less than 85 miles way, and is also geographically close to other emerging economies that are predicted to have an exponentially growing wealthy class particularly in Thailand and Indonesia. We used Porters Diamond to approach prospective regions and their internal locations, and found that J.
B. supported our recommendation of expansion. -Factor conditions- -Property with jungle/costal settings accessible to most in the region ($10,000 per commercial acre in costal J. B. compared to 20,000 or more in California) – Large amounts of capital as a result of close proximity to Singapore and large population -Stable government (established constitutional monarchy) recognizes MNC ownership -Highly developed communication system (country host its own satellite) -51% of the middle class income country works in the service industry Relatively low cost of employment -Related and Supporting Industries- -Easily accessible to most of the regions inhabitants because of costal location and regional trading post and tourist location that offer few restrictions to entrance -Government is open to businesses creating jobs in the tertiary sector and to communicating its needs and expectations to supportive industries -Domestic Rivalry- -Currently no property in J. B. that offers a full resort experience, and is regarded as one of the main destinations for tourism in the region (First mover advantage) Multiple casinos and forms of entertainment in J. B. and nearby Singapore – Easy access for new entrants but a focus on target market segment will limit threat -Domestic Demand Conditions- -Local demand in Malaysia is relatively high in J. B. compared to the rest of the country because it is a where a large concentration of wealth is (there is a high amount of separation between the poor and upper classes economically) -Strong demand from neighboring Singapore with one of the world’s highest concentration of wealth and of which nearly 50% of J.
B. ’s tourism derives from. We also have a strong confidence in Wynn’s ability to achieve dominant earnings when entering new markets because of Porters general theory that if a company is successful in its original domestic market that is highly competitive, than it will perform well in most new markets. Wynn Resorts has prevailed in arguably one of the most competitive resort markets in Las Vegas, and ultimately used that success to build a brand that can be leveraged on a global scale.
Entering the market in J. B. will initially have success with brand circulation due to the 50% of tourist arriving from wealthy Singapore. The country of Singapore is 80% Chinese and will be very receptive to the Wynn brand, because the cultural traits of its citizens closely align to those in Macau and will have a perceived value and recognition for the company and its services. However, the resort in J. B. must have a management and atmosphere that is adapted to the region.
Management in this region places a heavy emphasis on meritocracy, which will result in having the best employees for each job, but there is also a need for a hierarchical structure. Most of the culture consists of an Islamic influence and therefore would require many of the amenities and architecture of the resort to be built with this in mind. The service aspect which is so important to Wynn’s image is also one that must be thoroughly addressed in order to maintain a heavy hold on cultural sensitivity throughout the company.
This will ultimately aid Wynn Resorts in gaining crucial experience as to how to best operate in Islamic influenced cultures, and will help to support future parenting abilities if it were to move into additional markets like Abu Dhabi or Dubai which are projected as future areas for mass tourism. PERFORMANCE MONITORING METRICS While revenue from Wynn Las Vegas increased by 35. 7%, since the beginning of 2009 profitability plummeted. Wynn’s two Las Vegas resorts saw a drop in occupancy rate from 96. 0% in 2007 to 85. 2% in 2009.
The company cut down on its average daily rate (ADR) from $288 to $218 between 2009 and 2010 to improve interest and traffic to its hotels in Las Vegas, reducing Revenue Per Available Room (RevPAR) from $265 to $185. While it has fared better than the company’s Las Vegas properties, Wynn Macau is vulnerable to unfavorable changes in Chinese law and regulations. For instance, in 2008, the government, in an attempt to cool down the rapidly overheating Macau market, imposed restrictions on the number of travelers who can visit the island. In the first quarter of 2010, Wynn Macau achieved an ADR of $282, compared to $268 in the 2009 quarter.
The property’s occupancy was 90. 7%, compared to 83. 3% during the prior year period, generating RevPAR of $256 in the 2010 quarter, 14. 8% above 2009 levels of $223. For Wynn Las Vegas, hotel revenues were down 8. 8% to $77. 6 million during the quarter, versus $85. 1 million in the first quarter of 2009 as ADR decreased 8. 6% to $203, compared to $222 in the 2009 quarter. Occupancy was 89. 4%, flat with the 89. 5% generated in the prior year period, generating RevPAR of $181 in the 2010 period compared to $199 in the first quarter of 2009. REFERENCES 1.
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