Oliver Lovat lectures on business strategy, and specialises in the hospitality industry centred on Las Vegas. For him, there is one man that stands above the others as the driving force behind today's casino resorts industry
The origins of this article germinated almost 20 years ago on my 21st birthday, sitting at a blackjack table at the Mirage with my father. Joe dealt cards, I drank Chivas Regal. Like myself, the eight million new and 36 million returning visitors to Las Vegas each year generate memories that will last a lifetime.
Since 2011, I have been teaching an MBA Strategy class at London’s Cass Business School. Over 250 students of mine have made the trip to Las Vegas to study the most competitive market on earth. As part of the course, I share my thoughts on the career and business strategies of Steve Wynn. Most of my students know nothing about Steve Wynn prior to taking my class, but after, none will forget his name. In many cases it will change their perception of strategy and business outlook.
Here in Las Vegas, the name Steve Wynn and genius are frequently used in the same sentence, formed by his impact on the skyline of the city and accumulation of wealth. But, this is an outcome; Wynn’s genius is an iterative culmination of decades of hard work, synthesising psychology, marketing, environment and teamwork.
It is undoubted that Las Vegas would not be the city that it is today without Wynn, nor would the casino, gaming and hospitality industries. Wynn’s legacy deserves to be recognised outside the narrow term “casino mogul” and viewed instead in the same light as Pablo Picasso, Steve Jobs, and Henry Royce; creators with insight in understanding human needs and desires, and exploring solutions to surpass them.
ORIGINS AND GROWTH
Stephen Alan Weinberg was born on 27 January 1942 in New Haven, Connecticut. Wynn’s family had come to the USA in the early 20th century mass migration and like many Jews, Americanized their name to assimilate.
After studying English Literature, Wynn moved to Las Vegas as Jay Sarno was opening the transformative Caesars Palace. Wynn and Sarno both engender tales of daring and bravado which are undoubtedly embellished and are stuff of local legend, however, as Sarno’s star waned, Wynn’s was in the ascendancy. Whereas Sarno’s Grandissimo never saw fruition, it heavily influenced the impressionable curiosity of the younger entrepreneur.
In 1971, Wynn acquired a minority stake in the Golden Nugget on Fremont and managed a neglected landmark to become the local market leader. The Golden Nugget in Atlantic City was built and opened in 1980 and was exited in 1987. Wynn’s efforts focused on developing the Mirage, which opened in Las Vegas in 1989 adjacent to Caesars Palace. While it seems obvious now, The Mirage was a huge gamble for Wynn, his management team, his loyal investors and all those associated to the project. The Mirage’s success enabled MGM, Park Place/Caesars, Circus Circus/Mandalay and all other newcomers to reinvest in Las Vegas, meaning the modern Strip that we have today could be built.
In 1993, Wynn’s Mirage Resorts opened Treasure Island, followed by the Bellagio and Beau Rivage in Biloxi, Mississippi by the close of the decade. The Bellagio was Las Vegas’ first fully segmented casino resort for higher-end players and set the tone for much of Wynn’s thinking in strategic positioning.
After Mirage Group’s sale to MGM in 2000, Wynn began work on what is now the iconic Wynn Resort on the site of the Desert Inn in Las Vegas, which opened in 2005, followed by Wynn Macau in 2006. Encore Las Vegas opened 2008, Encore Macau in 2010, The Wynn Palace in Cotai opened in 2016 and his 12th project, Wynn Everett, near Boston. is currently in pre-construction.
To summarise Wynn’s influence on casino resorts, Dr David Schwartz of the UNLV Centre of Gaming Research states: “His Mirage changed the course of casino development, end of conversation. By marrying the most successful elements of several other properties, he showed that a large, high-amenity casino resort with appeal to a broad audience could be lucrative. His other resorts refined and extended this concept.”
FRAMING THE STRATEGY
Traditional strategy creation can be based around a series of frameworks. Some are bottom-up and others are top-down. Some, like Day and Moorman’s Outside-In, are concerned with creating an offering based on customer need. Conversely, Inside-Out creates strategy based on competency and deliverables. Porter and many others advocate differentiation and segmentation, or price leadership, both of which are difficult in a regulated environment such as gaming, as the games are generic and regulated. Price leadership is not a viable strategy – many of those operators who advocated this strategy are no longer in business.
Many strategies are formulated by externals with hypotheses, such as Gary Loveman and Harrah’s/Caesars’ big data approach, or Sheldon Adelson’s top down vision based on decades spent in the real estate and convention businesses. With over 40 years of hospitality experience, creating atmospheres, Steve Wynn’s strategy is his own. The headline vision of the group is the “pursuit of excellence”, which is a common aim in many businesses, with Wynn how this is implemented is a collective mission and what sets him apart.
Within the world of developing strategies in gaming there are only two sure-fire ways for sustainable competitive advantage. These are location and loyalty.
Wynn’s philosophy is not narrow and he is not in the traditional casino business, and as a developer he believes that the product makes the location. Therefore, Wynn’s only strategy for competitive advantage is customer loyalty.
In achieving this level of customer loyalty, casino resorts have multiple assets that need managing in order for business success and Wynn recognises this better than any other.
STRATEGIC ASSET MANAGEMENT
Within many businesses, management decisions revolve around exploiting their strategic assets effectively, whether tangible or intangible, depending on the company.
Prior to entering gaming, future Caesars Entertainment CEO Gary Loveman observed in the 1994 HBS article Putting the Service Profit Chain to Work, that high levels of service directly affected loyalty and therefore profits. However within gaming in particular, how the customer and employee relate to their environment is also vital.
Within casino resorts the strategic assets are customers, physical environment and employees, and for a company to excel, each of these needs active management.
EFFECTIVE CUSTOMER STRATEGY
As mentioned, Wynn is on record saying that the location is secondary and that the destination makes the property. To a large extent this is true in his later work, but it is unlikely the success of the Golden Nugget would have been as pronounced if it were not in the heart of the Downtown Las Vegas. However, it is evident that Wynn’s later success has been built strongly on customer loyalty.
The first step of Wynn’s strategy is recognising that there are different customers and different types of loyalty.
The Wynn customer is loyal. In my 2012 research Pyramids to Players Clubs, Wynn customers were among the most likely to always stay at the Wynn properties. Unlike other operators, loyalty was not driven by Players Cards or promotions.
The late Jay Sarno and Steve Wynn share an attribute that has set them apart from many in the industry; they truly understand psychology of the customer and the desire to make them feel, not just be.
Their casino resorts are not just a place to gamble, there are plenty of those. They sought to create an environment for the customer to self-actualize. If the customer leaves feeling good, with belief that their life has been enhanced by staying in their property, then they will come back.
One of Wynn’s original differentiators was the range of amenity. As Wynn himself is fond of saying, amenity is a cause and revenue is a consequence; in each of his Las Vegas properties, non-gaming revenues have been greater than gaming revenues. The range of amenities in Wynn’s properties has always been impressive. Wynn has created dozens of brands as the on-property experiences are controlled internally, unlike many other operators on the Strip that have favoured operator agreements, leases and licensing deals with celebrity chefs and other external companies. However, the range of amenity is not the primary reason of Wynn guest’s loyalty, as it is in other properties in Vegas.
Within a certain segment, and with the more recent properties, the driver is aspiration. To stay in one of Wynn’s properties, you are making a statement. As the brand suggests, Wynn’s ethos is the pursuit of excellence, and for those that only align with the finest things, to stay at Wynn’s properties is the embodiment of that. However aspiration is an example of the wider reason why customers are loyal to Wynn’s resorts, that of emotional loyalty.
In making a trip to a Las Vegas casino, Wynn believes that that it was about more than a bed and a gamble; it is about making an emotional connection to the customer, giving them esteem and a sense of belonging. Throughout all aspects of the operations, these values are pervasive.
The phrase Adult Disneyland to describe Las Vegas is a cliché that is well over-used, but in marrying Las Vegas with Umberto Eco’s insights from Disney in the field of hyper-reality, a greater understanding can be seen into how Wynn seeks to make that feeling real.
Oswick and Keenoy, note that many visitors have expectations of what Las Vegas is prior to visiting, formed from a collective consciousness from the media stories, advertising, marketing and movies. Therefore, an imagined reality of risk and emotion is already in the customer psyche outside of Las Vegas, so when the customer actually comes to stay, they are ready to play the role that is expected of them.
Wynn is prepared for this, with his innate insight into customer psychology. Although other operators use data and analytics to try and find this information, the competitive advantage of Wynn Resorts is Steve Wynn and to a large extent those who have been schooled in this environment.
After analysis, other operators can make similar conclusions, but where Wynn sets itself apart is the ability to translate these into reality, by managing other assets in the portfolio to meet these customer needs.
MANAGING THE PHYSICAL ENVIRONMENT
Within the walls of the casino resort are many functioning, operating businesses featuring a variety of retail, gaming, bedrooms, dining, nightlife, entertainment and an entire range of amenities. Wynn’s properties have always been amenity heavy, catering not just for existing guests, but acting as a showcase for potential customers on their next trip to Las Vegas or Atlantic City.
Where in Freedman’s Guide to Casino Management does it mention fish tanks? Or tropical gardens, art galleries, dancing fountains, tigers, dolphins or abstract circus shows? Yet all feature prominently in properties Wynn has developed. There is no investment value to the Mirage’s Volcano, The Bellagio’s Fountains or the Lake of Dreams, other than to generate an emotional response from the customer. The entrance to the Wynn, and the use of water and trees symbolise a metaphorical journey, an escape from the real world into a new world, where you can leave your baggage behind and really enhance what it is to be you. These environments stimulate feelings and emotions within the customer that are both powerful and addictive.
Although Sarno’s ideas created the modern casino as a palace of escapism, Wynn exploited it, by meticulously planning all aspects of the guest experience, to develop the perception of otherworldliness and give the customer an emotional response to their environment.
Wynn was late to shopping malls, and it is my view that Las Vegas’ number one activity, shopping, is not on the Wynn radar, despite the development of the retail options in Wynn Las Vegas. At the time of the retail boom in 1990’s Las Vegas, the Bellagio featured few shops, Wynn and Encore the same. In Macau, where the LVS properties heavily focused on retail for the masses, the Wynn staple of Hermes, Prada, Graff and Dior etc. are prominent. The purpose of these stores is not for revenue alone, most of the visitors are never likely to enter, never mind make purchases, rather it is entirely for market positioning and association within the aspirational customer, using the retail brands as external alignment, subservient to the headline and offering validation to the master brand of the resort.
Unlike nearly every other casino in Las Vegas, Wynn’s model is 360; they operate nearly all aspects of their property internally. When designing these experiences, with almost every example, all brands created by Wynn are proprietary. Each nightclub, restaurant, bar and experience is unique to Wynn. This is a challenge and each unit has had to be created and a value placed on that brand to capture meaning. The validation to these experiences are assured both by the fact that they are in the property and also by external methods; Wynn holds more Forbes Travel Guide Fives Stars than any other independent hotel company in the world. By controlling the customer experience when dining, as other operators do not, Wynn can hit those touch points of emotion. If the food, service and ambience all hit the desired level, the guest leaves satisfied. If they do not, the guest is dissatisfied, and if the latter, this is an obstruction to loyalty.
When the Mirage opened in 1989, few outside the industry knew who Steve Wynn was. You could spend a fortnight at the property and still not know. However, Siegfried and Roy and their white tigers were unavoidable. Likewise, when crafting the TV spots for the Golden Nugget, Frank Sinatra, the eternal symbol for class, elegance and sophistication, was the man who extolled the virtues of the property.
At Treasure Island, the Pirate Show and Cirque were the brand tools used to entice the families that the property was aimed to attract. And conversely, when seeking to attract more affluent and sophisticated adult customers, Wynn employed the most iconic fountain in the world and dining among Picasso paintings. By the mid-2000s, Wynn, standing atop his latest trophy, was ready to personify all the class that Sinatra once exuded, as he invited all Super Bowl viewers to come to the only hotel that was good enough for him to put his name to. If you didn’t know who Wynn was before that, you sure did after; it was the birth of “Wynn the brand” in high end luxury resorts. All the past was just training.
One can chart the design progression from Caesars Palace, to the Golden Nugget, to the Mirage, Treasure Island, Bellagio and to The Wynn Collection in Las Vegas, and Wynn Palace in Macau.
The lush opulence of Wynn’s recent properties, and the unmistakable influence of Roger Thomas, Executive Vice President of Wynn Design and Development and Architectural Digest Top 100 Designer, who has turned casino design into an art form, elevating interiors to ethereal escapism, using all aspects of human awareness.
“I have partnered with Steve Wynn for 37 years and have learned much of what I know about hotel design from him. Our hotels are unique in environment, service and quality and are designed to appeal to all of the senses. We design each space from a guest's point of view, using the very finest materials available, the best craftsmen and original creations in art and accessories. We strive to create environments that are comfortable, dramatic, glamorous, humorous, mysterious, surprising and above all unique.We create rooms of possibilities and adventure that exist nowhere else,” Thomas says.
Within the realms of hyper-reality, creating the environment is key. Although they have subliminally agreed to play a role on their vacation, the customer knows that difference between fake and authentic. For example, the customer knows that the gondolas at the Venetian are fake, yet ride in them. There is a certain value placed on the experience. However, when the same customer sees and identifies the fully restored 1918 Gustav Eiffel Chandelier hanging unassumingly at the Wynn, he also places a value on that, but this is a deeper and higher value which resonates as “real”.
Throughout Las Vegas, operators seek opportunities to create emotional responses through experiential architecture, but Wynn remains the master at this. As one can track the evolution of The Blue Period to neo-expressionism, the Apple II to the iPhone, the 1907 Silver Ghost to 2016 Phantom, one can chart the evolution of Wynn’s casino design from The Golden Nugget to the Wynn and Encore in Las Vegas and again to The Wynn Palace in Macau.
EFFECTIVE EMPLOYEE STRATEGY
In the 1980s Golden Nugget TV promos, Frank Sinatra walks around the property. Both properties in Las Vegas and Atlantic City had hundreds of millions of dollars invested to make them among the finest in the land.
“The Golden Nugget is a beautiful place, and you know why? Because of these people that work here that make it more beautiful.” Sinatra places arm around elderly server. “Ain’t that right sweetheart?”
Cut to Sinatra and doorman. “This is my man, Al.” High fives with Sinatra and Al, the doorman. “Mr S.”, says Al. Sinatra advances to front desk. “The minute you check in here you get a big bunch of smiles, like these, look at this..” Sinatra receives a light kiss from the receptionist with Steve Wynn in the background.
This 30 second spot is instructive to Wynn’s thinking and counterintuitive to marketing campaigns of that era.
Most marketers would ask Sinatra to address the functions of the property, showcase the luxury, the entertainment and the amenities. Not Wynn. A breakfast server, a doorman and a receptionist were promoted as symbols of the property. This is because the quality is assumed as a given if Sinatra lends his name to it, the employees are what translate the amenities, the atmosphere, the design and the deep understanding of the customer into an experience.
Moreover, if you were a member of The Golden Nugget team, how good would it have felt that you were being showcased as the key reason to stay at this property?
When coming from the staff quarters of Wynn, which incidentally offers a canteen which is as nice or nicer than many restaurants that are open to the public in other Strip properties, the employees come up an escalator and leave the corridor to the public spaces. Curtains are evident on either side and in large letters the words “It’s Showtime” are displayed. Every employee is trained that they have to be at their best. Always. And they are expected to be, as it is they who are the implementers of the strategy.
When reflecting on design, Thomas also states: “Each area of the resort is designed to make each staff member's task appear as effortless as possible so that they can focus their attention on our guests.”
In competitive environments (and within Las Vegas, Atlantic City and Macau, where good staff are all highly prized), competitors often seek to poach staff. As many of the employees are on low or minimum wages (including those on the commercial) how can you make your staff loyal? The answer is the same as those of customers. If your employees feel good, they are loyal, and as Wynn knows, and others are now realising, with loyal and dedicated staff, empowered to be creative in their roles, revenues actually increase. Moreover, they trust management and their abilities in fulfilling the mission.
Kurtzman, in his book Common Purpose, cites the ways employees at Wynn relate their experiences internally, through technology, continually motivating and inspiring each other. This is valid, and cited as one of Wynn’s unique tools, but in truth this is only part of the collective vision. Stepping back from the tactics (of which this is one) and looking at the strategic picture, at the core of Wynn’s strategy is a business built on creating a culture of excellence that is both unique, but also stands as a valuable lesson to other businesses.
One cannot expect people to come into a company and accept the culture immediately.
The customer training at Wynn is some of the most detailed in the entire hospitality industry. Employees are encouraged to connect with customers, by storytelling, engaging and relating, not just performing functions.
What Wynn has succeeded in is not just creating a platform for relaying company values, but has from top to bottom, has created an entire company culture.
Strategists Scholes and Johnston deploy several models to relate strategic management within organisations, however with in Wynn, we see a full demonstration of their cultural web in practice.
This model illustrates how the Wynn Paradigm actually is manifested. A combination of an implied purpose which is evident to all, and the structures that are in place to reinforce and enable the culture to be implemented.
Like Wynn’s own narrative, for those joining the Wynn family, it is a progression, beginning at function, developing emotion and lifting employees to a higher level of meaning.
NOT BORN A GENIUS
Wynn was not born a genius, nor was he handed a $14m check when he was 21 to allow him to build his fortune. When you analyse, understand and appreciate the career of Steve Wynn, it is a career of deconstruction and synthesis, embodying a deep understanding of psychology, environment and management of people. Even at 40 years old, Wynn was still at the beginning of his career, known to very few outside of Las Vegas.
In influencing his thinking, Wynn, possibly acted on his own emotional responses, visiting Las Vegas with his father, or experiencing Caesars Palace on opening night. Understanding the importance of these emotions, Wynn has sought to stimulate these emotions in others, and in the process has created a business model unlike any other; one where generating emotion is a key performance indicator, as emotion means loyalty.
Creating this strategy has not happened overnight for Wynn, but is the product of a long career alongside one of the greatest collection of minds that magnetically coalesced around Wynn’s desire to push boundaries and take risks in fulfilling what seems like an impossible and improbable mission.
As we turn into 2017, many of the early travellers with Wynn have moved on, retired or sadly passed away. Some have tried to capture and sell the secrets. Wynn’s disciples Paul Steelman, Brad Friedmutter and Tom Wucherer all run practices that seek to relay some of the architectural lessons of Wynn to other resorts and developments, and several Mirage Executives, including Bobby Baldwin, stayed at MGM after the merger, building the organisational capabilities of the new combined company. While there are undoubtedly transferable lessons that one can see in other properties, the complete strategy is only evident in properties run by Wynn himself.
When I asked Joel Bergman, architect of some of Wynn’s properties, who passed away in late 2016, how much of Wynn’s success was deliberate and how much was an accident, Bergman was robust: “None of it was an accident. For a man that don’t see good, he has more vision than any man I have ever met.”
So, after several years researching competitive strategy within the gaming sector, all fingers point towards Steve Wynn. The amount written on him and his businesses is insignificant compared to the impact that he has had on his industry. Other than an occasional chapter in a business book, or a speech given where he shares some insights, the body of information, biographies and interviews that exist that are more concerned with gossip and tales from his personal life rather than true business insights, and it is the shortfall of many an interviewer that fails to recognise these.
To really understand the business genius, you have to detach Wynn from the industry in which he is associated in, as calling Steve Wynn a “casino mogul” is akin to calling Picasso a painter, Jobs a computer programmer or Royce a mechanic.
Wynn’s genius is mastering customer psychology, synthesizing the physical environment to enable a heightened sense of self and in harnessing the power of employees to connect customers to their emotions. Wynn’s business is the curation of life-enhancing experiences and the creation of memories, which translate to unbreakable loyalty from his customers.
Moreover, his is the lesson of a life’s work at the front line. Ideas have been tested, risks considered, plans put into practice, theories developed, evolved, analysed, considered, and revisited to see how they can be continually refined and improved, with success and due recognition not achieved until well into the later part of his career.
This is why I teach a Business class on Steve Wynn. He is inspiring in every way.
Oliver Lovat consults on strategy for asset backed investments in the gaming and hospitality sectors. He is a Fellow of the Royal Institution of Chartered Surveyors, visiting faculty at Cass Business School and lives in Las Vegas.