Wynn's Encore Under Way

Aptly named Encore, the resort's rooms will all be larger than its predecessor, as well 200,000 sf of convention and meeting space, a 50,000-sf casino, a spa and salon, swimming pools and an undisclosed amount of entertainment venues, restaurants, and retail space. Wynn Las Vegas has a 111,000-sf casino; 22 food and beverage outlets; an on-site 18-hole golf course; approximately 223,000 sf feet of meeting space and 76,000 sf of retail space.

Steve Wynn and his then newly-formed Wynn Resorts acquired the Desert Inn property on April 28, 2000 from Starwood Hotels & Resorts, reportedly as a birthday gift for his wife. Exactly five years later, Wynn Las Vegas opened its doors. A few months before that, in November 2004, Wynn announced plans for Encore.According to published reports at that time, he originally hoped to open the 2,000-room expansion in late 2007 at a cost of about $950 million (net of additional equity contributions). By April 2005, the expected debt was to $1.4 billion and the completion date was the end of 2008. With he total cost expected to be 21% higher ($1.7 billion) the room count also went up 21% to 2,500 rooms.

The development cost translates to around $825,000 a room, or $175,000 per room cheaper than Wynn Las Vegas, which at $1 million per key stands as the most expensive resort ever built on a per room basis. Encore is costing less because the cost of Wynn Las Vegas included the cost of the land for Encore and the golf course, which Wynn is expected to develop eventually. The development of Encore will lower Wynn's cost basis in the overall complex to about $925,000 per key, which could help Wynn increase its return on investment from the 235-acre property.

Publicly held Wynn Resorts' owns Wynn Las Vegas and is later this year will open Wynn Macau, a $1.1-billion destination casino resort in the Macau Special Administrative Region of the People's Republic of China. Wynn is one of three primary gaming license holds in Macau. Each of the three had the right to sell one subconcession—the right to develop a competing casino resort in the market. The other two sold their subconcessions for $200 million while Wynn's brought in $900 million. The price was exponentially higher because the other license holders sold there's before the Macau government announced it would not issue any more subconcessions until at least 2009.

In February, in a conference call about the company's quarterly earnings, Wynn said the company is in the latter stages of receiving the concession from the Chinese government to develop 54 acres on Macau's neighboring Cotai Strip. The acreage would be enough for three hotel-casinos. Las Vegas Sands Corp. is reportedly developing eight hotel-casino sites on the Cotai Strip.

As for the quarterly report, the company reported a net loss of $11.4 million or per share of $0.12 cents for its fiscal fourth quarter. For the year, it reported a net loss of $98.4 million, or $1.00 per share. Wynn executives said earnings would have been $0.05 center per share were it not for expenses related to upgrades at Wynn Las Vegas and development costs related to Wynn Macau and Encore. Analysts polled by Thomson First Call had predicted the company would post earnings of $0.08 per share.