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Encore Slash Room Rates to Attract More Casino Players

On January 20th, 2008, Wynn Resorts Limited Chief Executive Officer Steve Wynn said that his lavish and astounding $2.3 billion Encore casino which recently opened despite the economic crisis-is about polishing basics. Even if casino customers believe that Encore can fulfill that promise, Wynn will have to keep the costs at a minimum level to keep customers interested in reserving one of its 2,034 suites. Because while Wynn Resorts is doing considerable well, the Las Vegas strip is not doing great as a whole due to the effects of the global financial crisis.

MGM Mirage Incorporated, which owns ten casino facilities on the Las Vegas Strip, has cut off a total of 3,200 employees since October 2007. Harrah's Entertainment has laid off a total of one thousand eight hundred employees since January. Bill Lerner, a financial analyst from the Deutsche Bank told gambling investors that he is tracking more postponed casino projects in the Las Vegas Strip than ever before. Steve Wynn said that he does not want to lay-off some employees as much as possible and he said that he is willing to slash the cost of the rooms to keep people coming into the facility and his staff working.

The five thousand brand new jobs at Encore, while three hundred short of the total number announced in July, were eagerly anticipated, even though local residents have seen a lot of swings in their city's economy before. Some 100,000 individuals applied for the available positions, according to company officials. Hit substantially by foreclosures, Las Vegas reported an unemployment rate of 7.9% in November, up from 7.6% in October and above the November national average of 6.7%. Encore's opening is likely to be the lone bright spot for a while.

Directly across Encore is the former location of the New Frontier hotel-casino, a vacant lot where a postponed project modeled after the Plaza hotel in New York has yet to take shape. Next to that sits Boyd Gaming Corporation's postponed $4.8 billion Echelon project. David Schwartz, the director of the Center for Gaming Research at UNLV said that the opening of Encore will bring some optimism. Schwartz said that some tourists will come just because it is Steve Wynn's hotel and other tourists will come because of the buzz around the casino.

Aside from the new job opportunities, Encore will likely contribute significantly to the Las Vegas economy through taxes on casino revenues, taxes on rooms and entertainment tax. But Encore's grand opening is sending unwanted ripples through the gaming market in Las Vegas.

Steve Wynn, who is well-known for shaking up Las Vegas one casino facility at a time, is doing it this time by cutting down rates so he can keep customers coming in Encore in the short term. Wynn said that he has booked sixty thousand room-nights since slashing rates at Encore and Wynn Las Vegas next door. He added that those customers, most of whom signed-up for visits the following month, would have probably check-in to other properties down the street instead.

Wynn said that he wants Encore and Wynn occupied and he is sorry to everybody. Wynn said that he would raise the rates as the hotel rooms fill up and hope to get as close to ninety-five percent occupancy as possible. 5% of the rooms are reserved for high-rollers. Weeknights, a standard, seven hundred square foot suite at Encore is worth $159, with prices higher on weekends.

Casino facilities are typically more willing to slash room rates than non-gambling hotels in order to attract more people, thinking that they will still be able to make more cash from players gambling, eating and entertaining themselves while inside the facility. But Wynn said that the company's room rate is a significant part of their profits and slashing it hurts. Brown said that the rate cuts could push other casino facilities to follow and further affect the Las Vegas gaming market's profitability.

 

Monday, February 23 , 2009
Edward O'Connor