Not so long ago, Steve Wynn<\/b>\u00a0stated an obvious truth: The our deepening recession would impact Las Vegas sooner or later. Wall Street promptly punished him by selling down Wynn Resorts<\/b>\u00a0stock.<\/p>\n
Fast-forward a few months and now it’s the conventional wisdom of the moment that “Las Vegas is not recession-proof.” Turn the crank on any stock analyst and that newly minted clich\u00e9 will come tumbling out. We’re not privy to the considerations that recently led MGM Mirage <\/b>and Station Casinos<\/b> to pink-slip a collective 500-plus employees last month. However, in the case of MGM, even a company that turned a $1.7 billion profit last year has to placate the whims of Wall Street, which lives from quarter to quarter, long-term considerations be damned.<\/p>\n
Hence the gargantuan post-9\/11 layoff that earned J. Terrence Lanni<\/b> the nickname “Osama bin Lanni” from his then-employees. MGM Mirage ended up having a profitable 2001 fourth quarter and year (and some of its executives were rewarded with six-figure bonuses, too). It was a panic-driven overreaction and highlighted how the mantra of “maximizing shareholder value” had turned into a millstone around some companies’ necks.<\/p>\n
Had MGM turned but one penny per share of profit (far less than it actually did) in 4Q01, would it have been the end of the world? If you’re a stock analyst, yes. They’ve no stomach for short-term adversity or austerity. It’s gotta be blue skies and sunshine eight days a week, 25 hours a day.<\/p>\n
That’s why it was satisfying to “open” today’s paper and read Steve Wynn<\/b>‘s thoughts on the subject<\/a>. A $0.41\/share profit is hardly the kind of scenario in which Wynn should be feeling pressured to lay people off. Yeah, it was 15 cents higher a year ago. And fuel was a lot cheaper then. As was food. And there weren’t Spamalot<\/i> costs to write off. And the Bush economy wasn’t in the crapper. And so on.<\/p>\n (Though, as Wynn told the Milken Institute Global Conference, our dollar seems like a peso to Europeans, so Vegas is a becoming an even bigger draw for them.)<\/p>\n A big part of what makes Steve Wynn who he is, as an evolutionary force in the casino-resort industry, is that he usually builds and plans for the long-haul, for better or (if you work on Wall Street) worse. The value of having fine art on property or building a conservatory, etc., doesn’t translate directly to the bottom line, but it’s what made the Wynn brand so highly respected and fungible. You won’t see a Palazzo<\/b>-style slap-happy opening from Wynn because of the value he places on his reputation.<\/p>\n He’s also been around long enough to have experienced a few adverse swings in business. By contrast, Wall Street’s relationship with gaming is manic-depressive. Excessive euphoria alternates with premonitions of imminent doom. It doesn’t really care if you beat up on the product so long as those ‘eps’ numbers keep going up and up.<\/p>\n Take this to an extreme and you get the Columbia Sussex<\/b> chop-shop mentality, which juices near-term profits but results in properties whose long-term performance brings up the rear in their respective markets. And for the consumer it means being offered places like the Las Vegas Tropicana<\/b>, where the prices are higher, the promotions are fewer and the product is filthy.<\/p>\n Margin-obsessed William J. Yung III<\/b> would never be caught dead saying,\u00a0“We consider the morale and feeling of security our employees have is the most important asset the company owns.”<\/i> That’s why he’s an industry laughingstock and Wynn is an industry leader. (Mind you, Wynn’s tip-confiscation regime hasn’t done anything for “the morale and feeling of security” among his dealers<\/a> and he seems wrongheadedly determined to make that his “line in the sand” issue.)<\/p>\n Sure enough, Wynn’s much-needed pushback to Wall Street produced some downward drift in Wynn Resorts stock. But we could use a few more CEOs who say things like,\u00a0“My colleagues and I are paid to run hotels in good times and fair times … This is not a company that gives a damn about short-term markets.”<\/p>\n Good on him.<\/p>\n","protected":false},"excerpt":{"rendered":" Not so long ago, Steve Wynn\u00a0stated an obvious truth: The our deepening recession would impact Las Vegas sooner or later. Wall Street promptly punished him by selling down Wynn Resorts\u00a0stock. Fast-forward a few months and now it’s the conventional wisdom … Continue reading