Case Study: Wynn Resorts

Wynn Resorts Ltd. & Wynn on the Cotai Strip.

Already operating in Las Vegas and Macau, Wynn Resorts seeks to expand in the Cotai Strip. However, such an expansion could prove precarious to its market standing; as such, a SWOT analysis may be helpful to determine whether an expansion fits in with the company’s overall strategy and whether there is enough support to make a significant capital investment in the new resort. A SWOT analysis includes looking at a company’s strengths, weaknesses, opportunities, and threats in a particular marketplace pursuant to the overall operations management of the service industry giant. (Page & Hoffman, 2008).

Strengths.

Among the most obvious strengths of Wynn Resorts includes the luxurious yet intimate accommodations offered to its patrons (Ibid). By utilizing its unique attention to customer service and high-end recreational facilities, the company has created in the Wynn Las Vegas a unique experience for customers and managed to attract over 38 million visitors in 2006, with a 94 percent occupancy rate (Page & Hoffman, 2008). Page & Hoffman (2008) declare Steve Wynn, Wynn Resort’s CEO, “the greatest operational strength” of the company and conclude that with Wynn’s experience Wynn Resorts will “…continue to build world-class operations” (p. C14). Thanks to its impeccable accommodations, stellar reputation, and meticulous service, Wynn Resorts charges premium prices for its services, making revenue generation more reliable.

Weaknesses.

Despite the attention to detail and experience that Steve Wynn brings to Wynn Resorts, as the company’s CEO he may also be their biggest weakness. Since Steve Wynn possesses important connections, takes a hands-on approach to running his business, and is the catalyst for the company’s line of credit; should he decided to leave, Wynn Resorts might experience severe problems (Page & Hoffman, 2008). Aside from the possibility that Steve Wynn could someday leave the company, Wynn Resorts must contend with stricter regulations than other corporations. In many parts of the United States and other countries, even though gambling may be legal, gaming licenses are still difficult to obtain (Page & Hoffman, 2008). China, for example, is a potentially huge area for growth, yet because of regulations expansion is limited (Ibid).

Opportunities.

Since the United States has begun to legalize gambling in more locales, the opportunities for growth are naturally increased. Another side effect of the increased legalization is the decreased social stigma of participating in gambling as a recreational activity (Page & Hoffman, 2008). The fun and recreation now associated with gambling appeals especially to the elderly, who can easily participate and often have disposable time and income (Ibid). Along with opportunities provided by the elderly, competitors who have recently merged have opened up a market for Wynn Resorts in Las Vegas. Since Harrah’s and Caesar’s, as well as MGM and Mandalay Bay, have merged, the competition for high-end players and consumers has been decreased (Page & Hoffman, 2008).

Threats.

While tourism is usually in demand at varying levels, after September 11, 2011, the United States introduced stricter restrictions on travel visas, making it more difficult for foreigners to visit the country (Page & Hoffman, 2008). Tighter travel rules, coupled with rising fuel costs, led to more expensive airline tickets, further dampening the number of tourists flying into Las Vegas for a vacation (Ibid). Additionally, while gambling as a social norm is acceptable in the United States, it is not yet as widely accepted in other parts of the world. For example, at the Wynn Macau, the occupancy rate in 2006 only reached 80 percent, sixteen points lower than the occupancy rate at the Wynn Las Vegas (Page & Hoffman, 2008). Besides the social stigma that may exist in some cultures, oftentimes gambling behavior differs as well. The average Macau visitor, for example, does not stay overnight in the hotel after gambling, reducing the amount of revenue for the company (Page & Hoffman, 2008).

Because of Wynn Resorts’ ability to successfully cater to high-end clientele, operate in diverse environments, and attract tourists from all over the world, an expansion into the Cotai strip appears both reasonable and desirable. While risks with regulations related to the gaming industry, rising airline costs, and differing social mores towards gambling are concerns, the potential benefits of expansion are worth making a significant capital investment in Cotai.

Wynn Resorts and Expansion.

Since Wynn Resorts operates in a highly competitive market, it is important to take opportunities that are promising but avoid ones that are precarious. One of the ways of analyzing whether expansion is desirable is to utilize Porter’s five forces—new entrants, buyers, substitutes, suppliers, the intensity of rivalry—to make a decision (Business Policy Development and Implementation, 2014).

New Entrants, Substitutes, & Intensity of Rivalry.

Although recent mergers in Las Vegas creates an excellent opportunity for Wynn Resorts to capitalize on its strategy of catering to high-end consumers, the competition in Macau is less ideal. In Las Vegas, merged casinos target, middle-range consumers, leaving the high-end market open for Wynn. Further, since the United States and Las Vegas, in particular, have a large number of qualified workers, Wynn is in an excellent position to increase operations. In Macau, government regulations have loosened, leaving the market open for new entrants to compete with Wynn Resorts. Moreover, because of the large number of competitors in Macau, talented workers are also limited. To expand operations, Wynn Macau may need to petition the government for more work visas for workers from other nations (Page & Hoffman, 2008). Despite the possible competition from established casinos and gaming corporations, the potential for competition from new entrants appears minimal because of the number of obstacles to opening a casino: a gaming license from the government, an enormous credit line, a large talent pool of employees, and years of experience (Page & Hoffman, 2008).

Buyers & Suppliers.

Wynn Resorts rely on two key streams of suppliers that may affect their buyers and investment in Cotai: travel costs and government regulation. One significant travel cost related to Wynn Resorts’ success is the cost of fuel, which affects users of automobiles and airplanes. When fuel costs rise, the cost of an airline ticket increases as does the cost of driving, which decreases the willingness of tourists to travel far from home (Page & Hoffman, 2008). Since any resort in Cotai is likely to rely heavily on foreign tourists rather than those close by, skyrocketing fuel costs could limit the number of visitors and revenue of a Cotai resort.

After performing a SWOT analysis and using Porter’s five forces, I have reached a mixed conclusion. Expansion for Wynn Resorts into the Cotai strip seems desirable because of the revenue and success likely to occur in the immediate future. Government regulations are loose, fuel costs are higher than in the past but bearable, and competition is not too fierce. However, because fuel costs, government regulation, and consumer preferences for travel are by their very nature are unpredictable, an analysis of Wynn Resorts does not support the conclusion that the advantage produced by a new resort on the Cotai strip is sustainable. If Wynn Resorts merely seeks increased revenue and success in the near future, then they should expand. However, should Wynn Resorts seek an expansion that will prove financially profitable and a sustainable advantage for decades to come, they should reconsider the expansion.

References

Business Policy Development and Implementation. (2014). Module 5: Strategy Implementation Case. MGT 451.

Page, V., & Hoffman, A.N. (2008). Wynn Resorts Case Study.