Today's Wall Street Journal page one article on Mirage (see below) gives a pretty good overview of the Biloxi market, which ByeByeNow.com services pretty extensively through its Florida Casino Marketing shop. With Steve Wynn desperate as he is to get folks into his resort, we should see ByeByeNow.com retain a new, lucrative customer: the Beau Rivage.
Mississippi Gamble: 'The Finest Casino That Could Be Built. That Was the Goal' --- Overbudget, Underbooked -- Mr. Wynn's Beau Rivage Takes
Some Bad Rolls --- Marble Baths vs. Barbecue
---- By Christina Binkley, Staff Reporter of The Wall Street Journal
Source: WJ - Wall Street Journal
Feb 2, 2000 2:00
BILOXI, Miss. -- Fifteen 75-year-old live-oak trees were painstakingly
transplanted from a local farm to grace the drive of the year-old Beau Rivage casino here. Seven pairs of live finches flutter in magnolia trees in the hotel's lobby, and 250 yards of fine silk line the spa's
walls. The sushi bar is Rosso Verona marble.
Mirage Resorts Inc. spent lavishly on these details -- the trees alone
cost $67,000 each -- to create a high-end riverboat resort for wealthy
Southeasterners.
The result, after six years of planning and construction, impresses
almost everyone. "It's exquisite," says Debi Romeo Morgan, a Biloxi native. But Beau Rivage -- Mirage's first big casino outside of
Nevada -- has failed spectacularly to draw the high-paying customers it's aiming for. The resort is producing about half the cash flow that investors expected. The $680 million property cost at least double its original budget. Recently, Moody's Investors Service put Mirage's
credit ratings on review, in part because of the property's disappointing results. Joseph Coccimiglio, an analyst with Prudential Securities, estimates that Beau Rivage diluted Mirage's fourth-quarter earnings by as much as five cents a share. "It's horrible," he
says.
Ms. Morgan suggests what the trouble is. "When you get underneath, it's disappointing," she says. "It doesn't have the Southern appeal that a business should have."
Ms. Morgan is a bartender at the local American Legion Post #33, which
offers bingo three nights a week. She knows something about the community on which Beau Rivage depends. People want a good Southern buffet, she says, friendly card dealers, and a sense of accessibility. Beau Rivage wasn't designed with Southerners in mind, she says.
In fact, while investing in fine linens and marble bathrooms, the
company underestimated the Biloxi market in numerous other details -- from its passions for barbecue and country-rock music to the value placed on valet parking to the high costs of flying in gamblers and training an inexperienced local work force.
The missteps have been a surprise, given the resume of Steve Wynn, the
58-year-old chairman and chief executive of Mirage. Over the past
decade, Mr. Wynn has played a leading role in reinventing Las Vegas with lush new casinos, including the $730 million Mirage, built in 1989, and the $1.8 billion Bellagio, which opened in 1998.
Some observers, including Mr. Wynn's archrival, Donald Trump, believe
the Mississippi blunders have forced Mr. Wynn to downsize his plans to
build a $1 billion-plus casino in Atlantic City. Mr. Trump, whose own debt-laden New Jersey casinos have been losing money for years, is reveling in Mr. Wynn's Beau Rivage woes. "He did marble in
every cranny," Mr. Trump crows. People "walk in there with their Bermuda shorts and they're not comfortable -- it's like a tomb."
Mr. Wynn retorts in kind: "Donald Trump doesn't know what he's talking
about, and I refuse to have my business shaped by anything that imbecile says."
Yet he concedes that he got a lot wrong at Beau Rivage. "God lives in
the details," Mr. Wynn says, insisting that investors grant the resort a couple of years to improve. "Sometimes you just misfire," he says. "There's plenty of time. It's going to be there forever."
Biloxi is a day-trippers market, a former fishing village where Barq's
root beer was first bottled in 1898, and where gamblers blow their $40
budgets before driving home. But its location was appealing to Mr. Wynn in 1993 when he was aiming to join casinos' nationwide
expansion. The region offered low taxes, high population growth, state
officials keen for investment, and an eager and plentiful labor supply.
Mr. Wynn considered buying a countrified casino called the Boomtown, but then heeded a fervent proposal from a young protege, Barry Shier, to build a new resort. It's not clear exactly what the original budget was. Mr. Shier, 44, now Beau Rivage's chairman, puts it at $275 million. Paul Harvey, then head of the Mississippi Gaming
Commission, recalls informally discussing $110 million before the costs spiraled northward. Either way, state officials were stunned at Mirage's willingness to spend. "Nobody's ever spent that kind of
money here," says Mr. Harvey.
In fact, Mr. Wynn's enthusiasm rendered the budget
virtually limitless,
according to people
who worked with him. "The finest casino that could be
built. That was
the goal," says Bill
Yates, chairman of the resort's builder, W.G. Yates &
Sons Construction
Co. Inc. in
Philadelphia, Miss.
Every detail sought perfection. The resort promised
nightly turn-down
service and triple
sheeting. Concrete ceilings were sanded to a perfect
smoothness. Mr.
Wynn's insistence on
avoiding typical riverboat mooring ramps "drove the naval
architects
crazy," says Mac
Johnson, Yates's project manager.
They adapted offshore-oil-platform technology, floating
the casino on
five barges
anchored by nine million pounds of structural steel. The
project
metamorphosed with Mr.
Wynn and Mr. Shier's whims. They added a $10 million,
31-slip floating
marina built of
Brazilian ipe hardwood. The resort claims that, per slip,
it is the
world's most expensive
marina.
As costs rose, Mr. Wynn and Mr. Shier stretched the
casino's size. Beau
Rivage swelled from
1,200 to 1,780 rooms and from four restaurants to 13.
Wall Street
remained sanguine:
Upbeat analysts predicted annual returns of as much as
20% -- well above
industry
averages.
Ultimately, internal Mirage reports suggested that the
now-huge resort
needed to draw
customers from within a 600-mile radius across the
Southeast. That
required regular,
cheap jet service into the Biloxi area.
Encamped in a room at the Best Western motel across from
the
construction site, Mr. Shier
began calling airlines. Major operators proved too
expensive. Three
months before the
grand opening, he settled on Airtran Airways Inc., the
Orlando, Fla.,
carrier formerly known
as ValuJet, then trying to recover from a devastating
1996 Florida
Everglades crash.
Beau Rivage proposed subsidizing its flights to nearby
Gulfport from
cities such as Dallas
and Atlanta. The casino also paid to open a gate in
Nashville, which
research showed was
an important feeder market. Horrifyingly, the first
Nashville flight
carried a single passenger
in its 105 seats, according to several people involved.
Beau Rivage
pulled the plug,
replacing Nashville with Orlando. "Nashville was a flop,
and we got
out," Mr. Wynn says.
Tad Hutcheson, Airtran's marketing director, says the
resort failed to
market the flights in
some cities before the opening. And, he says, just "one
flight a day
into Nashville doesn't
make sense."
While the airline deal cost Beau Rivage $5 million in
March, the resort
itself was in
pandemonium. Guests waited in 90-minute valet-parking
queues only to
arrive at
hour-long lines at the front desk. Resort officials'
attempts to smooth
things only made
them worse. When they declined to provide valet service
for local cars
to save space for
hotel guests, locals were irritated.
It turns out that Beau Rivage had failed to comprehend
several vital
differences from Las
Vegas. For one, Biloxi customers, spiffed up for an
evening on the town,
place a high value
on handing their car keys to a valet. "It's a big issue,"
says Maurice
Wooden, the resort's
head of operations. The resort ultimately added a second
valet area.
Mirage officials were also overwhelmed with work-force
problems. Unlike
in 1993, when
the project was born, unemployment was now at record lows
and
job-hopping workers
streamed from Beau Rivage "like a faucet," Mr. Wooden
says.
"If we had known more about Mississippi, if this had been
our second
hotel instead of our
first, we would have staffed even more because there's
less
productivity," Mr. Wynn told
investors in a fall conference call. When similar
comments hurt
employees' feelings, Mr.
Shier apologized in a series of employee meetings.
All this made a debacle of Beau Rivage's early days. But
the resort's
creators proved right on
one count. Visitors were flocking to Biloxi to gawk at
the new place
before leaving to
gamble elsewhere. Casino revenues on the Gulf Coast rose
43% in April
last year from a year
earlier, according to the Mississippi State Tax
Commission. The resort's
rivals were
reporting record numbers of visitors.
A bowl of oranges sparked Mr. Wynn's first go at an
overhaul. One April
morning just four
weeks after the opening, Mr. Wynn called room service for
breakfast: two
boxes of Special K
cereal, skim milk, one sliced banana and coffee with
Sweet'n Low. A bowl
of oranges, one
box of cereal, and a quart of milk arrived. Similar
mistakes followed on
the second and third
mornings. "You can imagine the panic that sets in," he
says. "If they
s---- Steve Wynn,
what's happening to everyone else? Disaster."
Mr. Wynn ordered a restaffing. By May, every manager in
every restaurant
had been
replaced, as well as nearly every department head, the
assistant
front-office manager, the
bell captain, and four telephone operators. "I needed to
cleanse the
place," Mr. Shier says.
He switched paydays to Monday to discourage weekend
defections. Chefs,
hostesses and
front-desk employees were imported from Las Vegas to tell
inspiring
stories of the
company. Parking valets received scripts on greeting
guests, and waiters
were tutored in the
pronunciation of foods such as foie gras.
New restaurant managers made the crabcakes bigger and
blander, banned
the lobster
crepes and added an 11.5-ounce T-bone. Soft rock replaced
opera and
Frank Sinatra
elevator music. To get quality radicchio and other
produce that wasn't
available locally, the
resort began hauling two refrigerated trucks per week
from California.
Costs were slashed. Plans for "hands free" luggage
delivery to the
airport, which cost $21 a
customer, were canceled. Night turn-down service was
discontinued in
standard rooms,
saving $6 per room per day. Staffing dwindled to 3,680
from 4,600 jobs
through attrition
and layoffs of gardeners, housekeepers and others.
By September, Mr. Shier figured he had fixed most of his
mistakes in
approaching Biloxi as
"Northerners coming in trying to change the South." He
awaited a flurry
of travelers. "We
thought that fall had one of the biggest upsides," he
says.
Instead, the hotel's occupancy perplexingly plummeted one
early
September weekend.
Nearly 300 of the resorts 1,780 rooms sat empty. Trying
to understand
why, Mr. Shier called
Mr. Yates, the builder and a Mississippian, and asked him
what he was
doing that weekend.
Mr. Yates replied, "I'm going to the Ol' Miss game.
Everybody will be
there."
Mr. Shier then dialed a Southern ballplaying pal, former
star
quarterback Archie Manning. "I
said, 'Archie, how big is this?' " Mr. Shier recalls. "He
said, 'It's
life.' " So Mr. Shier became a
student of the Southern penchant for football, keeping
college and pro
team schedules in
his desk drawer and promoting the resort in cities when
there wasn't a
big game.
He also bowed to local gamblers in October, forming the
"Coast Club,"
which throws
monthly themed dinners and invites members for food
specials. There's
prime rib on
Mondays and on Tuesdays, all-you-can-eat ribs.
Though improved, Beau Rivage still has a long way to go.
Occupancy rose
in the summer
and fall, but dropped back to 80% in December, says Mr.
Shier --
troublingly low in an
industry that shoots for at least 95%. Lately, Mr. Wynn
has been
considering canceling the
resort's Cirque du Soleil-produced show during winters,
to save money.
There are also deals galore for anyone willing to go,
gamblers or not.
On their recent
honeymoon, Lisa and Jason Hoch paid $119 apiece for
airfare from their
home in Tampa,
Fla., and a three-day stay at Beau Rivage. They don't
gamble much, says
Mrs. Hoch. But for
the price, she says, the resort "was more than I
expected." |
