Is Encore in trouble?
By Josh Resnek
A recent spate of disappointing corporate financials for the first quarter of operation coupled with dramatic price cutting for rooms at the hotel to shrink the vacancy rate at the Encore Boston Harbor points to apparent weaknesses in its business model that Wynn executives did not anticipate and are trying to correct.
During the first quarter revenues have been dropping rather dramatically in September and October, at about $3 million a month just in gaming revenues. Hotel occupancy is at 68%, and the club and restaurants at Encore are experiencing growing pains and financial difficulties.
During its first 90 days of operation, Encore Boston Harbor reported a $42 million loss.
Management has decided to drop parking charges and transportation charges for those arriving by boat.
Entrance into table games which were at $50, have been lowered to $15 dollars.
Room rates at the hotel have been slashed.
Rooms are this week being offered for as low as $120, with 10% off for that price for non Red Card holders, which means a room at the hotel can be rented for about $100.
In addition, the added savings on rooms is dove tailed with room renters receiving $100 in casino cash to eat at your favorite restaurant inside the casino.
Encore officials as well as casino industry analysts are privately asking themselves if the Wynn Company spent too much moneydesigning the wrong project for a geographic location with a different demographic than most major city locations where a casino might have been developed.
As recently as last week, Wynn officials were quoted as saying that Boston is not Las Vegas, and what works elsewhere does not work perfectly in Boston.
‘We are trying to determine what works in Boston,” said one Wynn official.
To that end, Wynn officials said they are working day by day to identify the Encore demographic and to cater to it and to build the business accordingly over the next three years.
However, nagging questions exist about Wynn’s patience with lagging revenues, the first quarter loss, and some difficulties they had not planned on.
Future profitability is also a question given the more than several billion dollars invested.
Part of the leadership’s angst caused the departure of Encore President Bob DeSalvio last month.
Officials said he left of his own accord but insiders claim he was fired.
DeSalvio’s bloated estimates of what the casino and hotel would bring in apparently brought him down.
He had predicted $800 million – $1 billion in revenues for the $2.6 billion project.
Annualized revenues are expected to be somewhere in the area of $600 million during the first twelve months based on first quarter financials. The reverberations from the loss of Wynn founder and casino guru Steve Wynn at the beginning stages of the build out for the project continue to be felt.
There is the belief held by a great number of casino analysts that Encore Boston Harbor will never be the way it would have been had Steve Wynn still been involved with the business.
During the first three months of operation there have been quite a large number of police calls to the hotel and to the casino for fighting among the patrons.
On more than several occasions the fights involved several dozen younger people and took place in the hotel lobby, spilling out into the parking lot arrival area and then into the casino itself and among gamblers in the gaming rooms.
Some of the disturbances were apparently caused by spillover from the casino’s club and involved highly intoxicated patrons, some of whom were apparently carrying weapons.
During the first 90 days of operation, about 170 arrests have been made by state and local police patrolling the property.
The local fire department and ambulance service has been called to the hotel and casino several dozen times for drug and alcohol overdoses with Narcan being administered a number of times, according to sources.
A number of employees have been let go because of discipline problems and theft as well as insubordination or for simply failing the strong Wynn work ethic which is required.
Encore Boston Harbor’s smooth opening, and it having almost no meaningful effect on traffic, was not a sure sign of success, according to a local observer.
“For the casino and hotel to be bringing in the big dollars, the traffic needed to stretch from Broadway to Saugus. That hasn’t happened. It isn’t going to happen.”