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The Wynn Resort Renovation Fee Theory

By Chuckmonster on Monday, 14th June 2010 5:41am
  » filed under Las Vegas  comments: 5


Since we broke the story that Wynn Las Vegas would be adding resort fee, many of us have been searching for sound reasoning to justify such an abrupt about face. In addition to our theories, myriad thoughts have been opined by VegasTripping's (awesome) readers, local news journalists and bloggers. Competitive pricing in travel aggregators? Playing the shell game with Nevada room taxes? Corporate greed? Paying for Garth Brooks' Gulfstream? The list goes on and on and gets less and less plausible the longer it gets.

Up until now, nobody has addressed the elephant in the room... the rooms themselves. As expected, Wynn Resorts confirmed during their Q1 earnings call what we've all known for about a year, they would be renovating WLV's five year old hotel rooms during the summer/fall of 2010. Numerous sources within Wynn have told us that model rooms were built quite some time ago and various iterations of design and materials have been tested and retested. These designs have since been approved and all systems are go for a resort wide room renovation.

Demolition of current resort rooms begins in July 2010 and will take each of the 45 floors out of commission for about two weeks - one week for demolition followed by one week of installation with two floors being worked on at a time.

By my calculations, taking these rooms offline will result in a loss of 38,000 nights of room revenue by the time the renovation is fully completed, a loss of $9.5 million dollars when calculated at a $250/night average daily rate. The math: 2716 rooms x 14 days offline x $250 ADR = $9.5M.

Conversely, based on 100% occupancy of the non-renovated block of rooms the addition of a $20 resort fee will bank about $9.5M over a six month renovation period. The math: 2600 rooms X 182 nights X $20 resort fee = $9.46M.

Guaranteeing 100% occupancy at $250 ADR isn't exactly reliable, but when inventory goes down, price goes up. Even so the numbers are too close to sneeze at, and we haven't even figured in Encore's contribution to the resort fee kitty.

Tagged: wynn las vegas   resort fee   new rooms   


Comments & Discussion:

good math - however i see these fees staying long after the room upgrade is complete, just like road and bridge tolls meant to pay for the renovation work.

indeed the permanence is the issue. down economy is also still a factor, but its WAY improved since (bottom in) feb/mar 2009...

Add to your theories that in the CNN interview with Wynn, he broke down the wear and tear costs per room to $18 per day. If you took that amount, $18, and multiplied it by 5 years X 365 days X total number of rooms to renovate, you get about $9.5 million. So is the logic that the resort fee is actually paying for current or future room renovation costs?

A couple issues with this one:

They're not going to be anywhere near 100% occupancy (at least not on weeknights) so they can probably lose two floors worth of rooms at any given time without turning many (or any) customers away. So it wouldn't be 38,000 room nights. The ADR of their remaining available rooms will probably also go incrementally higher, since reduced supply = higher room rates.

Second thing is that the $20 resort fee will replace a good amount of $13 internet charges and $20 gym charges that people were buying before. So it's not a free-and-clear $20. I have no idea what they were earning off of those ancillary fees though.

This is like that terrific Jim Carrey Movie 'The Number 9,500,000'

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