Can’t Wynn them all: Wynn Resorts underperforms despite Macau rebound

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Wynn Resorts second quarter revenue and adjusted earnings showed softer than expected mass-market results for its Macau business.


The company’s global operations – including Las Vegas and Macau – generated net revenues of $1.53bn for the second quarter of 2017, up 44.5 percent compared to $1.06bn in the same period a year earlier.

However Wynn Resorts’ new Macau venue, the $4.3bn Wynn Palace, came up short in Q2, failing to fully capitalise on the recovery in the world’s biggest casino market as ongoing construction works around the venue deterred some guests.

A strong recovery is underway in Macau, where industry revenue rose 22 percent in the second quarter.

After three years of decline, the market began growing last year, in part thanks to new resorts.

Wynn Macau reported total revenues of approximately $1.10bn in the Q2, up 71.6 percent compared with nearly $639.3m in the same quarter 2016. Casino revenue rose by 68.4 percent year-on-year, to $1.02bn.

The Wynn Palace generated property earnings of $87.4m, coming in below the average estimate of $115.5m from Consensus Metrix.

“The results in Macau need a little interpretation …but what is clear is that things are moving along. Our VIP business has picked up in both hotels and the mid-market is growing,” Wynn Resorts’ CEO, Steve Wynn contended, speaking during the company’s earnings call.

“We don’t care [that the Peninsula is growing faster than Palace]. It’s all one big thing. You know? It’s one integrated resort in two locations. To us, it’s six of one, half a dozen of the other.”

The company’s executives said that business continues to be hurt by construction on all sides of the resort which may not end until next year.

“We still suffer [from] the dislocation of our walk-in potential because of the extreme construction that surrounds us,” said Wynn.

“It’s virtually life-threatening to get across the street to our gondolas and our entrances. So we have been able to make money and have satisfactory progress in spite of these rather unique and unprecedented obstacles that we’ve faced.”

While the operator’s Peninsula property Wynn Macau rebounded as business from high rollers was a bright spot, the Palace was below expectations due to disappointing mass market revenue growth.

“The mass is really affected by the physicality of the neighborhood … mass has an awful lot to do with access,” Wynn explained.

“One of the reasons our mass numbers is so impressive downtown is because we’re in the middle of everybody.

“Right now [at the Palace] we’re on the edge and surrounded by fences. We’re on the edge of everybody. When we get surrounded again by SJM, by the monorail, by MGM and we have our connectivity, the picture’s going to change dramatically.”

Wynn Macau president Ian Coughlan stated that the premium mass market level may also have been impacted by issues surrounding the smoking ban. Macau banned smoking from casinos but government officials let some lounges focused on “high-limit” VIP gaming get around the rule.

“There are spaces in town that have been grandfathered in,” Coughlan said.

“That all goes away the beginning of 2019. [And then] everybody has a level playing field. We will be the biggest beneficiary of that because we’re operating handicapped right now.”

The company is in the midst of construction boom, building a new casino in Boston and a lake-themed resort behind its flagship property in Las Vegas.

Referring to Wynn Boston Harbor, Wynn stated that the project is moving quickly towards completion in April and May of 2019 and is currently “on budget” and “a little ahead of schedule”.

Wynn Resorts is also in talks with other companies to develop land behind the lagoon project planned just east of Wynn Las Vegas and Encore.

“The real estate behind in Encore, 10 million feet, is unquestionably the most powerful latent asset that this company owns,” Wynn affirmed.

“We’ve had expressions of interest from a number of companies who want to come on this property and participate either in the form of joint-ventures or ground leases and other financial arrangements.”


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