The combination of strong results in Macau and a positive outlook for the U.S. business environment made for an upbeat Steve Wynn at the company’s fourth quarter earnings call last month.
The call took place on the first day of a week that would end rather incongruously with a Wall Street Journal report alleging serious sexual misconduct by Wynn which he denied but would nonetheless drive the company’s stock down. The stock had been lifted by the numbers, especially in Macau, where Wynn Palace in Cotai is a big hit, particularly with the surging mass market. The Palace accounted for about 70 percent of the company’s overall revenue growth, with Wynn Macau accounting for the rest of the $388 million in growth. Wynn’s Las Vegas operation was down $6.2 million for the quarter, but the company was fully undeterred, announcing plans to fast-track development of a hotel that could add anywhere from 2,000 to 3,000 rooms on a 38-acre parcel of land across the street from Wynn and Encore that it purchased just last December. Here’s some of what Wynn had to say about both markets:
Macau: “We have said for the past two years as the Macau market experienced some vicissitude, that the fundamentals in China in terms of its business opportunity for our company were profoundly simple. The Macau market is still only touching a tiny percentage of the potential market that’s there. Since New Year, we thought we’d have a post-holiday slump, but we’re seeing mid-week business in the mass-market casino at the $3-$4 million per day level. The foundational strength of this market is real. We have been encouraged by the government there to file our plans for Phase II, which we are working on now.” (The Palace owns 11 acres of adjacent property on its existing Cotai land.)
Wynn added that the Palace generated as much as $5 million per day in January as it was headed toward Chinese New Year this month. He expected the neighboring MGM property to commence operations in by early February and for the Palace to have completed a construction operation that includes a new restaurant on the south side of the casino in time for the New Year. Other positives include public infrastructure improvements, including a new light rail system, coming on line in 2019 and an adjacent SJM property opening in addition to MGM.
“We took 2.5 to 3 years to design Wynn Palace,” commented Wynn. “We really grind on little things; God lives in the details in our business. Our buildings tend to gain momentum over time. Palace snapped up market share. We went from 9 percent to 17 percent; some of the other companies have opened places and not experienced anything like that kind of growth. We deal with that part of the market that tends to lead in good times and not suffer quite as bad in bad times.”
Las Vegas: The 12-year-old Wynn Golf Club closed at the end of the year and clearing and grading has begun for 460,000-square-feet of new convention space. A lagoon that will be a little over three times the size of the eight-acre Bellagio Lake will be constructed. “It offers tremendous developmental land on the beaches and the boardwalk,” said Wynn. “We’ll begin on the west side as we have already begun to develop restaurants, gaming hotels and public attractions. There will be at the east end, across the street from the Las Vegas Visitors and Convention Bureau, still another 60 to 65 acres of undeveloped property with beaches and boardwalk frontage.”
The new events building is directly opposite The Sands. “We’re all connected. Between Sands and Wynn there will be 15-20,000 hotel rooms when we’re done with over 6 million square feet of exhibit space and hundreds of acres of recreational opportunities that will be unique. Not a theme park; we’re not competing with Disney. Included in that will be the 2-3,000 rooms across the street at what we call West Wynn, the old site of the Frontier Hotel that we bought in December for $336 million. We’re going to attempt in the next four or five months artistic renderings that show the entire development over the whole 280 acres.”
It’s safe to say Wynn’s outlook on the potential for his brand of room product to prosper in Las Vegas hasn’t been dimmed by U.S. tax reform. “You have to ask yourself, investment community, do you believe that Las Vegas in the next decade or two will continue to be a major tourist destination city in America and the world? If you do believe it, then you can absolutely be fearless about accommodating these people at the best level and giving them the highest possible value. Anybody who doesn’t understand that is missing the boat.”