Casino operator Wynn Resorts flipped the script in its Q2 results, as Macau operations improved while Las Vegas declined.
For the three months ending June 30, Wynn’s overall revenue nudged up $20m to $1.06b while adjusted earnings improved nearly 6% to $312.7m and profit rose nearly one-quarter to $70.4m.
Wynn’s operations in Macau drove the results, as revenue gained 3.6% to $639m and adjusted earnings rose nearly 10% to $190.4m.
Wynn Macau’s VIP tables mirrored recent trends, as turnover fell 24% to $11.8b but Wynn got lucky, as VIP win hit 3.98%, more than one full point ahead of the same period last year. Wynn’s average number of VIP tables in action during the quarter fell to 183 from 247 in Q2 2015.
Mass market table drop was down a mere 1.7% while mass win rose 12.7% to $235m thanks to a better than average 20% win rate. Slots handle fell 21.5%, pushing slots win down 35% to $33.3m.
In Las Vegas, overall revenue fell 1.1% to $423.5m while adjusted earnings were flat at $122m. Vegas table drop fell 16% while slots handle rose 5.4%, resulting in a 1.3% decline in overall gaming revenue. Non-gaming revenue slipped 1% to $327m as hotel occupancy slipped three points and food & beverage fell 5%.
MUSICAL TABLES
Wynn announced that it expects to be allocated 100 new gaming tables when its Wynn Palace integrated resort opens in Macau on Aug. 22. Wynn said it expect supplemental table allocations in staggered groups, much as Macau’s government did with the two new Macau properties that opened in 2015.
However, 100 tables is half of the 200 that Melco Crown’s Studio City opened with before it received a top-up of 50 tables, and 50 less than the 150 tables that Galaxy Macau Phase 2 was given upfront before receiving another 100. It’s hard not to think that Wynn chairman Steve Wynn ‘s October tirade against Macau regulators may have played a role in those same authorities’ (apparent) decision to lowball Wynn Palace’s original allocation.
To fill out Wynn Palace’s casino floor, the company intends to shift around 250 tables from its Wynn Macau property. The resulting split will leave Wynn Palace with 350 tables and Wynn Macau with 270. Each property will have about 60 VIP tables with the rest devoted to the mass gaming floor.
RETHINKING MARGINS WHILE DOING YOGA
On Thursday’s analyst call, Steve said that at the end of Q2 2015, his company undertook a critical analysis of its operations in both Vegas and Macau, studying the contribution to earnings of each gaming unit, regardless of win, turnover or customer activity.
Wynn’s analysis determined that, of its 180 junket-run VIP tables, 60 were responsible for all VIP earnings, while the others were either breaking even or posting losses based on underutilization. As a result of this analysis, Steve believes each of its Macau properties carrying only 60 VIP tables will not only suffice but result in higher utilization per table, keeping staffing costs down.
Steve said Wynn Palace was designed from day one to cater to the premium mass player. Rooms, restaurants, all amenities, even the property’s layout is based on attracting the highly profitable high-end mass player, a stance that Steve believes puts Wynn Palace in a position to operate successfully with fewer tables than its competitors.
Steve said the old model of comping VIPs based on past performance was misguided. Wynn now doles out comps based on a player’s current activity, not based on what they might have done last year. In other words, what have you done for/spent with us lately?
Steve said operators had been less inclined to cast a critical gaze at the way they did business back when Macau casinos were setting new revenue records each month. Now, Steve says operators are “constantly in a yoga class” and the payoffs will go to those who are the most “agile.”
