Wynn’s tune has changed on Macau

Elise Amendola / AP

In this Thursday, Jan. 15, 2015, photo, Wynn Resorts CEO Steve Wynn delivers the keynote address at Colliers International Annual Seminar at the Boston Convention Center in Boston.

While discussing his company’s business in Macau this month, Steve Wynn used words such as “preposterous,” “outrageous” and “ridiculous” to describe his feelings about the Chinese gambling city, and more specifically, his uncertainty about the number of table games the government would permit in his new casino.

It was a far cry from the glowing review Wynn gave Macau more than eight years ago, not long after he opened his first casino there, when he proclaimed: “Macau is the safest bet on Earth.”

The casino industry in China has changed dramatically since Wynn made that comment in 2007, and his remarks this month reflect that.

Since 2006, Macau’s annual gambling revenue has surpassed the Strip’s; it now is more than six times as large. But the market has been in decline for more than a year. Macau has weathered 16 consecutive months of year-over-year gaming revenue decreases, fueled by a government-led crackdown on corruption that has hurt lucrative business from high rollers, as well as broader struggles in China’s economy.

That’s bad news for everyone with business in Macau but especially Wynn’s company, Wynn Resorts Ltd. Macau operations comprised about 70 percent of Wynn Resorts’ net revenue last year, accounting for more than twice the revenue earned from Las Vegas operations. Largely because of ongoing pressure in Macau, Wynn Resorts’ net revenue has fallen by double-digit percentages each quarter this year; profits and the company’s stock price have dropped as well.

Add on that the company is building another Macau casino, the $4.1 billion Wynn Palace, and it’s pretty easy to see why Steve Wynn was so frustrated. He has a lot at stake in Macau and undoubtedly wants to see his big bet pay off.

An examination of his comments about Macau over the past few years illustrates how stressful the situation has become.

• April 2010: Wynn considered moving his company’s headquarters from Las Vegas to Macau, to reflect more accurately where his company’s money came from.

“It is not improbable or unrealistic, considering so much of our revenue is from China, that it makes sense that I spend most of my time here,” Wynn told CNBC. “I’m seriously considering that, and I am weighing the implications of how I engineer that.”

• October 2012: Annual gaming revenue shot up from more than $33 billion to $38 billion. With the economic windfall came increased competition.

“It’s a tight game in Macau, and no place to take your eye off the ball for even a minute,” Wynn said. “I’ve got full confidence in our organization that we will continue to garner more than our share of the business and stay more than competitive.”

• July 2013: In the midst of another strong year, Wynn noted that Macau was “getting very powerful” and supporting a strong rate of growth “on an ever-increasing basis.” He said he could not wait to open for business on the Cotai Strip, the hot area of growth for casino development, and he spoke favorably of the competitive climate.

“We’ve taken into account these guys and what they’ve done, these competitors of ours,” Wynn said. “Man, it’s put us on our game. So there’s a lot of choices, fun things to do here, and it’s the first time that any city has ever, ever begun to offer the choice that Las Vegas, Nevada, USA, has offered. Thank God they’re 6,300 nautical miles away, so there’s room for both of us. And I’m happy to be in both markets ... and it’s just great.”

• October 2014: Wynn Resorts’ net revenue dropped slightly during the third quarter, driven by a 5.6 percent decrease in revenue from Macau operations. Still, Wynn said his company loved Macau and had “great, great confidence and gratitude to be involved with the place.”

But he also admitted that it had “always been government sensitive” and spoke of protests in Hong Kong, new regulations on smoking and the government’s anti-corruption campaign. Wynn noted that the government’s strategy of “being very, very aggressive” about corruption “has put a lot of the wealthy businessmen in the foxholes.”

Still, he remained optimistic.

“We have all noticed it, and I don’t know whether it’s a squall or we are in the rainy season, how long will it last, but we are still very, very bullish on Macau,” Wynn said.

• April 2015: Wynn Resorts’ net revenue from Macau dropped even further, from $1.1 billion in the first quarter of 2014 to $705.4 million a year later. The market had been declining for many months because of the corruption crackdown.

“It is impossible for us to predict how long that will last,” Wynn said. “We’re not in a position to answer those kinds of questions intelligently. We’re only in a position to react intelligently to what we see.”

Later, Wynn addressed the uncertain status of the table game count at Wynn Palace but appeared resigned to the situation. He called it “a very difficult uncertainty to adjust to” but said that “nevertheless, it is the uncertainty of the moment as to what the government will do.”

• October 2015: With revenue down nearly 38 percent in Macau and the table game count at Wynn Palace still unclear as the casino prepares to open next year, Wynn appeared to be all but fed up with Macau. He noted that another new casino had not learned its table game count until shortly before opening, and he lambasted the situation.

“The notion of finding out how many tables you’re going to get three weeks before you’re opening is outrageous and ridiculous,” Wynn said. “Ridiculous is the word for it. We’ve never operated a business this way. We train people. That’s how we give them a future, by training them. That contributes to their promotions, their pride and to the guest experience. And at the end of the day, guest experience is the only controlling factor in the survival of the hospitality industry.”

Tags: The Sunday

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