The issue of not getting left behind in terms of market coverage in a rapidly expanding Macau gaming market came up in a press conference following Wynn Macau’s board meeting today.
Casino companies never seem to question market share statistics when they’re working in that operator’s favour. The gross gaming revenue statistics only become ‘meaningless’ when the company is lower down the pecking order. Steve Wynn, Chairman and Chief Executive of Wynn Resorts, joined that debate this week when he took questions from the media after Wynn Macau’s board meeting.
Mr Wynn’s assertion that he will ‘double’ his Macau numbers when he joins the Cotai party has led some to ask the obvious question: ‘Why isn’t he there already?’
“I don’t know what measurements you use—revenue, profitability, total visitation, but we could be easily twice as big,” Mr Wynn said in interview with Bloomberg television this week.
As one analyst explained to IAG e-Newsletter this week: “I always ask operators not just ‘What’s your future story?’ but have a frank discussion on the execution timetable.”
In Macau, that’s not easy. Mr Wynn is arguably damned if he tries to introduce the certainty of a timetable in a situation dependent on Macau’s domestic politics—Sheldon Adelson knows how that feels over at Cotai 5 and 6—but Mr Wynn is also damned if he doesn’t nail things down for the market.
The provisional timetable for Wynn Cotai announced last June was for ground breaking this year and an opening in 2014. But then a table cap and moratorium on future Cotai projects were announced by the Macau government, throwing a spanner in the works. There were also some additional complications as a third party had an involvement in the land deal on the proposed Wynn Cotai site.
After the board meeting Mr Wynn was asked about analyst concerns that he doesn’t yet have a Cotai story to tell and that the two properties he does have on Macau peninsula are too VIP-centric.
Mr Wynn gave short shrift to the suggestion of being slow off the mark on Cotai.
“This business of building these buildings that has entertainment and food and beverage and casinos and private casinos and VIP services and fancy suites—building them, designing them, getting it right, keeping them operating efficiently—it’s not exactly automatic. It takes time to learn how to do it. If you have a monopoly it’s easy. It’s hard to make a mistake when you’re the only game in town.
“The danger here [in Macau] is the second rate property. We’re trying to attract people from all over the Pacific Rim. For that, you need to pay attention.
“My gang and I always need to do one more hotel. Because we think maybe, just maybe, next time we’ll get it right.
“[Wynn Cotai] is the best thing we’ve ever done.”
Mr Wynn also dismissed the idea Wynn Macau and Encore at Wynn Macau was too VIP-focused.
“We’re not VIP centric. We just have a lot of VIP business. But we also have the best win per table in the general casino, in Macau. Our business is up over 40% in the general casino. For the size of our building, we can’t get any more customers in here.”
Wynn Macau’s unaudited first quarter results for 2011 released today show a 46.6% increase year on year in net gaming revenue—to US$865.7 million from US$590.6 million a year earlier.
“Let’s deal with market share,” Mr Wynn said in comments following the results.
“When you have 33 casinos in a city like Macau, gross market share—that number the government puts out every Monday—is a meaningless number. Because if you have one building like this one, and you have 15% of the market—and someone else has 12 buildings or 20 buildings, they have 20 times as much depreciation, more interest, more payroll, more expenses.
“In getting to the bottom line of how successful are the enterprises, you can see that from the financial information that is published. But more importantly, the way to gauge the effectiveness of management in one of these buildings is real easy. Don’t look at the top line market share. It means nothing. What good is it if you get more market share if you give away 95% of the money in free chips for example?
“Here’s a way to look at it. Take a look at each casino and see what percentage of the equipment—the tables and the slot machines they have—compared to the whole [market]. And then take a look at the total revenue in the market and see what percentage of the revenue they have. In a perfect city where everybody is equal, your percentage of revenue would be the same as your percentage of tables. It would also mean your slots each won the same percent per day as your neighbour, that your tables had the same activity as your neighbour. That would mean the ratio of equipment to money would be 1:1. Or you could call it just the number ‘1’.
“But if the percentage of the money is less than the percentage of equipment, then that number is less than ‘1’, and you are a net donor of people to your neighbour (if you have rooms). If, however, your percentage of the money is greater than your percentage of the equipment then you are a net receiver of business and you’ve made a bit of a dormitory out of your neighbours. And that means you have a positive ‘fair share’. As competition has increased in Macau, our fair share of the money has climbed.”
