Steve Says He and His Palace Are Ready

At what seemed like the last moment, Wynn Palace finally received its table game allotment.  It was given permission for 100 new-to-market tables for its August 22nd opening, less than expected, but Wynn is ready to open.  The tables are designated mass market, not the VIP tables that most expected and there is a significant difference. Mass market tables historically earn less than half of VIP tables.  It is less than the 400 games the property was designed to operate, but, Wynn has a backup plan. It will move 250 of underperforming tables from Wynn Macau.

Observers are taking the allotment as a reprimand as for two years the governments of both Macau and China have been sending clear signals – they want destination tourist resorts, not gambling halls.  Wynn does not agree and thinks the allotment is adequate.  However, there are others who see a coded message in the allotment. Wynn has not pleased the powers that be in their eyes.

When making the announcement, the Secretary for Economy and Finance, Lionel Leong Vai Tac said, “We consider different factors when granting new-to-market gaming tables.  This includes whether the project is helpful for the development of Macau into a World Centre of Tourism and Leisure, whether the company supports local SMEs, as well as its input to developing non-gaming elements.”  Wynn apparently fell short by those measurements as his competitors Galaxy and Melco were awarded 150 more tables.  In the logic of those who see the allotment as a reprimand, Galaxy and Melco built better tourist attracting resorts and do more business with local companies than Wynn.

Wynn Palace will be authorized to operate 100 tables when it debuts Aug. 22 in the world’s largest casino hub, with 50 more to be allocated in the following two years, Macau’s Secretary for Economy and Finance Lionel Leong said. The government stipulated all the tables will be for mass-market players. The resort also received approvals for 1,145 slot machines. Daniela Wei, Bloomberg, 8-12-16

While Wynn may not be upset by the allotment, others are clearly disturbed. Investors and analysts are wondering how Wynn can get a fair return on $4 billion with 100 mass market table games and 1100 slot machinesBut by transferring tables from Wynn Macau, Wynn will have a better hand than the one the government dealt to him.  In fact, he apparently thinks by moving tables around he will have better utilization and be more efficient than Wynn Macau is currently.

Union Gaming has downgraded the stock for Wynn Macau to Hold with analyst Grant Govertsen saying that, while he thought it possible for Wynn Macau to achieve the firm’s estimates over the next two years, “it does raise concerns on how an operator can ultimately get to where they need to be on a longer-term basis with only 150 tables on a $4bn+ investment… While we do think it is possible that the company could apply for more tables post-2018, we are more comfortable being on the sidelines for the time being and until we get more clarity on how future table allocations will be dealt with (for all operators).” Asia Gaming Brief, 8-12-16

Regardless of the concerns of the observers, this is Steve Wynn we are talking about.  Every time Wynn opens a new property the pundits predict his demise.  The doubting started with the Golden Nugget in Atlantic City, but the Mirage really upped the game of doubt as all of the analysts agreed it was simply impossible to generate the million dollars a day that was necessary to service the debt. Of course it was possible.  In a way, the opening Wynn Palace is like the opening of the Mirage.

 “A casino is a passive place,” Wynn stated. “Its value as a revenue source depends solely on how many people come through it and what their average per person spend is. What is dynamic in my business is the non-casino stuff: that is what brings people from afar.”  Wynn Palace – which Mr. Wynn dubbed as “arguably the most beautiful hotel in the world” – would be themed around flowers, he said. The property features several large-scale floral installations to be changed on a regular basis. “People who come to Macau, they come frequently. So the building has self-change built into it,” Mr. Wynn explained.  Gross Gaming Revenue Asia, 8-17-16

While to others, a billion dollars in debt is impossible to service in today’s market and especially with the number of games allotted, Wynn is confident as usual.  He is confident and proud to be opening a resort that will once again redefine casino resorts in Macau and worldwide. He shared his strategy for dealing with opening in uncertain times with the media:

“I say don’t overreact, cool your jets. Focus on things that you can control: your business, your employees’ welfare, your guests and the quality of the product that you dish up,” he said. “Do that, keep your chin down, pay attention to business and the sun will come up tomorrow. That’s the way I figure it.” South China Post, 8-17-16

Wynn certainly speaks from experience. He has faced challenging times before.  He has faced a sea of doubters and he has made extremely high-value, high-risk wagers many times before.  It has been 36 years since the Golden Nugget opened in Atlantic City and in all of that time Steve Wynn has yet to fail. So if you are considering a wager on Wynn Palace, I would recommend putting your money on Steve.  Wynn Palace could fail, but it would be a first for Steve Wynn in over 40 years in the business.



1 Response to “Steve Says He and His Palace Are Ready”

  1. 1 ennyl ekrub August 18, 2016 at 4:34 pm

    ” A casino is a passive place.” Heck no Steve Wynn.

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