Wynn and Adelson: Trying to Please in Macau


It is earnings season; in the next few weeks all of the major gaming companies will reveal their 4th quarter results.  The first to do so was Las Vegas Sands reporting $607 million income and $3.07 billion in revenue.  Income was up 5.6 percent, mainly due to the new Parisian in Macau, but results were also good in Singapore, Las Vegas and Pennsylvania.  Sheldon Adelson was optimistic and said he is eager for an opportunity to compete for a casino license in Japan.  It was a good quarter for LVS, although its stock price dropped immediately after the release.  Still it was a good start for the earnings season, sending a positive message on the health of the gaming industry.

Wynn Resorts was next reporting $113 million in income on revenues of $1.3 billion, up 37 percent from the same quarter in 2015.  The reason for the huge increase is simple; Wynn Palace in Macau.  It opened in September and is generating $1.6 million a day in revenue.  Steve Wynn said Wynn Palace was doing a bit more than forecasted, but he expects it twill take a full year or longer for the property to fully “ramp up” and live up to its potential.  Additionally, Wynn stated that the company anticipates breaking ground on Paradise Park, Steve’s next project in Las Vegas, later in the year.  According to Wynn, Paradise Park will rely heavily on “non-gaming” revenues: “We want to take our non-casino revenue to enormously high levels,” he said during the earnings call.

However, the company’s revenue and future projects were not the main focus of Wynn’s remarks.  He was more interested in the relationship between China and the United States which is under a bit of strain lately due to President Trump’s apparent willingness to grant Taiwan full nation status.  President Xi Jinping of China is not pleased; he said the United States is on the edge of violating China’s “one China” policy.  Trump’s actions and Xi’s response have generated considerable tension.  But Wynn thinks it is a misunderstanding that will clear up in time.  He says everyone knows the world is better off when the U.S. and China cooperate.

By his own admission, Wynn is a friend and supporter of Trump and the current administration. And due to insider knowledge he trusts government policy toward China will develop favorably for both countries:  “I am in a position to know that that opinion is held in Washington and Beijing, and it gives me long-term confidence in spite of what happened short-term verbally. We must not confuse long-term United States policy with the short-term conversations that lead to its development.”  And as Steve was just appointed finance chairman of the Republican National Committee, maybe he really does know what Trump is thinking.*  His job will be to raise enough money for the Republican Party to retain control of Congress in 2018.  But it might also put him in the cross-hairs of the Chinese.

Steve Wynn and Sheldon Adelson are both caught in the middle of what might be an unpleasant situation.  They are friends and supporters of Trump, but they depend on the Chinese government’s approval and permission for the majority of their companies’ revenue.  Although a formal review of the licenses in Macau is not due for three years, Macau gaming authorities began this year discussing what appear to be preliminary reviews.  In an announcement, Lionel Leong,Secretary for Economy and Finance, said the reviews would be complete by 2020. Up to this point the media and analysts had assumed the reviews would begin in 2020.**  However, there still are no clear and objective criteria set at this point.  No one knows exactly how each operator will be judged when determining whether or not to extend the existing licenses.

Secretary Leong said only that he would consider the opinion of the community, the upward mobility of casino employees and a property’s ability to help make Macau a world center for tourism.  Noble goals, but without objective measurements it is rather like playing croquet with a Red King down a rabbit hole. Earlier statements by Leong had indicated that all workplace policies and conditions would be considered during the renewal process.  In attempting to meet those standards Wynn, Las Vegas Sands, MGM and Melco have recently announced annual bonuses and in some cases pay raises.  To further complicate the situation, the legislature in January passed a bill limiting the number of foreign executives a casino can employ.  Each casino will be required to promote locals to 85 percent of the management positions.   Leong also indicated lowering the tax rate was not likely, as he considered it to be an unimportant factor in a resort’s ability to meet the government’s foreign tourism objectives.  There is nothing new in any of this. Bits and pieces have been released and discussed for years, but as 2020 gets closer it ceases to be an abstract.  Casino operators are striving to please more than ever as the clock ticks.

Steve Wynn has been on both sides of the issues; some years he has criticized the American government and the economic and regulatory environments in the U. S. In other years, he has criticized the Chinese government for the same reasons.  However, now is not the time to call out the Chinese. Wynn has somewhere between 6 and 8 billion dollars invested in Macau; and Wynn Resorts gets most of its profits from those investments.  It is no wonder that he took advantage of the pulpit an earnings call gives him to deliver a message to both the president of China and the new president of the United States.  “Come on guys, let’s all work together and be friends.” Wynn, Adelson and MGM need to please the Chinese president. At the same time, they are trying to take advantage of their personal relationship with President Trump; it is not an easy course they chart.

*Steve Wynn, chairman of Wynn Resorts, downplayed concerns over “sabre-rattling” between the United States and China under the new Donald Trump presidential administration and was optimistic that leaders of both countries see one another as long-term partners. “We all believed, and I mean all of us, that the most overwhelmingly important event geopolitically for the last 50 years is a liaison – a constructive liaison – between the People’s Republic of China and the United States of America. That truth is undeniable, that dynamic is unquestioned.” “There isn’t a leader in America or a leader in China that doesn’t understand that when the United States and the People’s Republic of China come together on an intelligent basis, the world is a better place,” Wynn said during.  Aaron Stanley, CDC Gaming Reports, 1-27-17

**Secretary for Economy and Finance, Lionel Leong says the government’s review of its six casino gaming operators will be completed before 2020. The concessions of MGM China Holdings and SJM Holdings are due to expire in 2020, while the other four gaming operators’ concessions end 2022.  Asia Gaming Brief, 1-19-17

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