Wynn Resorts Ltd. last week was the center of two issues that could change the company markedly.
Early last week, the New York Post reported that the company is trying to sell its interactive division, WynnBet. The Post reported that Wynn was quietly seeking interest in the company at a $500 million valuation. This is a steep drop from a planned SPAC that Wynn had been considering that valued at $3 billion. Last May, Wynn was considering merging its interactive division with Austerlitz Acquisition Corp. — a special acquisitions company owned by Bill Foley, the owner of the NHL’s Vegas Golden Knights.
The deal would have provided the company with $640 million in marketing dollars to push WynnBet into the upper echelons of online sports betting and gaming. But outgoing CEO Matt Maddox said he wasn’t comfortable throwing that much money against the wall without any promise of return on investment.
“The market is really not sustainable right now,” Maddox said on a November earnings call. “Competitors are spending too much to get customers. And the economics are just not something that we’re going to participate in.”
Meanwhile, in December WynnBet won one of the nine licenses in New York, but hasn’t revealed a launch date. Despite the sky high 51 percent tax rate, that license will be valuable to all who failed to gain a foothold in the Empire State.
“I think it has to tone downed long-term if there is any hope of seeing profitability in the state,” Barry Jonas, an analyst at Truist.
A Wynn spokesman declined to comment on what he called “market speculation,” saying the business was clear on its last earnings call about the company’s desire to operate the sports business in a way that will create long-term shareholder value, adds The Post. Analysts say logical suitors for Wynn Interactive would be Fanatics and Penn National Gaming’s Penn Interactive.
“In light of elevated marketing and promotional spend in the sports betting industry, we are pivoting our user acquisition efforts to a more targeted ROI-focused strategy,” the company said at the time. “In so doing, we expect the capital intensity of the business to decline meaningfully beginning in the first quarter of 2022.”
Analysts, who partly credit the success of the market to the heavy promotion, have voiced concerns on the sustainability of these tactics: promotions are expected to tone down in the mid to long term should operators hope to see profitability in New York. It is believed it could cost between $300 to $500 on average to acquire an online gaming customer.
But the big news came later that week when Wynn Resorts announced it will create a $2 billion integrated resort with gaming on an island in the sheikdom of United Arab Emirates.
Due to open in 2026, the resort will be built on the man-made Al Marjan Island in Ras Al Khaimah, in partnership with property developer Marjan and local hospitality giant RAK Hospitality Holding. The project will feature a luxury hotel with more than 1,000 rooms, a “gaming area,” a high-end shopping mall, state-of-the-art meeting and convention facility, an exclusive spa, more than 10 restaurants and lounges, an array of entertainment choices and other amenities.
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Al Marjan Island, already a leading tourism destination, is 15 minutes from the Ras Al Khaimah International Airport and 45 minutes from the Dubai International Airport. Comprising four islands, Al Marjan Island features nearly five miles of beaches and 14 miles of waterfront in addition to world-class hotels and residential developments.
Al Marjan Island spans an area of 667 acres of reclaimed land extending into the Arabian Gulf. The new integrated resort on one of the exclusive islands, which covers an area of almost 62 acres, will offer a pristine setting with spectacular views of the Arabian Gulf as well as sandy beaches and a marina.
The integrated resort will be developed with significant foreign direct investment by Wynn Resorts. As the largest project of its kind in the Emirate’s growing hospitality sector, it will create substantial value to the local economy by accelerating tourism, creating jobs, and energizing the growth of related sectors.
The project is slated for completion by 2026.
Eng. Abdulla Al Abdooli, CEO of Marjan, said the new integrated resort highlights the fast-growing recognition of Ras Al Khaimah as a leading investment destination for high-quality hospitality projects.
“The integrated development, featuring a world-class hotel, entertainment and gaming amenities, will add to the emirate’s destination strategy to attract tourists from across the world,” Al Abdooli said.
“We are partnering with Wynn Resorts, one of the world’s most renowned integrated resort companies, which has a strong track record of developing luxury destinations with exceptional accommodation, dining, entertainment concepts and gaming facilities. By leveraging Wynn Resorts’ expertise in developing luxury hospitality destinations, the new development will raise the benchmark in luxury hospitality in the region. It will also create exceptional value to the Ras Al Khaimah economy and boost the leisure, business, and MICE tourism sectors.”
Craig Billings, newly appointed CEO of Wynn Resorts, said, “Al Marjan Island is a pristine setting and an ideal greenfield location for us to create the one-of-a-kind guest experiences for which Wynn Resorts is renowned. The region offers tremendous potential for the hospitality and tourism industry, and we are excited about the prospect of developing an integrated resort in Ras Al Khaimah.”
Ras al-Khaimah is the northernmost emirate in the UAE, a federation in which individual autocratic rulers wield wide powers. Ras al-Khaimah, or “the top of the tent” in Arabic, is ruled by Sheikh Saud bin Saqr Al Qasimi and is most widely known for its RAK Ceramics company. However, the emirate has been in an effort to increase its tourism profile to rival Dubai in drawing international tourists.
Plans for the new resort prompted the emirate’s Ras Al Khaimah Tourism Development Authority—known as RAKTDA—to form a new division for the specific purpose of regulating “integrated resorts,” defined as including gaming facilities. According to an emailed statement to Bloomberg, the new agency, called the Department of Entertainment and Gaming Regulation, will set the rules for “licensing, taxation, operational procedures, and consumer safeguards” needed to regulate gaming in those resorts. “The foremost priority of this new division is to create a robust framework that will ensure responsible gaming at all levels,” the statement said.
The explanation to Bloomberg, as well as a separate statement from the agency published by the Associated Press, makes clear that “gaming” as described by the new department refers to gambling, a fact that the UAE government has dodged before now, as gambling is forbidden by the Muslim faith. Gambling remains rare in the Mideast, with casinos only in Egypt, Lebanon, Morocco and Tunisia.
“Following global best practices in the regulation of gaming that operate as part of integrated resorts across various jurisdictions worldwide, the Department of Entertainment and Gaming Regulation within RAKTDA will consider the social, cultural, and environmental landscape of the emirate and cover licensing, taxation, operational procedures, and consumer safeguards,” the agency said in its statement to the AP.
Although Wynn provided no details publicly on the company’s financial stake in the development, Morgan Stanley analysts told the AP that Wynn appears to have a minority stake and estimates it will need to invest around US$333 million assuming a development cost of US$2 billion, an equal three-way share between the partners and a 50/50 debt to equity split. It is also likely that Wynn will run gaming operations on a management basis.
For WynnBet, when it comes to mobile sportsbooks, suffering a bunch of losses after spending so much on promotion to sign up customers is par for the course, at least during the early years. But Wynn Resorts, which operates WynnBet, wants nothing to do with that business model.
The fire sale comes less than six months removed from a major launch, even signing NBA legend Shaquille O’Neal as a brand ambassador. O’Neal sold his minority stake in the Sacramento Kings NBA team so he could work closely with Wynn.
“I am so excited to take WynnBet to new heights,” O’Neal said in an August press release. “Mobile sports betting is having a major moment, and I believe that WynnBet will be a powerful force in the industry.”
Ah well. Wishful thinking, Shaq.
