The message was clear. Cooperate and we’ll be on your side. If you don’t beware of our actions. Melco Crown and Galaxy know how to play the game. Wynn Resorts? Not so much.
Melco Crown Entertainment Ltd. can open its new $3.2 billion casino-resort in Macau with 200 new gaming tables. The Hollywood-themed Studio City, slated to open October 27, will be authorized to add 50 more tables in January.
Chairman Lawrence Ho has said he would be “very concerned” if the resort opened short of 400 tables; the firm, an alliance of Ho and Australian James Packer, is contractually obligated to offer that number as part of a loan agreement. The company has 12 months to get the full complement of tables.
Ho may be disappointed, but Bloomberg Intelligence analyst Tim Craighead said 250 tables “is a big allocation. No one should have been expecting 400.” And Union Gaming analyst Grant Govertsen said,“It’s more tables than expected. It’s definitely positive from an investor’s point of view. Studio City checked all the right boxes in terms of all the nongaming amenities that the government is looking for.”
In the interest of diversifying its economy, Macau has capped new-to-market tables at 3 percent per year. The policy raised questions about how many table would be allocated for other new casinos, like the new Wynn Palace, due to open next March, and Sands China’s Parisian Macao, which will open next summer.
Melco Crown says it will “proactively engage” lenders under its senior credit facilities to amend the requisite number of tables and avoid a default.
Meanwhile, said Govertsen, “Unutilized tables from other Melco casinos could likely be allocated to Studio City if there is a need. (But) we don’t think Melco has much incentive to transfer these tables now and, honestly, given the current demand, 250 tables may be enough for the new casino.”
At the same time, the government granted another 100 table games to Galaxy Entertainment, which opened Phase II last spring. It was initially granted just 150 games, while it wanted at least 400.
But it was Steve Wynn that went against the grain.
In a memorable earnings call October 15, Wynn launched a lengthy diatribe against Macau gaming regulators. Among his gripes is the on table game growth that led a competitor, Galaxy Entertainment, to reshuffle its citywide table capacity to outfit new resorts on the Cotai Strip.
Wynn is irate that the government has not disclosed how many tables will be awarded to the $4.1 billion Wynn Palace. Wynn called the situation “preposterous”; among other things, he said, it hampers an operator’s ability to train and prepare its staff.
“The notion of finding out how many tables you’re going to get three weeks before you’re opening is outrageous and ridiculous,” Wynn ranted. “Ridiculous is the word for it. We’ve never operated a business this way.”
The day after the call, according to Bloomberg News, Wynn Macau executives including President Gamal Aziz were summoned to a meeting with Secretary for Economy and Finance Lionel Leong. The government later said it “regretted” certain views of its economic policies, but did not directly refer to Wynn’s remarks. Government officials added that they will continue to require “full compliance” from the Macau casino industry.
Wynn Palace, which the mogul has described as “quite simply the most extravagant and beautiful hotel in the world,” features 1,700 rooms, a gondola system, and a performance arena situated on an eight-acre lake. It is also Wynn’s biggest investment at more than $4 billion. The casino has requested 500 tables.
Wynn called the table-game limits “the single most counter-intuitive and irrational decision that was ever made,” and a contributor to the city’s 16-month recession.
“If you wanted to undermine and scuttle the viability of that industry, you put in table caps,” Wynn said. “I don’t understand it in terms of anything in my 45 years of experience.”
Nomura Securities gaming analyst Harry Curtis thanked Wynn for being “refreshingly frank” during the call, the Las Vegas Review-Journal reported. But his candor may have come at a cost. A day later, shares of Wynn stock fell 1 percent on the NASDAQ. In subsequent days, the shares fell 6 percent and 1.95 percent.
If Wynn plans any damage control, he may have an important ally in Clark T. “Sandy” Randt Jr., a former U.S. ambassador to China who just joined the Wynn board.
