Non-gaming still takes a back seat
Steve Wynn’s Macau casino resorts have beat Wall Street expectations with US$293 million in property EBITDA for the first quarter, according to CDC Gaming Reports. Analysts forecast $254 million for the period.
“Business is good for us,” said Wynn, CEO of Wynn Resorts in a conference call last week. “We’ve been enjoying a resurgence of activity at the top-end in China. We’re enjoying the continuing prosperity of Wynn Macau and the steady growth of Wynn Palace pursuant to plans and the expectations we’ve had since the inception of that project.”
He added that Chinese VIP players have come out of hiding as “a corrective move” to end corruption “has softened,” Wynn said. He referred to a crackdown on money laundering and graft instituted in 2014 by Chinese President Xi Jinping. That crackdown precipitated a 26-month decline in the city’s chief industry.
“The suppression of the VIP market was the result organically of a process that the Xi administration thought was appropriate for the country, the elimination of corruption,” Wynn said. “But having made a corrective move in China there comes a point when it sort of finishes.”
As a result, he said, “People are settling back into routines that they’re comfortable with, and that includes going to Macau and buying a new car or shopping at Louis Vuitton.”
Analysts agree that Macau is on the rebound. “Management commented they are seeing players return to the properties they had been staying away from due to ongoing political pressures in the region, and it appears that junkets are going through some mild reinvigoration,” said Chad Beynon, an analyst with Macquarie, in a note to investors.
“We have become incrementally more bullish with the sustainability of ongoing VIP trends over recent weeks. Management reinforced this view with the return of familiar VIP customers, growing junkets, and, more importantly, return to previous behavior on the part of customers,” wrote Grant Govertsen of Union Gaming.
“We do not expect the outsized VIP-driven growth story to abate any time soon,” added Steven M. Wieczynski of Stifel.
Meanwhile, despite an increased emphasis on non-gaming attractions in the gaming-centric city—a change ordered by the local and mainland governments—Philip Xie of the Hospitality and Tourism Management program at the Macau University of Science and Technology, said up to 90 percent of revenues still come from gaming, and that’s unlikely to change. “This is a very different mode compared to Las Vegas,” Xie said. “The basis is still gaming. There’s no doubt about it.”
Sudhir Kale, CEO of Game Plan Consultants, agreed. “Companies are largely providing non-gaming amenities in an effort to appease the government,” said Kale. “No one in their right mind believes in the foreseeable future, that we are going to have a balance between non-gaming and gaming similar to that of Vegas.”
