Accent on luxury
Steve Wynn’s lavish new gaming resort, the $4.2 billion Wynn Palace on Macau’s Cotai Strip, has been granted just 100 gaming tables for its grand opening this week, all for the mass-market segment. The resort will then be allocated 25 more tables next January and another 25 in January 2018. The company’s rivals on Cotai, Galaxy Entertainment’s Phase II and Melco Crown’s Studio City, each were granted 250 tables.
According to the Asia Gaming Brief, however, Wynn’s newest resort will open with a total of 350 gaming tables, as 250 will be shifted from Wynn Macau.
Secretary for Economy and Finance Lionel Leong said the allotment was made to keep the SAR within its annual 3 percent cap on new-to-market tables. The government issued 445 new tables in 2015 and 100 in 2016.
Union Gaming downgraded Wynn Macau stock to “hold” on the news. “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 $4 billion-plus investment,” analyst Grant Govertsen said. “While we do think it’s 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 upcoming resorts like Sands Parisian and MGM Cotai.
But Telsey Advisory Group is bullish on Wynn. “The market is at present literally stable and is poised to grow modestly in 2017, fueled by the opening of new properties,” Telsey wrote in a report last week. The firm forecasts a full-year Macau GGR decline of 11.4 percent year-on-year in 2016, rebounding to more than 5.5 percent in 2017, “mostly driven by mass-market growth, though offset by VIP declines.
“We do not believe that the table allocation for the Palace is a significant surprise and a major negative for the story and had been contemplated by the company previously,” Telsey continued. “We maintain our outperform rating.”
At a press conference to preview Wynn Palace, Wynn confirmed that the property would feature 50 to 60 VIP tables, and denied that he had asked for 400, a claim made by Leong. He also denied that he received fewer tables because the resort offers fewer non-gaming amenities.
“That is not true,” he said. “The table allocation had to do with the cap.
“A casino is a passive place,” Wynn went on. “Its value as a revenue source depends solely on how many people come through it and what their average per-person spend is. What’s dynamic in my business is the non-casino stuff: that’s what brings people from afar.”
He said Wynn Palace is “arguably the most beautiful hotel in the world.”
Bucking the recent trend in Macau, Wynn is banking on luxury, not family-friendly amenities to make his newest venture a success, reported Bloomberg News. Wynn Palace is the businessman’s most expensive project to date with attractions like air-conditioned gondolas, a $100 million water fountain synchronized to music, and a spa that offers $450 gold-leaf-and-crushed-diamond facials. Wynn is a renowned art collector, and will also display $200 million in art and Chinese antiques at the Palace.
While Wynn focuses on luxury, other resorts on the Cotai Strip are going for mass-market and even family-friendly appeal. Melco Crown’s Studio City, for example, which opened last October, features a Batman virtual reality ride, Ferris wheel and Hollywood-themed amusement park.
Wynn seems to think little of that approach. “There are better places for kids than Macau and Las Vegas,” he said at the press conference. “All these convention and meeting spaces and entertainment are pitched at 21-year-olds or above.”
Even so, he added, “Our strategy is to make this hotel available to anybody, regardless of their income and their propensity to gamble. We cover all the rainbow of demand. Why do we want to turn our back on someone that wants to gamble for a lot of money?”
Rival casino operator MGM China Holdings, which will open its MGM Cotai in the second quarter of 2017, may have only mass-market gaming tables at its new resort. And Studio City made headlines by opening without VIP tables, though the firm is reconsidering that position.
Govertsen said the next project to come online, Sands China’s Parisian Macau, is likely to get “a greater long-term total table grant than 150 tables. No operator has historically focused more on non-gaming and family-style entertainment than Sands China and we think Parisian will be no different, not to mention it is bringing online about 3,000 hotel rooms that are not five-star, as we believe the government wants more affordable rooms in market.”
The local government is working to enforce Chinese President Xi Jinping’s demand for a more diversified economy in Macau. Xi’s plan, launched in force in mid-2014, included a crackdown on money laundering and graft that scared off a number of high rollers and led to an ongoing slump in the city’s multibillion-dollar gaming industry. The slump, now in its 26th month, coincided with a groundswell of new development on the Cotai Strip. Besides the Parisian and MGM Cotai, another new resort is waiting in the wings: SJM’s US$3.86 billion, 2,000-room Grand Lisboa Palace.
Angela Leong, an executive director at SJM, told GGRAsia VIP play will be all-important to the resort’s success, but it will concentrate on mass play.
“The direction we’re going is that we have to make the hotel residents here spend more at the property,” Leong noted. “We cannot really go always for the very high-end customer.” Construction of the project should be complete by the end of 2017, with an opening planned for 2018.
Wynn, meanwhile, declined to forecast a quick rebound for Macau. “The last two places that opened did not cause the market to grow, did they? No. Will this one? Good question. We’ll get an answer to that in September or October. I’m anxious to see it myself.”
