"In my 45 years of experience, I’ve never seen anything like this before," said Wynn Entertainment CEO Steve Wynn.
Wynn’s "this" is Macau.
And what he’s seeing is what happens when the Chinese government turns its back on your business.
Wynn made these comments on a conference call following another quarter of dismal earnings. His company’s stock fell 7.5% as he spoke.
Wynn’s third-quarter earnings missed analyst estimates of $1.03 billion in revenue, delivering $996.3 million. At the same time last year — while Macau’s slowdown was also apparent — the casino hauled in $1.3 billion in revenue.
"The decline was the result of a 37.9% net-revenue decrease from our Macau operations and a 3.9% net-revenue decrease from our Las Vegas operations," said Wynn in its release statement.
To paint the picture even more clearly, in the first quarter of this year Wynn’s Macau revenue fell 32% from the same time a year before.
In the second quarter, they fell 35% from the same time a year before.
This is getting worse
For over a year the Chinese government has been cracking down on gambling in Macau, the world’s biggest gambling center.
The government has stepped up the monitoring of debit cards in the territory, placed cameras in VIP rooms, limited the number of tables allotted to new projects, and scared off high-rollers concerned with getting ensnared in Chinese President Xi Jinping’s wide-reaching anti-corruption drive.
"Almost half the business of VIP is gone and may be shrinking … it has caused us to review our credit policies and relationships with junket operators," Wynn said on the call.
What astounded Wynn on the call, though, was something more specific than the general environment.
On March 25, 2016, his company will open another property in Macau. But like his peers who’ve opened up new casinos since the crackdown started, he has no idea how many tables he’ll be allowed to put inside the property.
This spring, casino-firm Galaxy opened a $3 billion casino project. The company expected to be allotted 400 tables. It got 150.
"It’s become a major issue in Macau … the impact of government policy in planning … None of us are really clear as to what our environment will be going forward. It makes planning and adjusting almost a mystical process," said Wynn on the conference call.
Galaxy wasn’t the only company to suffer from this.
"The notion that someone who has spent $2.5 billion, and I’m talking about Melco now, doesn’t know how many tables they’re going to have … weeks before opening is preposterous."
Wynn called this turn of events an "aberration." In his case, that word might be an understatement. Macau once made up 77% of Wynn’s revenue and, not counting its upcoming project, it only has two properties — one each in Las Vegas and Macau.
Wynn’s peers, like MGM and Las Vegas Sands, have more properties in locations unaffected by Macau’s misery.
Las Vegas, for the record, is not one of those unaffected places. Macau’s malaise has found a way to spread there.
"Any drop in our earnings in Las Vegas is a result of a drop in our Asian baccarat business," Wynn said on the call. "If anything, the problems in China are causing us to refocus our energies in America."
There’s really nothing else Wynn can do.
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