Wynn Resorts’ CEO said it set a record for adjusted earnings and margins for its Las Vegas property during the third quarter and that it’s taking market share, despite sticking with luxury-level room rates.
During Tuesday’s earnings’ call, outgoing CEO Matt Maddox also said the company is taking a longer-term approach to Wynn Interactive and not aggressively spending on marketing and promotions to attract customers, a move that is more economical and better for shareholders.
Maddox said the company’s strength in Las Vegas continued in October to start the fourth quarter. Wynn Las Vegas had its best month on record in October, with the highest adjusted earnings and margins, he said.
Wynn is in a good spot, the proof reflected in the third-quarter earnings, Maddox said
“In Las Vegas we had $183 million in adjusted earnings, and that’s not about a whole bunch of cost savings that are going away over time,” Maddox said. “We can sustain the margin. Only $15 million to $18 million came from cost savings. The rest of it we’re taking market share.”
Maddox said their moves are paying dividends. Over the last four years, Wynn opened a 400,000-square-foot convention facility, built a new golf course, and changed out 40 of its 60 retail stores to become a prominent shopping destination. They restructured their players club so that margins jumped from almost 7% to 30%. They also raised hotel-room prices, he said.
Last weekend, for example, Wynn Las Vegas’s average room rate was $780 and the hotel was still at 99% occupancy, said Maddox, who added that the trend will continue as Las Vegas is growing.
Wynn Las Vegas, which reported 83% occupancy during the third quarter and 93% on the weekends, has resisted dropping its price, with an average daily room rate of $392, to keep up a luxury-brand appeal.
Non-gaming revenue such as food and beverage and retail were well above pre-pandemic levels. Casino slot handle during the third quarter was 31% higher than 2019 while table drop was 18% higher despite depressed international play, Wynn reported.
“The way we’re running these facilities now, we’re unrelenting on price, because people like the quality and the flow-through is happening,” Maddox said. “In every area, we’re taking share, casino included. We’re not only outpacing all of our results, but we’re taking share from the market. I knew coming in that we needed to cater to a demographic that was more in the 30-to-50 range on top of our demographic in the Baby Boomer generation. We opened lots of new restaurants. In fact, one of the new ones, Delilah, you can’t get in until February. I’ve never seen anything like it. While that’s one restaurant, it’s an example of all the changes we’ve made that have set the foundation for Wynn Las Vegas to take off like a rocket ship.”
Encore Boston Harbor is positioned as well, setting a record $64 million in adjusted earnings, Maddox said. Boston Harbor eliminated its buffet, which lost $12 million a year, and built what Maddox called “the best sports bar on the East Coast” and will be the best sports book once Massachusetts legalizes sports betting. They put in new food and beverage offerings, reconfigured the casino, and changed the loyalty program whose database has more than 418,000 members and will probably double over the next two years.
“It is only at the beginning of its growth and the North American assets couldn’t be in a better position,” Maddox said.
The notion that government stimulus or pent-up demand is leading to strong gaming numbers may no longer be valid, considering the growth is continuing, Maddox said. Group business started coming back in August and September, taking 30% of the room nights.
Wynn is successful thanks to its culture, Maddox said, which focuses on “making people happy.” Employees believe in their future based on how they’re treated, especially when times are tough. During the pandemic, Wynn kept all of its employees on the payroll.
“I’ll give you an example,” Maddox said. “Hospitality is experiencing extreme labor shortages in North America right now, but not at Wynn. We had four open server positions in our restaurants last month, and we had 1,066 people apply. We had 22 open positions for casino cleaners last month and had 2,015 people apply. That’s a sign of a good business. That’s when you know you’re going to win over the long term, because your customers understand that loyalty and people want to be here. I feel very good about where Wynn Las Vegas is in terms of its culture, employees, product, and future.”
As for its Chinese operations in Macau, Maddox said while there have been stops and starts because of the pandemic, their consultations with the Macau government over the renewal of concessions in 2022 have been “very encouraging.” Some Wall Street analysts fear that the renewal process will face challenges as the Macau government sets more rules and seeks more revenue from the casino operators.
“It’s been open, transparent, and productive and we feel very good about the future of Macau and our position there,” Maddox said.
Looking at Wynn Interactive, the company touted its launch of new product initiatives in the third quarter and the progress it has made with the start of sports betting in Arizona by gaining first-time depositors. Maddox expressed concerns, however, about the sports betting marketplace.
“The market is really not sustainable right now. Competitors are spending too much to get customers. The economics aren’t something we’re going to participate in during the short term. While we built the brand and launched some products in the third quarter, we’re going to be focused on building a long-term business that’s sustainable and isn’t losing lots and lots of money. So we’re are shifting our strategy,” he said, “to think about the long term and cash preservation. We’re confident we will create significant value for the Wynn Resort shareholders.”
