Inside Gaming: Macau in a free-fall and taking Wynn Resorts with it

“If you were to ask me, since we’re making forward-looking statements, what will the second quarter look like in Las Vegas? Weak. Do you hear me? Weak. So I’m trying to lower expectations here. This notion of a big recovery is a complete dream. I don’t think Las Vegas is experiencing a great recovery.”

— Wynn Resorts Ltd. Chairman Steve Wynn, April 28, 2015

Maybe Steve Wynn confused Las Vegas with Macau.

After all, in 2010 Wynn talked about moving his corporate headquarters from Las Vegas to the Chinese special administrative region before abandoning the idea.

Today, Macau is in free fall and it’s taking Wynn Resorts along for the ride.

Gaming revenue in Macau has plunged more than 37 percent since last June. Wynn Resorts stock on Monday closed below $100 per share for the first time since December 2010 after Macau reported its 12th straight monthly dip. The stock bounced back to $100.10 on Tuesday.

The Strip is not the issue.

Las Vegas had its best April in eight years and expects to report robust tourism figures for May.

“Wynn stands out as the most controversial name within our gaming coverage universe,” Deutsche Bank gaming analyst Carlo Santarelli said. “While the stock underperformance, brand strength, and relative medium-term growth prospects appeal to us, we acknowledge the challenges presented by the Macau market.”

In 2014, Wynn Resorts drew 70 percent of its revenue from its two Macau casinos. The company is spending $4 billion to build Wynn Palace on the Cotai Strip, which is expected to open in 2016. Wynn Resorts is also developing a $1.7 billion hotel-casino near Boston.

No one disagrees on Steve Wynn’s place in Las Vegas history. He created the Golden Nugget Las Vegas and developed Bellagio, Treasure Island and The Mirage before selling Mirage Resorts to MGM Grand in 1999.

Wynn’s two Strip resorts, Wynn Las Vegas and Encore Resort, cater to a high-end market. MGM Resorts International and Caesars Entertainment Corp. together operate nearly 20 Strip properties that draw from a varied customer base.

The Strip has become a different dynamic. Almost 65 percent of all revenue is from nongaming attractions.

May was fueled by two large events: the Floyd Mayweather Jr.-Manny Pacquiao fight and the Rock in Rio outdoor music festival. MGM Resorts Chairman Jim Murren said the fight created “one of the highest revenue per available room weekends ever in the history of the company.”

It will be tough for the Strip to beat May 2014’s $593 million in gaming revenue, but the casinos might come close.

No one, however, is sure what brought on Wynn’s negative comments.

Maybe he was distracted after winning a nasty proxy fight with his ex-wife.

Maybe he got wind that Wynn Resorts’ largest stockholder, T. Rowe Price Group, was reducing its ownership stake by 40 percent, selling almost 7 million shares.

Maybe Wynn was thrown off by the social media outrage created by Yelp when his company tried to change Nevada’s strong anti-SLAPP law.

(SLAPP lawsuits, an acronym meaning strategic lawsuit against public participation, are aimed at stifling free speech when individuals speak out on public issues.)

Whatever the case, observers said Wynn’s view of Las Vegas was off-base. During Wynn Resorts’ first-quarter earnings call, Wynn appeared to answer his own questions posed to Wynn Las Vegas President Maurice Wooden.

“Here’s two of us saying we’d be thrilled if noncasino revenue was flat in the second quarter as it was in the first,” Wynn said. “My guess is that that’s going be a struggle.”

The comments were perplexing.

“I’m not really not sure what drives Steve to say that,” Caesars Entertainment Corp. Chairman Gary Loveman said a week later. “I am not sure exactly what was provoking Steve beyond that, but we feel very enthusiastic about what we see here for the remainder of the year.”

Murren, without directly naming Wynn, said, “We don’t understand the more negative views that I’ve heard about what’s happening in the current quarter.”

No one expects Las Vegas to repeat prerecession gaming numbers from 2006 and 2007. The construction of the $4 billion Resorts World Las Vegas and the opening of a new convention center on the site of the closed Riviera, will boost give the north Strip — including Wynn’s properties. But that will take time.

The worry is Macau.

Galaxy Macau opened an expanded casino last month, but regulators gave the property just 150 of the requested 500 gaming tables. Wynn Macau and Wynn Encore operate 467 tables in the mass market and high-end segments.

Wynn Palace is seeking 200 table games. Deutsche Bank gaming analyst Andrew Zarnett said Macau regulations allow the company to make up the shortfall by transferring tables from the older properties to the new casino.

Undaunted, Steve Wynn says Wynn Palace will be more than just a casino. It will have Macau’s “most extravagant exercise” in nongaming attractions.

“It’s going be the big photo op for Macau,” Wynn said. “And it will show up next year, hopefully with enough tables to allow it to prosper.”