International diplomacy, Steve Wynn-style

21 October 2015

It's a good thing Wynn Resorts Ltd. elected the longest serving U.S. Ambassador to China to its board of directors last week.

The company needs some diplomacy to repair the damages after Steve Wynn's hourlong tirade against Macau gaming regulators on a conference call with analysts.

"I don't know that this has been the most satisfying quarterly phone call we've ever had, but at least it's the most candid and the most honest one that we could possibly give everybody," Wynn said at its conclusion.

He blasted the limits that Macau gaming regulators have placed on the number of table games properties are allowed to operate. In addition, Wynn criticized the government's delay in disclosing how many tables will be awarded to the $4.1 billion Wynn Palace, which opens at the end of March.

Wynn described the process as "outrageous," "ridiculous" and "preposterous."

On Monday, Bloomberg News reported that Wynn Macau executives were summoned for a meeting Sunday with government officials.

Sounds like fun.

The outcome, according to a statement from the Macau government, was that authorities have "no plan to make any changes." And, the government demands a "clear understanding and full compliance" from the Macau casino industry.

In April, Steve Wynn described Wynn Palace as "quite simply the most extravagant and beautiful hotel in the world." The 1,700-room resort will feature an 8-acre performance lake and air-conditioned sky-gondolas to ferry customers over the water feature into the resort.

Wynn Palace's casino was designed to house 500 gaming tables. After last week earnings call, Macau might grant the property a baker's dozen.

For all his bombast, the 73-year-old Wynn was correct about the Macau government's table game limits, which he called "the single most counter-intuitive and irrational decision that was ever made."

Other Macau casino operators received less than half the number of table games requested when opening new resorts. On Tuesday, Macau Studio City — which opens next week — was told it would receive 200 table games initially and another 50 after January. Melco, which operates Studio City, wanted 400 tables.

Because Macau won't tell Wynn how many tables Wynn Palace can operate, the company has no idea the number of casino floor personnel to hire.

"If you wanted to undermine and scuttle the viability of that industry, you put in table caps," Wynn said. "I don't understand it in terms of anything in my 45 years of experience."

Contentious might be an understatement in describing the conference call. Wynn's voice raised to octaves not normally heard on the usually relaxed question and answer sessions.

Twice, his dogs could be heard barking in the background. But Wynn was so focused on his comments, that he never tried to silence them. His subordinates were hesitant to respond to the remarks. One analyst never asked a question when called upon.

"Thank you for being refreshingly frank here," Nomura Securities gaming analyst Harry Curtis told Wynn.

A day after Wynn's conference call, shares of the company's stock fell 1% on the Nasdaq. The shares fell another 6% on Monday and 1.95% Tuesday.

"We believe one can reasonably argue that management's frank tone of increasing frustration regarding Macau policy uncertainty was meant to send a message to policymakers in both Macau and Beijing that the industry needs support," said J.P. Morgan gaming analyst Joe Greff.

But did it work?

Macau is in a tailspin. The market has experienced 16 straight months of declining gaming revenue, primarily due to the Chinese government's crackdown on corruption that ensnared operators of junket businesses tasked with bringing high-end gamblers to Macau casinos' private gambling salons.

"We are not totally certain the Macau gaming market is fully on a path toward recovery and believe there could be additional near-term pain, particularly within the VIP business," Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski told investors.

Earlier this month, the Chinese government indicated it would help boost Macau's economy but didn't offer any details.

"I think it's time for them to put their actions where the rhetoric is but the rhetoric won't solve the problem," Wynn said.

Clark T. "Sandy" Randt Jr. joined the Wynn board last week. His company advises firms with interests in China. He served as the U.S. Ambassador to China from 2001 to 2009. Prior to his ambassadorship, he was the partner in an international law firm that oversaw the business's China practice from Hong Kong.

Randt better be ready to hit the ground running.

Related Links
Stifel Nicolaus Gaming Vendor Information
Wynn Macau Details
Macau Studio City Details
Wynn Palace Cotai Details


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