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Wynn Resorts: Reinvestment in Las Vegas to deliver competitive edge

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November 07, 2019 By Richard N. Velotta

Wynn Resorts Ltd. executives say their investment in the company’s Las Vegas properties will give it a competitive edge over its peers.

CEO Matt Maddox told investors Wednesday in the company’s third-quarter earnings conference call that it will start remodeling Tower Suite and resort hotel rooms at Wynn Las Vegas in June. The room refresh will come on the heels of the opening of a $302.7 million, 430,000-square-foot convention facility in three months. Wynn officials did not provide a cost estimate for the renovation.

“If you look at Las Vegas, we actually have more product coming online in 2020 than we had since we opened Encore in 2008,” Maddox said.

“This convention center is on our golf course and has a 390-foot promenade with two-story glass walls overlooking the golf course leading to an 83,000-square-foot ballroom that’s almost two acres,” he said. “When we walk event planners into that space, their jaws drop and they say, ‘Where do we sign?’ ”

‘Entirely new fun experience’

Maddox said Wynn’s competitors are falling short in reinvesting in their properties, which he believes is a mistakethat will enable his company to capture a greater share of the high-end market.

“We’re spending the money to create an entirely new fun experience here while a lot of our competitors are not doing that, and so we see a real opportunity in Las Vegas to capture share,” Maddox said. “The market may be growing along with the economy, but we’ll be capturing share.”

Wynn Las Vegas President Marilyn Spiegel told investors that the opening of the Wynn Golf Club in October has been well-received.

“We often have more demand than we have supply for the number of players coming to the course so we feel really great about that,” Spiegel said. “In 2020, February is the launch of the convention center and we will see good growth in the convention center…The room remodel is going to hit in June. We haven’t refreshed our rooms at Wynn in eight years and it’s time to do so, that will be factored into 2020 also.”

While executives are anticipating a positive 2020, third-quarter performance wasn’t nearly as rosy.

Poor gaming hold in Las Vegas and Macao dampened Wynn’s third-quarter earnings.

The company reported $87 million of casino revenue from Las Vegas operations, a 6.3 percent decrease from the third quarter of 2018. The table game drop was $430.8 million, a 6.6 percent increase from the third quarter of last year.

The table game win declined 1.1 percent to $85.7 million. The table game win percentage was 19.9 percent, below the property’s expected range of 22 percent to 26 percent and below the 21.5 percent recorded for the third quarter of last year.

Wynn Resorts saw revenue decline 3.6 percent to $1.648 billion for the quarter.

The Las Vegas-based company took a loss of $3.5 million, or 3 cents a share, compared with net income of $156.1 million, $1.44, for the third quarter of last year.

The company failed to meet analysts’ revenue and earnings expectations. But it did announce that it would pay a cash dividend of $1 per share, payable Nov. 22 to stockholders of record as of Nov. 14.

Patient with Strip land

Maddox also said the company is in no hurry to develop 36 acres across Las Vegas Boulevard from Wynn Las Vegas.

“We like owning that land as option value,” he said in response to an investor inquiry. “We’ve invested significant capital in Wynn Las Vegas over the past two years to position this product to take more market share. We’re continuing to think about what could work on the 36 acres across the street.”

The company needs to get a feel for the Las Vegas market once projects such as Resorts World Las Vegas and Allegiant Stadium come on line, Maddox said.

“Right now, it’s expensive to build in Las Vegas because the trades have more jobs than they have manpower,” the CEO said. “So what we want to do is watch and see how the Las Vegas market expands with these new projects coming on board, and then we can determine what will make the most sense to increase shareholder value on that 36 acres.”

The company’s Las Vegas strategy is similar to its plan in Macao, where rooms at Encore Macau have been refurbished, two restaurants have been added and 7,000 square feet of new retail space is opening. Maddox said he believes the refreshed product will enable the company to grab share on Macao’s main peninsula.

Maddox also said the company believes it’s still in the early side of its rollout at Encore Boston Harbor, where the company intends to launch a tiered loyalty card next year to accommodate visitors who make frequent return trips.

Wynn shares, traded on the Nasdaq exchange, closed down $4.04, or 3.2 percent, to $122.56 on Wednesday on average trading volume. After hours, the shares rebounded $1.94, or 1.6 percent, to $124.50.


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