Blockbuster quarter in Macau. Even after normalizing the unexpectedly high Mass hold, the beat was still huge.
CONF CALL NOTES:
- If there was a recovery underway, it was abandoned by the addition of inventory to Vegas, but in spite of that, room rates are up a little, occupancy is ok, and convention is up a lot. Indicators are pointing up, but it's still very lackluster and disappointing. However, 2011 will surely be better than 2010.
- Well, they also have less room capacity to sell given the renovations
- The market is Macau is very robust. Their Cotai project will be the best thing that they have ever done.
- Had the biggest CNY in Vegas in history with $16MM in table revenues. In China they also had a record night - casino win of over $46MM.
Q&A
- In Macau, the credit balance is outstanding with their associates. They reserve 3-4% on their own accounts for bad debt - in 40 years, they have never had exceeded their reserve. They are just as conservative with their junkets. They have never used credit as a marketing tool in Macau or in general.
- $13MM bad debt provision - $11MM of that was in Macau and that was a function of business volume. So it was purely based on business volume.
- On a volume basis, direct play, is always 10-15% of of VIP RC. This quarter, it was on the low end. They are adding 24 tables through 2 junket rooms which will open in 2Q.
- By our math, direct play as a % of RC was 11%
- The entertainment component of the Cotai project is far and away the best they have ever done
- Corporate expense run rate level - 3Q is a better run rate - 4Q just had some development activity in the quarter
- A little more than 50% of the cash is at the parent; rest is at Wynn Macau
- Signing of the concession in Cotai?
- Master plan for Cotai specifically includes Wynn's property as well as SJM's and MGM's site. However, they are still waiting for official approval.
- Opening in Cotai - Late 2014 / early 2015 is Wynn's best guess but needs to wait on the government's approval
- Everything is up in Macau and Las Vegas in Jan & Feb - and they are being lucky but in their range
- They will definitely book btw 20-22% of their rooms as convention rooms in 2011 vs. 13% in 2009. Historically it was always btw 20-25%.
- Competitor's new comping policy - doesn't really make any sense to them. They have always been the most conservative with their comping policy. There was a period when LVS and MGM were very aggressive with comping. Invariably, high comping policies end up picking up the "unworthy" and unprofitable customers... sort of like granting too much credit.
- On the convention side, people relaxed about coming to Vegas
- Infrastructure improvements to Macau -Hong Kong-Zhuhai-Macau Bridge will be huge for Macau. Left room in their plans to add more additional business that may come from this in the future
- What was the unusual corporate development activity in the quarter?
- No comment - would rather fill the call with deals that they have signed not spec.., don't want wild speculation on their call
- Property growth at Wynn Macau was across the board not just attributed to the one junket added in the Q
- Japan? No one knows about Japan yet.
- Areas for growth in 2011:
- Improvements in domestic business. Just remodeled the entire Vegas facility - spend $200MM in Vegas. Raising rates, and will finish renovations by April. Only 2-3% of their rooms are out of commission in the meantime.
- First full year of Surrender and the new night club
- Improved the cost side of F&B and should see the benefit of that
- Full year of Encore Macau in 2011 also continued to modify their floor to accommodate the premium mass business and new VIP business.
- Think that they can do a lot better on the slot side as well. They restructured their slot operation - will be completed in 2 days.
- Win per unit at the Encore casino in Wynn - 3x that of the general casino. Chinese customer base responds to intimacy.
- $2.5BN is a comfortable budget for Wynn Cotai. Expect that the government's approval is not very far away
- Is credit extension too loose in the Macau market as a whole?
- It appears that credit for a time was overextended and that some operators have more liberal credit decisions than Wynn's
- Only holding at 1.9% in Macau in February so far... so that's why their market share dipped
- Doesn't think that there is a current infrastructure capacity issue today
- Impact of Galaxy Macau on the market?
- Thinks it's a very ambitious project that will be well received and should be good for Cotai and the market given the hotel shortage on the weekends
- Can't wait to see it next month
- Have 9300 FTEs in Vegas and feel like that's a good number to handle any recovery- they have a pretty fixed cost structure
- Would consider developing something in the US in the not so distant future