WYNN MACAU: VIP CONVERSIONS AS MARKET SHARE ERODES

Wynn Macau, the Teflon Don of Macau, posted a huge second quarter in Macau, generating explosive growth in both the VIP and Mass Market business. The property appeared untouchable from the escalating competitive environment and government efforts to slow growth. Indeed, as Steve Wynn pointed out in the conference call: “Five of the six (operators) chased each other in a circle raising junket fees and blew their margins and then complained about it. We did not. We experienced our greatest revenue periods in the history of the company at a lower rate of junket commissions than the other five.”

My guys in Macau are indicating that the teflon surrounding the casino may be getting a bit sticky. I think pressure is finally on Wynn Macau to raise commissions. The property appears to be losing VIP market due to very high junket commission rates offered by Galaxy, Grand Lisboa, and MGM. The mass market side of the business is not offering any relief. Foot traffic is noticeably and consistently lower the last few weeks, probably resulting from the fully ramped ferry service offered by Venetian Macau. Remember that Venetian Macau resides on the Cotai Strip which is surely pulling visitation away from the peninsula and Wynn Macau. In fact, Wynn Macau recently converted at least 20 high margin mass market tables to lower margin VIP tables. This could certainly be indicative of slower mass market visitation.

Wynn Macau is clearly best run and most successful casino in Macau. That won’t change. However, expectations for the property and for the stock remain very high. The fall from the top is much farther as John Gotti found out.


Wynn Macau has been untouchable from the competition, until now

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