Wynn Encore Macau has been open over four months. While still preliminary, we took a look at the incremental revenues and EBITDA from the new property.
How is Encore doing? Based on the first four months of data – admittedly preliminary – we’d definitively say that Encore is doing, well, okay. We look at the Encore contribution in two ways: 1) by calculating the incremental market share gain and deriving an estimate of EBITDA and 2) calculating the incremental EBITDA from Q1 (pre-Encore) to Q2 (post-Encore) and adjusting for the hold differential.
In Q2, Wynn generated $216m in EBITDA versus $181m in Q1. After adjusting for the fact that Encore was only open for 72 days in the quarter and hold percentage was significantly higher in Q2 and Q1, we calculate the annualized incremental EBITDA from Encore was $83 million. Encore cost $600 million to build so the ROI per this method was a respectable 14%.
The second methodology yields a lower ROI of 11%. Given the market growth from Q1 to Q2, we decided to look at the Wynn Macau VIP market share following the opening of MPEL’s City of Dreams on June 1, 2009 but before the April 21st opening of Encore (June 2009 through March 2010 period) and compare it to the May-August period (post Encore). We are focusing on VIP because Encore did not add any Mass tables. In fact, according to the numbers, Encore added nothing to Wynn’s Mass share. The 2.2% increase in market share would generate approximately $64 million in annualized incremental EBITDA per our math. See the chart below.
So the jury is still out on Encore. However, Wynn’s post Q2 market share has been substandard and trending lower. I guess we’ll just have to wait and see.