There is “no question” that the “atmosphere” in Macau “has changed and become cloudier in terms of predictability and consistency,” said Steve Wynn (pictured), chairman and chief executive of Wynn Resorts Ltd, in a conference call with analysts on Tuesday. Mr Wynn also leads the group’s Macau unit Wynn Macau Ltd.
The chairman referred during the call to a public apology made to Macau’s Legislative Assembly in mid-April by Raimundo do Rosário, Macau’s recently appointed Secretary for Transport and Public Works, about the delays and cost overruns to the city’s under-construction light rail transit system, known as LRT.
“If that’s going on at the highest levels of the government in Macau, you can imagine how – what happens as it filters down to those of us who are part of the resort industry,” said Mr Wynn. He was indicating the frankness shown by the official. Mr Rosário had said it was “impossible to justify the unjustifiable”.
Mr Wynn was responding on his firm’s first quarter earnings call to a question on whether the new round of Cotai casino openings – including Mr Wynn’s own property, the US$4.1-billion Wynn Palace due open by the end of the first quarter 2016 – might cannibalise the existing gaming and tourism market in the city, rather than increase earnings.
Deutsche Bank AG analyst Karen Tang said in a note on Wednesday that on the call Mr Wynn highlighted many uncertainties in Macau, including table allocation and VIP play. “We felt a tone of frustrations,” she added.
Market wide, gross gaming revenue (GGR) in Macau fell 36.6 percent in the first quarter of this year, which analysts have attributed to China’s anti-corruption crackdown.
Morgan Stanley Asia Ltd stated in a report in mid-April that the six large new Cotai projects under construction by the six current Macau concessionaries – and the 12,000 new hotel rooms linked to them – might not expand the gaming market. That is if many of the fresh visitors they attracted were in the mass-market segment and with smaller amounts of money to wager than the VIPs and premium mass customers currently said to be staying away.
Wynn Resorts said on Tuesday it was cutting its first quarter dividend by two-thirds after seeing a 59.3 percent year-on-year fall in Wynn Macau’s net profit attributable to shareholders for the period.
Asked on the Tuesday call if it were possible to scale back the Cotai project, Mr Wynn stated: “You can’t slow it down. It’s being finished and there’s bank obligations. You can’t slow it down in Macau. The building is sitting there. The skin is on. They’re getting ready to fill the lake. Staff is hired. I don’t suspect that we’re going to lose money in Macau…if you want me to draw that inference…I don’t want you to infer that.”
Speaking of his firm’s relationship with officials in Macau, Mr Wynn said: “We hear their public statements and we certainly enjoy private conversations with them, but they tend to be very formal. They’re never critical of anything directly.”
Mr Wynn conceded during the call that the firm’s request to local officials for construction labour quota on its new Macau project had met with a mixed response. A note from Daiwa Securities Group Inc in February had indicated labour restrictions were a factor in Wynn Palace being likely to miss the Chinese New Year 2016 opening date sought by Mr Wynn.
“These jobs, after all, are people from mainland China just on the other side of the fence. But there’s pressure locally. I guess it’s sort of, the locals don’t want the streets too crowded or something, and they put pressure on the local government officials and they respond – they’re very sensitive to local pressure. So it leaves us in a bit of a quandary,” said Mr Wynn.
But he added during the call regarding the longer term business outlook for Macau in relation to mainland China’s policies: “If the Communist Party and its leadership are dedicated to a peaceful, growing and harmonious China, then it’s hard to believe that they would do anything to sabotage one of their key possessions, Macau, going forward…”
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”Assuming that our [Tigre de Cristal] phase two project and the other future operators’ development plans remain on track, we may see the benefits of a ‘cluster’ effect [in the Primorye Integrated Entertainment Zone] as early as 2021”
Summit Ascent, lead developer of Tigre de Cristal