The management of United States-based casino operator Wynn Resorts Ltd says it has “spent a lot of time” reconfiguring its properties in Macau in the last six months, in order to cater for a growing premium-mass segment, as the company eyes a bigger slice of the city’s gaming market.
“It’s crystal clear that the growth drivers for Macau are really the sweet spot for our company, and that’s the premium segment, premium mass in particular,” said chief executive Matt Maddox.
Wynn Resorts is the parent of Wynn Macau Ltd, which runs the Wynn Macau complex (pictured) on the city’s peninsula, and the Wynn Palace casino resort in the Cotai district.
Speaking on Thursday in a conference call with investment analysts following Wynn Resorts’ fourth-quarter results announcement, Mr Maddox also flagged the group expected to have less reliance on junket operators in future, as volumes in the VIP segment were not likely to return to previous levels.
Wynn Macau Ltd returned to quarterly earnings before interest, taxation, depreciation and amortisation (EBITDA) profit, driven by a premium mass led-recovery, according to the group’s management.
“The premium segment did better than the core mass segment – it was not down 50 percent as the overall mass was,” said the CEO on the call.
“We do not need 50,000 people a day walking through our facilities to get back to our EBITDA target. We require significantly less people because we cater to the higher-end customer … We are targeting that segment,” said Mr Maddox.
He added: “We think we are going to get more market share in the premium-mass segment than we have in the past.”
Ian Coughlan, president of Wynn Macau Ltd, said on the call that the company was “priming” its properties to take advantage of the return of players and business volumes.
“We believe we are ready to take our fair market share. We proved that in the fourth quarter, where we built our market share up to 16 percent and we believe there is more market share for us to take,” stated Mr Coughlan.
Slower VIP return
The return of business volumes in Macau also meant an increase in costs for the fourth quarter, said Craig Billings, Wynn Resorts’ president and chief financial officer.
Wynn Macau Ltd’s operational expenditure was approximately US$2.2 million per day, down from approximately US$3.0 million in the prior-year period, but “up modestly” from US$2.0 million per day in the third quarter 2020. That was “due primarily to an increase in variable costs as [business] volumes returned,” said Mr Billings.
He added: “You could see an uptick [in costs] as we moved into about 30 percent of fourth-quarter 2019 volumes. A decent chunk of those [costs] are permanent, but … staffing flexibility is just not the same as in the United States … but we feel that the cost base is appropriately sized for the business volumes that we have today.”
On Thursday’s call, Mr Maddox said that Wynn Macau Ltd was “leaning on the premium-mass segment and on the mass segment”.
“The VIP business is not going away, but it is definitely going to be less, whether it is 20 percent of 2019 of 35 percent of 2019 in the future, it’s hard to say,” said the executive.
He added: “I do think there will be significantly less VIP players, as junkets consolidate [business] and [some] fall out [of the market], but there will still be very large [value] VIP players, and our focus is on that direct business and the very high end, as opposed to having lots of junket operators and driving lots of VIP customers.”
According to Mr Coughlan, VIP volumes at Wynn Macau Ltd’s properties in December “got back to 35 percent” of December 2019 levels. “It’s not a small contributor – it continues to grow, but the pace of recovery is obviously slower than premium mass,” he said.
Mr Coughlan said additionally that bookings for the Chinese New Year period this month, had been affected by a number of Covid-19 outbreaks in mainland China.
He added: “We do have a lot of player interest still in Chinese New Year, we have a number of our bigger players reserving suites or villas. We are probably looking more at an October Golden Week situation, than the Christmas and Western New Year period.”
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