WYNN Q3 2017 Conference Call Tidbits

Last night’s $WYNN earnings call had enough words of wisdom from Steve Wynn that I figured it warranted a post.  All excerpts are from the Seeking Alpha transcript.

I thought this part, where Steve Wynn describes his plan for the midway at the new boardwalk/lake development was pretty crazy, but the detail in Wynn’s plan is fascinating:

And then there are a number of other things that we call in “midway”. We have decided to take the theme of carnival and turn it on its edge and make a series of attractions and interactive experiences that in some ways have their roots in what all of us grew up with carnivals, but are not really that, they’re far more.

For example, the notion of bumper cars, remember that when you were a kid. Imagine that there are a whole lineup of bumper cars like in a pit in the Indianapolis. You get into the bumper car, but the entire skin is LED lights that are controlled by a system that is linked through contact with the car. So that — and then we have this rally every 10 or 15 minutes. And you go around and around in these cars and if you touch another car it triggers an enormous audio response and an electrical response. So all of these cars are flashing and exploding in color and making crash and explosive noises.

Now you go around this oval, and if you win, you get a price. But there are three Keystone Cups that have their bumper cars, which are dressed up like police cars with flashing red lights and they are in costume. And if you get in the lead, they smash into you and cause tremendous crashes. So in order to win the rally, you have to overcome our policemen and our traffic cops. Anyway, it’s bedlam in audio visual interaction. Now I give you that one example and there are a number of others. Because it’s the notion of carnival, but also we’ve taken the word carnival and we have put an E on the end as they do in Rio de Janeiro and its Carnivale sort of high [saluting] way of saying that.

This next part was Pure Steve Wynn – quoting elevation levels to the foot and how it jives with his vision – he knows, literally, every square inch of his property:

After we move these trees and the earth — the site Las Vegas is the whole valley here slopes from west to east downhill 1 foot per 100. So the strip is a 2,075 the Paradise Road is 2,045. You can’t see a 1% drop, but its 30 feet down across the length of our golf course. You could see it if you go to Bellagio, you come into the backdoor of Bellagio on grade, but if you go to the nightclub they call Hyde, you can look down on the water and you could see that the strip is lower. So we had to pick a level that where we wouldn’t have to bring in thousands of truckloads of dirt or take out thousands of truckloads of dirt which would then add to a lot of costs.

And the water level is at elevation 2,060, the boardwalk is at 2,062. Wynn the hotel and Encore are at 2,086 because we have back of the house below the casino. So you’ll be looking down on the boardwalk about 20 feet and that allows us to have boardwalk buildings that are below the casino level and below the hotel level. And I think that’s probably enough information for now. It maybe was more than you wanted.

On capital investment:

It shows that we never — you know in our business sort of like the theme park business, if you’re not growing you’re shrinking. If you’re not getting better you’re slipping. It’s a capital intensive business, but what’s wonderful about our business is those capital investments are well rewarded. For example, this year we closed after the final four last year in March. The next morning we closed the whole north end of the casino where the race sports book were located and our delicatessen Zoozacrackers.

We closed it off spent $11 million and then opened it up the day of the exhibition games in August. New screens of the most advanced kind, a brand new restaurant called Charlie’s, new bar, new everything, brightened and opened the whole north end of this casino for $11 million. Well we’ve now assessed it for several months. It looks like we’re going to increase our EBITDA by 5 million. Now when we keep a couple of billion dollars in the bank, we can make 2% maybe, but when we can invest in our own business and have a return of 40%-50% actually double digit returns there’s no comparable use of our money.

We have a dividend program, but the same thing happened when we moved poker over to Encore and turned Botero into Jardin. There we invested 5 million and we made an extra 1.5 million in EBITDA. So like The Sands, in this case they’re doing it on a rather larger scale. We invest in our own business continually to give our guests a better experience and it’s a good investment.

on comps:

We changed the criteria from average bet and linked the play in all those traditional metrics that casino marketing people for decades have — half a century have run hotels and we went to EBITDA per foot with a cold blooded attitude that promotional allowances would only be issued on current play, not on what you did last trip or the trip before, but what was your activity now. And we told our customers, look, if you want to say you will be treated like a prince, just give us your credit card. We treat everybody that way. But if you expect to get free room, free food or any of those things, we’re just a business and it’s based upon if you gamble at a level that’s acceptable well then of course we won’t charge you for your dinner or your hotel room. But if you don’t, don’t expect us to give it away free.

Now that’s a soft way of putting it, but I assure you that the applications hurt as hard as a diamond. We don’t comp people that don’t play, period. And therefore, our margin on table games, which historically has been below 20 in this city, it’s 50. We had the same margin with table games virtually now as you do with slot machines and our rooms. So maybe we have a little less business, but we sent a lot of non-productive customers over to our neighbors. And because we love our customers, we send them over to our neighbor in a Rolls Royce.

on security:

I know what we did here because as one of my competitors described it, Wynn is paranoid and two years ago between Thanksgiving and Christmas we had a series of repeated consultations with consultants including Greg Kelly from New York, the people from SEAL Team, from the development group, SEAL Team 6 as they are known to some people, a lot of people came. We beat the bushes to find out everything that was — that we could throw at this problem to harden this as a target. With the idea that someone was looking at the hotel, they would see that we had meet the threat level on a number of ways and they’d move on someplace else, because this would be a tough place to survive from more than 3 minutes if you had a gun on you.

on the Vegas shooter:

Now having said that, we knew this particular fellow that did the shooting at Mandalay, he has been a customer here since ’06, first started coming, we first picked him up on our records as a typical slot player with a modest credit limit of $50,000. And I got to interview — and in the last three years been coming frequently with this lady companion of his and I interviewed — I had a chance to interview the people in the high limit slot area, he plays video poker, he did. At a $20,000, $30,000 level and he never owed a dime. He had a $50,000 credit card. He doesn’t owe a dime in Las Vegas. He played Mandalay and Caesars and here. He was a winner at Mandalay. He was a loser over the six or seven or eight years here.

But he never owed any money. He didn’t meet the profile of a problem gambler or any like that. He was a very controlled person. And he and his lady ate dinner and played the poker with the slot machines in a high limit room before in the afternoon and they went to dinner tipped very well, went — played after dinner, went to bed. They were served by people in this organization over a period of years and can only be described as the most vanilla, unexciting, totally typical couple that has ever walked in this building. When I interviewed the employees that knew them, they were stunned, mystified, that the person they knew could have been a person that tried to assassinate hundreds and thousands of people and succeeded in killing 58 of them. My employees were stunned.

more on security:

We had a program for training our employees for two years; room service, housekeeping, audio-visual people that go and fix the TV or touch screen. They’ve all been trained for two years. They inspect the rooms, they look at the people. We profile everybody. We sniff the baggage in the baggage room. We don’t interfere with people that have pull-along luggage when they come in, we just watch them and look at them and think about them. And if there is anything about them that meets our various criteria, they’re immediately tagged and followed and observed. We have a whole routine that we do here that’s transparent as far as a guest is concerned but highly articulated on our side. Now if you’re a bad guy and you were looking at the vulnerability of this hotel, you’d probably spot a lot of the things that we’re doing. And that’s okay with us. It’s all right if they see what we’re doing in part. Maybe that’s a good thing. But we don’t flaunt it, it’s just there.

related: prior WYNN recaps

no positions in $WYNN or $LVS

-KD