WYNN Q1 2013 Earnings Call Tidbits

As has become a custom on these pages, I’m going to pull the tidbits from Steve Wynn’s ($WYNN: no positions) quarterly earnings call which I found interesting.   Wynn speaks with a candidness, clarity, and expertise that I haven’t seen from anyone else in any industry.   His calls frequently yield intriguing insights, not just typical accounto-bullshit speak.

This call actually started out pretty boring, but the last 25 minutes or so picked up with some interesting items.

Transcript courtesy of Morningstar:

I have, in the past,  written posts about the role of luck in casino company quarterly earnings.  By “luck” I mean exactly that – if the casino got more or less lucky than they expected to.   I do this by analyzing hold or win %’s compared to typical expected %’s.  Wynn noted:

“There is something in Matt’s release that I would like to draw everybody’s attention to, because it’s significant and critical that you take note of it. What’s happened in Macau is something that we’ve never seen in Las Vegas, but as a growing pattern and it should effect all the analysis that most of you are doing, but what’s happened is the customers are buying the chips at the cage, which does not enter into the drop. So the whole percentage in the mass market and our diamond club, our premium mass market is irrelevant number you should disregard that number now and pay only attention to the amount of the win, because this absence of the chips purchased at the cage and they handle, they skewed the numbers and make it look like we’re holding an abnormal amount of money. There was one part of our casino in Encore, which look it held the 100% or more. So our advice now to observers of the industry and our investors disregard the whole percentage in Macau in the mass market. It is now an irrelevant number, because of the particular nature of the behavior of the customers.”

So even though it’s just one category (Macau Mass Market), I’m probably not going to do that report for WYNN anymore…

The next interesting tidbit is a lengthy reply Steve Wynn gives about the difference between Macau, where his property is right in the middle of all the others, and he benefits from walk in traffic and gamblers looking to change their luck, and Cotai, where he had to build a must-see destination.   The segment is too long to excerpt, but you can read it yourself.  It’s the reply to Barclay’s analyst Felicia Hendrix

On online gaming – and how he doesn’t know how to distinguish his product, like he can with a beautiful hotel/casino (emphasis mine):

“Another thing is that it’s very difficult to distinguish yourself online. We still experience in our buildings and that’s a long and difficult assignment, but we have experienced, we know how to do that. I don’t know how to make the experience on a computer screen 17 inches in diameter particularly unforgettable. We’re going to learn how to do it because we’re not going to be left behind in this matter and we’ve turned this over to the capable hands of Mr. Maddox who will give you his view of the subject”

I’ll excerpt this lengthy explanation of what Wynn calls “boxes of slots” –

“How do we compare to the other regional casinos? Hear me, there is no comparison. Regional casinos are boxes of slots. Period, end of sentence. We are building very lovely integrated hotels. Now they don’t have 3,000 rooms, they have got 300 or 500 or whatever, but they have beautiful restaurants. They have atriums. They have convention facilities, meeting rooms that are delicious and better than any hotel in any city that we’re going into. They have spas that are wonderful. These hotels are great places to go for a weekend and you don’t ever have to get near a slot machine or a blackjack table or a baccarat table in one of our places. Down the hall, the way a convention meeting room might be separate. So then in each of our cities, visitors who are not predisposed to gamble, families with children can go into our hotels and enjoy fanciful restaurants and shopping and our other experiences that are associated with hospitality. And remember this, in our industry there has been a simple truth. Slot machines and blackjack tables in and of themselves have no power at all. You create a legalized casino in a city and they open up, a box of slots opens up and the first year there is a big puff of tax revenue and a big puff of earnings and then they flatten out because basically they deal only to the neighborhood. Unless you bring people from outside the region into the region, you do have a future growth pattern. We are building buildings that will grow and be the places where people from out of town come to stay, little destination resort hotels in beautiful cities, like where I went to school in Philadelphia or where my family is from in Boston. My mom and dad were born there. So, we have no comparison whatsoever to any local casino. They are all boxes of slots by my lights. Now, that’s all that they needed in those days. Harris did a very good job building this network around the world. Harrah’s did a very good job of building this network around the world and I admire what they did. Their progressive bonus program has been a very successful one. But make no mistake, what we are building is not a box of slots. We’re building hotels that just happen to have a gaming room of back with its own garage and its own access. But two separate concepts. The Urban Wynn idea will undoubtedly be copied as we go forward because we usually get copied. But there isn’t a model for what we’re doing anywhere.”

On the importance of the international market in Vegas:

“So having said that we have the largest component of gaming revenue of any Nevada casino, I must point out that of the $600 million in table win, 70% of it is in roulette and baccarat, which our business, that is primarily Latin American, European and Asian. Without the international market, we would be in an entirely different position.”

And the grand finale, in response to a question about the importance of the Chinese customer in Vegas (emphasis mine):

“If anything interfered with Chinese traveled in the United States, would it impact our property? Roughly the equivalent of the building is falling down. Yeah, nothing serious, just a catastrophe, that’s all. If you want to have anxiety about potential scenarios that could cause problems, you will just pick one right there. I don’t think that we’re not having an anxiety attack on that point nor have we worried about it for the past 30 or 40 years. The Chinese are on the move. The Japanese are on the move. The Taiwanese are on the move. The Latin America, Brazil, Chile, Colombia, those are all – we have a big business this first quarter from Chile, Colombia, Brazil, Mexico, Taiwan, Japan, Singapore, Malaysia, Indonesia and the People’s Republic of China. That’s our business. That’s who we are.”




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