Wynn Resorts posted a weaker-than-expected set of Q2 2024 results. While revenue rose 8% year-over-year to $1.73 billion, adjusted earnings came in at $1.12 per share. While the company's Wynn Palace, Wynn Macau, and Las Vegas operations expanded, this was partially offset by a weaker performance of the Encore Boston Harbor operations.
Wynn's Macau business has picked up as Covid-19 restrictions are eased in the region. Wynn's Macau operations accounted for roughly 70% of the company's 2019 pre-pandemic revenue, and this number fell to a mere 19% of total revenue in 2022, amid travel restrictions and China's stringent zero-Covid policy, which led to a drastic decline in tourist inflows into the region. However, the number recovered to about 48% in 2023.
Below are key drivers of Wynn's value that present opportunities for upside or downside to the current Trefis price estimate for Wynn Resorts:
For additional details, select a driver above or a division from the interactive Trefis split for Wynn Resorts at the top of the page.
Wynn Resorts is a leading developer, owner, and operator of destination casino resorts. It currently owns and operates the Wynn Las Vegas and Encore at Las Vegas, as well as the Wynn Macau and Encore at Macau. Wynn reports its results in two segments: Wynn Las Vegas (which includes Encore at Wynn Las Vegas) and Wynn Macau.
Wynn's Las Vegas property features about 194,000 square feet of casino space with 233 table games and 1,674 slot machines. Wynn Las Vegas also has two luxury hotel towers with 4,748 rooms in total. The property also has 174,000 square feet of retail space and 513,000 square feet of meeting and convention space.
Wynn's Macau operations feature about 294,000 square feet of casino space. Wynn Macau also has two luxury hotel towers with a total of 1,010 guest rooms and suites, offering two health clubs, two spas, a salon, and a pool. Additionally, Wynn Macau offers 14 food and beverage outlets, approximately 64,300 square feet of retail space, and approximately 31,000 square feet of convention space.
We believe that Macau VIP gaming operations are the primary source of value for Wynn Resorts because:
Macau offers significantly high gaming revenues as compared to the Las Vegas Strip. Macau gaming revenues are approximately five times higher than the Las Vegas Strip. For instance, before the Covid-19 pandemic, in 2018, gaming revenues on the Las Vegas Strip were $7.24 billion as opposed to about $37.6 billion in Macau. This significant difference is due to the very high demand for gambling in Macau, which is also the only place in China where gambling is legal. A lot of tourists from nearby countries visit Macau for gambling.
The casino business is divided into two categories in Macau: VIP gaming and mass-market gaming. VIP gaming offers high volume but a lower casino hold percentage, while mass-market gaming offers a high hold percentage. Wynn has established a premium casino image in the region, helping the casino attract more and more VIP players. Wynn is further developing a new casino resort in the Cotai region. The new resort will further enhance Wynn's capacity in Macau and drive growth in the coming years.
Wynn is recognized worldwide as a premium brand resort. It has a sophisticated style and offers exquisite luxuries to its customers. It mainly caters to high-end gaming customers, and the company does not intend to shift its focus from its existing global image. Its premium offerings include an array of amenities and indulgences, including private lagoons and waterfalls, an exclusive shopping promenade featuring renowned designers, and an 18-hole golf course designed by Tom Fazio and Steve Wynn as well as a tranquil spa and salon. The nightly entertainment includes the magical Lake of Dreams and the provocative water show 'Le Reve.' The company has been targeting VIP gaming customers and has been successful in its business model. We estimate that Macau VIP gaming contributes more than 20% to Wynn Resorts' stock price.
The Macau government is reinforcing a series of initiatives to drive visitor growth in the region. The gaming industry is a key contributor to Macau's GDP. The government is investing in new transportation links to ease travel for Chinese visitors. It should be noted that most of the tourists visiting Macau are from Mainland China.
The Guangzhou-Zhuhai high-speed railway is expected to improve travel time from Guangzhou to Macau to 40 minutes, down from the 2+ hours taken by bus. The Macau Light Rapid Transit will link ferry terminals and key locations. It will have 12 stops on the Macau peninsula, 11 stops on Cotai and Taipa, and fully integrate different Macau regions.
Also, the Hong Kong-Zhuhai-Macau bridge, which opened in October 2018, connects Hong Kong to Macau - reducing car travel time from 4 hours to 40 minutes. This has driven greater Mass market visitations. The Macau International Airport is presently undergoing capacity upgrades. Its capacity will be increased to handle 10 million people per year from the current capacity of 7.8 million people. This project got underway in early 2020.
