When Wynn Everett executives presented a report on the company balance sheet to the Massachusetts Gaming Commission (MGC) last September in the days leading up to the decision to award a license to the casino company, prominent on that sheet was the overflowing revenues from Macau – a former Portuguese colony off the coast of China that has experienced tremendous gaming growth over the last several years.
While Wynn’s sources of revenue were not limited to Macau by any means, their presence in that booming market – along with other gaming companies like MGM, which has a casino project in Springfield – bolstered their case and their stability in times when American gaming was on the decline.
Now, inexplicably and suddenly, gaming revenues in Macau have dropped sharply in the last several months due to the fact, industry leaders say, that China has begun a crackdown on corruption and VIP spending in the Macau gaming industry. Gaming revenues over the last year in Macau, as reported by the Macau Gaming Inspection and Coordination Bureau, are down nearly 50 percent. Since February 2014, when revenues there hit an all-time high of $4.76 billion, revenues in Macau have sunk to $2.45 billion.
With world events tied together in such an intimate way – especially for worldwide companies like Wynn or MGM – one has to look at the old Monsanto site in Everett and wonder what effects such news on the other side of the world might have right in Everett and Charlestown.
In the midst of that wondering, and the sudden change in China’s gaming industry, Wynn officials – even Steve Wynn himself – have addressed the situation in a positive way.
“The recent market activity in Macau will have no impact on our plans for Everett,” said Michael Weaver, Senior Vice President of Marketing at Wynn.
As for the MGC, officials there said last week that when they chose their operators, they didn’t just pull the shiniest coin out of a basket. In fact, they said they weighed long-term trends such as the Macau situation and what a downturn might do to the financials of licensees like Wynn and MGM. In short, they said they see the situation as a short-term worldwide variation in what is a long-term bet for Massachusetts.
“After a lengthy and comprehensive evaluation, which included a detailed financial analysis, the Commission chose exceptional resort-casino proposals in terms of variety of attractions and the global reach of the operators,” said MGC Spokesperson Elaine Driscoll. “The commission selected the strongest possible gaming companies and required extraordinary non-gaming amenities that will ensure that Massachusetts casinos are the most attractive, highly-competitive and true destination-resort facilities. In addition, the Commission closely monitors long term industry trends as opposed to more short term market variations. We are confident that our licensees will develop top-quality resorts that will withstand a competitive environment.”
In a conference call last month with financial analysts, Steve Wynn talked about Macau and how the Everett property and resurgence in Las Vegas are now part of the long-term plan to deal with changes in the industry – as is being seen now in Macau.
“People with money are destabilized at the moment in China. I think, and you were seeing that all across mainland China, that people are being cautious,” Wynn said in the conference call. “There’s an uncertainty in China these days about things that are a little foreign to us here. What is expected of them? What’s the relationship of Chinese businessmen to Chinese government officials? Is corruption as widespread as people say it is?…Now it’s comforting to note that the liaison officer who represents the central government in Juhai that looks over Macau made a public statement when I was there last week that there is little or no evidence of any government officials gambling away their money in Macau. He wasn’t concerned about that. That was a positive announcement by him, and I think he felt it necessary to say that. But we wait for announcements from the government with baited breath to understand what their perceptions are of Macau and what the related activities will be as a result of those perceptions.”
Wynn also said something he has often said in Boston and Everett – that he creates an experience that goes beyond gaming. That, he said, has insulated the company from being severely harmed by gaming declines and has helped the overall industry to diversify in the way that Wynn has made its trademark.
“Tourism, the broadest definition of tourism, a positive exciting experience that you can’t get at home, and surely we recognize that a slot machine or a Baccarat is an experience you can get anywhere,” said Wynn. “Every slot machine on earth looks like every other one; I can’t tell one manufacturer from another unless I look at the plate on the side. Every roulette table is identical to every other roulette table no matter what nation you are in from one end of the gold to the other. Our company has recognized that more than any other company in history. Our non-casino revenue always exceeds our casino revenue. Wynn Palace was built as Bellagio and Wynn and Encore have been built, to create a complete tourist destination experience. Only the smallest part of our budget in Macau is dedicated to Baccarat tables, but hundreds of millions – yes billions of dollars, up to $4 billion dedicated to entertainment, shopping, food and beverage, spas, incredible hotel room experiences…”
Wynn went on to speak at length in the conference call about the Everett casino and how it’s financing and purpose have really helped to diversify the company overall.
“We’re feeling great about Boston incidentally, just great,” Wynn said. “We love the idea that we’ve got that for diversification. We’ve never ever been in the position we were the only game in town…So speaking for myself, I am delighted with the Boston opportunity Wynn America now enjoys. I think we’re alone. This last few months we got our investment grade which we’ve had from Moody’s, now from Standard & Poor’s, so our credit rating is the highest in the industry. We financed $1.25 billion of our Boston project a few months ago at LIBOR plus 175, and we’re in real apple pie shape just as our financing in China was at LIBOR plus 175; $3.85 billion of the project in China was financed nonrecourse at LIBOR plus 175…Our Boston financing is nonrecourse to the parent in Wynn America, which is as I just said, I’m proud to say investment grade. So all in all, the setup is just right for Massachusetts, and as we wind our way through the complexities of the Asian situation, our setup is just right to keep our promise to our employees and to the government in China.”
Even with the spotlight on the Macau situation, stock prices have not suffered. In the wake of more news last week concerning Macau revenues declining, stock prices for Wynn’s Macau division rose 3.2 percent.