Inside Asian Gaming

November 2008 | INSIDE ASIAN GAMING 7 Cover Story Word Spreads Steve Wynn believes the middle of a global crisis is no time for compromise at Wynn Macau S teve Wynn is resisting the temptation to gloat. Being named least worst loser in a bearish global gaming market isn’t exactly cause for celebration. “It’s sort of like dancing at a funeral. I feel guilty that my company is in such good shape,”Mr Wynn stated in a recent interview. The‘good shape’referred to byMrWynn relates not somuch to his company’s share price, although that has also held up well compared to those of his rivals. It relates to something more fundamental, namely positive cash flow and a relatively low gearing on debt, especially in Macau. If it’s a truism that experience is the best teacher, then Mr Wynn can be considered a diligent dance student. He’s had previous acquaintance in Las Vegas with what heavy exposure to debt can do to a company during a downturn. Turning point A pivotal moment in his Macau venture was when Mr Wynn’s company pocketed US$900 million of what in effect was free money by selling a gaming sub-concession to Lawrence Ho and James Packer.The cash largely paid for the first development phase of Wynn Macau, helping the company avoid the kind of gearing now proving so challenging to Las Vegas Sands Corp. The low gearing helped the company to complete an extension to Wynn Macau on schedule in December 2007. It added around 75,000 square feet of gaming space, most of which was immediately injected into the VIP part of the business. The extension also added 20,000 square feet of retail space, including 11 new boutiques. The company is feeling so upbeat it has now announced extra cash—16.6% more to be precise—for Encore Macau, the 404-room casino-hotel tower for high rollers scheduled to open on the Wynn Macau site in the first quarter of 2010. Mr Wynn has decided to add several floors to the building, taking the final bill to US$700 million. Message It sends out an important message at a time when rival operators in Macau and Las Vegas are talking about cutting back spending or reducing the scale of their projects. During a recent interview with The Wall Street Journal, Mr Wynn summed up his approach. “If I start compromising, what happens? Word gets around. It’s viral.That’s why this is a dangerous time.” The spending on a new VIP facility in Macau at a time of bearish global sentiment gives an indication not only of the company’s general strategy, but also more specifically the approach in Asia. Wynn’s caution on capital spending was backed by a strategic decision to chase hard after VIP revenue in Macau, despite the relatively modest margins on that business compared to the mass segment. This was not a bad call in a market where VIP turnover has been going up in real terms and also as a proportion of gross gaming take year on year. Quality product, quality players Mr Wynn says, though, he isn’t just after any VIP. He wants the