Inside Asian Gaming

INSIDE ASIAN GAMING | September 2009 10 Asian Gaming 50 – 2009 4 (3) Steve Wynn Chairman and CEO, Wynn Resorts appears to the least financially-stressed of all the foreign outfits in that market and at home during the current downturn. Not only has he managed to fund Encore Macau—the VIP-focused extension to his sole Asian property, Wynn Macau— at a modest capex, but he has also managed to position the company for an initial public offering (IPO) that could raise as much as US$2 billion once conditions are deemed favourable. In July, Wynn Resorts announced one of its subsidiaries had filed an application with the Hong Kong Stock Exchange Ltd in connection with a possible listing on the exchange. It added at that time that no decision had yet been taken regarding the timing or terms of any IPO, though sources familiar with listing procedures in Hong Kong said it normally takes three months to process an application. Steve Wynn’s influence on Macau extends well beyond the walls of Wynn Macau, right up to the front door of his industry rival Sheldon Adelson’s Venetian Macao property. Mr Adelson may dispute the idea that Mr Wynn was an influence. But it’s a matter of record that it was Mr Wynn, back in the 1980s, who first had the bright idea of creating a casino resort on the Las Vegas Strip that placed as much importance on dining and entertainment as on gaming. The result was the Mirage. It was this pioneering of the integrated resort concept that is also credited with having secured Mr Wynn a Macau casino concession. It’s fair to say that Mr Adelson, with his background in trade exhibitions, enhanced and refined Mr Wynn’s concept in Las Vegas by developing conference facilities at gaming resorts to ensure hotel rooms remained full all year round. Mr Adelson then exported this concept to Macau, and The Venetian Macao was born. MrWynn showed considerable acumen in the Macau market by converting a sub licence granted to him into a cool and virtually cost-free US$900 million profit. Why he had the sub licence in the first place is almost worth an Asian Gaming 50 – 2009 entry of its own. The concise version: only three concessions were awarded, but following Las Vegas Sands Corp’s split with its original bidding partner, Galaxy, each concession holder was awarded a sub-concession in order to allow LVS and Galaxy to go their separate ways without re-opening the bidding process. Stanley Ho sold his sub-concession to the joint venture involving his daughter Pansy and MGM MIRAGE for US$200 million. Mr Wynn, meanwhile, sold his sub-concession to the Melco Crown joint venture in April 2006 at a price that covered three quarters of the initial US$1.2 billion cost of Wynn Macau, which had its first phase opening in September 2006. Mr Wynn is known for his ferocious energy. He needed it recently when he made a 28-hour round trip to Wynn Macau just to attend a wedding reception for Jonathan Zeman, son of Wynn shareholder and director Allan Zeman. He didn’t even have time to stay the night, but as a showman like Mr Wynn understands, courtesy and appearances count. contribute to escalating junket commission rates). Each, however, quickly realised that junkets are crucial to operating a high-roller business in Macau, and adopted the familiar arrangements created by Dr Ho. For the time being, Dr Ho’s grasp of strategic issues in the Macau market remains unparalleled. It was Dr Ho who was one of the driving forces in the creation this year of a trade association for Macau operators. His aim was to reduce financial pressure on the operators during a global recession by eliminating irrational or excessive competition among them. The arrangement was formally recognised in July with a signing ceremony at Dr Ho’s flagship Grand Lisboa property. of ‘non-negotiable’ or ‘dead’ chips by the players they brought in. The commission serves not only as a reward to junkets for bringing their clients to a particular casino, but also for extending credit to those clients, since the bulk of VIP gamblers in Macau come from mainland China and are unable to bring large sums of money with them owing to China’s currency controls. In addition, gambling debts are not legally enforceable in China, so the junkets are also charged with the sometimes onerous task of collection. Each successive foreign operator arriving in Macau proclaimed it would court high-rollers directly and do away with the junket middle men (and therefore not basket—as occurred with Las Vegas Sands Corp, led by the person ranked number two on this list, has proven to be a little more challenging in the current straitened credit markets. Dr Ho also deserves a nod as the pioneer of Macau’s unique VIP market structure— involving operators of private VIP rooms and the rolling chip commission programme— that continues to generate the bulk of casino revenue in Macau and virtually all of Asia. Starting in the mid-1980s, the VIP rooms located within Dr Ho’s casinos took on some of the administrative burden of the gaming operations in exchange for a share of revenue. Meanwhile, junkets received a commission on the purchase Steve Wynn was the least bullish in terms of spending commitments of all the foreign-owned casino companies in Macau. A consequence is that his company