Inside Asian Gaming

inside asian gaming september 2016 58 MOP$100 (US$12.50). Once mooted as fire-breathing dragons, this tamer version has a boarding station directly connected to what will eventually be the Macau light rail’s first stop in Cotai from the airport and Taipa Ferry Terminal. Wynn Palace manifests its floral theme in cut flowers, carpet motifs and massive, bright and breezy flower sculptures at each entrance, crafted by Preston Bailey. Carousel and Ferris Wheel , displayed at the opening, are among seven creations standing up to seven meters tall, weighing several tons and using tens of thousands of flowers along with the “non-botanical” elements. Others include a jack-in-the-box, Fabergé egg and see-saw with monkeys, chosen for the zodiac symbol of the current Chinese year; expect to see a rooster homage next year. The sculptures are shown on platforms that can be lowered to the basement for changing displays. Fine artworks include Jeff Koons’ US$34 million stainless steel Tulips and a rare quartet of Qing Dynasty Buccleuch chinoiserie vases – the British royal family has the other known set – valued at US$16 million. Mr Wynn says he’ll place a book with information about the resort’s artworks in guest rooms and possibly sell copies. BANKING ON STYLE Bankers are impressed. Sanford Bernstein’s Vitaly Umansky and Clifford Kurz write that Wynn Palace “exemplifies the most impressive and elegant casino property ever built, not only in Macau, but in the world. Steve Wynn and his team have built a masterpiece of a luxury integrated resort … based on what we have seen, we expect Wynn Palace to be a game-changing addition to Wynn Macau and allow the company to strongly compete in Cotai in both gaming and non- gaming. Our impression of the property strengthens our view of Wynn’s ability to outperform the market.” Add Morgan Stanley’s Praveen Choudhary, Alex Poon and Thomas Allen, “Wynn Palace is everything we expected and more. The casino is tastefully and elegantly built for customers with aspiration. It definitely has the best hardware, which should be complemented by Wynn’s culture of service quality.” The government was less impressed, granting Wynn just 100 of the 400 tables it requested. While Mr Wynn and some analysts – Sanford Bernstein most convincingly – say Wynn Palace’s table numbers don’t matter, others have handed out downgrades, including Union Gaming, or cut earnings estimates, such as JP Morgan. DOUBLE OR MISS There’s widespread agreement that the movement of tables and similarity of product will lead to the cannibalization of Wynn Macau. Morgan Stanley calculates that Wynn will need to raise its mass market share from 7.6% in this year’s second quarter to 10.8% next year to reach breakeven, and more than double it to 15.3% to reach Wynn’s EDITDA forecast of US$900 million. Global Market Advisors Senior Partner Andrew Klebanow suggests taking a step back. “There are a number of parallels between Las Vegas in 2010 and Macau in 2016,” he said. “The opening of [MGM’s] Aria/City Center is a case in point. The project, the largest privately funded construction project in the history of the United States, opened in December of 2009, at the nadir of the recession and did not have an immediate impact on citywide visitation and gaming revenue. This does not mean that CityCenter failed. As the US economy and the Las Vegas tourism economy recovered, CityCenter has emerged as a very profitable enterprise. “Mega-projects such as CityCenter or Wynn Palace cannot alone overcome market fundamentals. Wynn Palace alone cannot be expected to turn the fortunes of Macau around. One, two or three buildings – albeit really big buildings – cannot overcome Chinese government policy and a contraction in economic growth. What they can do is to take advantage as economic conditions improve. “Financial analysts that watch the Macau gaming space are too focused on monitoring this week’s or this month’s gaming revenue performance and hotel occupancy/ADR trends to appreciate that Cotai 2.0 is a long-term investment in a market that has the capability of turning around very quickly and producing prodigious amounts of revenue. “And,” Mr Klebanow adds, “no one has ever won betting against Steve Wynn.” Feature In Focus Steve Wynn paid US$34 million for Jeff Koons’ stainless steel sculpture Tulips “Hengqin has the roller coaster … but you don’t put the roller coast in the casino. They tried that in Las Vegas and it didn’t work.”