A crackdown in corruption in China that has hushed the once frenzied Macau casino business took its toll on Wynn Resorts in the company’s fourth quarter.
Labor delays, for one, have pushed back the company’s opening date of Chinese New Year 2016 for its $4.1 billion Wynn Palace casino-hotel into mid-2016 instead.
Wynn talked about the formula that has worked in Las Vegas as he’s focused properties there on non-casino experiences recognizing gambling was a result, not the cause of profits. There, room revenue, average daily rates, food and beverages and entertainment and shopping were all up in the quarter compared with a year prior.
“It’s a pretty big deal,” DeCree said. He said it signals that the company’s Las Vegas business is in better shape than in pre-recession 2007, although the company hadn’t added the Encore tower by that time. Decree said it sticks with the trend that Las Vegas is rebounding from the recession.
Wynn also confirmed the price tag for his Boston-area casino-hotel has risen slightly from $1.6 billion to as much as $1.75 billion. While Wynn didn’t elaborate why, DeCree, the analyst from Las Vegas-based Union Gaming, said it’s likely because of design changes. The casino-hotel property will closely resemble that of the Wynn casino-hotel on the Las Vegas Strip.
The game has changed in Macau.
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A flood of money from mainland China boosted Macau casinos, both local and foreign owned, which now rake in about seven times more than those on the Las Vegas Strip. But the tide has turned as the Chinese economy slows and President Xi Jinping’s high-profile corruption crackdown deters high-rolling mainland gamblers from lavish spending on baccarat and other games of fortune.
Casino revenue fell for the eighth straight month in January, declining 17.4 percent over a year earlier, according to data released Monday. Last year, revenue from the city’s 35 casinos fell 2.6 percent to $44 billion.
That marked the end of a decade of supercharged growth which began when the government of the Chinese territory ended a 40-year casino monopoly, opening the door to foreign operators such as Sheldon Adelson. Analysts and government officials forecast the contraction will last until mid-year.
Macau now faces the tough task of pivoting to a new model of growth, as dictated by Beijing. The authorities want to wean the city off so-called VIP high-rollers: wealthy patrons wagering staggering amounts in smoke-filled private rooms brought over from China by junket agencies. The junket middlemen facilitate travel and help clients get around China’s capital controls by lending them money to gamble.
Instead, the focus is now on family-friendly resort developments to attract China’s burgeoning middle class. Junkets are reportedly consolidating as funds dry up amid the crackdown while casinos are busy adding theme rides and boxing matches to resorts as they prepare for Macau’s new reality. “There’s a big chunk of that VIP market that’s simply disappeared largely in the wake of the anticorruption crackdown,” said Grant Govertsen, an analyst with Union Gaming Research in Macau. The legislation would add penalties for violating the ban and would implement a 70 percent tax increase on sales of tobacco products.
After implementing a partial casino smoking ban in October, Macau is contemplating a total prohibition on smoking in all areas of the region’s gaming market.