Wynn Resorts CEO Matt Maddox Tells Analysts Macau Wynn Palace Needs Additional 1,300 Hotel Rooms to Accomodate Gambler Demand
Posted on: August 8, 2019, 12:30h.
Last updated on: August 8, 2019, 12:32h.
The Wynn Palace is sending would-be guests away because of insufficient hotel rooms especially after selling out on busy weekends in Macau. Given the high-occupancy resort casino model, the lack of inventory to fill that high demand could mean money is left on the tables, so to speak.
The Wynn Palace currently has 1,706 rooms. Some 1,300 additional rooms are planned once two adjacent expansions are complete.
On Tuesday, Wynn Resorts Ltd. CEO Matthew Maddox told analysts during a conference call “On the weekends, we’re turning away [Palace] customers that we do not want to be turning away. And we know that they will spend more time and more money with us if they’re staying with us.”
Casino hotels typically run [at] 95 percent occupancies, since empty rooms don’t place bets,” Reneta McCarthy, senior lecturer at Cornell University’s School of Hotel Administration, told Casino.org.
“If a hotel is running an annual occupancy of 70 percent or 80 percent, that means that they are sold out several nights a week and will be turning people away,” she added.
Wynn Palace opened about three years ago as the company’s second Macau property. It is time for expanded space, company officials said.
“I think you can see from some of our competitors that have just ramped up their new, quite nice hotel product, what that has done to their bottom line,” Maddox added.
What’s to Come for Wynn Palace
Starting in 2021, the company is likely to begin construction of a glass addition called the Crystal Pavilion, and add a 650-room tower. It will cost $2 billion and is scheduled to open in 2024.
A second phase of building will lead to the property getting another 650 rooms. It will also be in a tower.
The planned expansions will not include any new gambling space. But the company will construct areas for a theater, art museum and restaurant — an apparent lure for mass market tourists as opposed to VIP gamblers.
“We think that the Crystal Pavilion project will be attractive to a much broader audience,” Maddox said. “We think that we’ll get significant incremental visitation from the core mass [players] with the [Crystal Pavilion] project.
“Macau is… really [a] core mass market-driven market right now,” he explained. “We’re continuing to see some choppiness in the premium market and in the VIP market.”
Lack of Rooms Ongoing Issue
Reneta McCarthy confirmed that many hotels “frequently” do not have enough rooms.
In this situation, she advises hotels to use “proper revenue management … [and] … setting their rates high enough … that they are getting the most money they can for the rooms they are selling.”
There are some short-terms solutions, too. For hotels, generally, they should “close out … low rates and only sell rooms at … [their] highest rates,” McCarthy said. For the long-term, hotels with insufficient rooms should add and expand, she noted.
When it comes to VIP gamblers, “They are the people who will lose the most money — which means you are likely to comp their room because you know how much you will theoretically make from them based on their historical play,” McCarthy said.
Wynn Resorts Q2 Revenue
Wynn Resorts Ltd. (NASDAQ: WYNN) reported its second-quarter earnings based on generally accepted accounting principles (GAAP) came in at 88 cents a share, missing analysts’ estimate of $1.26. But turnover at the company’s Macau properties edged higher.
Earnings before interest, tax, depreciation and amortization (EBITDA) in Macau, considered the company’s most important market, fell 2.6 percent to $343 million, below the estimate of $355 million.
But revenue at its properties there increased. Casino revenues from Wynn Palace were $528.5 million for the second quarter of 2019, a 0.7 percent increase over $525.0 million for the second quarter of 2018.
Operating revenues from Wynn Macau were $546.5 million for the second quarter of 2019. That is a 0.6 percent increase over $543.3 million for the second quarter of 2018.
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