Two Way Hard Three | Las Vegas Casino & Design Blog

Wynn Resorts reported earnings today for their third full quarter of operations.

Net revenues for the quarter were $277.2 million and adjusted net income was $1.1 million. If you include pre-opening expenses and adjustments for 'Avenue Q', that swings to an $11 million loss.



Read archived comments (22 so far)
May 3, 2006 4:37 PM Posted by detroit1051

I listened to this afternoon's conference call. Financial details will be online and in tomorrow's Las Vegas papers, but I thought some aspects of the call were interesting.

First, Steve was very mellow. He didn't show any of the testiness or irritation which were sometimes apparent in past calls at Wynn and the former Mirage Resorts.

Steve clearly was the master of controlling the call and setting the tone for it. He started out by saying he wanted to offer some perspective from an "elevated" level, not details. He effectively broke down Wynn Las Vegas' performance for three distinct periods:
1) April 28, 2005 through December 31, 2005.
2) Q1 2006
3) April 1-28, 2006.

It was very effective to bring in April '06 even though it had nothing to do with the first Quarter. Steve wanted to demonstrate that the trends are favorable for Wynn Las Vegas. He also compared Wynn's first year performance with Bellagio during its first year.

Here are a few examples with the corresponding time periods from above:

Hotel Occupancy / ADR
1) 92% / $274
2) 95.5% / $293
3) 95.6% / $308

Average Non-Casino Revenue
1) $1.485 Million
2) $1.674M
3) $1.902M

Table Revenue Constant about $1.1 Million a day.

1) $496,000
2) $507,000
3) $508,000

Total Daily Revenue:
1) $2.911
2) $3.080
3) $3.290

1) $854,000
2) $901,000
3) $1.1 Million
He compared this to Bellagio which had 3,000 rooms at opening compared to Wynn's 2,700. It took Bellagio several years to reach $1 million.

Steve very smoothly tried to minimize any criticism of expense levels by saying the expenses were required to date because Wynn is still in the process of "...solidifying our position as the premier hotel in Las Vegas and "It takes more than year to build a franchise like this."

Spamalot/Avenue Q: By enlarging and utilizing the Avenue Q Theater for Spamalot, Wynn saved real estate by not having to build another theater and more importantly, it permits the Wynn and Encore convention/meeting space to be joined as a contiguous facility.

The six North and South main floor Fairway Villas, with swimming pools, have all been upgraded to be on the same level of luxury as the villas above the baccarat pit. (I didn't know that's where they were, but it makes sense after I used Google Earth to zoom in on Wynn.)

Interesting quotes by Steve:

"We're not the low-end bottom feeders."

"We will be more of a Chinese company than any other type of company within...(I didn't get the timeframe.)

Future Macau development could involve JV and might consider a Ferrari-themed property. Note: Wynn Las Vegas sold more Ferrari's than any other dealer last year.

"Some Las Vegas customers have expressed interest in staying and playing at Wynn Macau." Steve said he hadn't expected this.

Disclaimer: I believe my notes are accurate, but corrections are welcome.

May 3, 2006 5:01 PM Posted by Brian Fey

I attended the annual shareholder meeting today, which was followed by that conference call. It was very informative, and I learned some new things. I am at the airport now waiting for my plane, I'll post more details tomorrow, when I get back home, as I don't land till late tonight.

May 3, 2006 5:48 PM Posted by Matthew Hart

Thank you for the summary!


May 3, 2006 8:49 PM Posted by Mike E

I just listened to it as well. Agreed that Steve didn't seem as defensive this time around.

Now I'm very intrigued about the ground-floor Fairways. My friend in Tower Suites just saw one and he said other than the size, they're easily as nice as the villas above the baccarat pit.

Interesting that he seemed a bit complementary to Adelson. Maybe they're putting they're differences aside?

May 4, 2006 10:19 AM Posted by Brian Fey

Well, Steve was in very good spirits at the meeting yesterday. To hear him speak in person, is art in itself. I don't think Steve cares or plans to make a profit anytime soon. At least much of one. He is much more interested in building the single best gaming company in the world, for the 2nd time. He always stresses, he has no plans to be the biggest, just the best. In reality, their losses, are very small, and since much of it is his money, he dosent seem to care a lot.

He said building and opening Wynn was by far the hardest project he has ever done. Bellagio was a breeze, becuase he was able to staff it, by moving people from his other hotels. They only had to learn the building, not his policys, procedures, and expected level of service. With Wynn he said, they had to start from scratch. He expects Encore to open much more smoothly. He said he could swing to a profit tomorrow, by simply cutting staff, as most of his competitors have done, but he thinks that would be short sided. He goal now, is to get the new company known and established as the single best hotel in town, and he feels that by cutting staff now, would only slow and hamper this process. He said the day will come, where expenses can and will be cut, and they will become more efficient, but that day is not today.

He said his next tough decision is to figure out what's next. The golf course, or the Cotia Strip. He said there is a chance they will attempt both projects at once, but he is unsure of that at this time. I was pleased to hear, we can expect to hear something on one, or both of these projects very soon.

Unlike his competitors, Steve takes his time, he does things right. I can't wait to see what's next. The only dissapointment I had, was neither during the meeting, nor conference call, did he really reveal any more details about Encore that we didn't already know. But that's Steve. He keeps us guessing!

May 4, 2006 11:47 AM Posted by Hunter

The RJ response is here:

May 4, 2006 2:45 PM Posted by detroit1051

Brian wrote, " In reality, their losses, are very small, and since much of it is his money, he dosent seem to care a lot."

Brian, first, let me say I like being a guest at Steve Wynn properties. He does things right to ensure superior guest experiences. The problem is, imo, he is a public company and is responsible to shareholders. I made money when MGM bought Mirage Resorts, but some of Steve's actions had driven down the share price to the low teens or maybe even $11, I can't recall. If he hadn't alienated the investment community with the use of corporate funds for art purchases, etc, he wouldn't have been forced to sell to MGM at $22. If Steve were as good an operator as he is a visionary, MIR share prices would have been in the $50's at the time and he never would have been vulnerable to the takeover by MGM.

I also believe Macau's potential is what's holding up Wynn share prices now. If he doesn't show strong financial results both there and in Las Vegas, he might be putting WYNN in the same position as MIR was.

I just listened to the Las Vegas Sands (LVS) conference call. I don't like staying at the Venetian, but I have to say Adelson and Weidner really know how to operate a corporation. I can't imagine this ever happening, but wouldn't it be something if Steve were some day forced to sell to LVS? Think of the synergy: Venetian, Palazzo, Wynn Las Vegas, Encore, Sands Expo Center, the golf course property, and then add to that Wynn Macau, Sands, Venetian Cotai Strip.
I'm sure Steve would rather jump off the top of Wynn than do a deal with his nemesis, Sheldon Adelson.

May 4, 2006 7:15 PM Posted by Brian Fey

Detroit--Stockholders in general are very short sited, and greedy people. They want everything right now. Everyone said Bellagio cost too much money to build, he overspent, it would never be profitable, blah, blah blah. Well now, today, its widly considered to be the hotel to beat, in many terms. Now we are right back here again. They said this about Mirage, then Bellagio, now Wynn. People just don't get it. He does have a job to do for shareholders, I will not argue that, however... at the meeting yesterday he mentioned something very interesting. The most successful stock from 1980-2000 was Microsoft, compounding an annual interest of I believe 52% I think he said, 2nd was Berkshire-Hathaway which came in somewhere in the mid 30% range, and number 3, was Mirage Resorts, @ 24.9%. Could he have done better for shareholders??? Maybe, but i'll take #3, I'll take 24.9% any day of the week! Steve has so much going against him now, its unreal. He has to compete with the best hotels in town, most of which he designed and managed. He dosent have the greatest location in town, I think that in 5 years, this will be a very different story, but we are talking about today. He had to open a new hotel, with zero workforce, unlike Bellagio or TI, where he simply moved staff from one property to another. And lastly there is more competition, and better competition in town than ever before, yet with all of these negative factors Steve faces, he numbers were very respective. Did you really examine the numbers, i mean with a fine tooth comb? Compare Venetian alone to Wynn, from the 1st Quarter. In revenue, and average room rate, table win, slot wynn, food and bev revenue, Wynn blew them away. I mean it was not even close, with 1300 less rooms, far fewer shops, and meeting space, it was not even close. But I realize that LVS made money, and Wynn did not. Why? Simple, mostly due to Macau. Wynn has too much overhead, he knows that, and is fully aware of that, however he dosent want to cut workforce at this time, he has to establish a level of service that he is happy with first, and sacrifice that level, but cutting staff, just to hurry and turn a profit.

Lastly, Steve said yesterday, that between his parter and the four major banks that invested in his hotel, these six people own 90% of the company. Wynn owned about 7% of Mirage Resorts at the end, he was simply outvoted, as shareholders became restless. Wynn and Okada, own over 50% of Wynn. What happen before won't happen again, he is seeing to that. Steve makes mistakes, but he is very careful in the future, and learns from his mistakes, and corrects them in the future.

May 4, 2006 9:25 PM Posted by Hunter

In addition to having a solid block of voting shares, I believe WYNN was setup with even stronger anti-takeover poison pill provisions than MIR had... I think a WYNN takeover would be next to impossible.

May 4, 2006 9:48 PM Posted by detroit1051

Brian, this is a fun discussion. Where was the annual meeting held, in one of the ballrooms? Did many shareholders attend? The last one I attended was Mirage Resorts a few months before Bellagio opened.

May 4, 2006 9:52 PM Posted by Hunter

I wasn't at this meeting but I did go to the one last year, a few days after WLV opened. That meeting was in the largest ballroom and was pretty full, at least a few hundred people there. It was a lot of fun.

May 5, 2006 6:02 AM Posted by detroit1051

Wonder what brought this about?

The "Norm" Column in the Review Journal reports that Eric Klein has left SW and will be replaced by David Walzog of the Country Club Grill.

I've talked with some people who have said they've had better steaks at Country Club Grill than at SW.

May 5, 2006 6:45 AM Posted by Brian Fey

Yeah I wonder about that SW Steakhouse thing also, I just hope they keep the place great! I'll find out next week!

The meeting was held in the Ave Q theater. I would guess there was maybe 300-500 people? Kinda hard to say. There was not as many as you would expect, mostly due to the fact, that there are not that many shareholders. With 6 people owning 90% of the company, that does not leave much left for the rest of us. He has big plans and big dreams. He will make them happen. I may make this an annual trip in the future. It was fun and done first class as you would expect. For many people this would have been a bore, but for us Wynn junkies, just to sit 20' from him, and listen to him speak for an hour, was worth the 6 hours in a plane and traveling about 3000 miles in a single day!

May 5, 2006 2:03 PM Posted by Hunter

Personally, I can't wait to visit Macau. If it wasn't so far away, I would go this year but I think I will wait for the Venetian Macau to open as well so I can see it along with Wynn Macau.

Surprised to hear about Eric Klein and SW. I just ate there last Saturday night and it was absolutely fantastic.

May 5, 2006 3:44 PM Posted by mike_ch

When I first saw this headline, my internet connection failed shortly thereafter but I was about ready to reply with something like, "Posting before someone spins $11mil in losses as a positive and everone talks about how great Wynn is."

Looks like I never had a chance, really.

May 5, 2006 3:47 PM Posted by Hunter

That's a fair statement and they did indeed lose money... But when you take out the one-time events, they made money... And on record revenues for a Nevada casino... From everything I've read about the shareholder's meeting and what I heard on the call, Wynn Resorts is being very honest about where they are - they are still basically a development stage company and they are building.

I think the future looks bright. Do you disagree?

May 5, 2006 3:52 PM Posted by mike_ch

Detroit said:
"I'm sure Steve would rather jump off the top of Wynn than do a deal with his nemesis, Sheldon Adelson. "

Are you sure? Wynn's career has revolved around buying something, building it up, and selling it off. This is what he did the first time he owned property adjacent to Caesars and threatened to open a junker casino next door if they didn't buy it at inflated prices. He bought up properties like Boardwalk to work on later and was rumored to be looking to sell the Nugget when MGM bought in.

I don't care if his name is on the building, I wouldn't be suprised to ultimately see such a cycle happen here, too. Although my guess is it would set up his retirement.

(Disclosure note: I have no stock in anything but am a bit more skeptical of Wynn than some of the regulars on this blog.)

May 5, 2006 8:28 PM Posted by Brian Fey

He sold the property next to CP to make money, to do something. He spent what 20-25 years building up Mirage Resorts? He did sell Golden Nugget AC, to make money to build the Mirage, but your statement is somewhat unfair. He didnt choose to sell to MGM, he didn't have a choice. He just didnt own enough stock to stop the buyout. He fixed this at Wynn. He isn't selling out to Sheldon. And he prob won't turn a profit, or one to speak of for what could be years. Right now he is focused on building a great company, not making a profit. As a shareholder, I'm fine with that. Many companies that are very successful didn't turn a profit at first. It's not like he is loosing his shirt here. The numbers look good, he blew away LVS in every revenue catagory when you compare Venetian to Wynn, and leave out LVS Macau operations. He just has to get his overhead under control, which he will in due time.

There I put a positive spin on it! Again! :)

May 6, 2006 3:50 PM Posted by mike_ch

I guess my way of putting it is that Mirage was soaring until Steve's top business guy left and he tried to handle the Wall Street end by himself. That was the point where everything fell apart.

I don't see WYNN in the same box as Mirage, where anyone from MGM to the Stratosphere could have walked in and pluked it up, but I think Steve does the salesman's act of talking about how losses are irrelevant while building a product base. Other companies, such as Apple before they had a successful product line, have done the same thing. $11mil is no earth-shaking number, I'll admit, but I always feel insulted when someone tries to sweep that under the rug as the costs of image-building. You can have a brand name and make money at the same time.

June 12, 2006 8:21 PM Posted by Pat Spampinato

I just found this BLOG and found many of the posts very useful. I noticed that Eric Klein was no longer featured on the WYNN web site and could not find any information on where he went. Thanks for the posts. I loved SW when I ate there a few months ago so I hope its still just as nice. I've also eaten at the country club and thought it was excellent as well so I think things will continue to go well at SW.

I too am a huge WYNN fan and shareholder. I've been to every shareholders meeting held by Steve Wynn for the better part of 10 years now (except for when he was in between MIR and WYNN).

I too was surprise that the turnout this year was so light in the AVENUE Q theatre. I think there was a significantly higher turnout the previous year (the week of the Grand Opening). I plan to attend every year. One thing you find is that you learn a tremendous amount not only about WYNN, but about Las Vegas, Macau, and the Gambling industry as a whole. Steve Wynn knows his stuff and he's always great to hear speak.

Thanks again for the posts.

June 12, 2006 9:02 PM Posted by Hunter

Thanks. We welcome your future contributions to the conversations.

Basically, Eric wasn't running the restaurant the way Steve wanted it and as one of the signature restaurants, he got the boot. Warzog, who runs the Country Club, is now running SW. SW is in good hands and a recent meal there confirms that it is a good place for a some grilled cow.

September 23, 2006 12:37 PM Posted by detroit1051

I read a brief item in the new Las Vegas Life that Eric Klein, former chef at Wynn's SW, has joined the Light Group as chef at Fix in Bellagio.