Two Way Hard Three | Las Vegas Casino & Design Blog

February 24, 2009

Wynn Resorts Q4 Results: Down But Not Out

Posted by Hunter

Wynn Resorts has released their financials for Q4 2008:

Not great, as expected. Still, not terrible. For the quarter, adjusted net income was $7.6 million, down from $82 million a year ago. Most of this decline is due to Las Vegas as Wynn Macau saw an uptick. They also took a tax charge, bringing the GAAP earnings for Q4 to a loss of $159.9 million.

While only online for a little more than a week in 2008, we get our first peek at how the company will be reporting Encore. It seems that they will not be breaking the WLV/Encore numbers apart. For the Las Vegas complex ADR was $281 and REVPAR was $224. Occupancy was down to 79.7% for the quarter - incredibly low.

Wynn Macau seems to be humming along nicely with a 35.6% revenue bump over 2007.

All the details are in the press release linked above.


Read archived comments (26 so far)
February 24, 2009 2:12 PM Posted by TC from Boston

During the call a couple times I believe it was Wynn or someone talking about how they changed there rates said they got people they didn't want...something to that extent I forget the exact quote. I can only think that they meant people who stayed who didn't spend anywhere in the place? Just wondering if anyone else caught it and or knew which group they were talking about.

February 24, 2009 2:42 PM Posted by Dave


February 24, 2009 3:06 PM Posted by socalduck

TC, my understanding was that believed they tried to hang on to the higher room rates for too long, and decided they needed to do something dramatic to get people in the building. Steve did allude to the fact that they were disappointed that some of guests that took the offers did not bring in the level of play they were hoping. What I though was really interesting was what Steve described as a change in player behavior, specifically gamblers walking away from the table when they were ahead. Table game hold was only 15% for the quarter, vs an expected range of 20-22%, and that this due in part to players quitting while they were ahead. If this is true, it is pretty amazing, and makes you wonder if they need to rethink their projections.

Like Hunter noted, Macau was not so bad, but Vegas was a disaster. The tone was somber, and I think they provided a realistic assessment of the market. It will be interesting to see how this quarter plays out.

February 24, 2009 9:15 PM Posted by detroit1051

Steve Wynn directed some pointed comments toward President Obama and the Vegas bashing which has been going on. Steve said Obama's loose lips cost $5 Billion in the loss of a convention. The Call transcript is fascinating:

February 24, 2009 9:17 PM Posted by Hunter

I listened to the call and I believe Steve meant $5 MILLION not BILLION. He said the company (I assume they are talking about Wells Fargo here) paid $3.3 million to cancel but they would have rather had the five and the people in the hotel.

February 24, 2009 9:28 PM Posted by detroit1051

Hunter, you must be right. No convention could generate $5 Billion for a single property. I thought perhaps Seeking Alpha made a typo, but it sounds like you heard Steve say $5 Billion. Regardless, Steve was trying to send a message to the administration, and I hope it's received in Washington.
Steve was excellent in the Call, much more focused than in some past ones when business was better.

February 24, 2009 9:50 PM Posted by John

I hope they don't allow the level of service to slip because of their projected losses in Vegas.

I can't believe someone who appears to be as smart as Steve Wynn is still on this 'the President is bringing down Vegas' bullshit. He clearly did not say companies shouldn't go to Vegas. He said that if you're bumming money off the taxpayer, maybe it's not a good time time to have a massive 'appreciation trip' for your company in a year you lost and then borrowed billions.

Funny that when Wynn Resorts loses over a hundred million in a quarter people are just like... *yawn*

Having been privy to Bellagio's occupancy on a day-to-day basis, Wynn being down below 80% is a bit shocking and more than a little scary.

February 24, 2009 9:58 PM Posted by Hunter

I hope my post didn't sound too much like *yawn*. I can see how it might have.

Losing $150 million is terrible... I'm probably desensitized by all the bad news at this point and after LVS sorta set the bar, I think this was expected.

I expect all these companies to lose a lot for Q42008. The ones without a ton of money coming in from China are really screwed. I'm scared to see MGM Mirage's numbers. I expect they'll be a good bit more depressing given the lack of buoyancy from everyone's favorite SAR.

February 25, 2009 12:11 PM Posted by mike_ch

Should have built Encore in Macau first. Where there was actual demand for it.

They won't let the level of service slip. Wynn knows that having the best place means he'll be the last one on the Strip to turn out the lights, and the people who work there will be thrilled to be working there as the market contracts below their level.

When (=not if) the Strip looks like a post-apocalyptic ghost town in the future, Wynn/Encore is going to look like the vault where all the survivors are stored.

On the other hand, people taking their chips when they're up a low percent and walking away shouldn't shock them.

February 25, 2009 6:49 PM Posted by charlie

mike - no the lights are not going down on the strip. worse case scenario is that assets (hotels/casinos) are sold to the highest bidder (either in bankruptcy or firesale) or bond holders have to restructure. All these scenarios lower the carrying costs of capital, lower the denominator and increase the profitability of the enterprise. When is the last time a major casino on the strip has sat vacant in the last 50 years? and they have changed hands by virtually every scenario possible.

a rising tide lifts all boats...this is the inverse.

the reality is that Encore LV was a little too ambitious for a complementary hotel to Wynn. if it was brought online with 1200-1500 rooms in 2006/7, at 900MM-1B, it would have much more sense. This was the original plan and it was the right move. the extra $1B in cash/unleveraged capital would be MIGHTY handy right now. If you don't think big money guys with cash and access to capital (including wynn) won't pounce on a deal with the right terms, you're not thinking straight.

February 25, 2009 6:52 PM Posted by Hunter


See, I look at Encore's 2,000 rooms and it seems downright conservative next to ARIA, Vdara, the Mandarin and Fontainebleau. Given the state of the Las Vegas market during the period these were planned, it's downright low-key compared to what it could have been in the hands of other operators.

February 25, 2009 8:14 PM Posted by charlie


Can you actually spend more on sq ft basis than Encore. And, CC other than ARIA, was a real estate play. So, line up WynnEncore and ARIA side by side. They are more or less comparable in key metrics, rooms, conference space, casino space and yes cost ($5B neighborhood).

With either one or both catch Bellagio in EBITDA.. they should... but they are 2x the investment. Bellagio is still the most solid asset on the strip.

I like Encore, i just think the original vision of a smaller hotel with suites (yes the rooms are slightly bigger than wynn, but do they really raise the bar to justify a major price point difference?)...and Encore would have been better served with one 'Tower' Lobby for the entire property. Encore needed to be Tower Suites++, but its just Wynn+. While spa and casino at encore takes it to the next level, rooms, common areas, restaurants fall short,

And I'm getting the vibe that ARIA is going to better than you are expecting.

February 25, 2009 8:21 PM Posted by Hunter

Charlie - just curious, have you been able to check out Encore yet?

As far as ARIA being 'better than I'm expecting' - I'm not totally sure what that means. I think I've only ever said I expect it to be good.

When you say CC other than ARIA was a 'real estate play', what exactly do you mean? In the end, isn't it all a 'profit play' (or lack thereof)?

February 25, 2009 9:31 PM Posted by charlie

Yes, I've been to Encore. I really liked the overall layout and design of the casino, loved the atrium, but disappointed that it was for people coming by cab and not for oriented to the hotel guests or as a transition area between Wynn & Encore. And I thought the restaurants (except botero) were fitted into (literally) tight corners/spaces. Restaurant design and orientation are a great strength of Wynn and given the footprint of Encore, this could not be replicated. And I don't think the properties connect and flow well together (its quirky - a little caesars like in that regard) And like what's been noted before, with 2000 rooms Encore should stand on its own, but it doesn't have the mass/infrastructure. That's why I think it should have been 1000 rooms, where you can raise the room rates and table limits to not encourage or give people not staying there a reason to stop by/hang around or have much to do. Encore should have been all about the FIT hotel guests and the premium casino player. No compromises. Or Encore should have been another Bellagio Spa Tower to drive more traffic to Wynn (and decrease the overall investment per room). Encore achieved neither. So what is it really?

As far ARIA, I think it will give Wynn a run for its money (including this crowd) in design and service - that's what I meant.

What I meant by real estate play, is that a $10B hotel/casino with 8000 rooms would never be built. Real estate development, not travel & gaming, was the financial backbone to build VEER, Vdara, Mandarin, & Harmon. And if you could finance another 800 hotel rooms at MO and Harmon and drive an additional 6000 people into ARIA or Bellagio casino, with minimal investment... only a bonus.

February 26, 2009 12:58 AM Posted by mike_ch

Seemed I had a consumed post earlier.

As for lights out, I meant in terms of companies. Of course if everything falls apart someone will come in and pick up the pieces. I honestly think Harrah's would be doing better if someone wanted to buy some things, as a sale of Bally's/Paris would actually free up enough funds that they could actually operate again (or have save to do so later), instead of their current method of just holding their breath and hoping nothing will require investment until conditions improve.

I have to agree with Charlie that I can't figure out what Encore is trying to do. It's floor capacity, food offerings, and dependence on Wynn scream boutique hotel, but the huuuuuuge nightclub and 2,000 rooms aren't boutique at all.

Most importantly, there's the issue that small occupancy doesn't work on the Strip. The size of the casino floor and the number of tables downstairs does not scale properly with the room count upstairs, and then you've got drive-in traffic. Tower Suites and other attempts have their scale subsidized by being an element of a much larger development.

February 26, 2009 5:56 AM Posted by LeoNYC

What about the pools at Encore? They look so small that IF Wynn/Encore gets sold out during the hot summer of Las Vegas, the pools will be so crowded that they might need to open the pools at Wynn for the Encore guests. Sometimes I have the impression they added too many rooms at Encore without thinking of the comon areas. Its casino and pools are the best design ever, but they fit for a smaller hotel. Hopefully, by the time people start to go back to Las Vegas again the Golf Course (re)development will be on its way so it can add more space for the 5,000+ rooms at Wynn/Encore complex.

February 26, 2009 8:52 AM Posted by Sean

Encore guests have access to Wynn poll, but not vice versa. I checked before booking Encore, for fear of over-crowding...

February 26, 2009 9:06 AM Posted by Brian Fey

I guess its time for me to chime in. Some of you are right, about Encore's public area being smaller than normal for a hotel with 2000 rooms, but I think this was done on purpose, rather than being an accident. I think Wynn fully intended to make the public areas and Encore small, in order to help it ramp up business at Wynn, and not just take business away from Wynn.

February 26, 2009 5:37 PM Posted by Pikes

The casino-atrium space was not planned small on purpose, they only had so much space (think Cosmo) to work with. The pool area is to small for 2000+ rooms, and ugly to boot, enough earth tones and white, spray some color on it.

March 8, 2009 6:01 AM Posted by detroit1051

I hope this item in "Norm" is a sign that Las Vegas will start fighting for its survival and resurgence. Steve Wynn can change the country's perception to some extent.
"In the works, we hear: a Steve Wynn appearance on CBS' "60 Minutes" and a trip to Washington, D.C., by Las Vegas Mayor Oscar Goodman, who, we predict, won't be shy. ..."

March 8, 2009 4:40 PM Posted by Mike E

Detroit, the cameras at Encore's opening belong to "60 Minutes." That episode is long overdue. I can't wait to see it.

March 8, 2009 4:41 PM Posted by mike_ch

Detroit: Don't bet on it.

I maintain until the city (and to a larger degree, the state) gets some new governing, it's screwed.

March 8, 2009 5:10 PM Posted by mike_ch

Actually, I'll step up and clarify my own comments:

Nevada desperately needs a new set of politicians. Las Vegas will never be taken seriously on a national level because of arguments that the city should be self-sufficient on it's own gambling incomes or that it will be frittered away by the low-brow politicians that get elected there. The state gets a bit of the first but usually not as much of the second. Unfortunately, our Gov. is a bit in over his head, and we really need a switch. Would probably be nice also to not send a strictly anti-tax hardcore conservative to a room full of Democrats to beg for money, but I guess that's just my politics showing through.

I'm pretty convinced any clown can be elected to something in Vegas, though, so I can't blame any serious pol for just using it as an easy target. That and when we were the recipient of the nation's largesse over the past few years, it has been spent poorly. What has the wealth brought in recent years? The only public project to get off the ground during the "good times" was Fremont East. Meanwhile: Schools falter (too many stories to list), transportation sucks (getting between my house and the Strip totals two hours of riding around buses in slow traffic, I'm visiting my Mom at the house where I grew up right now and can get from that rural suburb town to San Francisco in as much time), there's no real cityscape and the place is woefully underprepared for any kind of change brought about by infrastructure or ecology except maybe for it's drought controls.

Las Vegas has a lot more issues to deal with than finishing those condos at the Palazzo, but I don't think even the city fathers understand that.

March 9, 2009 7:25 PM Posted by charlie

FYI - nice article on Encore in April AD. Great photos of Sky Casino and Sky Villas.

March 10, 2009 5:19 AM Posted by detroit1051

Charlie, thanks. The April AD isn't on the website yet but should be soon. AD had done nice pieces on Wynn's Villas and on Roger Thomas in the past. It's always good publicity. AD's piece on The Mansion at MGM Grand has been linked here before.

March 10, 2009 11:37 AM Posted by detroit1051

Architectural Digest's photos of Encore are unbelievably spectacular, especially the Sky Casino and Duplex Suites. Wow!