WYNN Gets Lucky

As the saying goes, it's better to be lucky than good. Wynn Resorts (Nasdaq: WYNN  ) certainly had its share of luck in the second quarter. Macau made more than "normal" gaming revenue, allowing Wynn to earn an adjusted $0.52 per share, beating analyst estimates of $0.42.

Even without good luck, Macau led the way, and Las Vegas was an anchor on earnings. But that shouldn't surprise anyone at this point. What did surprise me was how bad Las Vegas was, and the direction it's headed. Contrary to upbeat numbers by Las Vegas Sands (NYSE: LVS  ) , both MGM Resorts (NYSE: MGM  ) and Wynn's Las Vegas operations seem to be getting worse. Operating loss in Las Vegas was $17.2 million, worse than $8.3 million in 2009. Bad luck did play a role in the Las Vegas results, but gambling levels weren't impressive.

But the direction of Wynn Las Vegas caught my attention. The complex may slowly be becoming a high-end nightclub instead of a casino. Food and beverage revenue increased 11.5% to $111.5 million -- now nearly as much as casino revenue of $117.2 million, which was down 5.8%. How long can Wynn rely on high-end clubs and restaurants to support a multibillion-dollar hotel?

But if you're like me, you gloss over Las Vegas results and move straight to Macau. And in Macau, Wynn is developing again. Wynn has a basic design for its Cotai Strip casino and is moving forward, although it's not releasing any budget or timeline yet. This could be perfect timing in Cotai. By the time Wynn opens up its casino, the strip will be developed, and it could leverage the existing casinos. It won't be a stand-alone like The Venetian Macau was in the early days.

Of course, investors should look for growth in Macau, which continues to look strong. But don't overlook the casino I call Club Wynn in Las Vegas. It would be nice if it could start contributing more positively to future results.

More on gaming:

Travis Hoium owns shares of Las Vegas Sands. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a jackpot disclosure policy.


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  • Report this Comment On August 04, 2010, at 2:58 PM, spokanimal wrote:

    Re: "Wnen it opens, Wynn could be leveraging the existing (cotai) casinos"...

    Just who will be leveraging who, Travis.

    By the end of next year, 2 years before Wynn Cotai opens, Venetian will be surrounded by resorts... COD and LVS sites 5&6 accross the strip, 4-seasons next door, and the monsterous Galaxy Cotai behind it.

    Venetian's giant malls and gigantic convention facilities are themselves dwarfed by a 15,000 seat arena. THAT will be the epicenter of Cotai to which all other resorts feed. Just ask the "ladies" who line the route between Venetian and COD today which way people are walking each day... and when the day is done.

    Wynn will be a smallish, off-strip resort back behind COD... it won't leverage squat.....

    .... it will be "leveraged".

    Spok

  • Report this Comment On August 04, 2010, at 11:38 PM, MainStreetMayor wrote:

    In comparison to when The Venetian Macau was built Wynn will be in a much better spot. The casino won't be all by itself, it will get natural traffic from other casinos in the area.

    It's just like the LV Strip. If there was one casino there would be no draw. Have a full strip and you draw people, more hotels are built, who draw more people, etc. This network effect doesn't work if you're the first mover on the strip. It does if you're one of the last. That's what I'm talking about them "leveraging".

    TH

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