Image source: Wynn Resorts.
Wynn Resorts' (WYNN 2.38%) newest resort, Wynn Palace Cotai, will officially debut on Monday, opening up a new phase for Macau's Cotai Strip. Las Vegas Sands (LVS 3.27%) has thus far dominated there, though Melco Crown (MPEL +1.00%) has added two resorts there as well.
But Steve Wynn redefined the Las Vegas Strip when he built the Mirage and Bellagio before selling his Mirage Resorts to MGM Grand, founding his eponymous company, and building Wynn Las Vegas. He has a history of building the most profitable resorts in a region. Will he repeat the pattern with Wynn Palace?
An uphill battle
Steve Wynn has been clear that he wants Wynn Palace Cotai to be more than a gaming resort. In an interview with Bloomberg, he said he wants the hotel rooms, restaurants, shopping, and other entertainment options to be the draw more than gambling. But gaming still dominates in Macau.
In the second quarter, Wynn Macau generated $608.8 million in gaming revenue compared to $68.1 million for all non-gaming activities. Even a significant shift in focus toward generating more non-gaming revenue would leave the company heavily dependent on gaming. And therein lies the problem.
Wynn Palace was only approved for 100 gaming tables, with another 25 coming at the beginning of next year and 2018. Management plans to move 250 tables from Wynn Macau, leading to a total of 350 tables at Wynn Palace and 270 at Wynn Macau. But those restrictions could lead to disappointing financial results, so investors should keep an eye on both types of revenue at Wynn Palace Cotai.
What to expect from the resort
It's hard to argue that Wynn Palace Cotai won't be one of the most luxurious resorts in the world. Below I've included a few images that show the space. With the fountain, it's like Bellagio and Wynn Las Vegas rolled into one.
Wing Lei Palace main dining room. Image source: Wynn Resorts.
SW Steakhouse main dining room with Kong Experience show. Image source: Wynn Resorts.
Mizumi main dining room. Image source: Wynn Resorts.
Cafe Fontana dining room. Image source: Wynn Resorts.
Carousel Floral Sculpture by Preston Bailey. Image source: Wynn Resorts.
A big bet on Macau's future
Wynn is betting $4.2 billion that it will be able to attract customers willing to spend money at the casino, on hotel rooms, and more. If they are, it'll be a shift in how Macau operates. Las Vegas Sands, Melco Crown, and Wynn all get a vast majority of their revenue from gaming, and have had a hard time shifting the ratios. As gaming fell, they all suffered.
Wynn Palace Cotai will test the non-gaming appeal of Macau, and also its ability to absorb new capacity. If Wynn Palace expands the market, that'll be good for everyone, just like Mirage and Bellagio were in Las Vegas. But if it simply cannibalizes business from other resorts, it will bode ill for Macau, which will also have to absorb a new resort from Las Vegas Sands this year, as well new properties from MGM and SJM in the next year or two. In many ways, even Wynn's rivals have to hope this new resort is a huge hit.
