The most obvious takeaway from Wynn Resorts's (NASDAQ:WYNN) third-quarter results is that Wynn Palace on Macau's Cotai Strip is off to a slow start and may be underperforming Las Vegas Sands' (NYSE:LVS) new Parisian resort a few blocks away. As fellow Fool Rich Duprey recently pointed out, the Parisian reported more EBITDA in fewer days than Wynn Palace, which isn't a great sign for the new Wynn property.
But drawing broad conclusions based on just a few weeks of performance isn't a wise move for long-term investors. Here's a look at some of the history between Wynn and Las Vegas Sands, and what the numbers within the resorts are telling us.
Wynn has always beaten Las Vegas Sands
One thing I'll go back to is traditional relative performance of Wynn and Las Vegas Sands' resorts where they're in close proximity to each other. You can see from the table below that Wynn generates far more EBITDA (a proxy for cash flow) than Las Vegas Sands in both Las Vegas and the Macau Peninsula.
Wynn Palace is Wynn's first foray into the Cotai region of Macau, and in time it could outperform properties like the Venetian Macau and Sands Cotai Central. History says that's exactly what should happen.
Complicating the comparison right now are the construction that surrounds Wynn Palace and the fact that it's basically on an island by itself -- somewhat isolated from the rest of the territory's action -- from until MGM Cotai opens in the middle of 2017. The Parisian opened right next to Las Vegas Sands' fleet of properties, which gave it an early head start. But within the properties, Wynn Palace isn't doing as poorly as you might think.
Is Wynn Palace really underperforming?
To compare Wynn Palace to The Parisian properly, we have to look at how they're performing on a comparable basis. And table game win per day and revenue per available hotel room are a good place to start.
In the short time Wynn Palace was open, its VIP tables generated $42,117 in gaming win per day and mass-market tables averaged $4,702 in win per day. On average, each table generated $12,489 in gaming win per day. These figures compare to Wynn Macau's VIP table game win of $28,003 per day and mass-market win of $11,089 per day. It's likely that VIP win per day will fall somewhat in the future and mass-market play will rise as Wynn begins attracting more premium mass-market players to Wynn Palace, probably its biggest opportunity for improvement.
At The Parisian, the average table generated a gaming win of $8,289 per day, which is all we know because Las Vegas Sands doesn't break out VIP and mass-market play seperately. This was slightly lower than the $11,930 of the Venetian Macau and $9,784 of the Sands Cotai Central, but higher than $7,046 the average table won at Sands Macau.
On a the hotel room side, The Parisian had an average revenue per available room of $121 compared to $203 at Wynn Palace.
Despite the challenges facing Wynn Palace's opening, the property is generating significantly more revenue per gaming table and hotel room than The Parisian. And that's a good sign for its long-term health.
Too early to gauge if Wynn Palace will be a hit
It's possible the critical mass of casinos and the customer base Las Vegas Sands has built over the years will lead to The Parisian being a more profitable resort than Wynn Palace. But it's too early to draw that conclusion, and history suggests that Wynn's will eventually be the most profitable property in the region.
Investors will want to watch for steady improvement in the numbers as infrastructure is completed and resorts around Wynn Palace are opened, and we see how management adapts to attract more mass-market players. A slow opening could be followed by a long tailwind. With Steve Wynn's history in the gaming industry, he's not someone I would bet against.