As small as Macau is, it's already turning into a regional affair. The Cotai Strip is acting completely differently from the Macau Peninsula. and it's having a big impact on the fortunes of the gaming operators there.
Las Vegas Sands (NYSE:LVS) reported earnings last week, and while Sands Cotai Central was the biggest addition to its revenue, the trends showed that mass-market table play will be a long-term driver. Venetian Macau saw a 56.1% increase in mass-market volume and Four Seasons Macau was up 104.5%, compared with just a 14.8% increase at Sands Macau on the Macau Peninsula.
When Wynn Resorts (NASDAQ:WYNN) reported earnings this morning, investors expected to see more of the same. Results generally held true to form, with VIP table game volume down 1.6% and mass market volume up 8.5% in the second quarter. That's a nice increase in the mass market but isn't anywhere near what Las Vegas Sands is doing on Cotai.
Overall, Wynn is pretty much holding steady in Macau until its new resort opens on Cotai in early 2016. Revenue was up 2.6% to $930.9 million, property EBITDA was down 4% to $290.1 million, and adjusted net income rose 10% to $152.9 million, or $1.51 per share. That's fairly strong, because holding steady or slight increases in revenue and EBITDA is about all investors can expect until its Cotai resort is ready.
The following graphic shows how important Cotai is from a geographic perspective and why Las Vegas Sands' figures were so much better. Las Vegas Sands, Melco Crown (NASDAQ:MLCO), and Galaxy have built new resorts there, and they're all growing quickly on Cotai, sucking the air out of the Macau Peninsula. That won't change until Wynn and MGM Resorts complete resorts there. You can think of it as downtown Las Vegas versus The Strip in the late 1980s.
Las Vegas was a lot better for Wynn, but it was affected heavily by luck. Net revenue rose 16.2% to $401.4 million, and EBITDA was up 65.6% to $135.7 million, but table game drop fell 4.8%, showing slowing gaming volume. The big revenue increase was due to a comparison to a very unlucky quarter in 2012.
Beyond gaming, non-casino revenue was up 3.9% to $302.1 million, and since non-casino revenue accounts for three-fourths of Wynn's Las Vegas revenue, this bodes well for the long-term picture.
Foolish bottom line
Like Las Vegas Sands, Wynn's results fell short of expectations, but the two companies are on two different paths. Las Vegas Sands and Melco Crown will continue to grow and take share as Cotai develops critical mass, while Wynn and MGM just hope to hold steady until their Cotai resorts are complete.
For investors (like me), the hope is that revenue and EBITDA will double when the Cotai resort opens, but it's a long wait until that happens. Until then, even mild growth is a slight positive for Wynn Resorts, and that's what we got in the second quarter.