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Chris Sieroty

Size of Wynn's Macau play surprises industry analysts

6 June 2012

Wynn Resorts Holdings, LLC said Tuesday that its casino-resort project in China's special gambling district will cost $4 billion, just shy of the $4.4 billion price of Las Vegas Sands Corp.'s new Sands Cotai resort. Steve Wynn, chairman of Las Vegas-based Wynn Resorts, revealed the project's budget at a news conference following the annual shareholder meeting of the Wynn Resorts subsidiary, Wynn Macau Ltd. The project's $4 billion cost was considerably higher than the $2.5 billion and $3 billion industry analysts had expected. "No ... The cost hasn't gone up," Wynn told reporters. "When we first said what we thought we would spend, it was strictly a horseback comment on what a hotel might cost." Wynn said the cost estimate was made before it was decided the complex would have 2,000 hotel rooms, 500 gambling tables, 10 restaurants, shops, a spa, meeting rooms and a nightclub. The 6-million-square-foot development will be built on 51 acres of reclaimed swampland and will take almost four years to complete. It will include an eight-acre lagoon fronting the property where visitors will be able to boat in air-conditioned gondolas imported from Austria. Wynn said the new Wynn Cotai project will be financed by a mix of equity, debt and cash flow from Wynn Macau's existing businesses. He refused to confirm reports that a $1.5 billion loan had been approved, saying the company has $2 billion in cash and a very strong balance sheet that would keep financing costs low. Macau's economy has boomed and casino revenue has surged since the government ended a four-decade gambling monopoly in 2002 and allowed foreign operators in. Gaming revenue jumped 42 percent last year to $33.5 billion, five and a half times bigger than the Strip. Sheldon Adelson's Las Vegas Sands is also heavily invested in Macau with four resorts, including three on Cotai. Shares of both Wynn Resorts and Las Vegas Sands, which have struggled in recent weeks, moved higher Tuesday. Shares of Wynn Resorts gained $2.82, or 2.87 percent, to close at $100.99 on the Nasdaq Global Select Market. Las Vegas Sands shares gained $2.34, or 5.48 percent, to close at $45.03 on the New York Stock Exchange. MGM Resorts International shares rose 51 cents, or 4.9 percent, to $10.92 on the NYSE. MGM Resorts operates the MGM Grand Macau and is seeking approval for its Cotai hotel-casino project. With its latest multibillion-dollar project, Wynn Resorts is hoping to increase its revenues in the former Portuguese territory, the only region in China where gambling is legal. More than 70 percent of Wynn Resorts' $1.3 billion first-quarter profit came from its Wynn Macau subsidiary. Macau, the world's largest gaming destination, reported 7.3 percent growth in its May gambling revenues, the slowest expansion rate recorded since July 2009. Macau's Gaming Inspection and Coordination Bureau said casinos collected $3.26 billion during the month. Meanwhile, Wynn said his company's new property could provide a return on investment despite the "troubled state" of the world's economy. He said the European crisis was "totally unpredictable," while the U.S. economy "is, at best, spotty and irregular." "The world is an unsettled place, China happens to be one of the more stable stories at the moment, but even here, in the PRC (People's Republic of China), there are questions of about a slowdown or a change," Wynn said. "We don't see it here yet. Macau is sort of special in that regard."