Image source: Wynn Resorts.
Continue Reading Below
There's no question that Wynn Resorts has taken the brunt of the fall in Macau gaming revenue over the past two year. High end players aren't gambling like they used to and Wynn Macau's location on the Macau Peninsula doesn't have the same kind of draw as the burgeoning Cotai Strip. For investors, understanding how Wynn's business has suffered and what the future looks like is key in deciding how bright the future looks for the stock.
The VIP market has been hit hard
Wynn Resorts has always been a company who has catered to the high end of the market. In Macau, that was no different. The company attracted the biggest gamblers and junket operators and that was the core of its business. And that's been a problem as the VIP market collapsed over the past two years.
Data source: Wynn Resorts.
You can see that the win per table game actually went up from a year ago. But the number of tables declined and that's where the numbers got bad for Wynn Resorts.
Mass market players aren't Wynn's game
It's in the mass market where Wynn's flaws really start to show. Below are the same statistics as above, but for the mass market segment.
Data source: Wynn Resorts.
You can see that not only did win per table per day fall to only about half of what a VIP table makes, but there were more mass market tables.
Wynn Resorts' customer isn't naturally the mass market player that traditionally visits Las Vegas Sands' casinos in Macau. It's a higher level of player, and those players in particular were hit hard by China's corruption crackdown, weakening economy, and other macro factors.
It's also important to keep in mind how Wynn compares to other operators in Macau. Las Vegas Sands is the biggest operator there, and its Sands Macau resort, which is on the Macau Peninsula with Wynn Macau, only generated $9,708 in table win per day in the first quarter. No matter what segment you look at, Wynn is crushing that.
On Cotai, The Venetian Macau generated $12,107 in win per table per day, and Four Seasons Macau led the company with $15,792 in win per table per day. But even that was below the average of $15,828 at Wynn Macau overall. In other words, Wynn is making a lot less money than it was a year ago, but it's making significantly more than Las Vegas Sands, a main competitor.
How this affects Wynn Palace
This dynamic becomes very important for Wynn Resorts in the opening of Wynn Palace. If the company can pull VIP players of very premium mass market players from competitors on Cotai, it could make for a very successful resort. But most competitors have focused their Cotai properties on the broader mass market, which could mean lower revenue per table.
Visits and stays at Wynn Palace will be just as important as how many people enter the building. If Wynn can attract the right players, there's still a lot of money to be made in Macau. But there's a lot of competition for those highly profitable players, and competitors won't let them go easily.
The article The Numbers Behind Wynn Resorts' Struggles in Macau originally appeared on Fool.com.
Travis Hoium owns shares of Wynn Resorts, Limited. The Motley Fool owns shares of Wynn Resorts, Limited. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.