Wynn’s big surprise; T-Mobile disappoints

As though seeking to steal the thunder from T-Mobile Arena, the ever-clever Steve Wynn used yesterday’s earnings call investor showcase to roll out a new project. If you have a spare $500, then use it to play Wynn Golf Club as soon as you can: Wynn Resorts is going to grind up at least some of the beautiful course to build a lagoon (one mile in circumference and something very much like this) with a white-sand beach where guests can wind-surf, fronting a thousand-room hotel with additional meeting space (250,000 square feet of it), but no casino. Wynn is expecting to engender additional revenue, however, by charging guests to use the amenity. (Steve Wynn giveth, Steve Wynn taketh away.) Saying the lagoon would “reinvent Las Vegas,” Wynn professed indifference to gamblers, saying, “I don’t give a damn if they put a nickel in a slot machine. I want them to pay my admission, I want them to stay in my rooms — I want them to drink my booze and eat our food.” According to our research department, the attraction “will offer [free] ice cream and a fireworks show every night.”

The new project is nominally “subject to board approval” but, c’mon, we know who’s calling the shots here. “We don’t know many who surmised this,” wrote a surprised Deutsche Bank analyst Carlo Santarelli of the project’s specifics. Including the price of the lagoon ($40 million, tops), the tab on Wynn’s new baby is expected to be around $1.5 billion, with construction starting in mid-2017. That counts as frugality in Las Vegas, considering the sums of money that are being thrown into Resorts World and Alon. (The only other property with water rights comparable to Wynncore‘s is Bellagio, so Wynn will have a near-unique asset.)

If Wynn Resorts meets its expectations of free cash flow from its new retail mall at Wynncore, from Wynn Palace in Macao and, eventually, from Wynn Boston Harbor, it should be able to build the Wynn Paradise Park & Lagoon without having to take on new debt. Wynn is bullish on the return on investment it expects from Wynn Palace (approximately 15%) and Boston Harbor (at least 18%). We don’t see those ROI numbers very often in the gaming sphere anymore. Some of the company’s confidence can be inferred from the extra bang for the buck it gets from its gaming positions. In Macao, it has 13% of the gaming capacity on the Peninsula, where most of the casinos are, but 235% of the fair share for that sector. On the Las Vegas Strip, it has a 175% fair share. And it expects to have as much as 193% fair share of the Boston market, meaning that Penn National Gaming‘s Plainridge Park had better brace itself for a hard hit, albeit several years down the road.

JP Morgan analyst Joseph Greff was unsurprised when Steve Wynn mooted an August 8 opening for Wynn Palace — yet another delay — and said that the company still had an unspent $496 million in the kitty. Wynn seems resigned to a 2019 opening for Boston Harbor but expects gross gaming revenues of as much as $900 million of a $2.8 billion market. All in all, we’d say Wynn is doing well for him/itself.

* We’ve not sampled the consensus reaction to the opening of T-Mobile Arena but a reliable S&G source, while impressed with the sightlines, said the seats were half-full “at most … and the acoustics were horrible,” with spoken remarks rendered completely unintelligible. The Hyde Lounge got mostly high marks (a rare win for Sam Nazarian) but MGM Resorts International missed a monetization opportunity by having its vendors in The Park shut down early, missing the post-event crowd. Given the opening-night entertainment (The Killers and old, played-out Wayne F. Newton), we can’t say we’re surprised by the weak draw but the acoustical problem, if it persists, could be a real problem for MGM down the road, since intends to rely heavily on T-Mobile as a concert venue.