Lost: Steve Wynn’s marbles

Oh Christ, Steve Wynn, grow up already. Busy Wall Street analysts were held hostage to a 433-word talk-radio tirade while they were probably itching to write up quarterly earnings reports. When other CEOs might have been bragging on an “amazing second quarter,” beating the Street’s cash flow estimates by $72 million and achieving a 32% profit margin, Wynn threw a hissy fit that would shame most toddlers. Confronted with an innocent Bill Lerner question about condos on the Cotai Strip™, Wynn — to borrow an old line from Nevada historian Michael Green — started “sounding like a guy broadcasting from his bedroom on public access on the far end of the AM dial in Buttflap, Alabama.” Regardless of whether the “weird business philosophy” of the White House is the “pure socialism” of Wynn’s Red Scare rhetoric, one can’t help but notice that he speaks truth to power … only when he needn’t fear any repercussions.

Take China, to whose leadership Wynn has shamelessly toadied in the past and to whom he continues to grovel. He blew sunshine up Peking‘s ass yesterday, saying $2.5 billion Wynn Cotai “should help broaden the appeal of Macao to make it a destination resort,” even as the land-grant process creeps along at its usual sub-snail velocity.

Don’t tell me it doesn’t chap Wynn’s ass in private that he’s got fully completed Cotai designs, “shovel-ready” and yet seemingly forever in limbo. If Clark County took this long to sign off on Wynn’s developments, he’d be ripping the county commissioners a new one, you can be sure of that. (Cripes, if Macao isn’t a “destination resort” with Venetian Macao, Wynn Macau, City of Dreams and new Galaxy Macau, when is it going to become one?)

We find the [Chinese] political environment, the regulatory environment, the human resource environment that we’re in to be absolutely delicious,” Wynn warbled like an emperor’s pet nightingale.

Mind you, in the Capitalist’s Paradise that is Communist China, Wynn can’t own land — and his Cotai acreage could be pulled back at a moment’s notice. He can’t extend credit to “whales” (a made-in-Nevada restriction, but still …), has to cope with government limitations on the number of laborers he can hire — and where he can get them. Oh, and access to Macao from Chinese provinces can be curtailed upon the central government’s whim. Imagine if Wynn Resorts had to contend with a governmental diktat limiting the number of times customers could drive in from California.

No pesky trade unions overseas, much to Wynn’s satisfaction. His migrant workforce is “anxious to please” and not impertinently asking for things like the right to merely see its tips being divvied up. (Even local conservative blogger Heidi Harris was irked by Wynn’s hypocrisy.) Besides, the business climate in totalitarian states in preferable to El Steve’s mind because it’s “predictable.” So is prison life.

As Fox News pointed out, there was a $1.4 billion disconnect between the parallel-universe narrative spouted by Wynn and the quantifiable story told by his 2Q11 earnings … in which Wynncore‘s cash flow came in 35% above one investment house’s estimates. J.P. Morgan analyst Joseph Greff attributed the latter, in part, to a high-end clientele that’s “outperforming” Wynn’s competitors in its non-gambling spending habits, with room revenues up 17%. And that it doesn’t hurt the bottom line that Vegas has gotten “rational” (read: stingy) with comps. Wynncore’s convention business, about which Wynn wrung his hands back in late ’08, looks strong through the rest of 2011 and into 2012. If corporations are “frightened” to spend money, somebody forgot to tell their convention bookers. On its present course, Wynncore is on pace to far overshoot Wall Street projections for 2011 — levels that weren’t supposed to be hit until 2013. Heck, Wynn is flush enough to pay a $0.50/share dividend on August 11. I guess the sound of fear is: Ka-ching!

(All the financial data I see supports Paul Krugman‘s counter-analysis. To wit: “cash-rich corporations see no reason to invest that cash in the face of weak consumer demand.”)

In Macao, both VIP play (+52%) and mass-market gambling (+26%) were way up from last year, and holds were very impressive. Expectations for Macao are so giddy that Wynn’s stratospheric Macanese numbers still came in under what J.P. Morgan analysts had expected. Even in hard-hit Vegas, Wynncore did much better than anticipated in 2Q11, net revenues increasing 23% in every meaningful category except slot handle and win,  which are mired in a two-year slump.

Maybe the jacked-up hold percentage, 1.5 points higher than when Encore debuted, is driving slot players away. Management itself was pleasantly surprised by $240/night ADRs. One could cite many additional metrics — like the Garth Brooks factor — but it’s plenty obvious that Wynn is beating his competitors like a drum.

When Wynn says he could add 10,000 jobs locally under a different administration, he’s clearly drunk his own bathwater once too often. The proverbial “pent-up demand” for Vegas isn’t out there. Just ask Jim Murren. Who is building on the Strip right now? Nobody, that’s who. Why? Because tourism levels and consumer-spending habits still don’t warrant it and are unlikely to for some time. If Steve Wynn honestly felt he could monetize an extension of the Wynncore convention center, he’d be doing it already, sparing us the Hamlet-like posturing. Oh sure, Caesars Entertainment makes some periodic rumbles about Project Linq, but a Ferris wheel and some shops are pretty small potatoes in the grand Vegas scheme of things. This city is still struggling to assimilate the supply glut created during the bubble years.

Does anybody besides Wynn seriously think that Boyd Gaming, Sheldon Adelson (left) and Carl Icahn are sitting on half-finished condo and resort properties because they’re scared stiff of slightly higher tax rates and financial regulation? For that matter, although his company’s got $1.7 billion in the bank, in precisely what U.S. growth market does Wynn propose to spend it? Perhaps he should be directing his wrath at politicians in Massachusetts, Texas and Florida who have thwarted his expansionist goals … and those of his rivals. But no, he sings them sweet love songs. After all, speaking truth to those powers might have negative consequences, too.

Wynn, the man and the company, are doing better than most in the industry by concentrating in the luxury niche — without being overexposed — and by hewing to sound business practices. Regardless of how the rest of us are faring, Wynn and Wynn Resorts are beating the odds. They’re also rolling in dough. (Say, how many jobs did purchasing $13 million in antique vases create?) Take a chill pill, Steve.

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