Wynn Resorts is Staying the Course with Its Gaming Strategy
Over the last week or so, the largest publicly traded U.S. gaming companies have been engaging in the quarterly ritual of reporting and discussing their most recent three-month earnings, explaining their companies’ performances and projecting their futures. And, increasingly, what financial analysts hear about are the various new and innovative directions those companies are heading in chasing success.
At the top of the list is the pursuit of what’s perceived as gaming’s new pot of gold: Online sports wagering, often followed by forays into media, both broadcast and digital. Some companies, such as DraftKings, tout even less traditional business endeavors, such as that company’s online marketplace for digital collectables called NFTs.
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Meanwhile, when Wynn Resorts reported its third-quarter financial results on Tuesday, there was no mistaking that Wynn is steadfast in understanding its place in gaming.
Wynn Resorts is a casino company.
Yes, Wynn has a digital division. Yes, Wynn operates online sportsbooks in seven states, is an iGaming player with WynnBET Online Casino and was one of nine operators to win a license in New York this week. And, by the way, Wynn reported a third-quarter loss as have a parade of gaming companies during this earnings season.
In the case of Wynn, that loss was $166.2 million but it also was an extraordinary improvement from the 2020 third quarter when the COVID-19 pandemic and attendant shutdowns devastated the Wynn balance sheet for a loss of $758.1 million.
The company has casinos in Las Vegas, Macau and in the Boston area. The Las Vegas business was brisk in the 2021 third quarter generating $183.4 million of adjusted property EBITDA on $476 million of operating revenue. And that happened while generating business and gaining market share, not trimming expenses, CEO Matt Maddox said.
’Only People Make People Happy’
Interestingly, while many gaming companies seem preoccupied with extolling the efficiencies of their technology, Wynn’s Maddox spent a fair amount of time reflecting on his company’s culture in terms of people relating to people.
During the pandemic shutdown, Wynn continued to pay its employees. Given such a gesture, Wynn’s front-line employees express their loyalty in how they treat customers, and those customers are willing to pay the prices for the service that a luxury property commands.
Anecdotally, Maddox referenced the standing that the Wynn company has earned by noting that, in an extremely tight labor market, openings for four food server positions drew more than 1,000 applicants. And 22 jobs for casino cleaners attracted more than 2,000 applicants.
“One of the most important aspects of a successful business is culture.” Maddox said. “People talk about that, but we all know in our business, only people make people happy. And if your employees believe that their future will be better because of the place they work and that their employer is going to take care of them when times get tough, you've harnessed the power of the universe.”
Attracting High-End Customers
The two Wynn properties in Las Vegas and elsewhere are unapologetically ultra-luxury. During the depths of the pandemic but while casino-hotels on The Strip were still trying to attract customers with discounted prices, Wynn attempted doing the same briefly. That ended after an ugly melee in the Wynn Encore made national news. Wynn raised prices quickly.
In the hospitality industry recovery from the pandemic, Wynn has planted its flag where the company made its reputation, delivering a world-class casino resort experience.
“Overall, our hotel occupancy reached 83% in the quarter, with 93% occupancy on weekends. Importantly, we stayed true to our luxury brand and have resisted dropping rate with overall (average daily rate) reaching $392 during the third quarter of '21," Wynn CFO Craig Billings said.
Putting an exclamation point on room rates, Maddox noted that on a recent weekend the average rate was $780 in Las Vegas. “And we're at 99% occupancy,” he said.
As an example of changes at Wynn that are attracting high-end customers, Maddox mentioned an upscale supper club, Delilah’s.
“If you call right now, you can't get in until February,” Maddox said of the restaurant. “I've never seen anything like it.”
During the earnings call, Maddox addressed his decision to step as Wynn CEO early next year but also said he was staying with the company in some key capacities, especially in connection to Macau. Billings will be the new CEO.
Maddox took over as CEO in February 2018 during a corporate crisis when company founder Steve Wynn resigned amid allegations of sexual misconduct involving employees. Wynn has denied the allegations but his departure was quick. Billings started with the company in 2017 as CFO and treasurer.
Where Does Sports Betting Fit In?
Maddox and Billings both noted that while the company will be a player in online sports gambling, it wasn’t eager to join the free spending that other operators have resorted to for customer acquisition — including in the New York online market with WynnBET.
“While sports betting remains an exciting, high-growth market and will potentially be a $30 billion to $40 billion (total addressable market) over time, the marketplace is proving to be very competitive with multiple operators deploying meaningful marketing dollars, driving high cost per acquisition and significant customer bonus offers,” Billings said. “In light of this dynamic, we are intentionally pivoting our approach to scaling, taking a more measured and long-term focus to grow a healthy and sustainable business.”
Meanwhile, Wynn Resorts is bullish on the bricks-and-mortar side of gaming.
In October, Wynn Las Vegas had its best month on record, highest EBITDA, and highest margin, Maddox said.
And the company is holding onto its luxury pricing because, as Maddox pointed out, “people like the quality.”