Wynn Resorts opens with highest room rates on the Las Vegas Strip

By Liz Benston (contact)

Tuesday, Aug. 2, 2005 | 11:06 a.m.

After opening April 28 with a blistering first five weeks, the $2.7 billion Wynn Las Vegas megaresort late Monday reported quarterly results that are more in line with what analysts have been expecting.

Some experts say they expect profit to widen in the coming months as the resort begins to attract a loyal following.

Wynn Las Vegas reported a loss of $35.2 million in its first 64 days of operation after paying $43.4 million in pre-opening costs.

Excluding those costs, the megaresort posted $8.2 million in profit in the second quarter ended June 30. The property's 8 cents per share in profit was in line with analysts' estimates.

Casino companies typically account separately for pre-opening costs, which are costs incurred before a property is operational.

Parent company Wynn Resorts Ltd. said the resort generated $201.1 million in revenue, including promotional expenses. That's about $3.1 million in revenue per day and less than the $4.1 million daily average the resort reported over its first 34 days of operation.

"As we anticipated after month 1, opening weeks had above-average volume which lowered to a more normalized rate in month 2," UBS Securities stock analyst Robin Farley said in a research note today.

Casino revenue was $98.7 million, or about 43 percent of the property's $226.1 million in gross revenue. Non-casino revenue such as rooms, retail, food and beverage was $127.3 million or 56 percent of total revenue.

The slots won an average of $304 per day from customers in the first month and $238 in the second month, still better than expected, Farley said. Tables won an average of $9,200 in the first month and $4,700 in month 2, just below estimates, she said. Overall, casino revenue in the first month was twice what was expected but in June was closer to expectations, she said.

The occupancy rate at Wynn Las Vegas was about 90 percent and the average daily room rate was $284.

In a statement, Chief Executive Steve Wynn said the property's revenue across various departments has been "outstanding" so far and that the property will focus on raising profit margins in the coming months.

"We deliberately and substantially overstaffed in order to offset our expected initial disadvantages in productivity," Wynn said. "We had more than 9,000 employees working with approximately 58 newly integrated operating systems."

Deutsche Bank Securities bond analyst Andrew Zarnett said the results "raise the bar" for resorts in Las Vegas.

In a research note Monday, Zarnett said room rates at Wynn Las Vegas easily topped the Venetian resort's average daily rate of $220 in 2004.

"We believe that as the property improves service and customers gain a greater appreciation of the Wynn experience versus its competitors (rates) and occupancy will continue to rise," he said.

The company broke ground on its Wynn Macau resort in June 2004 and is still on track to open it in September 2006. The majority of architectural and structural work is done on the resort, with 23 floors complete.

Shares of Wynn Resorts fell nearly 4 percent in midmorning trading today to $54.44 per share.