Vegas down, Macau up in the third quarter, Wynn Resorts says

By Liz Benston (contact)

Monday, Oct. 13, 2008 | 4:47 p.m.

Wynn Resorts expects to report third quarter operating income that's more than $30 million less than the same period a year ago, the company said today.

The decline was mostly attributable to factors that are unrelated to the economic downturn, though investors will no doubt see the report as more bad news for Las Vegas and the gaming industry. Wynn released the figures after the market closed and shares promptly fell 5 percent in after-hours trading.

The casino industry has been harder hit than most sectors by the volatility on Wall Street. Casino operators are crossing their fingers for a tourism rebound as they stare down ballooning debts and a slew of new resorts opening in the next few years.

Wynn Resorts is in a better position than some gaming companies because it has received financing for its next upcoming project, the Encore resort. The company recently negotiated deals with its lenders allowing the company to incur further earnings declines without being forced to pay higher interest rates on its debt.

Gaming companies are expected to report third quarter earnings that are just as bad, if not worse than earlier results given recent figures reported by the state Gaming Control Board and other sources.

Wynn, which operates the most expensive hotel on the Strip, issued the report to offer investors more guidance amid unprecedented market volatility.

The company's Wynn Las Vegas property is expected to report an operating loss of $2 million or an operating loss of $2 million in the third quarter compared with operating income of $35.8 million a year ago. Earnings minus certain expenses are expected to be between $68 million and $72 million versus $93.2 million a years ago, primarily because gamblers were luckier against the casino than expected and an increase in the company's bad debt reserves.

Table game betting volume rose 12 percent from a year ago while slots volume fell 12 percent. The property's average daily rate fell $10 during the third quarter to $272 and occupancy was off less than a percentage point, at 96 percent.

The company's Macau resort is expected to generate operating income of $57 million to $63 million in the third quarter compared with $39.2 million a year ago. Table games volume in its high-roller VIP segment rose 36 percent over that period, and revenue, as a percentage of volume, was 3.1 percent, slightly higher than a year ago.

The company will release official third-quarter numbers Oct. 30.