Wynn shares rise, buoyed by Macau resort

By Liz Benston (contact)

Thursday, Oct. 30, 2008 | 4:43 p.m.

Shares of Wynn Resorts rose more than 13 percent today, ahead of an earnings report that revealed a cash-rich company that hasn’t been as battered by the downturn as some of its competitors.

Earnings at the company’s only hotel in Las Vegas fell 25 percent in the third quarter but rose 15 percent at its resort in Macau, which opened September 2006 in a region that is booming with gamblers flowing from mainland China in spite of recent visa restrictions imposed by the government there.

Overall profit rose 14 percent in the third quarter compared with the same period a year ago and revenue increased 18 percent.

During a conference call, executives said the company is focused on lowering debt amid the downturn but isn’t laying off workers or cutting corners.

“We’re not a company that gets to bounce around and change staffing levels and compromise service,” Chief Executive Steve Wynn said, calling his company “elite.”

However, the company is hiring fewer people at its Encore resort, which opens Dec. 22 next to Wynn Las Vegas. More of Encore’s more than 5,000 employees will come from Wynn Las Vegas, allowing Encore to hire more workers later on if business is better than expected.

Wynn also said the downturn will likely delay future resorts in the pipeline, including additional resorts in Macau and on more than 100 acres now occupied by an 18-hole golf course at Wynn Las Vegas.

Wynn Resorts will generate enough earnings from Encore and the 2010 opening of a like-named 404-suite resort in Macau without needing to initiate those other projects, he said.

Some analysts say Wynn is weathering the downturn better than many because the company has less debt and an opportunity to pay down more with future earnings. Also recently, the company drew out hundreds of millions in cash from an Encore bank account without spending it in case any other banks go under in the turmoil on Wall Street.

Wynn said he expects to take some business from competitors when his properties open, as they have in previous downturns.

“We drive this company on oversaturated, overbuilt markets where we can skim off the top,” he said. “More people come to town and check us out. People think we’re prettier ‹ and the next time people stay with us.”

Wynn says his well-to-do customers will eventually open their wallets and return to old habits.

“I think what we’re seeing is almost a freeze,” Wynn said. “Like a muscle that’s flexed, you can’t hold it very long."

At Wynn Las Vegas, third quarter casino revenue fell 4 percent on lower gambling volume. Hotel revenue fell 4 percent on declining room rates, though occupancy fell less than a percentage point, to 96 percent. The property has been discounting rooms for returning customers midweek, when business is slower.

Food and beverage revenue rose 3 percent and entertainment revenue fell 6 percent on the closure of the resort’s "Spamalot" show in July. Entertainer Danny Gans will begin performing at the Encore Theater in February.