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Wynn Resorts sees profit decline in quarter

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Steve Marcus

The Encore is shown to the left of the Wynn Las Vegas on the Strip.

Updated Tuesday, Oct. 27, 2009 | 11:29 a.m.

Wynn Resorts Financial Information

  3Q 2009 3Q 2008 % Change 2Q 2009
Revenue $773.1 million $769.2 million .6% $723.3 million
Net income $34.2 million $51.2 million -33.3% $25.5 million
Net income per share 28 cents 49 cents -42.9% 21 cents

Wynn Resorts saw its profit fall during the third quarter as gamblers continued to spend less and operating costs increased due to the addition of Encore Las Vegas.

During a third quarter conference call to investors and analysts, Wynn Resorts Chairman and Chief Executive Officer Steve Wynn discussed the current operating environment in Las Vegas, developments in Macau and the arrival of Garth Brooks.

The company reported net income of $34.2 million, or 28 cents per share for the quarter, compared to net income of $51.2 million, or 49 cents per share in the same quarter of 2008.

Net revenue for the quarter held steady at $773.1 million compared to $769.2 million in the third quarter of 2008.

“In the fourth quarter of last year… as we were getting ready to open Encore, we were saying ‘Boy, this is really tough timing.’ We thought that 2009 was going to be really horrible,” Wynn said. “But if things continue the way they are, we are going to equal or beat what they were in 2008 in Las Vegas and Macau.”

At its Las Vegas operations, Wynn Resorts said its revenue was up 10.2 percent but earnings before interest, taxes, depreciation and amortization were flat because of the cost of operating the Encore resort on the Strip. The $2.3 billion Encore, which opened in December 2008, wasn’t open during the third quarter last year.

Gaming revenue in Las Vegas was $144 million during the third quarter of 2009, flat with the third quarter of 2008.

Occupancy was 83.9 percent during the quarter compared to 96.1 percent during the same period of 2008. Average daily room rates fell from $272 to $210.

Weekday occupancy is still low as the meeting and convention business remains slow in Las Vegas, Wynn said.

“Businesses in America are down and they are cutting back and it’s affecting Las Vegas,” Wynn said.

Wynn, who has partially blamed the decline in the convention industry on President Obama’s remarks about Las Vegas, said little about the administration during the conference call.

The company said its food and beverage revenue in Las Vegas increased 29.8 percent to $96.8 million in the quarter as a result of the additional 12 food and beverage outlets in Encore.

Retail revenue was $21 million in the quarter, 8.6 percent below last year. Entertainment revenue increased 3.9 percent to $16.6 million from the third quarter of 2008 primarily because of the contribution of headliner performances during the quarter, the company said.

“The most difficult to predict part of my business has been the entertainment business. It’s very tricky; it’s very expensive,” Wynn said during the call. “The most powerful, the most desirable of all forms of entertainment is the fascinating power and charm of an individual performer on stage.”

While the cost of having Brooks at the resort is an expensive one, Wynn said the company expects to see a boost in revenue during the fourth quarter because of it. Brooks’ first five weekend shows sold out just hours after tickets were released this past weekend.

“People are coming to Las Vegas who haven’t in a very long time,” Wynn said of those who booked tickets.

Wynn also weighed in on other developments in Las Vegas, calling unfinished projects like Echelon, Fontainebleau and Cosmopolitan “disconcerting.”

“When you look at Fontainebleau, you’re reminded of the chaotic state of some businesses in Las Vegas,” Wynn said.

Aside from Wynn Las Vegas and Encore Las Vegas, Wynn Resorts owns a 600-room hotel and casino in Macau and is in the development process of the Encore at Wynn Macau.

The company said the current budget for the expansion project is $650 million and as of the end of September, it has incurred $375.6 million associated with construction costs at the resort. While Wynn said the company has opened pieces of the resort over the last few days, Encore Macau is expected to be fully complete by April 2010.

“It’s the first building that we had the luxury of building in Macau where we could take advantage of what we’ve learned about our customers,” Wynn said. “The building is specifically designed to the real sensitivities of the people that come to Macau who spend the real money.”

As for new developments in Las Vegas, Wynn said, “Until we understand what’s going on in this country, we will not be expanding anything here. Period.”

Shares of Wynn Resorts were down nearly 10 percent in midday trading.

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