Shares of Wynn Resorts (NASDAQ: WYNN) have been volatile for most of 2019 primarily due to the company’s high exposure to the Macau Gaming Market. The ongoing demonstrations in Hong Kong and increased regulatory oversight on junket operators have impacted Macau’s overall business outlook. Trefis analyzes the importance of Macau’s VIP gaming segment for Wynn Resorts in an interactive dashboard and finds that this segment contributes nearly 40% of the company’s casino revenues.
A Quick Look at Wynn Resorts’ Revenue
Wynn reported $6.7 billion in Total Revenues for full-year 2018. This included four revenue streams:
- Casino: $4.8 billion in FY2018 (72% of Total Revenues). This segment includes income from regulated gambling activities at Wynn properties. Macau and Las Vegas properties contribute 90% and 10% of the casino revenues, respectively.
- Rooms: $752 million in FY2018 (11% of Total Revenues). This segment includes income from visitors/tourists who lodge in Wynn properties. Macau and Las Vegas properties contribute 35% and 65% of the room revenues, respectively.
- Food and Beverage: $754 million in FY2018 (11% of Total Revenues). This segment includes income from restaurants at Wynn properties. Macau and Las Vegas properties contribute 25% and 75% of the Food and Beverage revenues, respectively.
- Entertainment and Retail: $427 million in FY2018 (7% of Total Revenues). This segment includes income from retail stores at Wynn properties, per different agreements. Macau and Las Vegas properties contribute 54% and 46% of the Entertainment and Retail revenues, respectively.
Macau Gaming Market has remained fairly stable, thanks to mass market gaming
- Macau’s consolidated gross gaming revenues declined by 4% to MOP 70 million ($8.5 billion) during the third quarter of 2019.
- The declines were primarily due to the shrinking VIP Baccarat business as a result of increased scrutiny of the city’s junket operators.
- VIP gaming contributes nearly half of Macau’s gross gaming revenues but its share fell by 10% in the third quarter.
- However, mass market gaming, which is a more profitable business for all casinos, has surged by 20% in 2019.
Wynn Resorts earns nearly 40% of its casino revenues from VIP gaming
- Wynn Resorts’ generates nearly 90% of its casino revenues from Macau.
- In 2018, we estimate that VIP gaming and mass market gaming contributed 41% and 59% of the company’s casino revenues from Macau.
- While VIP gaming drop has observed consistent declines in recent quarters, Wynn Resorts’ mass gaming segment has been observing strong growth.
- However, Wynn’s 14% share of mass market gaming is unlikely to provide a quick recovery to the company’s top line in the near term.
- (In Q3, Total Mass Market GGR was $3.6 billion, Wynn’s mass market drop was $2.6 billion, approx. casino win = $2.6 * 20% => $524 million, Wynn’s share = 14%)
- Moreover, comparing this year’s fall in Macau’s VIP gross gaming revenues to the declines in 2015, it seems the bottom has been reached and recovery should occur going forward.
- However, we expect Wynn Resorts to continue facing headwinds from Macau as nearly 40% of its casino revenues come from Macau’s VIP gaming segment.
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