Wynn Resorts (WYNN)
Q2 2010 Earnings Call
July 29, 2010 4:30 pm ET
Stephen Wynn - Founder, Chairman, Chief Executive Officer, Chairman of Wynn Macau Limited and Chief Executive Officer of Wynn Macau Limited
Ian Coughlan - President of Wynn Macau
Andrew Pascal - President of Wynn Las Vegas LLC
Linda Chen - Director, President of Wynn International Marketing Ltd and Chief Operating Officer of Wynn Resorts Macau
Matt Maddox - Chief Financial Officer, Principal Accounting Officer and Treasurer
Previous Statements by WYNN
» Wynn Resorts Ltd. Q1 2010 Earnings Call Transcript
» Wynn Resorts, Limited Q4 2009 Earnings Call Transcript
» Wynn Resorts Q3 2009 Earnings Call Transcript
John Strzemp - Chief Administrative Officer, Executive Vice President, Member of Gaming Compliance Committee, Chief Financial Officer of Wynn Resorts Holdings and Executive Vice President of Wynn Resorts Holdings
Shaun Kelley - BofA Merrill Lynch
Dennis Forst - KeyBanc Capital Markets Inc.
David Katz - Jefferies & Company, Inc.
Robert LaFleur - Hudson Securities Inc.
William Lerner - Deutsche Bank Securities
Chris Woronka - Deutsche Bank AG
Mark Strawn - Morgan Stanley
Joseph Greff - JP Morgan Chase & Co
Robin Farley - UBS Investment Bank
Steven Kent - Goldman Sachs Group Inc.
Good afternoon, and welcome to the Wynn Resorts Second Quarter 2010 Earnings Call. Joining the call on behalf of the company today are Steve Wynn, Marc Schorr, Linda Chen, John Strzemp, Matt Maddox, Andrew Pascal, Scott Peterson; and on the phone, Ian Coughlan and Robert Gansmo. [Operator Instructions] Now I would like to turn the call over to Mr. Maddox. Please go ahead, sir.
Thank you, and good afternoon, everyone. Before we get started, I just need to remind everybody we will be making forward-looking statements under the Safe Harbor Federal Securities Laws. And those statements may or may not come true. With that, I'm going to turn it over to Steve Wynn for opening comments.
Not much to say that isn't explained on our press release except this. Business is slightly better in Las Vegas. We're noticing a little improvement because we've been working on our hotel mix. And we opened up the Beach Club on May 30, which was right in the last section of the quarter. But that's helped and been profitable and is ahead of plan. And it also has a related nightclub called Surrender. It had a minimal impact on our other clubs. So that segment of our business is quite incredible in Las Vegas. And that's in sharp contrast to the softness in the market, the nightclub and younger-person recreational market represented by Tryst, Blush, XS, Surrender and the Beach Club. That's a business that could do over $150 million for us, with a profit margin in the mid-40s. So we're really happy about that.
We opened up Encore on April 22 or 21, so we had the benefit of it for all but 40 days. Its impact on our operations in Macau was, interestingly enough, accretive. There's a number that I mentioned on these conference calls in the past that I consider to be the critical number in understanding the gaming industry in any given jurisdiction. That number we refer to as fair share. And you measure the percentage of equipment you have in a market like the Strip or Macau, and then you measure the percentage of revenue. If you have the same percentage of revenue as you do of equipment, then you have your fair share, and that's a one-to-one. To the extent that, that number is less than one, then you are a dormitory for your neighbors and a net donor to the neighbor. And if it's more than one-to-one, then you are a net receiver, and you've made a dormitory out of your neighbors.
Prior to the opening of our Encore facility, we had 8.5% of the equipment and 10.5% or -- and 13% of roughly of the revenue. After, we didn't add much equipment, we went to 10% of the equipment, but we went to 17% of the revenue or 16% or 17%. Our ratio before Encore was 1.6. And I think that was by far the best in the market with our 500 tables now. Interestingly enough, we would have been very happy if we dropped down to 1.5. In fact, we went to 1.62. So not only do we add more equipment, but it increased our fair share ratio slightly. And that meant that our tables and our facility were well received. And that's, of course, gratifying for us. We're on the way to having the biggest year in the history of this company or any other company that I've been involved in, in my 42 years.
So we're very happy. We had a board meeting a few minutes ago in this company. And after months of work, I was very proud to show the board of directors the Cotai project, which is now assembled. We now know what it's going to look like, what its components will be, where its romance and excitement will come from and how it will attempt, and I think very successfully attempt, to gain the upper hand competitively in a very competitive market, which is Cotai and Macau.
So all of that, we’re underway now. We're finishing the back of the house, and we'll be starting the drawings for the foundation now almost in a matter of weeks. So we're a little ahead of schedule in where we thought we would be in Cotai. The design development period went much faster than it's gone in my career in the past, when we did all those other hotels, like Golden Nugget, Golden Nugget of Atlantic City, Beau Rivage, Treasure island, Mirage, Bellagio, Wynn, Encore in Las Vegas, Wynn in Macau and Encore in Macau.