Wynn's Macau Game Plan
On Sept. 5 Wynn Resorts will open its first casino and resort in Macau as part of its $1.2 billion project underway in the city. Analysts say the former Portuguese colony could overtake Las Vegas as early as this year as the world's largest gaming market. Grant Bowie, president and general manager of Wynn Resorts Macau, spoke to BusinessWeek Asia correspondent Frederik Balfour about the unusual challenges the group faces in the Macau gaming market. Edited excerpts of their conversation follow:
Will the revenue split between hotel and gaming be similar to that of your Las Vegas properties?
In Las Vegas, 40% of our revenues come from gaming. That's not going to happen in this market. And I don't think it's feasible to achieve in the midterm. It's a different environment. But the nongaming assets are going to change our penetration of the market. Macau's success is going to be created by finding more and more people who find gambling and other activities that fit conveniently together.
How are you promoting yourself in China?
It's not legal to advertise and promote gaming in China. Our main nongaming offices are in Hong Kong, Beijing, Shanghai, and Guangzhou. The key issue is: We are looking for customers with rapidly growing levels of disposable income, the people who buy high-end retail, who travel. We know there are somewhere around 200 million people on [the eastern seaboard of China]. That represents 80% of China's wealth belt.
What non-Chinese areas are you targeting?
Other key targets are Hong Kong, Taiwan, Korea, and Japan. Japan is looking very good for us. And Macau is not a place the Japanese have tapped into. We see northern Asia as our primary opportunity. Visitors to Macau from Western countries are only 8% of the total.
When I arrived here, there were 6.7 million visitors to Macau in 2003, down from the previous year, because of SARS. Last year there were 18 million. But we have seen a slight diminution of stay from 1.2, to 1.15, days per visit. Therefore Macau is a day-trip market. That is something we all need to address.
Who will operate the junkets to bring in high rollers?
It won't be the Vegas model. Here the agents provide the credit. With some agents under previous arrangements, there was a perception they may not have had appropriate associations. For us, it's simpler and more sensible to create new and different opportunities with new operators.
With all the concern about money-laundering in Macau now, how can you be sure the tour operators you're dealing with are clean?
We have created our own corporate investigation team. I won't talk about it in detail because that defeats the purpose of the structure. We are very aware of our obligations under U.S. and Macau laws.
About 65% of Macau's revenues come from VIP gamblers now. How will that change?
Macau is primarily a VIP market, because you could run relatively small operations and, under a monopoly, generate huge amounts of revenue and profitability. But when you scale up the business, there is a finite number of VIPs. One of our skills is that we portfolio-manage our market segmentation. More than 60% -- as high as 70% -- of our business will come from the mass market. That's the model we are looking at. Of our 500 tables, 460 will be mass market and 40 VIP tables.
What's the average take per table per day?
Across Macau, main-floor tables are doing about $7,000, and VIP tables could be doing $40,000. On a blended rate, it's $8,000 or $9,000 per day. Blended in Las Vegas, it is about $3,200. Some of the smaller joints are down to $1,500 per day. But the key issue is that the margin on mass-market tables is significantly higher than that of the VIP tables because of the cost of commission. The payments to the operators are significant.
What are slot machine margins?
About the same as a main-floor table in Macau. Here, machines are less than 3% of revenues [up from close to zero a few years ago].
Will Macau overtake Vegas?
It's clearly on the same scale -- with significantly less hardware.
What's your revenue projection?
By 2008 or 2009, it's entirely feasible we are talking about an $8 billion to $10 billion market. We have to give people reasons to come to Macau other than gaming. We have to get people to stay and spend time. There is a big correlation between making them stay and spending.
What are your staff needs, and is there upward pressure on wages?
Yes, but it's not uniform. With higher-skilled workers, we have seen 5% to 10% increases in the past 12 months. This includes chefs, IT workers, accounting, finance, and hotel-operation personnel. At the introductory levels, where we can train, there hasn't been that level of pressure on salaries.
By July, 2007, we will need 7,500 additional staff members. We are training dealers as we speak. If Macau goes from 1,450 tables to 4,500 tables -- as has been announced -- by the end of 2008, we expect to see some pressure [on dealer salaries]. Here the monthly base salary for dealers is between $800 and $1,000. In Las Vegas, a dealer gets minimum wage, but tips are a big component. They can make up to $70,000 a year.
How will the Melco-PBL deal [the two companies paid Wynn Resorts $900 million for a casino sub-concession] affect you on an operational level?
It creates even greater financial strength for us. We have a strategy of continuous investment in Macau, and this allows us to further enhance our investment in Macau.
We are already moving forward on additional properties in Macau, and it makes financing and development so much simpler.
What about the degree of prostitution in Macau?
It's not illegal. [But for us] it is an unacceptable activity. Those activities are carried out on other properties not because the operators have turned a blind eye but because they have said it is acceptable. If you say it's not acceptable, you put mechanisms in place to protect yourselves accordingly. It's the same as in any other city in the world.
Who will be the opening entertainment acts at the Wynn Macau when it opens in September?
That's Mr. Wynn's baby.