By floating the Wynn Resorts Macau IPO on the Hong Kong Stock Market, Steve Wynn hopes to become more tightly integrated with the Chinese gaming and financial communities. The Financial Times reports that the offering makes Wynn Resorts the first American-based company to establish a presence on the Hong Kong Stock Exchange. This strategy helps Wynn not only become more successful with the Chinese market in Macau over the near term, but in Las Vegas over the long term.
photo credit: アランWynn Macau's $1.5 Billion IPO is scheduled for October 9 on the Hong Kong Stock Exchange
Steve Wynn has always understood the relationship between product, operations, marketing and financing. He used these skills to redefine the Las Vegas Strip 20 years ago and is now positioning Wynn Resorts for success over the next 20 years by embracing Chinese financial markets with the Wynn Macau IPO. After making the gaming experience look a lot more like an entertainment experience, Wynn clearly understands that the bottom line depends on gambling and is working hard to make certain his casino company is properly positioned in what is now the world’s largest gambling market.
Wynn’s timing could not have been better, with the IPO taking place just as the Macau gaming market again shows signs of life after a deep decline resulting from the global financial crisis. CLSA Hong Kong gaming analyst Aaron Fischer projects future growth rates for Macau gambling revenues in the low teens for the 2010 to 2012 period. Additionally, it is rumored that visa restrictions for mainland Chinese visitors may be easing, providing Wynn with valuable exposure to a growing clientele with huge upside potential.
Steve Wynn has always embraced the Chinese market, first with Mirage Resorts – particularly at Bellagio, and now with Wynn and Encore. As outbound travel from China grows, Wynn obviously hopes that exposure to a five-star, Las Vegas style gaming experience in Macau will translate into long term brand recognition and guest conversion in Las Vegas as Chinese gamblers begin to travel in greater numbers to the west.
Additionally, the Macau operation provides Wynn Resorts with invaluable experience in catering to the Chinese as a primary market (mainland chinese represent 65% of Macau visitors.) These lessons can only make Wynn’s Las Vegas operations even more highly attuned to the needs and nuances of the Chinese gambler, particularly in the five-star segment. With deep Chinese product, marketing, operational and now financial experience, Steve Wynn’s integration of Chinese perspective and sensibility within his organization can help him penetrate and sustain a presence as a casino operator that truly understands the Chinese player. This is important as 90% of Wynn’s revenue in Macau comes from gambling.
With Las Vegas seeing a future focused on digesting the new supply of hotel rooms provided by the MGM Mirage City Center project and the future completion of projects such as the Boyd Gaming Corp Echelon, Fountainebleau and Cosmopolitan, Wynn’s Las Vegas operations need all the help they can get from the Chinese market. With the Chinese government owning 23+% of US Treasury Securities (as of June, 2009) Steve Wynn’s tighter linkage with Chinese markets looks like a sure bet over the long term.
By leveraging his presence in Macau with an entry in the Hong Kong Stock Market, Steve Wynn has cleverly engaged his relatively small casino company as higher quality, more Chinese-centric, and most importantly, more successful in the minds of both high rolling Chinese gamblers and financiers. Those two groups are extremely valuable to Mr. Wynn, both as customers and potential future investors.
It would also be interesting to know to what degree the Chinese gambling and financial communities overlap as both are known for wagering large amounts of money – either at the tables or in the markets. It is my guess that Steve Wynn has a very good feel for that dynamic – better than most.
About Robert Cole
