It went right until the last minute but there’s a deal in place between Wynn Resorts and the Culinary Union. When negotiations were gaveled finished this morning, Wynn was three hours shy of the Culinary’s 5 a.m. strike deadline. The new pact resembles those achieved with MGM Resorts International and Caesars Entertainment, especially in two crucial (and reasonable): substantial pay increases and reduced workloads for some staff. Big Gaming beat up on labor during and after the Great Pandemic, so it was time to give something back—and it did. Kudos to them and to the Culinary for a masterfully run campaign that said ‘nay’ to the union’s naysayers, including some corporatist lickspittles at the Las Vegas Sun.
The general tenor of post-negotiation remarks was that it is “the best contract ever.” Said Wynncore kitchen employee Araceli Villa-Lobos, “My favorite part of the contract is the successorship language. It’s important to me that we are secure and stable and that our jobs, seniority, and benefits are protected, no matter what the future might bring.” Added Wynncore housekeeper Artemisia Orozco, “I feel so happy that I am able to have a more manageable workload so that I can go home and have energy to spend time with my family, and with this new contract, I’ll have more money in my pocket.” Other key provisions of the contract are expansion of the safety-button program and the right to picket third-party restaurants. Expect to see a lot more of the latter.
Yesterday also marked Wynn Resorts’ 3Q23 earnings call and the results were slightly above Wall Street consensus, including cash flow of $530 million. Going forward, J.P. Morgan analyst Joseph Greff says, Wynn is “positive on Las Vegas as top-line trends remain strong through October with healthy [gross gaming revenue] and y/y RevPAR growth during the month.” No wonder. Wynncore’s 3Q23 performance included 90% occupany at $463/night, $607.5 million in table wagering (with 26% hold) and slot win per day of $771 … and if you do $200 per slot per day you’re considered to be doing pretty well. Coin-in and table wagering were respectively 85% and 41% higher than pre-pandemic levels. F&B was up 10% to $292 million, as well.
Vital Vegas reports that 10K tickets are still unsold for the Las Vegas Grand Prix but Wynn is sticking with the official line that demand is “robust.” Maybe for them it is. Wynn says there is “more credit lined up for the event than any other in the property’s history, with expectations to set a new record for hotel revenues for the 3-day period that should exceed the prior record by ~50%.”
As for the company’s all-important presence in Macao, Greff reported, “its business has strengthened in October, with mass drop 24% above October 2019 levels, 98% hotel occupancy, and healthy tenant retail sales.” Still, Greff dialed back his Las Vegas Strip expectations 9% to $823 million of Vegas-derived cash flow, but projected Macao table play to hit 110% of pre-pandemic levels next year. He called the company “strong” in high-roller play and “underappreciated” for its projects in development (Boston expansion, United Arab Emirates megaresort). Encore Boston Harbor, though, generated less than Greff expected: revenue of $210 million and $60.5 million in cash flow. Sumner Tunnel road work, which impeded casino-bound traffic, was partly to blame, although the quarter ended better than it began and “cost efficiencies are offsetting union related payroll increases.” Is that a euphemism for job cuts? Massachusetts and Nevada will also be the foci for WynnBet, which narrowed its negative ROI to $5 million during a drastic service curtailment.
Whereas Greff saw Wynn’s returns as “solid,” Deutsche Bank‘s Carlo Santarelli perceived “weakness.” He wrote, “Not surprisingly, the common refrain tonight, amongst those with whom we interacted, was one of confusion,” with the stock trading down despite phat numbers. Macao didn’t come through as strongly as he expected and as for Sin City, “domestic assets have been plagued with concerns about the future trajectory of the businesses, and as such, the beat was largely disregarded.” Still, he noted, $266 million cash flow from Macao was cause for hope and Wynncore did also far better than Wall Street anticipated. While predicting that the stock market would react adversely, Santarelli said “we would be buyers on weakness.” He set a price target of $124/share, far above where WYNN shares were trading at the time. The third member of our stock Cerebus, Barry Jonas of Truist Securities, had no comment on the quarter.
Much as predicted by CEO Bill Hornbuckle, a security-challenged MGM Resorts International shrugged off a September cyber-rape by hackers with too much time and malign intent on their hands. Yes, Las Vegas operations took a $195 million hit, regional casinos a $49 million one. But China-derived revenues surged 829% to $812.5 million, far more than offsetting any Strip weakness. Cash flow in Vegas was $714 million, 15.5% down from 2022 at the same time. There was still $212 billion in profit, quite a turnaround of a billion-plus loss the year previous. Greff, Jonas and Santarell all termed the quarter “solid,” although Jonas allowed that it was “noisy” because of the computer raid. Formula One biz is allegedly “robust” (you’ll hear that word a lot) and regional customers “resilient.” Despite having a $2 billion commitment to Japan and another $2 billion in New York State, MGM continues to splurge on stock buybacks: $527 million last quarter and $2 billion next year. Remember when those were illegal, as they’re a form of stock-price manipulation? Perhaps it makes Hornbuckle nervous to have $3.8 billion cash on hand, so some retail therapy was in order.
Customers have been forgiving of the Sept. 10 debacle, with 95% occupancy in October. MGM has also sold 10K tickets for the Grand Prix and the company is predicting $900/night rooms, 50% more gambling winnings “than any other event” (Greff), and $60 million in additional hotel revenue from Formula One Weekend. “The setup into 2024 is promising, with mgmt pointing to strength in bookings/rates and group pace into 1H,” Jonas wrote, although the Super Bowl was no more than “meaningful,” perhaps because attendance is skewing more toward corporate groups than the individual tourists that F1 was drawing. The Marriott International alliance is on hold until early next year, although MGM then expects to gain as much as $75 million/year in extra profit. Another tailwind is the soon-to-occur completion of the Mandalay Bay convention center upgrade, which is thought will sell 100,000 more room nights at MBay, Luxor and luxurious Excalibur at higher rates.
Santarelli led off by observing that it was “hard to read too much into [3Q23], given the cyber security event, difficult comparisons, high table hold in Las Vegas, and, while detailed financially, some assets leaving the portfolio.” However, he noted outperformance by BetMGM, in-line results from Macao, and higher-than-expected Strip and provincial revenues. Vegas casinos did $29 million in cash flow more than Santarelli anticipated, although the cyber issues blew an $80 million hole in cash flow. He did note headwinds, including difficult labor negotiations in Detroit, the unlikelihood that MGM National Harbor can repeat its outsized 4Q22 performance and “choppy resumption” of promotional offers when all the dust had settled from Sept. 10. BetMGM generated a $12.5 million profit (praise be!) for the quarter, although Santarelli expects it will be “considerably weaker” than its rivals going into the new year.
Greff noted “a slight shortfall” in Macao but termed 3Q23 “a healthy quarter” withal, even as he trimmed his price target from $61/share to $59. (Some of these year-end price targets, and we don’t specifically mean MGM’s, look awfully roseate as Dec. 31 draws nigh.) “It’s tough for us not to be excited about LV next year (and the 4Q23), but, to be conservative, we are reducing our 2024 land-based casino [cash flow] estimates for no other reason than to incorporate a fairly downbeat scenario and one that we’d like to believe is unaggressive and serves to de-risk estimate expectations going forward,” Greff wrote, reducing his Strip cash-flow target to an increment below $3 billion. He also felt investors were undervaluing MGM projects in Dubai (above), Osaka and New York City … although the last-named is hardly home and dry. Despite MGM’s cyber woes, Strip revenues of $2.1 billion were well above what Greff or Wall Street expected. Yeah, “better than expected” pretty well sums it up.
Photo credits: Shutterstock (Wynn Macau) and Greg Askins (MGM Grand).