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Did Wynn Blow It With Wynn Palace?

Macau Ave Da Prosperidade

Wynn Resorts have released numbers for the ten or so weeks of operations at Wynn Palace, missing on analyst projections. You can read the earnings press release here. You may find our Cotai casino map helpful reference for this article.

The quiet firework display started early during the quarterly earnings call this afternoon, where Steve Wynn and his team of executives struck a defensive stance right out of the gate, explaining away lackluster numbers at Wynn Palace Cotai at every turn.

Wynn himself told analysts that the property is surrounded on four sides by construction projects, blaming the Macau LRT elevated railway project, MGM Cotai, Grand Lisboa Palace construction sites for obstructing access to the property. While it is true that Wynn Palace is surrounded by construction, when I was there six weeks prior to opening the roads were clear on all sides for automobile access.

Wynn Palace suffers, perhaps tragically, by being near or connected to absolutely nothing.

Wynn execs repeatedly complained about the street crossing at Avenida da Prosperidade and Ave de Nave Desportiva. This is a valid concern... tons of traffic blasts through here from the Airport towards the south side of Cotai and drivers who use this road have probably never seen any pedestrians trying to cross it, ever. They also discussed MGM construction barriers being in the way. This is hogwash. MGM Cotai is on the opposite side of the street 80 yards away and the barriers are limited to their property.

The problem here isn't construction debris or cross walks. The problem is they didn't design the property to fit customer behaviors.

In Macau, the weather makes walking from property to property - even ones right next door or across the street - a phenomenally taxing experience. Generally, gamblers in Macau travel from joint to joint using taxis, shuttle busses, connected interiors or the single air conditioned bridge that connects Sands Cotai Central to Plaza Macao and The Venetian.

Even if people walked from property to property, there is the issue of distance. The three closest egress points to other properties that are nearest to Wynn Palace are never used by pedestrians. The south casino entrance at City of Dreams is essentially a shuttle stop and the Hard Rock and St. Regis entrances are hotel valet porte cochere drive ways. Nobody walks out of either of these entrances. The next set of entrances are located in front of City of Dreams, the front of Sands Cotai Central and the The Venetian across the thoroughfare. Anything further away than that may as well be Nebraska.

Wynn Palace

On the Peninsula, the scale and surroundings are pedestrian friendly. On Cotai, it isn't. There is absolutely nothing between the main drag on Cotai and Wynn Palace. There are no stores to poke around in, no sculptures too ogle, no light shows to dazzle, no cafes, no pork jerky stands and no shade. In the parlance of Las Vegas, Wynn Palace is the Downtown Grand of Cotai, but at about 4x the distance and 90x the humidity.

I'll posit that the issue isn't chain link fence 40 yards away from the street crossing or cement road partitions or construction garbage or any other external influence, but instead Wynn's choice of location upon which to build and how they chose to interact with expected customer behaviors.

Steve Wynn often evokes the theory that a successful carnival barker "controls their portion of the midway." This philosophy has served him well with volcanoes, pirate battles, fountain shows and a giant mountai... uh... and the flaming fountain show at Wynn Macau. What Steve Wynn may have failed to realize is that Wynn Palace isn't on the midway. Wynn Palace is located in a corner parcel surrounded by a university, an airport, a storage yard, the uninviting ass ends of three resort projects, a seldom used tennis facility and eventually MGM Cotai. Building a gorgeous lake and a fountain show that nobody is going causally stroll past (a la Bellagio) does not create a midway, it creates a gorgeous lake and fountain show situated on an access road.

Imagine the horror. Steve Wynn builds the crowning jewel of his career - $4 billion dollar, six-years-in-design-and-development, Wynn Palace - and completely botches the most basic of resort concepts, the arrival.

Did he think that a fountain show would be enough to inspire the Sic Bo obsessed to get up from the table, walk through the labyrinthine maze that is Venetian out onto the street, passing Sands Cotai Central and City of Dreams and walk all the hell down there to go look at the fountain show? Anyone who has walked through any of these properties will surely vouch that getting out of them and onto the street is no easy task.

Until MGM Cotai opens, Wynn Palace is a one property island. The addition of Grand Lisboa Palace won't help much as it faces opposite direction from Wynn Palace. Perhaps Wynn Palace is the location that deserves both the fountain show and a mountain surrounding it.

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Comments & Discussion:

I think there's a lot here to digest.

Especially for folks used to Las Vegas, the way people move between Cotai properties may seem counter-intuitive but Chuck's right - they don't walk around. I was one of just a few people I saw walking on the streets cruising Cotai in June.

I don't know how you build a AC walkway between CoD and Wynn Palace but they should figure something out if they care about foot traffic. Which they seemingly didn't until this quarterly call.

Whether or not the location is ultimately (fatally?) flawed, today's call was clearly total spin in an attempt to make sure financial analysts don't downgrade $WYNN because they think the Palace ramp will take way longer or may never reach potential.

On the flip, the Wynn Macau/Encore location on the peninsula is epic - perfect spot.

Oh, I should also say - I don't believe that if Wynn Palace were imagined today, it would have been built out as a $4.4B resort. It might have been $3B or so but the current and predicted market doesn't justify $4B of spend in phase 1.

I'm super excited to check-in there in ~9 weeks but I think we'll be hearing about a slower-than-expected ramp at Palace for the next few calls at least. If the company is lucky, recovery on the peninsula will make up for it.

That call may have been the most eventful earnings call of the last year. There is a lot to comb through between the lines. How did none of the execs see that the municipal infrastructure wasn't keeping pace with resort construction until the numbers came in? Who didn't tell Steve that guests generally aren't going to walk to City of Dreams? Who didn't tell Steve that there will never ever be foot traffic of any meaningful amount from The Cotai Strip (trademark) to the fountain show?

Seems like Galaxy may have had the right idea all along... one ginormous centralized building with wings and arms surrounded by hotel towers that has been extended in phases.

Honestly - and I'm not trying to be an asshole - but is a part of this that Steve literally can't see so doesn't notice some of these little things?

Funny that the lesson they claimed they learned in Vegas - that the market was shifting from a big event-level attraction on the corner to being 'looking inside out', was not applied on Cotai where perhaps it matters even more than in Vegas.

Also, if the story about dodging traffic was true, trying to imagine how running for your life works when you're 70+ and have to have your hand on someone's shoulder to avoid obstacles. That must have been something to see... Honestly, glad they made it unharmed.

I was wondering when this conversation was going to come up. Regardless of past success, no one, including Steve, are immune to failure, but these guys have too much gaming knowledge not to make corrective changes. It may take months or years, but I have faith they'll make the needed changes. However, property location is permanent, whether it's a Downtown Grand level dilemma I guess we won't know until all the surrounding construction is complete.

Other points, I was checking virtually daily the hashtag #wynnpalace on instagram for the first 3 weeks or so after its grand opening and quite frankly was shocked to see how dead the Wynn Palace restaurants and mall seemed. This wasn't one picture or two, but probably close to a couple hundred photos from many instagram accounts that seemed to frame this narrative. Now I've heard the Chinese gambler's habits perhaps don't put a high priority on dining as it's almost an event in the Vegas market, but the lack of customers seemed very odd to me.

Looking at the property map, there really doesn't seem like there's much to do. After looking at the two flower displays and Jeff Koons sculpture which probably kills 15 minutes at best, what else is there to do there? Maybe the Chinese are not the kill time and enjoy a drink in a bar type, but outside of restaurants, I don't see any bar or public gathering place surrounding the lake either. That seems to be a missing feature in the place. Based on it's lack of attractions, I gather if you're not a gambler, then the Wynn Palace doesn't want you around.

I don't get going with another fountain show at Wynn Palace. Bellagio is a few years away from being 20 years old, people all over the world have seen these types of fountains, WETT design and others have produced these in mass on a global scale, sure they may not be as large in scale, but it's not as fascinating as it once was. As an opening visual statement the Wynn Palace fountains were very much of the same-o same-o. Hell, you got the same damn attraction at the other Wynn down the road.

Interesting that the other new resorts in town seem to be more of a Vegas model (Venetian Macao/Parisian Macao/Studio City), the Wynn Palace in some strange way is designed as if Chinese corruption crackdown never happened.

Just getting back to this comment now... Many thoughts.

1) I have no doubt that WP was conceived in a different era (duh) but interestingly, the scope was not revised as the economics changed. Perhaps a hope for future recovery or a determination that a change would fundamentally change the whole character of the place - but the resort designed for Macau 2011 opened in 2016.

2) Pretty much most of these places are 99% centered around gambling as the primary (for many, only) activity. I walked through the high-end shopping mall at Studio City - granted, it was right at the time the stores were opening - and I was *literally* the only non-employee in the facility. The only one. It was weird. My presumption is that all of these high-end stores survive on either a couple of spending sprees a month by super-high-rollers or they are actually running a loss but get free rent because they wany Prada and Brioni in all the ads and on the sign.

3) Despite the fact that the Bellagio fountains are 20 years old, many many people in this part of the world have never seen them and cannot afford to travel to the US. The fountains at WP are definitely an attraction, even if distilled for folks that have been to Bellagio.

Viva.

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