Gaming’s 1st-quarter earnings season full of intrigue

Four times a year, publicly traded gaming companies open a tiny window into their financial world.

Sometimes, quarterly earnings reports are enlightening. Sometimes, they’re snoozefests.

Analysts and journalists nationwide, including my colleague Todd Prince and I, listen intently, hoping to glean some clue into what makes companies and their top executives click.

Every once in a while, the planets align and multiple calls have a common thread.

That’s what happened last week when three of the four big dogs on the Strip — MGM Resorts International, Wynn Resorts Ltd. and Las Vegas Sands Corp. — served up an earnings-call trifecta.

The timing of last week’s first-quarter calls couldn’t have been better with all the drama and intrigue within the industry. Is Wynn going to stick with its Boston project, or will Massachusetts gaming regulators hold the alleged sins of Steve Wynn against the company and give it the boot? Could MGM take on Wynn’s $2.5 billion Boston Harbor project? If so, what does that do to MGM Springfield in western Massachusetts? Unlike Nevada, Massachusetts allows its licensees to run only one casino, and MGM is counting down the days to Aug. 24, when the doors of its $960 million hotel and casino complex open.

One of the common threads of MGM, Wynn and Sands is that all of them do business in Macau, which is experiencing a cyclical business resurgence after a two-year slump.

Sands, the market leader in Macau, reported revenue from Macau hit $2.16 billion for the quarter. It wasn’t that long ago that hitting $1 billion for a whole year was a big deal.

MGM, which partners in a joint venture in Macau with entrepreneur Pansy Ho, reported net revenue of $596 million in China. The significant news there is that the company got its first glimpse of revenue generation from its new MGM Cotai property — one month of activity totaling $85 million.

Wynn also performed well in Macau, but what might have been most impressive was the 99 percent occupancy rate at Wynn Macau and the 96.8 percent rate at Wynn Palace. Pair that with the $291 average daily room rate, and you get an idea of how astounding that market is. Wynn’s occupancy and room rates in Las Vegas were 83.9 percent and $340, respectively.

While Wynn has capitalized on its Macau accomplishments, and CEO Matt Maddox has hinted at a reinvestment strategy there, the outlook on the Strip is far different than it was 2½ months ago.

Steve Wynn, in the company’s fourth-quarter earnings call on Jan. 22, said he wanted to press ahead with the Paradise Park lagoon project and start preliminary work on land across from Wynn Las Vegas acquired by the company in December.

Wynn is no longer calling the shots, having stepped down as chairman and CEO of the company on Feb. 6 after being accused of sexually harassing employees over three decades.

Maddox, in Tuesday’s first-quarter call, said the plan was financially “unsustainable” and indicated the company would go forward with one or the other. Bet on Paradise Park, which has a head start and which Maddox now says would be accessible only to hotel guests, to be the next project.

Meanwhile, MGM shared in its call that the negative impact of the Oct. 1 shooting and disruptions at Park MGM/Monte Carlo have been more detrimental to the company than initially thought. It would be interesting to hear MGM executives’ thoughts on those challenges and other potential influences, but they’ve rejected interview requests since the shooting tragedy.

All of these financial questions are swirling at a time when the next big international play is waiting in the wings: Japan.

Sands expects to be be one of the chosen developers there. MGM has lobbied long and hard in Japan and has rolled out a responsible-gambling program that could have major appeal with the Japanese public. Wynn is in the mix, too, and it has an important new investor, Hong Kong-based Galaxy Entertainment, which is well-respected in Japan.

And let’s not forget that Caesars Entertainment Corp. wants to be in Japan, too. Maybe we will hear more about that from that company when it reports earnings Wednesday.

The Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.

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