Different locales call for different strategies in the casino business.
When Macau was the buzzing international growth market as recently as 2019, most American casinos sold investors on their plans to expand in China.
But a couple of years of pandemic lockdowns, and uncertainty about gambling licenses amid a crackdown on corruption in the country's gaming sector, have splashed cold water on some of the hotter expectations in the region.
Take Wynn, for example.
Wynn Resorts (WYNN) has two casinos in Macau, the Wynn Macau and Wynn Palace, that were the company's most profitable resorts. But both resorts lost money for the company in the final months of 2021.
Just three years ago, Macau accounted for 70% of Wynn's business.
While Wynn never abandoned Las Vegas, the company definitely put its hometown on the back burner while it focused its efforts abroad.
During the company's most recent earnings call, recently installed CEO Craig Billings gave some insight into the move.
Las Vegas' High Cost of Success
Las Vegas as a gambling hub is different than any other city in America for numerous obvious reasons.
However, the city is also different than other gaming communities, according to Billings.
"Las Vegas is a very different market compared to regional markets. Potential operational deleveraging in an economic downturn is more extreme [in Vegas] as we saw in 2009, and the need for continuous and sizable reinvestment in order to stay relevant is high," Billings said of the city.
Just how high?
Billings said Wynn is back to regular, pre-pandemic maintenance costs of between $75 million to $85 million a year.
Beyond core maintenance, Wynn is reconstructing the Le Reve theater at Wynn Las Vegas at a cost of about $120 million, about $30 million of which it spent through the end of 2021.
Wynn is also renovating the Wynn Las Vegas tower rooms with a total budget of $220 million, of which $120 million has been spent.
"I never want us to be in a position where in the midst of a downturn, we have to choose between our world class service and escrowing rent or between paying rent and investing in our property,” Billings said, calling the company's service its "calling card."
Meanwhile, maintenance costs at the company's property in Boston are only $20 million, on a property that just opened in 2019.
Instead of using capital expenditures on maintenance in Boston, Wynn plans to spend between $200 million and $250 million to expand the property over 2023 and 2024.
In contrast, maintenance costs in Macau are expected to total between $60 million and $80 million in 2022.
Wynn Hasn't Soured on Macau
Macau is in flux.
While the government has begun renewing casino licenses, Bloomberg reports that the local government is likely to demand new investment from companies like Wynn in order to keep operating there.
But that hasn't dimmed the company's hopes for a long, fruitful business in the region.
"As we have seen before, when Macau is more accessible, demand snaps right back. Long-term, I remain incredibly enthusiastic about the prospects for Macau," Billings said.
"Between the shift to higher-margin premium mass customers and to customers who have more motivations to visit than just gaming, the market is evolving, and we are prepared to adapt and grow our business as we embrace those changes,"
