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Reaction: Wynn Palace opening brings positives and negatives

Maca

WynnPalaceMacau
u’s newest casino, Wynn Palace, had its grand opening on Monday, and analysts have outlined mixed thoughts on how the casino will perform.

The casino, situated in Cotai, was unveiled by Wynn Resorts Chairman of the Board and CEO Steve Wynn and the ceremony was officiated by Macau Special Administrative Region Chief Executive Chui Sai On.

The resort boasts 1,706 furnished rooms, an eight-acre lake and fountain show, two floral sculptures and art displays that have been assembled over a six-year period and cost $125m.

It is reported that the resort cost $4.1bn to develop.

Wynn Palace certainly takes Macau to the next level in terms of delivering a product that is of higher quality than has ever been seen before in IR developmentGrant Govertsen


Wynn said: “Wynn Palace is arguably the most beautiful hotel in the world, which is a wonderful thing to be able to say.

“But it is not in London, Paris, New York or Rome. It is in Cotai, in Macau, and sits here for all the world to come and see. It's our gift to the community, to the public. It will be here forever and it's perhaps unlikely we'll see a place of this scope and artfulness in our lifetimes again."

Wynn Palace opens at a difficult time for the Macau market, which has seen its monthly casino gross revenue decline year-on-year in all of the last 26 months, with the H1 2016 total being 107.79bn patacas (£10.24bn), down 11%.

Grant Govertsen, Managing Director, Equity Research at Union Gaming Securities Asia, told Gambling Insider: “Wynn Palace certainly takes Macau to the next level in terms of delivering a product that is of higher quality than has ever been seen before in IR development. The question remains whether it will be enough to generate incremental demand for the market.”

Morgan Stanley Equity Analysts Praveen K Choudhary, Alex Poon and Thomas Allen said in a note:

What we liked: The casino is tastefully and elegantly built for customers with aspiration. It definitely has the best hardware, which should be complemented by Wynn's culture of service quality (consistent Forbes awards). The project is fully ready, retail space (200k sq. ft.) is let with rental rate of 15%, and hotel booking is over 80% full in the first few weeks. Hotel rates command a premium to most hotels in Macau and are 20-30% above its own Peninsula properties.

Our concerns: The product caters to higher-end customers (VIP and premium mass), which have not been growing in the last two years. Also, it could cannibalise its own property in both the premium mass and VIP segments (overlapping junkets including Suncity, Guangdong and Tak Chun). Despite superior product, Wynn may be disadvantaged by having less smoking tables than peers.”

Morgan Stanley’s research shows that Wynn Palace will rank fifth on the list of Macau casino mass table offerings with 285 tables, 253 behind leader Venetian Macao, based on Q2 2016.

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