Wynn recognizing technology's role to increase profits, efficiency

August 02, 2016 3:09 AM
by

share

Steve Wynn sounds like a big fan of the doorways to increased efficiency and profitability that technology and sharp-eyed analytic efforts are making in the casino industry.

The Wynn Resorts CEO will be making use of these insights at the $4.2 billion Wynn Palace resort in Macau where the company will be working to overcome the limitations imposed by government decisions. The Wynn property expects to welcome its first guests Aug. 22.

Las Vegas Sands will debut its Parisian resort Sept. 13.

Add it up and that’s about $7 billion worth of spending by these two Las Vegas-based companies. There’s not much room for carelessness when the investment reaches such levels.

About some of the new technology benefits:

Wynn said he stopped by Sheldon Adelson’s Bethlehem Sands casino in Pennsylvania recently to take an up close look at what is known as stadium gaming.

“I saw what an alert management team did to offset limitations imposed politically on the number of table games. They used three or four dealers for roulette and blackjack and have 150 automated digital stations ringing the several live games.”

He called it a “much more efficient use of an allocation of tables because you get 150 players with four dealers.”

The casino has been able to take advantage of that and introduce people at lower minimum table limits to roulette and baccarat, people who might not have played those games were it not for the low entry-level afforded by this stadium concept.

“Now,” he said, “We use these games at the Wynn Macau and they’re being used in Singapore and around the country. I suspect that because of the payroll efficiency inherent in such concepts that we’re going to see more of it.”

As for the decisions concerning profitability that came out of Wynn’s recent review about where money is being made or, in some cases not made…

The results in Las Vegas and China have been “very, very enlightening,” Wynn said.

During a recent month – he did not say which month – the company looked at 180 tables allocated for VIP or junket action in Macau.

Sixty of those 180 tables were responsible for all of the earnings attributable to junket players.

“The other 120,” Wynn told financial analysts during a recent conference call to discuss the outlook and second quarter performance, “were either break even or in some cases losses after taking all costs into account. In other words, profitability was limited to a much smaller number group than one would have imagined.”

The result: “We changed Wynn Las Vegas and Wynn Macau… We changed the layout of the floor. We put our higher yielding games in more prominent positions. We put destination-type games in secondary positions. We changed the amount of free odds that we gave at dice games for what is commonly referred to as the 3-4-5 game.”

Wynn added, “We made a bunch of changes and in doing so we were able to overcome in terms of profitability what would have been a massive loss of top line revenue.”

The way Wynn looks at it, “The gaming industry is a little deceptive in many respects. A sharp analysis and a high degree of self-awareness can make a big difference.

“Casino table games in Las Vegas have a profit margin in the teens at best.”

But by taking hotel rooms away from the casino bloc and and selling them for cash, a department where margins are – like slots – in the 40s or so, the casino was able to boost the margins associated with table games to similar level.

“Which I think is unique in our industry,” Wynn said.

Also, comps and the various promotional allowances big players have always had access to are being awarded on current spending levels and not past performance.

“We were always in a position to operate our casino with less equipment than our competitors,” he said. “When we opened Wynn Las Vegas, we had close to 2,900 slot machines and we won $180 million a year. Today, even with Encore, we win well over $200 million with less than 1,800 machines. Technology has played a role in this and it is playing a role in table games as well.”