As the world grappled with the COVID-19 pandemic, Macau’s gaming industry faced unprecedented challenges, with tight restrictions severely impacting the market. However, with the easing of travel restrictions at the beginning of 2023, the industry witnessed a remarkable turnaround. According to Fitch Ratings, the mass-market baccarat segment, particularly the premium mass market that Wynn Resorts focuses on, has bounced back to levels seen before the pandemic hit.
Mass-market baccarat revenue in 2023 was at 91% of the figures in 2019, and in a striking sign of recovery, the fourth quarter of 2023’s figures even surpassed those of the fourth quarter of 2019. Visitor numbers and airline seat availability have yet to return to their pre-pandemic prominence, indicating potential for further revenue growth moving forward.
Wynn Resorts’ operations in Macau generated a respectable $910.6 million in the fourth quarter alone. Of this, Wynn Palace contributed a significant $524.4 million, marking yet another quarter of strong performance, with revenue from mass-market operations and property EBITDAR margins in the third quarter of 2023 already surpassing those seen in 2019.
Fitch also observed Wynn Macau’s strategic shift, gradually pivoting towards the lucrative premium mass market as it moves away from its earlier focus on the VIP sector. Going forward, Fitch projects an improvement in Wynn’s EBITDAR leverage, forecasting it to drop from just under 7x in 2023 to a low-5x by 2025. This improvement is expected to stem from continuous growth in both Las Vegas and Macau, alongside a surge in EBITDA and partial debt reduction initiatives.
Wynn Resorts is also anticipated to stay free cash flow (FCF) positive throughout the forecast period, bolstered by a strong liquidity position, with $2.8 billion in cash, $792 million in short-term investments, and $737 million available through the Wynn Resorts Finance LLC credit facility.
Despite substantial ongoing projects in Las Vegas and the United Arab Emirates, and a potential venture into the New York casino market, Fitch predicts that Wynn’s credit position will continue to strengthen.
Within the past year, Wynn announced a pullback in U.S. operations, exiting several states, including Massachusetts last week. However, the Nevada operations, primarily in Las Vegas, remain active and have seen a 16.3% revenue increase to $2.48 billion in 2023.
On the sports betting front, Penn Entertainment recently acquired Wynn Interactive Holdings’ New York sports betting licenses, paving the way for Penn to roll out ESPN Bet in New York come 2024.
Craig Billings, Wynn’s chief executive, commented on the exceptional performance of their Las Vegas operations, highlighting Wynn’s status as a leader in luxury and as the premier destination for high-end clientele attending major city events such as Formula 1.
Macau’s gaming sector’s remarkable resilience and Wynn Resorts’ strategic market moves paint an encouraging picture for its financial recovery. With increased tourism and an improved global health situation, the industry is well-positioned to capitalize on the renewed flow of customers eager for the entertainment and luxury that Macau’s casinos are world-renowned for.
