Caesars Entertainment (CZR) – Get Caesars Entertainment Inc Report and MGM Resorts International (MGM) – Get MGM Resorts International Report have taken a more-is-better approach to the Las Vegas Strip. Both companies own a variety of properties that cater to different levels of customers.
MGM, for example, has Excalibur and Luxor to reach lower-end customers and MGM Grand, Mandalay Bay, Bellagio, and Cosmopolitan at the higher end. It also has New York New York in the middle tier. The company, of course, does not break its resorts into tiers, but it’s fair to say it offers hotel rooms at its casinos at a variety of different price points.
Caesars has followed a similar approach. It owns its signature Caesars Palace, which contains the even-more-exclusive Nobu Hotel as a hotel-within-a-hotel concept. It has lower-end properties Bally’s (soon to be redesigned under the Horseshoe name) and Flamingo. And in the middle, it offers Harrah’s, the Linq, Paris, Cromwell, and Planet Hollywood.
Those aren’t all the casinos MGM and Caesars own, but both companies want to serve a wide range of customers.
Wynn Resorts (WYNN) – Get Wynn Resorts, Limited Report, which operates its self-titled casino hotel and the adjacent Encore Resort Casino, has instead opted to focus more on higher-end clientele.
The company, however, made clear during its first-quarter earnings call that it’s continuing to invest in its Las Vegas properties.
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Wynn Invested Through the Pandemic
Wynn Resorts Chief Executive Craig Billings talked about how his company has been recovering as Las Vegas has slowly come back from the pandemic.
“Encouragingly, March strength has continued into Q2, and our forward bookings also show no signs of a slowdown with our booking pace at pre-covid levels on substantially higher [average daily rates],” he said.
“Now, everyone on the call knows that Las Vegas as a market has experienced a rapid rebound over the past years. We certainly have been a beneficiary of that. But we’re also benefiting from our own efforts of the past several years.”
Billings said that the company has been recovering from the pandemic not just because the market has improved but because Wynn has been steadily investing.
“Even during difficult times, we invested in our people and our products. We opened Delilah. We completed a refresh of the lounges adjacent to the Lake of Dreams. We opened Casa Playa and we remodeled the Wynn Tower rooms,” he noted.
That’s a commitment the CEO expects to continue.
“We look at every inch of this market-leading property and ask ourselves, ‘how can we make it better? How can we make it return more?’ It’s a dedication to our craft that makes me incredibly proud, and it’s what drives enduring results,” he added.
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There’s plenty more to come for its Las Vegas property.
“We spent $96 million in the quarter, which was primarily in Las Vegas on the room remodel and the renovation of the theater,” Chief Financial Officer Julie Cameron-Doe said.
“We’ve got about $50 million to $60 million left on the room remodel and that should complete in June. We’ve got around $55 million to $65 million to come on the theater renovation, and that should open in the fall.
“In addition, in terms of maintenance [capital expenditure], we’re looking at around the $75 million to $85 million annually in Vegas.”
Controlling Costs, Luxury Experience
During the earnings call Cameron-Doe explained how the company has managed its expenses. She also outlined how the company’s Las Vegas business has recovered.
“Overall, our hotel occupancy was 77% in the quarter, with 62% occupancy in January, improving to 91% in March,” she said.
“Importantly, we’ve stayed true to our luxury brand and continue to compete on quality of product and service experience.”
Cameron-Doe made clear that Wynn had its eye on the bottom line but also wanted to ensure that any cost cuts were not visible to guests.
“The team in Vegas has done a great job of controlling costs without negatively impacting the guest experience, delivering adjusted property Ebitda margin of 36.1% in the quarter,” she said.
Operating expenditure excluding gaming tax per day “was $3 million in Q1 2022, approximately $160,000 per day below Q1 2019 levels due to lower head count and broad-based cost efficiencies in areas that do not impact the guest experience.
“We remain committed to maintaining a cost structure that appropriately balances margins and our exacting service standards.”
Wynn, which markets itself as a high-end property, has been able to keep its prices at (or above) historic levels despite the pandemic.
“With respect to ’19, we continue to grow rate significantly. And as far as volumes, we’re right on pace with ’19 volumes,” Wynn Las Vegas President Brian Gullbrants said.
Wynn has delivered a roughly $400-per-night average daily rate for its hotel rooms.
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