Outspoken casino magnate Steve Wynn conducted a highly entertaining conference call for analyst Wednesday slamming the Chinese government over their Macau crackdown on gambling. Wynn is openly very frustrated with the government in Macau and their new "ridiculous" table restrictions.
Here are quotes from Steve Wynn we have taken from the call:
We don't see any major change or new development in Macau other than all of the comments we have made in the past about the confusion, the ambiguity with what we face in terms of tables in the upcoming months. We are about 170 days before the opening of the Wynn Palace, which is the most significant event in the companies near future. Based upon what's happened to Galaxy and what we expect to happen at Studio City which just today found out how many tables they are going to have, just a few weeks before they are opened... the confusion and rather mystical policies governing the assignment of equipment in these new hotels which are tremendous diversifications away from pure gaming into all other forms of non-gaming... the confusion about the tables and the governments position in this regard has made it very difficult to plan for employees and other aspects of the facility.
I mention this early in the conversation because it has become a major issue in Macau as to the impact of government policy on planning for employment, promotions, hiring and compensation. None of us are really clear on what our environment is going to be like going forward and it makes planning and adjusting almost a mystical process. This is the major topic in executive conference rooms as people try and resolve their planning on human resources in the Macau market.
Our construction of our hotel in Macau is on schedule. We are scheduled for a March 25th opening. The results of the last quarter are consistent with the previous quarter and that is that half of the VIP business is gone and may be shrinking. It's caused us to review our credit policies and our attitudes towards junket operators. Some of them have gone out of business and others will go out of business, which means you have to focus very intensely on the policies you will employ in regards to the credit that the junket people enjoy.
In Las Vegas we are the principal beneficiary of international business. So if a segment of the international market is impacted for extraneous reasons or external reasons like a change in government policy in China, then we would be the principal victims and we would suffer the most, and that's exactly what happened. Any change in our earnings in Las Vegas is strictly a reflection of a drop in Asian baccarat business. If anything the problems in China are causing us to refocus our energies here in America even more intensely.
The notion that a person who spent two and a half billion dollars would not know how many tables they are going to have three weeks before they open is so preposterous that it is worthy of comment. How in the world do we underwrite the job security of the local workforce in Macau and keep the promise of promotions and better opportunity under these circumstances? I'm at a loss to answer that question and as we go forward in the planning of Wynn Palace I am hopeful that we will be able to press the issue and get much more clarity from the leadership of the local government.
We always adjust to the situations. We don't sit by and allow ourselves to become victims of anything and over any aspect of our operation that we have any control. My long-term view of our operations in America and China is still positive. It's the short-term that's bewildering. It's bewildering enough to complain about it, but as far as adjusting here and in China it's a constant process. I was in China last week and I kept my people up until two in the morning on the subject of VIP... and then we reconvened at 8 AM again and went for another six hours. I think all together we spent 15 hours in the most intense kind of consultation with every smart person we had. Adjusting is what we do.
These facilities are enormously diversified (In Macau) but they depend on their survival, their payroll, their operational viability on the gaming equipment that was always part of the whole construct. Here in America we would never have a Las Vegas with the diversity we've had if the city told us how many tables we could spread. The table cap is the single most counterintuitive and irrational decision that was ever made. Here we are spending billions of dollars creating non-gaming facilities and then arbitrarily someone says well you should only have this many tables. No jurisdiction ever has imposed that kind of logic on us. What's it's done is turn our human resource planning inside out and upside down. You can tell by the tone of my voice the extent of my frustration on this point.
My frustration on behalf of our colleagues at Melco who made commitments for 400 tables. Why on earth they have to deal with half as many is beyond anything I can understand in the 45 years of experience I've had. It isn't good for Macau, it's not good for the citizens of Macau. It's not good for the tens of thousands of employees of Macau who looking forward to promotions and raises and all kinds of benefits that accrue because of the viability of these resorts.
We build tens of thousands of rooms and restaurants and attractions, but we have to say you are not allowed to gamble because we can't have the tables. That's one of the main reasons they come to Macau. If you wanted to undermine and scuttle the viability of that industry you would put in table caps. You can tell I'm a tremendous critic of that decision because I don't understand it in terms of anything that in my 45 years of experience explains it. To see the predicament that the Melco people find themselves in because they made covenant agreements is dazzling to me. I've complained to the government about this and tried to understand what the rationale was for this thinking and I've never gotten a reasonable answer.
What we are getting now is unemployment. The junket operators are the beginning of it. I don't know whether the local government has been intimidated by the unions or something... but the unions are going to be acting up about this subject before it's over. We as operators are going to have to stand there on the sidelines bewildered at the position that the industry finds itself in.
Hopefully, the leadership of the community will intervene and correct this aberration that threatens the employment security of the citizens of Macau. When you say that the government has made favorable statements, it's time that they put their actions where there rhetoric is.
Macau has transformed itself by the projects that have been built in direct response to the suggestions made by the leadership of the local government. Understand that the reasons these extraordinary non-gaming attractions exist is because the damn casino is the cash register. That's what drives Las Vegas. None of my hotels that my organization has built have even half the revenue from gaming but make no doubt that none of them would exist if we had been given a table cap... because the people that stay in the rooms want to go down and play sometimes. Besides eating, entertaining and shopping and going to the spa they want to play or they wouldn't come to Macau.
We support these extravagant non-gaming diversification's with the casino. That's the truth of it. That's the irrevocable, undeniable, inexorable truth of it. The gaming allows the non-gaming to flourish and that's the lesson that we are trying to penetrate the leadership of Macau. The very thing they want requires that they let us run our business based upon our long experience everywhere else. That's where the heart of the frustration is. Somehow we haven't been able to get that truth really accepted.
I'm hopeful that before we have demonstrations or real angst... I had an employee approach me in Macau and he said, Mr. Wynn, is the government angry at the unions and trying to cut back on gaming employees? That's the kind of stuff going around in the staff dining room. This confusion is not isolated to management, it's now spread to the employees. It's a very unhealthy situation both socially and politically. When I'm asked questions like that I don't have a clear answer and I want to clear this up before it gets out of hand.
At the present time unemployment in Macau is almost zero. The government wanted us to build highly diversified non-gaming structures. We went and did it for ten billion or more if you count all of us, the largest being us at four billion. How in the hell can you run those places without employees? What are we supposed to do, shut down a floor, close a restaurant, curtail the very thing that they told us they wanted to see happen? Without employees... it's so ludicrous that it defies rational conversation.
Some of these places are going to close locally creating unemployment, we can absorb them in the industry. Still, the extent of the new operations are so comprehensive that in order to operate them appropriately you still need more people to work. The spectacle of these buildings being unattended is beyond imagination. It will have dire consequences. You only get one chance to make a good impression (in the hospitality industry) and if you bogey that it's a long time to fix it and maybe never. What's important is that the Macau market as it is viewed by the world never loses its viability. That will impact the community of Macau in a very negative way and that's one of the things that concerns me a lot.