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As their Macau casinos remain open but continue to struggle financially from government-imposed coronavirus restrictions, Wynn Resorts CEO Craig Billings said he never thought he would see the day when his company's properties in Las Vegas and Boston were out-earning those casinos in the Chinese enclave.
Billings, who succeeded Matt Maddox as Wynn CEO earlier this year, admitted Macau has been a disappointment as the company prepares for the renewal of its casino concession later this year.
But Billings said he was pleased with the results in Las Vegas, even as international tourism, especially visitors from China, has not fully recovered.
“Vegas has been a tremendous story,” Billings said.
“There's a narrative around here that Vegas consistently reinvents itself,” he said. “I actually don't think that's the case per se; what I think the town does very very well is find additional sources of demand and then bolt them on.”
Despite broader macroeconomic uncertainty, Billings said Wynn's two Las Vegas properties were still posting record average daily room rates, excellent occupancy and “everything is firing on multiple cylinders.”
Derek Stevens, owner of Circa Resort & Casino in downtown Las Vegas, joined Billings for a keynote panel on Tuesday (October 11) moderated by Contessa Brewer of CNBC during the annual Global Gaming Expo (G2E) at The Venetian Expo.
Billings said Las Vegas was still only seeing a “trickle back” from international markets, while China was still a “big unknown."
He said Southern Nevada was not immune from macroeconomic pressures in the U.S., but Wynn was less impacted by high gas prices or inflation than other markets due to its “aspirational luxury customers.”
Brewer followed up by asking Billings if Wynn Resorts was in a “buying mode” or in this interest rate environment if it was more a case of “wait and hang on to your balance sheet.”
Billings reminded G2E attendees that interest rates have not always been as low as they were over the course of the past number of years.
“It's about prudent capital management. If you're building or reliant on construction financing, you have a property that's ramping, I think the game has changed a little bit.
“You're going to need more equity and therefore to get the same returns, you're going to have to have an asset that's more productive. But for us, it's about prudent capital management over the cycle.”
Stevens indicated he was unsure Circa, which opened in 2020, could be built today under existing economic conditions.
“We're fortunate,” Stevens said. “We put our equity in and then we had our construction loan [when] interest rates and liquidity in the markets were a little bit different four years ago and three years ago. So today I'm glad we did a refinance and we've got a stable business that's up and going.”
Stevens said liquidity and higher interest rates continue to be a concern, along with supply chain issues, particularly in construction.
“I would definitely be more conservative today than maybe what I was three years,” he said.
Stevens and Billings also agreed that safety, cybersecurity and water resources were the biggest issues facing Southern Nevada.
“Safety is a societal issue and Las Vegas is not immune to broader societal issues,” Billings said.
Not far from where Billings and Stevens spoke, eight people were stabbed on October 6 along a sidewalk near Wynn Las Vegas. Two people died in the attack.
“I think when you combine the security presence that exists within these buildings, the Metro police force here and the surveillance infrastructure that exists up and down the Strip, it’s hard to find a safer location than the Las Vegas Strip,” Billings said. “So we should keep that in perspective.”
Stevens agreed, saying public safety is the number one issue on everyone’s mind both on the Las Vegas Strip and in Downtown Las Vegas where Circa is located.
He noted that Fremont Street in Downtown Las Vegas recently imposed a 21-and-over age limit, which has improved security.
“Obviously it’s tough for me to stand up and say that because something could happen tonight … but we’re dedicating more resources than we ever have to safety and security in Las Vegas,” he said.
As for cybersecurity, Billings said at any given point in time, there are “millions of bots out there trying to poke holes in your security infrastructure.”
“It’s just a fact of life,” he said.
Traditionally in the U.S. land-based casino industry, “for regulatory reasons, a lot of the data was stored on premises. And that's still the case today. So in that case, it's about hardening the perimeter of your network. And we started doing that we put a ton of resources into that beginning in 2014, after a competitor of ours was, was very famously hacked.”
In 2014, Iran hackers inserted malware into the computer networks of the Venetian and Palazzo that destroyed almost three quarters of the company’s Las Vegas servers. The attack is reported to have cost the company $40m to recover its data and build new systems.
“I think what's changing is the advent of digital,” Billings said, referring to online sports betting and internet gaming.
“So now you have applications that are out in the wild passing personal information to third parties, from third parties back to servers that the operator owns. That's, I think, the next frontier and it requires a lot of vigilance.”
“It's not rocket science, per se, but it requires a real focus and real dedication,” he added. “The industry is scaling very rapidly. So this is something that you have to constantly monitor.”
