The impact of the coronavirus outbreak is affecting more than the health of people worldwide, with thousands infected and a death toll that's already exceeded the SARS epidemic from 2002. It's hitting the global economy hard, including the casino market in Las Vegas, especially the Wynn resort chain.
On Feb. 7, while Wynn was making its fourth-quarter financial statements public, the company revealed that it is losing up to $2.6 million a day in foregone revenue at two casinos it owns and operates in China. The two establishments and 40 other casinos operating in Macau were shut down by the Chinese government as a measure to curtail the spread of the virus.
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The company, headquartered in Las Vegas, where it owns Wynn Las Vegas, reportedly the world's largest five-star resort and casino by the Forbes Travel Guide, did not report how it will affect operations in the Nevada metropolis. Latest reports have it that revenues at Wynn Las Vegas increased by three percent, which added to the company's fourth-quarter revenues which stood at $1.65 billion.
That's a huge wad of cash to be sure, but the results indicated a drop of two percent over the same period in 2018, meaning they'll be leaning more heavily on places like Las Vegas to bring in the dough. Needless to say, their next quarterly statement is going to take a huge hit.
Two Wynn casino properties shut down in China
On Wednesday, Wynn discovered that its two Macau casinos, Wynn Macau and Wynn Palace were closed indefinitely, although a few restaurants were still allowed to stay open, while a very small number of suites were still available for booking.
Presumably, its employees are still getting paid, since Wynn CEO Matt Maddox stated that much of the incurred costs due to the shutdowns are tied to labour. Some 12,000 employees work at the Wynn establishments in Macau. While they wait for an announcement concerning when the Wynn properties will open its doors, the company stressed the well-being of its staff as a top priority.
“I’d like to commend the government of Macau and China for the decisive action they continue to take to contain the coronavirus,” said Maddox. “We’re in daily conversations with the government, and they’ve been terrific partners.”
Top brass confident Wynn will bounce back
But the longer Wynn waits, the more cash will leak out of company coffers, although Craig Billings, the company's chief financial officer, said that they have enough reserve cash to plow through the doldrums without having to resort to any drastic cutbacks.
“We have a ton of liquidity,” he said to Forbes. “We have a couple billion dollars of availability between cash and revolver in Macau. That’s more than sufficient to last for, really, any period of closure.”
It also didn't help that the closures took place during the busiest times of the year, near the end of Lunar New Year celebrations, two weeks of revelry and more gambling than usual. Optimistically, Maddox predicted that once the virus has run its course, Wynn's Macau operations will bounce back better than ever. "Tourism is one of the first things that rebound with events like this because people want to get out and move around," he said.
Other Las Vegas companies reporting losses in Macau
The news isn't all bad, considering a few of Wynn's Las Vegas-based competitors are in the same boat when it comes to Macau. Establishments like MGM and The Sands are also based in the China territory and both reported feeling the impact of the virus on their overseas casinos.
MGM's two Macau casinos are costing its parent company $1.5 million a day, claimed its top brass, which won't look good on the books for the first quarter of 2020. Adding to the uncertainty surrounding Macau, MGM CEO Jim Murren inexplicably called it quits.
Meanwhile, The Sands didn't report any hard numbers, but one executive claimed that the Macau shutdown will result in revenues being 80 percent less than expected. That's a hard hit considering nearly 65 percent of The Sand's business comes from Macau revenues.
Coronavirus big blow to Macau economy
Macao at last count reported 10 cases of people who contracted the virus and will have to deal with the economic fallout of the casino shutdown. Gambling's been a cash cow for the region since the Chinese government opened the activity up to outside competition in 2001.
While Las Vegas-based competitors have taken a few blows, Macao stands to face even more financial devastation with 20 percent of its population working in the casino industry. And with the closures, the region expects to lose about $100 million worth of economic activity a day. About 85 percent of tax revenue comes from the industry.
And when the region eventually recovers, the Las Vegas investors might lose additional sleep over another issue. In 2022, the Chinese will be reviewing the licensing procedures and decide on which ones to renew. Which is why CEOs like Wynn's Matt Maddox is being so cooperative.