Wynn Resorts Ltd (WYNN)

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Wynn Macau raises junket commission as VIP pressure intensifies

https://www.asgam.com/index.php/2020/03/04/wynn-macau-raises-junket-commission-as-vip-pressure-intensifies/

Wynn Macau has raised its junket commission for the first time in 14 years, bringing it in line with its main rivals in Cotai amid ongoing challenges in the VIP gaming space.

Effective from 1 March 2020, the luxury operator has raised junket commission from 40% to 42.5%, likely in response to falling market share.
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The move is seen as a surprising one by analysts, with Credit Suisse’s Kenneth Fong, Lok Kan Chan and Rebecca Law noting that Wynn has traditionally competed on product over pricing, adding, “We are very surprised by such a move, especially with such minimal demand now.”

The analysts, however, point to Wynn’s declining junket rolling share, which fell from 23% in 1Q19 to 20% in 4Q19 and down to as much as 16% in February, according to estimates.

“As volume shrinks, junkets will naturally allocate business to operators offering higher commission,” Credit Suisse said in a note.

“Wynn’s actions highlight the industry’s difficulty (low revenue and cost pressure as they cannot fire staff) and the cautious outlook.”

Credit Suisse estimates Wynn’s EBITDA margin in junket VIP is currently around 13% but will fall to 10% on new commission. It will also mean a 7% EBITDA impact, offset by some gain in market share.

The analysts noted that VIP rolling is down around 80% year-on-year since Macau’s casinos re-opened on 20 February, with mass down by 90%.