Newcastle University: Wynn Macao Case Study - GSBS6481

This case study analyzes Wynn Macao's operations in Macau, focusing on the competitive landscape of the gaming industry. The analysis examines the impact of institutional developments, particularly the Individual Visit Scheme and the increasing wealth of Chinese citizens, on the industry's growth. The study identifies the resources and capabilities that contributed to Wynn Macao's success, including its focus on VIP, slots, and non-gaming businesses, as well as its strategic timing in entering the market. The case study also incorporates an assessment of recent developments, such as changes in gaming volume, VIP player numbers, and the company's expansion efforts, including the opening of Encore Boston Harbor. The analysis considers how these factors may influence Wynn's future performance and contrasts the current assessment with previous performance evaluations, highlighting factors that may explain any performance shifts, such as construction and the premium mass market.

THE CASE STUDY OF WYNN MACAO
The Case Study of Wynn Macao
Name of Student
Name of University
Author Note

1THE CASE STUDY WYNN MACAO
Table of Contents
Response to Question 1...................................................................................................................2
Response to Question 2...................................................................................................................3
Response to Question 3...................................................................................................................4
Response to Question 4...................................................................................................................4
References........................................................................................................................................7

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Response to Question 1
In the whole of China, the only region where casinos are legal in Macao. The requirement
for the entry of the mainland Chinese people into Macao is also not a cakewalk. Before the year
2003, mainland Chinese people were only allowed to visit Macao on group visas for tours or
business visas were given out to people who were travelling to Macao for business. July 2003
onwards the Individual Visit Scheme was started in Macao, which boosted the business of the
casinos, as more people could visit the region just for the purpose of playing the game. This
provided a major boost to a number of people visiting the country. Apart from the visas that
increased the business, the Chinese always favored this game because of the fortune it brings to
the person playing it. Adding to this is the factor of wealthier people in China. The number of
wealthy Chinese in the region has also increased over the years and this has also contributed to
the fortune of the gaming industry in Macao.
The major companies that have built their industry in China are Sociedade de Jogos
macau, S.A. (SJM)- a subsidiary of the S.T.D.M., Galaxy Casino, S.A., Wynn Resorts (Macao)
and Venetian Macao S.A. (Melco). By the end of the year 2011, Wynn Macao was reported to be
the company generating maximum profit. Another factor that influences the competition in the
gaming industry is the number of gaming tables that are provided at the casinos. In the year the
2002 the number of gaming tables was 339 which increased to 5302 in the year 2011. However,
to curb the unprecedented growth of the gaming table the government has put a cap on the
number of gaming tables. Not more than 5500 gaming tables can be installed by the year 2013.
Another source of revenue for the Macao gaming industry are the VIP tables. 70% revenue from
the casinos is generated from the VIP tables. The junket operators are also a major source of

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revenue for the gaming industry. They were illegal before the year 2011. They are middlemen
who lend a lump sum amount of money to play at the VIP tables are given 40% of the casinos
return. All the six major players in Macao generate a whole lot income and among them Wynn
Macao is winning.
Response to Question 2
The first major development that facilitated the growth of the casino the casino is the
legalizing of the casino. Before the year 2003, the culture of casino as non-existent in the People
Republic of China. Legalizing the business meant that the large number revenue would be brought
into China. The maximum profit that was generated was from the Individual Visa Scheme. Before
the year 2003, individual visas were not given out. Group visas for tourists and business visa were
the only type of visa that was given out to. From the year 2003, when the government started to give
out individual visas, the revenue generated by the gaming industry increased. The number of visitors
from mainland China to Macao increased when the government started giving out individual visas.
The Chinese also prefer games that earn them a lot of money. The game of poker earns a lot of
money and the Chinese spend a lot of money on them. This earning has been facilitated by the rise of
the value of the Chinese currency. The institutional shift of the legal system of China has contributed
to the increasing revenue for the casino industry. The number of wealthy Chinese has also increased
over the years. This has led to the increasing number of people who play at casinos. Mostly casinos
are availed by people who have a certain amount of wealth and fortune and over the years the
number of wealthy people in China has increased considerable. This show that with the increase in
the currency value the wealth of the Chinese people has not declined, on the contrary it has increased
by a considerable amount.

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Response to Question 3
A report published by the Standard Chartered talks about the reason behind the success of
Wynn Macao is its investment on the VIP, slots and non-gaming businesses. However, in the
gaming section also Wynn’s fair share ratio was higher than any other company in the year 2011.
Compared to the number of gaming tables, retail space and hotel rooms, the profits that are
generated by Wynn Macao are higher when compared to the Venetian Macao. A leading
business newspaper reported that the timing when Wynn entered the market in Macao proved to
be very profitable for them. Even before they entered the market, three quarters of Wynn’s
business was already paid for because of the sale of sub-concessions. The cost of Wynn’s first
phase of development in Macao was $1.1. the casino has 380 gaming tables, 1270 slot machines
and the total space of the casino is 205,000 square feet and the excludes the 46,000 square feet of
retail space. The casino is positioned in such a lucrative manner that it will always be a part of
the upper end of the market. Apart from this, Wynn Macao also has social dividends; they have
successfully preserved Chinese art, with the donations that they receive from the display of
Buccleuch vases that was purchased by Wynn for $128 million. These vases are all displayed at
their hotel lobby. Wynn Macao has made its name as one of the most prestigious hotels where
most of the reputable guests from all over the world come to spend their leisure time.
Response to Question 4
Wynn Macao established a voluntary pension plan for the employees. The plan was drafted
by the Macao government to provide voluntary pension for the local employees. Although the
government did not make this a voluntary plan but the it was expected of the private companies to
take it up so that every company could a certain amount of security of the employees. After July

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2019, the employees at Wynn Macao will be enrolled under this new government pension plan.
According to the company, they believe that this initiative will provide the employees a sense of
security and they aspire to be in line with the policies of the government and support the government
in all their initiative.
In the first quarter of 2019, the gaming market in the Wynn Macao stagnated. The gaming
volume went down considerably and the number of VIP players also went down, because of the less
numbers of the VIP, the gaming also got affected at the Wynn. However, this has not growth affected
of the company. The company is expanding and in the United States of America, Wynn is opening its
second casino on Encore Boston Harbor. This is the first time that the company is expanding outside
of Las Vegas.
There was a 0.5% fall on the revenue of the company in the first quarter. Wynn Macau’s
revenue dropped to $523.9 which was a major disappointment to the company’s revenue. Little
construction work has been going on the Macau part of the casino, and because of that they lost a
major part of the shares. The construction that was going on in the Wynn Macau property was to
rebuild the place and make the property favorable for the premium mass players. They were making
the property more attractive so that the more players visit the casino and the revenue that they lost
could be made up. Premium mass players are those players who deal with a lot of money but all of it
is in cash. The business margins for the premium mass players are much higher than the junkets or
the VIP players. Hence, their future plan is to attract more customers who are premium mass players
and increase the revenue of the company. The company is also trying to recover from the sexual
misconduct claim that was made against the chairman and chief executive of Wynn, Steve Wynn.
Although Mr. Wynn denied the allegations but there are lot of media reports which crucified him and
blamed him for covering up his wrong deeds. Although this happened in the US but has affected the
image of the whole Wynn group.

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As mentioned earlier when Wynn entered the Macau market the timing was right and they
gained a lot of revenue because of their timing. However, recent reports from 2019 have shown that
the company has been going through a loss in the first part of the year 2019. This could be because of
the fact that a lot of changes were done to the property, and this harmed the business of the company
in the year 2019 but there U.S. market has been gearing up for the launch of the new casino at Encore
Boston Harbor. This would largely increase their revenue in the U.S. in Macau, the company has
been trying to build its fortune by attracting the majority of the premium mass players. Although they
suffered some problems during the first quarter of the year 2019 but their future is a lot stable with
the new expansion and the business gained from the premium mas clients.

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References
Editorial, R. (2019). Wynn Macau Ltd (1128.HK). U.S..
Hsu, T. (2019). Wynn Resorts Fined $20 Million Over Handling of Steve Wynn Misconduct
Claims. Nytimes.com.
www.businesstimes.com.sg. (2018). A plucky local upstart will take on Macau’s moguls. The
Business Times.
www.ggrasia.com. (2019). Wynn Macau casino revamp to focus on premium mass:
firm. Ggrasia.com.
Zandonai, S. (2019). Macau | Wynn planning two new hotels in Cotai, construction expected to
begin in 2020 | Macau Business. Macau Business.