On his company’s Q3 conference call last night, Steve Wynn fielded this question from a analyst:
I was just wondering, as it does pertain to your VIP business, do you guys feel as though we’ve hit an inflection point as it pertains to maybe share going away from new competitor openings and maybe some neighbors being a little bit more aggressive? And as well as if we take that in light with your comments on obviously having some tables out of service in the quarter?
This obviously touched a chord with Wynn. His long response addressed the ever-present tension with discounts, long term growth and customer experience for retail businesses:
Look, if anybody in my industry stands up and says publicly or privately that they’re absolutely certain that they can stop someone else from cutting into their business, then they’re inexperienced and unsophisticated. It is a battle every day. It’s a constant, constant struggle against very smart people about the use of credit, the deployment of facilities, the competitive use of discounts, that is to say, screwing with the price. All of these things are moving all the time in Macau and in Las Vegas. The worst thing that happens is that when one player achieves a good deal of dominance, as we have in the past in the sector, well, it drives the competition to extreme response sometimes because they get frustrated. And when they do, sometimes they overreach. It happens in entertainment. It happens with disc jockeys in nightclubs. It happens with big customers in a Baccarat game. The fellows that — the men and women who have the second-tier property or the property that’s trailing, they get frustrated and they try and buy the business using a number of techniques.
That, of course, immediately rebounds to us, and our sales and marketing people say, “Oh, well, so and so gave this customer or this junket operator this. We’re going lose some business if we don’t equal the price.” And at that moment, in every business in the world, regardless of what industry we’re talking about, the rubber hits the road, and it usually comes to the boss or to the top people in the company. If we could only lower the price, if we could only give away a little more, then we won’t lose this businesses and we’ll keep this volume.
Everybody fights for the top line. The government in Macau publishes these numbers every Monday with market share, top line. And that, of course, gets played against the executives of each company. Why are we now — why are we 12 instead of 14? Or why are we — why with all of our casinos, aren’t we doing better against Wynn or whatever? Well, I don’t think there’s a CEO or a Chief Financial Officer or a Chief Operating Officer in United States of America or Europe or Asia that isn’t faced with this predicament every single month and year of their career. And that’s where discipline and experience comes to bear. Look, we’re giving away as much in promotional allowances in the casino as we can afford. Believe me. If I thought I could afford more promotional allowances, if I could make this place more user-friendly in terms of the way we treat our big gamblers, I would do it in a minute, because I probably could talk to myself into believing I’d get more customers. But the fact of the matter is that’s not really what gets you more customers. And when you overreach, when you pay more than you should, and I’ve been watching for 45 years, I’ve been watching guys come into the industry, get promoted in one hotel or another, try and buy the business, either using credit or using discounts or using shopping sprees or misusing airplanes, they last for a couple of years then they disappear and a new guy comes along, or the company’s performance is poor and the stock suffers and the shareholders aren’t happy. We’re staying as close to the line that you can — as we understand you can get, when it comes to what consideration can we give our customers.
But at the end of the day, remember this, I go to these meetings and all of us in this company are convinced of one thing, only people make people happy. And it’s our service and our environment and our service levels and the way we treat people that allow us to maintain a price for our product, which is a service product, that allows this company to perform well financially. And we are not controlled by our neighbors. We certainly are informed by our neighbors, but we cannot be controlled by them. So at any given moment, it’s possible for someone to steal some of our top line business. But we’re all in the same town, whether it’s Las Vegas or Macau, and we’re all in the same business and we understand cost structure and we understand expenses and all that sort of thing. And when you start giving away more than a certain amount of the revenue to people that get you business, promotional allowances or profit sharing or whatever you want to call it, then you don’t have a good business anymore.
So I’ll take the risk of losing some top line in order to protect my bottom line. And even sometimes, I have to say, it’s possible to lose some of the bottom line when the market is under extreme pressure. I don’t know, it is a long-winded answer. But I’m trying more to tell you how I think rather because the answer to your question is sometimes we get chipped away, sometimes we chip away at the other guy.
See also from the call – Steve Wynn: We’re raising our dividend because investors are chasing dividends
