You probably didn't notice that Steve Wynn changed the rules of the games in his casinos

In order to cope with an entire market crashing under his feet, billionaire casino mogul Steve Wynn decided to change the rules of the game, or more appropriately games.

“We changed the layout of the floor. We put our higher-yield games in more prominent locations. We put destination-type games like craps in secondary locations,” Wynn said on a call with investors on Thursday. “We changed the amount of free odds that we gave at dice games from what was commonly referred to as the three-four-five game. And that had to do with the amount of free odds you’d get if you made line bet to double odds.”

From 2014 to 2015 Wynn Resorts was brutalized as the Macau gaming market completely collapsed. The Chinese government chased out high rollers, limited foot traffic to the territory from the mainland, and started monitoring Chinese citizens’ debit transactions as they gambled.

Wynning and Losing

Wynn was impacted harder than any other company as the lion’s share of its revenue came from Macau. It also got hit hard by the fact that gamblers from Asia weren’t heading to Las Vegas to gamble as much either. At one point, he said, the lack of Asian traffic cost Wynn $150 million.

So it was ugly, with Macau gaming revenue falling 50% in some months, but Wynn survived. To do so — and to better weather potential downturns — he had to change his empire a bit starting last July.

Wynn shared the details of that overhaul on an call with analysts and investors after posting a slight earnings beat. In a nutshell, he found ways to get more money out of the customers he had, instead of chasing the customers he’d lost.

Wynn is known for having incredibly detailed knowledge about his casinos and the business in general, and this stuff is pretty impressive (emphasis added):

Now, to give you an example, when someone has a three-four-five crap game, the house advantage is 37 basis points, 38 basis points. When you go to double odds, the house advantage is 58 basis points or 57 basis points. Now, that doesn’t sound like a lot. That’s a very narrow margin of a house advantage mathematically. However, 20 basis points is a 60% or 70% increase in the margin of a dice game, so that the outcome in terms of profitability was based upon a rather granular analysis of each game.

We made a bunch of changes. And in so doing, we were able to overcome in terms of profitability what would ordinarily have been a massive loss of top line revenue. So the gaming industry is a little deceptive in many respects. It takes a very sharp analysis and very high degree of self awareness because when you take rooms away from the casino block and you can sell them for cash, our margins in the hotel rooms are very high as they are in slot machines. Casino table games in Las Vegas, if you were to do an analysis, would have a profit margin in the teens at best.

We were able to take our profit margins in table games up into the 40s which I think is unique in our industry. Well this kind of analysis applied to China is also very enlightening and instructive.

Wynn is going to need to keep this up. Next month he opens yet another casino in Macau, and Las Vegas Sands will open another after that in September. Demand has stabilised but it’s not at all what it used to be, and there’s more supply coming on line.

You see how this could end up.

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