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Encore Boston Harbour starting strong

Wed, Jul 10, 2:21pm by Staff Writer

The Boston Globe recently reported that during the first 24 hours that Encore Boston Harbour was open there were thousands of people waiting to enter, the nightclub was sold out and there was a wait to bet at the $100-minimum blackjack tables.

At the least, these anecdotes indicate strong demand at the resort early in its existence.

When Wynn Resorts reports earnings, it’ll be important to look at how those crowds translated to revenue in the resorts’ first few days.

Were hotel rooms full, were people gambling, and were restaurants and clubs busy enough to justify the property’s cost.

With a $2.6 billion price tag, the resort needs to generate a lot of revenue to be considered any kind of financial success.

To make a decent return on investment, investors should look for at least $260 million in annualized property EBITDA, a proxy for cash flow at the property.

This would be a 10 per cent EBITDA return on what was invested and is a good benchmark used to assess resorts.

Assuming an EBITDA margin of 30 per cent, that means the resort needs to generate $867 million of revenue per year, or $2.4 million per day.

That’s a big number considering the resort has just 671 hotel rooms, compared with 4,750 at Wynn Las Vegas.

The price of rooms will likely be higher than in Las Vegas and have been going for more than $1,000 per night at times.

There will be a lot of pressure on the hotel, restaurants, clubs and the casino to generate a lot of cash each day.

Since there’s no baseline for a casino near downtown Boston, it’s hard to know what to expect from the property.

But the $2.4 million per day is a good benchmark to watch for – and a lofty goal considering how small the property is.

Wynn’s latest project was shrouded in controversy before it opened as company founder Steven Wynn was embroiled in scandal.

Wynn paid fines to Massachusetts board

The company paid Massachusetts a record US$35.5 million in fines last month for failing to disclose the allegations of sexual misconduct against company founder Steve Wynn, who denies the allegations but resigned as chief executive officer.

The Massachusetts Gaming Commission also fined CEO Matthew Maddox US$500,000 for his ‘clear failure’ to require an investigation of at least one misconduct complaint he’d been aware of.

It also required the Nevada company, which also owns properties in Las Vegas and Macau, to be subject to review by an independent firm selected by the state as a condition of maintaining its licence.

Wynn Resorts and lawyers for Steve Wynn didn’t respond to emails seeking comment on the late evening decision, which effectively clears the way for the opening of the company’s US$2.6 billion Encore Boston Harbour resort in June.

The long-awaited decision comes after the commission released a report last month of more than 200 pages, held tree days of public hearings and deliberated for nearly four weeks on what company officials knew and did about the allegations.

Steve Wynn has denied the claims, saying his relationships with female employees, many of them spa workers and cocktail waitresses, had been consensual.

Wynn fined $20 million by Nevada regulators

He resigned as CEO last year after the Wall Street Journal first reported on the allegations.

Nevada regulators, after an investigation similar to Massachusetts’ earlier this year, levied a US$20 million fine on the company, but also allowed it to retain its casino licence.

Regulators in both states were focused on how long company officials were aware of the allegations and how they responded, rather than the truth behind the claims.

In Massachusetts, gambling investigators found company officials were aware of many of the allegations but failed to report them to internal investigators or take other steps mandated in the company’s sexual harassment policies.

They also found Wynn officials failed to disclose to regulators settlements paid out to Steve Wynn’s accusers during their initial application for a casino licence.

Among them was a US$7.5 million Steve Wynn personally paid in 2005 to a former salon employee who alleged she’d become pregnant after Wynn raped her.

Massachusetts regulators also found Wynn executives were aware but didn’t disclose at least three other complaints casino massage therapists brought against Steve Wynn as the company was being vetted by the state from 2013 to 2014.

Wynn Resorts officials argue the company has fundamentally changed since the scandal.

Every top executive that actively covered up or failed to act on the allegations has been fired.


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