拉斯維加斯金沙集團 (LVS) 0 Q0 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Las Vegas Sands first-quarter earnings conference call.

My name is Katie and I will be your coordinator for today.

At this time, all participants will be in a listen-only mode.

We will be facilitating a question-and-answer session towards the end of this conference.

(OPERATOR INSTRUCTIONS).

I would like to know turn the call over to your host for today, Mr.

Bill Weidner.

Sir, you may proceed.

And that concludes our first quarter -- no (inaudible) -- I'm sorry!

(LAUGHTER) I have to say good afternoon to you all and thank you all for putting up with the technical difficulties that we experienced today.

On the call with me today, partially perhaps because of this, would be folks that are calling from further away.

Mr.

Sheldon Adelson, our Chairman, is here and he is on the East Coast connected in.

Executive Vice President Brad Stone is here; Brad Stone is calling us from Macau.

Rob Goldstein is here, the President of the Venetian and the Palazzo.

Scott Henry is here; Bob Rozek, our Chief Financial Officer; Dan Briggs, our VP of Investor Relations.

Before we begin today, I need to remind you that today's conference call contains forward-looking statements that we are making under the Safe Harbor provisions of federal Securities laws.

I would also like caution you that the Company's actual results could differ materially from the anticipated results in those forward-looking statements.

Please see today's press release under the caption of "Forward-Looking Statements" for a discussion of risks that may affect our results.

In addition, we may discuss adjusted EBITDA, adjusted net income, adjusted UPS, adjusted property EBITDAR, which are non-GAAP measures.

A definition and reconciliation of each of these measures to the most complete GAAP financial measures are included in the press release.

Please note that this presentation is being recorded.

By now, you should have received our press release detailing our financial results for the first quarter of 2008.

Our agenda today calls for -- is as follows.

I will begin with some summary observations and spend a few minutes on Las Vegas.

From there, we will turn our attention to Macao and address some of the recent developments there, as well as the actions we've implemented as the market evolves and the Venetian enters into its eighth month of operations.

I will then make some closing remarks, including some comments on our opportunities in Singapore, and then we will move on to your questions.

In Las Vegas at the Venetian, we delivered a very solid performance throughout the property in a challenging economic environment, a testament to our convention-based strategy.

We soft-opened the Palazzo in late December, and its results have steadily ramped up as we spent the first quarter completing and introducing additional amenities to the property.

The grand opening of our entertainment offering this week weekend, the Broadway hit Jersey Boys on Saturday night -- We will near completion of the product set at the Palazzo.

Turning to our hotel operations, our hotel average daily rate and RevPAR statistics were solid, although less than we would've liked, reflecting the conscious decision we made during 2007 to increase our allocation of rooms to the FIT marketplace in 2008.

While we have been able to respond somewhat to the softer FIT marketplace booking more group rooms, we did pay the price for that FIT exposure in the first quarter with lower occupancy than we had actually planned.

Looking at the two properties as a whole, first-quarter gaming volumes were up across the board, reflecting our now significantly larger asset base in Las Vegas.

We've also seen a steady ramp, particularly in slot play, throughout the quarter and into April as the Palazzo's gaming business has continued build as more of its features, including some of our high-end suites, have now come online.

With the Palazzo now open, we are extending our successful convention-based business model to a far larger 7100 room asset base.

Now with the largest destination resort in the world nearly complete, we are enthused about that (technical difficulty) both to perform well in what is a challenging current marketplace, as well as the future as Las Vegas inevitably recovers.

Let's now turn to Asia.

Our progress in establishing the Cotai Strip in Macao as Asia's Las Vegas continues and our development of the Marina Bay Sands in Singapore is also progressing.

At the Venetian Macao, compared to the quarter ended December 31 of last year, our visitation remains strong, our mass gaming business grew while our hotel rate and occupancy statistics remain solid.

There were two developments in the quarter in particular which we want to address.

First is that we lost significant amounts of market share of the VIP business.

As a result of that loss in market share, our EBITDAR decreased by $8 million sequentially to $110 million for the quarter ended March 31, compared to $118 million in EBITDAR in the quarter ended December 31.

It's clearly an unsatisfactory result.

We've now taken actions to remedy that VIP market share loss.

The second item warranting particular discussion in the quarter is that we've not yet been able to get our ferry service approved to run on a 24-hour basis and at 30 minutes sailing frequencies.

But before we discuss those two important developments and our results in greater detail, we wanted to try to put the current state of market into a larger context by addressing the recent statements by Chief Executive Edmund Ho concerning the new government policies that will guide the future of Macao's gaming industry.

There is clearly much we do not know today about how these rules will ultimately be put in place.

But looking at the big picture, we do believe there are some likely outcomes that will positively impact Macao's future as a destination, and more importantly our position vis-a-vis that future itself.

First, it seems very clear that no additional concessions be on the current [fixed] three licenses and three sublicensees will be granted for the foreseeable future.

That's something that's not at all a surprise.

But secondly and clearly more importantly, it appears that no more applications for casinos will be allowed to be filed; no more landfill permits for the development of casinos will be accepted; no more additional casino construction beyond what has already been agreed to by the government will be allowed; and no current casinos will be allowed to increase their gaming capacity.

We will need to see how this is interpreted and enforced, but this policy has the potential to significantly limit the addition of new VIP halls, gaming tables and slot machines.

It's also possible that only those developments that are consistent with the evolution of Macao into a multifaceted business to leisure destination will be approved.

We understand that the current pipeline of projects under construction, approved or under discussion with the government, will not be affected.

Francis Tam, the Security of Economy and Finance for Macao, was quoted in the Macao daily Post on April 24 that "Total casinos will not exceed 40, with Cotai not surpassing a total of 10." If Secretary Tam's comments reflect the government's view, this will be pretty interesting, considering that there are 29 casinos operating in Macao today.

These pronouncements are quantifiable and measurable and provide a clear backstop to future supply growth.

Third, and again depending upon enforcement, the item with the greatest impact on current gaming operations is the introduction of rules to control junket room operators, licensing requirements, and junket commissions, as well as the conduct of a review of the current VIP room service contracts, which are effectively sub-sub-casino licenses.

We will stay acutely attuned to these developments and react swiftly and appropriately to their effect.

In the long-term, the phenomenal growth in visitation and gaming win, as a whole, first-quarter visitation up 18%, gaming went up 66% -- a big piece of that driven by VIP win at 79%.

But more importantly for the future, mass market table win was up 40% with slot win up 85%.

These gross statistics attest to the depth of the market as new high-quality destination-style product is added to the marketplace.

This growing demand, coupled with the supply limitation backstop that is the stated objective of Macao authorities, bodes well for the long-term prospects of our strategy.

We have a critical mass of superior, complete destination supply on Cotai that will drive that growing demand and allow us to provide superior returns of the dollars we put to work in Macao.

Okay, that's the 30,000-foot altitude big picture.

But what about today?

How are we managing today's market in light of both the dynamic nature of the market in general and Macao's government recent declarations?

First, let me address our approach to the VIP market.

We certainly look forward to seeing how Macao's authorities proposed new junket [room] commission rules will be implemented.

Successful implementation and enforcement of these actions could both limit the number of licensed representatives in the marketplace, thus limiting their ability to the smaller sub-sub unlicensed facility, and limit the number of VIP room casinos they operate in themselves.

While we clearly support these actions by government and believe they are consistent with development of Macao as a more well rounded tourist destination, we will not wait to see how this story develops.

Today, we've already responded and adjusted our commission rates to be more competitive in the VIP marketplace with two principle objectives -- one, growing our VIP market share; and two, increasing our cash flow generated from this portion of our business.

As government actions are sorted out, we will react quickly to any actions that the government ultimately adopts.

I would also point out that credit is also a very important part of the VIP picture.

Historically, we've taken a very conservative approach to our granting credit, both to junket operators and to individuals in the marketplace.

In the future, we will begin to expand the amount of credit we are granting but continue to do so in a judicious way.

Second, let me address the critical element of building our mass gaming business for the Venetian Macao, our ferry service.

We will continue to press to achieve full operation, meaning 24 hour per day, seven day a week service, as well as more frequent service for our Cotai jet ferry service.

We've already completed the trials required to achieve approvals to operate at night and have the equipment to operate on a 30-minute frequency to the Cotai Strip while we continue to await a formal berth assignment approval from the Hong Kong Transportation Bureau.

While we already have enough ferries in our fleet, we will not be able to sail at night nor will we be able to increase our frequency of service without moving from the Hong Kong authorities to allocate our requested berthing slots.

This is particularly frustrating to us, as we've been given assurances by the Hong Kong authority, in advance of completing our ferry manufacturing orders, that more than sufficient slip and berthing capacity existed at the Shun Tak Ferry Terminal and Hong Kong, as that capacity will be made available for us as our boats were delivered.

We understand there's plenty of berthing spot capacity available, but to our dismay, the requisite approvals from the Hong Kong authorities have not to date been received.

We look forward to increasing our sailing hours and sailing frequencies as soon as the Hong Kong authorities provide the requisite approvals.

We will be able to achieve a good frequency of service -- that's half-hour frequency -- immediately upon the granting of berthing availability from the Hong Kong authorities.

Additional ferries that will be delivered in the coming months will allow us to provide optimal frequency of service -- that's one sailing every 15 minutes -- to the Cotai Strip by August of this year.

Ferry services affect every segment of our Venetian Macao facility.

VIP from regional and international markets with linkages to Hong Kong and Hong Kong Airport, mass tables and slots, particularly high-repeat convenience by Hong Kong mass players, FIT rooms business meetings and convention and trade shows for the convenience of delegate access, arena events, shopper convenience for retail sales, and on a non -- all are critical for maximizing the synergies of our integrated resort, particularly important as we add more reasons to come to Cotai directly -- the Four Seasons and the upscale shopping brands of the Four Seasons Mall to be opened this summer.

Third, let me spend a moment on the pacing of our development activities.

At this point, it's clear that the pace of approvals for development activities throughout Macao has slowed.

Looking ahead, we anticipate some additional near-term slowdown as the government sorts it all out.

We will do everything in our control to pursue our announced developments as aggressively as possible, and we anticipate that pace will pick up as the [Alaman Long] incident reaches resolution.

Fourth and most importantly, we will focus more directly on profitability from the current operations in the near-term.

We have staffed for breakneck growth to be ready for multiple openings one after another.

For example, we will staff the casino at the Four Seasons property without any additional headcount.

We can operate our current facilities, the Sands Macao and the Venetian Macao, more efficiently.

Brad Stone is in Macao now heading up a slot team to rationalize operations as we prepare for and open the Four Seasons.

Rob Goldstein will focus on the evolving VIP market and direct customer marketing environment in Macao, as he will be there next week, as will I.

We can and we will execute better in the near-term.

Our six factors of success measurement are still in place.

Despite our inability to hold market share without responding to competitive junket commission pressures and the fact we have only partial ferry service in the first quarter, nearly 14 million visitors have experienced the Venetian Macao since it opened approximately eight months ago.

Our hotel performance is solid with ADR reaching $232 for the quarter, occupancy reaching 78.6%, and RevPAR reaching $183.

Our entertainment offerings to date have worked, the opening of Cirque's Cosmos in a custom-built theatre at the Venetian Macao this summer and appearances by Team USA as they prepare for the Olympics will expand our entertainment offerings further.

Our group meetings and convention business, after a strong start, continues to grow.

The business is seasonal, so there are naturally weaker and stronger periods of the months but overall, the trajectory is positive.

Retail sales figures at the Grand Canal Shoppes, with more stores opening over time, and retail sales per square foot on average exceeding $700 today, with more visitation and ferry service set to drive those numbers higher in the future, our retail offering is a clear success.

Gaming volumes -- well, in the VIP market, we certainly hit a road bump.

We will be more competitive with commissions going forward and we will grant more credit on a judicious basis.

We expect to grow our share of this business and our cash flow.

Our mass gaming volumes have been solid; clearly the largest in the Macao marketplace, reflecting the acceptance and appeal of the Venetian Macao.

We can squeeze more profitability from this robust base, and we will.

So what will drive our performance in the near-term?

Besides executing better on operating efficiencies as we open the Four Seasons, most important developed will be for more frequent Cotai jet ferry service from Hong Kong Harbor to the ferry terminal at the foot of the Cotai Strip, followed by direct service from Hong Kong International Airport.

These services will enable increases in visitation to Macao and the Cotai Strip and a more satisfying customer experience and more convenience for shoppers, arena and events attendees, convention and trade show delegates, and others.

Second, the opening of the Four Seasons Macao this summer, with the upscale shops of the Four Seasons Mall, will create more traffic to the Cotai Strip; third, competitive ferry service to drive the mess business.

Now, not to give Singapore a short shrift because of the dramatic announcements of the Macao government dominating the news, I want to say that our Singapore construction continues apace despite challenging site conditions.

Singapore set a new record for visitors in March with 908,000, with an average length of stay of 3.7 days, represented 3.4 million visitor nights in March alone.

98,000 of those visits were from mainland China, second only to Indonesia's 155,000.

Average daily rate was up 23% year-over-year to over $160.

Occupancy was 87% of Singapore's nearly 40,000 room and service departments.

We continue to believe we have a tremendous opportunity in Singapore, and we continue to execute there.

So that includes the highlights, but before we go to Q&A, I will make a few concluding thoughts.

First, in Las Vegas, the Venetian is performing well in a weaker Las Vegas market overall, and the Palazzo continues to ramp up to full power.

On the Macao Peninsula, the Sands continues to be the resilient market leader in mass gaming volumes on the Peninsula, despite a very large increase in high-quality competitive capacity, both compared to the same quarter last year and sequentially.

We will continue to work to capture more VIP play and additional operating efficiencies and focus on maximizing the Sands market-leading cash-on-cash returns.

Finally, on the Cotai Strip, we will rationalize more efficient operations of the various profit centers at the Venetian Macao -- rooms, retail, entertainment, events, convention, trade show, VIP table business, mass table business, and slots -- and capture synergies among them as we continue to grow our revenues.

We'll also complete the Four Seasons this summer and continue to construct other operating -- or the (inaudible) properties on the Cotai Strip.

By the end of 2009, there will be yearly 15,000 international standard rooms on Cotai, more than four times as many as the Macao Peninsula has today.

With the bulk of the Peninsula investment now in place, the focus of future development will be on Cotai.

Those factors, together with a strong market growth and with supply being backstopped by government decree, combined with expanded infrastructure improvements, including additional ferry service, made pretty compelling pictures for the future of our Cotai investments.

We remain confident that the execution of our plans will lead to superior returns for our shareholders as we focus more particularly on the near-term and executing on our operations that are currently in place.

With that, I will open the lines for your questions and answers now.

(OPERATOR INSTRUCTIONS).

Operator, can we go to questions now?

(OPERATOR INSTRUCTIONS).

Larry Klatzkin, Jefferies & Co.

I don't know how we get rid of the music there.

One thing -- I noticed the [WUC] at the Sands Macao was bad.

What would you guys say how bad the WUC was?

Can you guys hear me?

Larry, your line is open.

I'm talking!

Okay, better.

Can you guys hear me?

Operator, maybe we can go to the next

Guys?

Okay.

Hello?

Can you hear me?

Can you guys hear me?

He will call back in.

(multiple speakers)

Felicia Hendrix, Lehman Brothers.

Please proceed.

Can you hear me?

Hello?

Hello?

Operator?

I guess everybody is shy.

(multiple speakers)

No, hello?

Operator?

Joe Hudak, Wachovia Securities.

Operator?

It's not working.

Operator, we can't hear any of the questions.

Hello, operator?

Joe, you're in the conference.

You may proceed with your question, please.

Operator, can you hear me?

Yes, I can hear you, sir.

We cannot hear their questions.

Can you hear their questions?

I have Joe in the queue.

Joe, if you can hear us, you can go ahead and speak.

Your line is open.

(technical difficulty)

Operator, it doesn't work!

One moment, sir.

Ladies and gentlemen, please stand by for one moment.

Joe, if you are in the queue, you may go ahead with your question.

(technical difficulty)

Felicia, your line is also open.

You may go ahead with your question, please.

Felicia?

Hi.

Finally!

Felicia beat out Larry.

Well, in deference to Larry, the operator should put Larry in next.

This has been fun.

It's always fun every quarter with you guys!

(LAUGHTER)

Okay, so just you mentioned that you were going to explore starting to grant credit.

A wondering if you thought through -- or I'm sure you thought it through, but if you want to share with us perhaps what percentage of your overall business you might carve out to -- the overall VIP business you might want to carve out to grant credit to.

We were just talking about Brad about that one minute ago.

Brad?

Can you hear the questions so far?

Yes, I heard it.

I think, Felicia, it's not a matter of percentage; it's a matter of decisions that make sense.

I think we will be challenging our people over here.

I mean, certainly we have a strong base of Asian business that we've granted credit to in our Las Vegas operation.

We've established certain credit lines.

We're going to review those lines.

I think it's really a balance.

You know, we were on a call the other day, and we were talking about our provision for bad debts is basically nonexistent here in Macao and that it's almost like a bank that doesn't have a few bad loans, they probably aren't lending enough money.

So we're going to go through that.

I mean, as Bill said, you know, we're going to be cautious about it.

We have expanded extended credit to our junket reps.

As we've talked in the past, we have them somewhat collateralized by the commissions we owe them.

We're going to look at that as well, and probably extend more credit to the junket reps themselves, those who have performed well.

So we don't have a target.

The target is to issue as much quality credit as we can, to attract particularly the premium customer directly to our property, and certainly continue to support the junket reps in their endeavors as well.

So to say we have percentages is probably not -- we haven't established that but we're going to look at those barriers that we've had in terms of extending credit here.

Okay.

Then on the same line of addressing your VIP share, you know, we've heard and you've implied in the past that the Four Seasons could be an all-VIP property.

I was wondering if you wanted to address that.

Then I have some follow-ons.

I guess, you know, it's interesting, we are finding that we're going to have two different types of experience for the VIP customer here in Macao very shortly.

One is the big property, Venetian experience, which includes obviously Celine Dion shows, lots of restaurants, shopping and entertainment options, a lot of variety of room product.

But we are also finding a desire on the VIP market for a smaller, more boutique-ey hotel experience, and certainly the Palazzo (LAUGHTER) excuse me, the Four Seasons, allows that opportunity for us.

There is and the plans for the property are that we will have a ground floor, what I'll call premium player area, which is designated for customers directly marketed by Las Vegas Sands and Venetian Macao Limited here.

We will end up more than likely with two floors of junket rooms above those, because we are seeing a real desire by our junket reps to have a presence at the Four Seasons itself.

Then later on at the end of this year, we are opening 19 really luxurious apartments with their own casino; each suite actually has their own casino gaming room, as well as restaurant, kind of reminiscent of what you'd see in London in terms of the type of experience and similar in a way to what The Mansion provided in Las Vegas for its customers.

So there is certainly going to be an emphasis on product.

We are hearing from the market itself that there's a strong desire for a Four Seasons type of product to round out our initial offerings here at the Cotai Strip.

Is that still on schedule to open in June?

We're looking at a July opening right now, Felicia -- July, sometime in the third quarter.

I guess the key there is the shops are progressing well at the Four Seasons.

The property is a gorgeous property.

We want to make sure that this property is opened properly and as a Four Seasons would be, so we are focusing on an early third-quarter opening.

Okay.

Then just finally, just moving to Las Vegas, you know, during the quarter, as you were having meetings, you kind of mentioned that the overall property now (inaudible) the increase of 70% in terms of room base, conference bookings at the time you were talking about it were only up about 25% to 27%.

I was wondering if you could tell us in the quarter how that was and then just looking forward, how your conference and convention business is looking.

I'm not sure I quite understand.

I mean, what we've done actually at the Venetian and Palazzo is the group bookings are really a combination of both properties.

We really don't say group bookings at Palazzo versus Venetian.

It's a total.

What we have done recently, because of the better known name of the Venetian, as we launched the Palazzo product, is we have moved a significant number of group room nights that were originally booked, let's say, in the Venetian product over to the Palazzo and backfilled the Venetian with FIT business because, quite frankly, we get a higher call volume per room on the Venetian because it's a well-established product.

That's kind of a short-term strategy.

Certainly, we are aggressively out there, in a more than competitive environment right now economically, aggressively booking the group business.

We may have some statistics there.

I don't happen to have them here in Macao.

I don't know.

Rob?

Just to explain the April numbers perhaps, give you an indication where we are going in April, both Palazzo and Venetian are above 95% and ADR in excess of $245.

So bookings are trending upward.

The Palazzo is really filling up.

As the property ramps up, I think it will get stronger.

Obviously, has Brad alluded to, the economic conditions in Las Vegas have been difficult in the first quarter, but they are improving.

Always the first segment to improve and to grow is the group segment, which is our strength, and we will keep playing to that strength.

Rob, this is Sheldon.

I talked to our VP of Sales just before the call, and he said we are up 110,000 rooms in forward bookings for the seven month balance of the year compared to last year.

That answers my question.

Thank you.

Larry Klatzkin, Jefferies.

I like (inaudible) better!

A couple of questions -- one, just a quick housekeeping -- it looks like you had some bad luck at the Sands Macao.

Could you guys quantify what that cost you?

Are you talking about the normalization, Larry?

Yes.

At the Sands Macao, it's a little bit more complicated to calculate that now because of the two different programs you operate at the VIP level.

But if you go back and look at it the way we do, we do it where we hold win constant and then we also do it where we hold the rolling volume constant.

The midpoint of that range is probably around $7 million or $8 million at the Sands.

Right.

The second thing is I know everybody is wanting this; you make you guys may not give it.

But could you give a breakout of net revenues and EBITDA for the Palazzo?

We could talk EBITDA.

I mean I think -- I don't know --

EBITDA would be good.

Just under $20 million, Larry, for the quarter.

Okay, okay.

Keep in mind, we opened Jan.

17 at 44,000 (inaudible) off the books, and obviously it was a work in progress.

All right, that's fair.

As far as timing of the future projects and the budgets for everything, Brad, can you do your usual and go through that or is that possible?

Yes, I can take you through.

I mean, we mentioned the Four Seasons property opening early in the third quarter.

The budget on that is intact, as we discussed at the investor day.

Cites five and six continue to move towards their spring, the first phase of spring of '09 opening for the Shangri-La Traders and First Sheraton Tower, again with the second Sheraton Tower and St.

Regis, and the St.

Regis apartments opening towards the end of the year.

Again, that project is roughly in the same budgetary state.

It seems to be tracking along very well.

Cites seven, eight and cites three, as Bill mentioned in the conference call, we are ready to start work on cites seven and eight.

We have the rigs there.

We've just been frustrated because of some challenges within the government, based upon the scandal that happened here in an area that related to the public works department.

There has definitely been a slowing in the pace around Macao of approvals.

So we are anxiously waiting to get through that.

Again, that's a project whose budget is still a work in progress as we go through and really take the conceptual design and work on pricing it.

So we really don't have reports specifically on that project.

And on cite three, it's very similar.

Cite three is somewhat behind seven and eight.

We have filings in for all of these projects with the government.

Again we're just waiting for the government to right itself in such a way that we can get some more normal development cycle.

In Singapore, that project is progressing very well.

I was there about a week and a half ago and spent some time on the site.

You know, if you look at pictures of it, everyone has to realize that there's actually several floors underground.

We're coming out of the ground with the towers now.

You know, we have a very aggressive goal of the end of next year in the fourth quarter of '09.

We are working basically 24/7 on that project where we are allowed with the government.

That's just a fantastic project.

We are still in the range that we've been talking about in the $4.5 billion,$ 4.6 billion range including the land all-in costs on that project.

Bethlehem is progressing nicely.

Steel is being erected very aggressively now.

Our goal is to get that opened by the third quarter of next year.

Again, that project is consistent budgetarily with what we expressed at the investor conference day back in February.

I think that's the main projects we've discussed.

Oh, the condo tower is also moving along nicely.

Again, that's certainly on the same budget we discussed at the investor day.

Okay, so Pennsylvania is now third quarter '09?

Yes.

Okay.

The next question, as long as we're talking condos, Four Seasons unit sales -- when do we start to see those?

It's a complicated process here.

We've had some resistance, shall we say, in Macao, in terms of the sale of the units.

I don't want to get into too many details here at this point.

We have plans to move forward.

I think the primary issue we're having there in Macao is having those that have a vested interest in real estate to understand we are not selling residences here.

We are selling what we call vacation suites.

We don't want to just sell real estate and pick up dollars, although that's a nice thing to do.

We want to sell reasons for people to visit.

We want our cake and eat it too.

We want people to pay us a lot of money for these residences that they use when they come to visit.

We don't want a residential tower.

We want units that wealthy people buy so they have their own place on the Cotai Strip, similar to the market that we're focusing on here in Las Vegas.

We want that tower not to be "residences" per se; we want them to be residences for wealthy people that want their own place on the Strip.

So they pay us and they make an investment, and they expect to make money on that investment when and if they decide to sell it.

But in the meantime, they come and visit three times a year, eight times he year, seven times a year, or whatever number of times a year to have their own residence on the Strip.

It's exactly the same intentions in Macao.

It's just that the local market guys who sell real estate don't get it.

So we are working our way through it, and we're confident we will find a resolution.

All right.

The last question would be how's the mall going in Macao?

What kind of average retail rate are you seeing, and how far are you along in renting stuff out?

Larry, can you hear me?

Yes, I can hear you.

This is Sheldon.

Latest time I talked with, I had (inaudible) (technical difficulty) over there, I talked to him last night our time, and I'm on the East Coast right now until tomorrow.

I'm told that there was a separate committee that was formed by the Macao government, and the committee decided -- there's no guarantees on this, but it appears as though they wanted to take a different approach and call us something else other than residential.

But they've concluded the only approach that everybody can be happy with is a co-op approach, like New York, where people buy into the shares of the company with the right to use a particular apartment.

So without any guarantees, it sounds more encouraging that we will be allowed, if it goes through in the near future, to move the property into a separate condo regime and be able to sell co-op interests.

You still think $2000 a foot makes sense?

We have no reason to believe that what we estimated in the past should be changed at this time.

We stopped taking orders at 100, stopped taking -- we didn't take orders, we took indications of interest.

Some time ago, when we knew it wasn't -- we don't want the interest to get stale.

So we stopped taking expressions of interest.

I think we're going to start up again very soon.

Okay, great.

Thanks, Sheldon.

Listen, there's -- one is a hope and the other is -- the other is realism and in this case they could coincide.

Okay.

Well, good luck with that.

And then on the retail, what are we seeing on average rate and everything?

Larry, the rates that we've been talking about historically haven't changed with respect to minimum rent.

You notice that we put, for the first time in Bill's script, that revenue or retail sales themselves are running north of $700 a foot on an average basis.

Obviously, you've got some high-end retailers that are doing far, far in excess of that, and then you've got people in the pieces of the mall that will benefit from more traffic that are doing south of that number.

But we're pleased with the progress there.

That's (multiple speakers)

Okay, which is much lower.

And then --

(multiple speakers) much lower.

I think, in the future, I'd like to separate the F&B sales from the pure retail sales.

Well, thanks, guys.

Sheldon, again, with your change, proposed change in laws in Macao, how do you see the redivision of slots and tables?

Any comment on that?

It's too early to make any predictions.

If you ask me what I'm wishing for when I fantasize, like to they reduce all of the casinos back to eight or ten and get rid of all of the VIP rooms that are operated independently,.

My fantasy is such.

I mean, when we first got involved in Macao, we were assured that it would take a couple of years to phase out the VIP rooms.

That hasn't happened, and they've allowed more independent casinos to open.

I think the announcement by Edmund Ho last week was a reaction to pressures gotten from both us, and hopefully -- we don't know for sure because we're not that convinced about that kind of pressure -- from the CLO, the Chinese Liaison Office, that the way the development was going was not what they originally intended for it to be.

So, we're hoping that our goal is to turn a city of CD backwater gambling dens into a city of convention, business travel, and business and leisure travel where the casinos represent no more than 10% of the total amount of space.

So I mean right now, the biggest casino in the world that we have at the Venetian is only 5% of the total amount of space.

So I think we're getting a good -- we are speaking to welcome ears when we say that you have to have a -- where suggesting you've got to have a certain percentage, certain ratio of exhibition space, convention center space, shopping space, etc., etc.

If you don't have that, we are suggesting that the proportion of casino occupancy be reduced.

So it's too early, Larry, to tell what they're going to do and how fast they're going to do it.

But it's certainly a very good first step.

All right.

Well, thanks, guys.

[Dustin Savinti], Standard Pacific.

(technical difficulty)

Can you hear me?

Dustin, was that you?

(LAUGHTER)

Steve Kent, Goldman Sachs.

I'll try!

Could you just give us some comments on progress on financing for the Macao development?

Also, Brad, you talked about some of the expenses, specifically headcount, managing that in Macao.

Can you talk about the relationship between keeping expenses in-line versus just boosting more mass-market revenue and where you're focusing?

In Vegas, what can you do to reduce expenses on a go-forward basis, given the economic environment?

Do you want me to go first Brad?

Right.

On the financing front for Macao, I think the message, Steve, is the same that we delivered during our investor day -- is that we've -- we intend to finance our needs for the Macao properties that are under construction and to be developed in an offshore transaction predominantly anchored by Asian banks and other global banks that have a large operation and lending capacity in Asia, similar to what we did in Singapore.

I've been having very active conversations with a number of our bigger banks and even some other medium and smaller sized banks, and the level of interest and level of enthusiasm there is actually quite good.

Hopefully, by the next quarter conference call, we will be able to have more indicative direction in terms of the size of what that financing might be and what may cost us.

Okay.

I'll go on -- as far as our opportunities here in Macao, Steve, you know labor is certainly an opportunity for us.

We want to take advantage of the opening of the Four Seasons to readjust our labor counts here at the Venetian Macao and move people that have experience over there without disrupting the labor market here.

We are very sensitive about that.

Certainly, the Four Seasons provides an opportunity to get ourselves more efficient here, and we will do that.

There are other opportunities here in Macao.

Energy is a huge cost.

We're looking at focusing on areas like that.

But the reality is, I mean, you're never going to save your way to success here in Macao.

Our goal has to be to drive to correct our market share at the Venetian Macao and the VIP business.

I think you'll see our efforts really start hopefully becoming evident this month as discussions with junket reps and etc.

do take -- they can't move immediately, so month-end is a time where people can shift some of their business.

So we're hoping to see some of our more competitive moves on the VIP markets start reflecting themselves truly in the month of May.

On the mass side, I mean the good news is we have a tremendous amount of business here at the property, but it is disturbing when you look at the fact that we have 2.5 times the size, the amount of visitation here at the Venetian that we do at our sister property and the Sands, and yet we're generating only about 15% more in mass volume.

So one of our goals there has to be to convert a lot of that traffic.

Certainly, as Bill pointed out, we have significant upside in the ferry business in terms of being people directly here.

So our goals have to be twofold.

One, translate more visitation in the gaming win, drive more visitation to the gaming floor itself, and then adjusting our VIP commissions so we drive both more revenue and more EBITDA or cash flow out of that market.

At the same time, really addressing as we understand our business better now and as we have opportunities like the Four Seasons, to correct some of our structural issues as far as staffing, and we will do that.

I think you'll start seeing those translations later in this quarter and going particularly into the third quarter.

As far as the Venetian Palazzo, I think we've always done a pretty good job there managing costs.

We told investors that we believe the synergies between the Palazzo and the Venetian would generate in an area of about $60 million of efficiencies compared to if they were two separately operated entities.

Our initial analysis of that shows that we're meeting that goal, so I think that, as a base, the structure that we set up in terms of the overhead at the Venetian Palazzo in Las Vegas will work, and as we drive -- as Rob said, as the property matures and we get the products in place, we see our increase in occupancy and rate as we've seen.

As Rob pointed out in April, I think we will see the revenues drive the majority of the EBITDA growth and that the cost structure isn't fairly good shape.

Of course, like any new property, we will learn more and we will make adjustments accordingly.

It's a lot easier to make adjustments in a market like Las Vegas than it is necessarily over here.

Okay, thanks.

[David Faber], Credit Suisse.

My questions have been answered.

All of my questions have been answered.

Thanks.

[Joel Calawan].

(technical difficulty) the majority of the EBITDA growth, and that the cost structure is in fairly good shape.

Of course, like any new property (technical difficulty)

Robin Farley, UBS.

Great, thanks.

I've got two questions.

The first is, you know, you talked about focusing more on the profitability of your existing facilities and the timeline you gave for additional Cotai properties sounds like it's unchanged.

When you talked about focusing on existing facilities in the near-term, is there some thought to delaying the openings of additional capacity at this point?

No, I think, as I mentioned in the script, the intention is to continue to aggressively develop those properties as quickly as we can, but I mean, we need to make sure that we turn our efforts in the near term to make sure that, between now and significant completions in 2009, that we generate as much income in the near term as we can.

So you know, we have an opportunity with the Four Seasons coming along, and as I say, Brad is there in Macao now as we begin to more rationalize the cost structures there.

Then as we ramp up the Palazzo, I think it's more a matter of controlling the costs as that comes online, so we can deliver more EBITDA.

So that's all I was saying, is that we are not losing focus of the near-term with the construction process for the long-term.

Okay, no, that's great, thanks.

Then also, I wonder if you can give a little more color.

You talked about you've taken actions in the market in Macao and that, at the end of the month here, you may start to see the impact of some of that.

I wonder if you could give us a little more color on -- you know, it sounds like the market is moving towards 45% of revenues as payment to junkets, but in some cases, we are hearing it's above that.

We are hearing it's 48% of revenues in some cases.

I wonder if you could talk about kind of what level you are now.

Then also, do you expect to announce anything as you're taking different actions in Macao?

Do you expect to announce anything with a large aggregator, or is that something that you would do just without announcing it?

If you could give us a little more color along those lines?

We probably are not going to broadcast what we're going to do on a conference call, so I think that's fairly short.

I just -- we're going to act and react to the market as we see fit and appropriate.

I would just like to mention that don't disregard the possibility of these commission rates eventually going down as the supply of gaming capacity decreases.

If it does contract as the government has indicated, they are going to consider -- if it does contract, it will take the leverage away from the guys who were demanding greater commissions.

Hopefully -- and just the increase in demand and reduction of supply, it will create a different (technical difficulty).

Okay, and so in terms of -- it sounds like you don't want to give specifics out about what you may do, but one of your competitors, for example, has said, on one of their conference calls, that they will be announcing something in the next few weeks with a large aggregator.

Obviously, I'm not asking you the specifics of that, but is that the kind of thing that we might see you announce as well?

Like Bill said, I think we would rather not get into that right now and signal our competitors -- to our competitors what we're going to do or not do.

Okay, great.

Thank you.

Joe Greff, Bear Stearns.

I was hoping, just on the lines of the commission structures or the commission rates, what was the average VIP commission rate at the Venetian Macao in the 1Q?

Can you remind us what it was in the fourth quarter?

Yes, I will give you that information.

Give me just one second here; I have it.

The commission rate was, for the first quarter was I believe 1.13%.

Let me -- one moment here, Joe, unless somebody else has it right there (multiple speakers)

I'm looking for it as well, Brad.

(multiple speakers)

The commission was 1.13%.

That compares to, in the prior quarter, I believe about 1%, Joe.

1%, okay.

Maybe looking at it differently, can you comment on margins on VIP gaming revenues, what they are on absolute basis, and maybe talk about it in the first quarter relative to the fourth quarter or do we see those sequentially go down at Venetian Macao?

Again, I don't have the breakout directly of all the -- I don't think we want to get into that.

I would say obviously, as commissions go up, you know, the profit margin is going down.

Our goal is to drive enough volume as we -- and being competitive, we are kind of caught in the switches.

Our rates went up but they didn't go up enough, so we encourage some expenses, additional expenses, but we didn't drive enough volume through the door.

That won't happen again.

Okay.

Back to Las Vegas, the EBITDA impact from the average or the above-average table hold percentage, I get somewhere between $9 million and $10 million.

Is that math right?

Yes?

Yes.

Okay.

Just one interesting point I think you have to understand about the first quarter is an unusual quarter in the sense that it's so dominated by Chinese New Year that it's almost like there should almost be a separate hold percentage for the first quarter for Las Vegas.

Traditionally, we hold significantly higher than our normalized rate in that quarter.

Last time, we were actually lower than last year.

Right, and then I've got a comment for Scott in relation to his prior comments on the financing.

If you look at your CapEx on the Cotai Strip, what is left to spend assuming for the remainder of the development pipeline?

And then what do you have existing right now in terms of your existing available cash, existing (inaudible) your facilities over there?

I think, Joe, as far as required funding necessary to completion, you know, a portion of that is expected to be generated by a combination of cash flow that comes from operations as well as from the sale of residences -- is what we are forecasting internally.

I don't think we share those internal estimates because we don't want to give forward forecasts for those properties.

The balance, the balance that we're talking about and focusing on to take us out to completion of all of our funding requirements goes out through 2011.

Actually, some of the costs you can leak into 2012 because of the way construction contracts and contractor payment schemes are practiced in that part of the world.

It is several billion dollars.

I think what we indicated during our investor day was we require approximately an incremental $4 billion to get us to what we believe is completion and a fully funded program over in Macao.

That $4 billion is inclusive or after the benefit of the sale of residential stuff, right?

Yes, that is correct.

That is correct.

Now, can you remind me of the other part of your question?

I think you completely answered it, Scott.

Just sort of on (multiple speakers)

(multiple speakers) -- ability under our existing facilities is that -- that was the other piece of your question.

We are almost fully drawn on our facilities over in Macao.

I think, as we had indicated at the investor day, that we will require incremental funding but before the end of this year.

Okay.

Then one final question and I will let someone ask some additional questions.

Just along the lines of internal forecasts, obviously in the press, with regard to one of the lawsuits out there, there's this idea that, internally, there's a document that you lowered internal forecasts for 2008.

I will leave it as broad as that, but do you want to comment on that?

That was mostly including first-quarter, or this quarter results.

That was a revenue number relating to internal forecasts that mostly included updates based on this quarter.

So it's in the number; it's baked in the numbers.

Good enough.

Great.

Thanks, guys.

Excuse me, I'd like to add to that.

Yes?

I just want to say that was before we heard the announcement from Macao.

Celeste Brown, Morgan Stanley.

Hello?

Celeste, we are here.

Great.

Do you have a good sense for why the non-gaming was down sequentially in Macao?

Is there a seasonality, or is it the initial surge of people and it died off a little bit?

I am surprised to see it with Chinese New Year.

You're talking about the actual hotel primarily, Celeste?

Well, hotel, retail, food and beverage.

I think, you know, as good as Chinese New Year is for the gaming side, it does affect us in -- and I think Bill or somebody made a comment about seasonality.

You know, you don't book a lot of group business before or after Chinese New Year, and so that's -- and ended up going a little bit more into, in this particular quarter, into our wholesale business and other segments.

That affected rate and affected, to some degree, the occupancy.

So the time before Chinese New Year is very slow here and is was really not group business you can fill in, typically.

So you don't have FIT; you don't have groups who rely on wholesale.

So I think somewhat of that is seasonality regarding the first quarter.

Then are you seeing an impact on the business in Macao overall just with the shortened golden week this year?

Or is that better for you, I guess, from a-non gaming perspective, per what you just said with golden week?

(multiple speakers)

I don't -- Bill, did you start to answer?

I think golden week this year is weaker than last year, so there's no question about it.

Even though golden week is no longer seven days, there's still a couple of days in there where they do celebrate it, so it's kind of a double whammy.

It's not as strong as it was last year, as far as the number of days, and they still don't book group business around golden week itself.

So it's a one or two day holiday that they stay away from for group business, as opposed to a seven-day holiday.

So, yes, it does affect us, although we see more demand on the shoulders of it on weekends and things like that.

So I think an increase in shorter-term vacations, as it were, as opposed to the seven or ten days of golden week.

Then without saying what your expectation was or is, do you think it's still possible for you to reach what you're expecting at the Venetian by the fourth quarter of this year with all of the challenges you face and with some of the changes you see coming in the market?

Certainly on a run-rate basis, yes.

Thank you.

[Robert Armstrong], [Symmical] Capital.

Gentlemen, can you hear me?

Yes, we can.

Just to continue the conversation of financing, how committed are you to getting the $4 million incremental you're going to need in Macao through banks?

Is equity an option, or are there other options out there, just on the assumption that credit market might be turbulent over the upcoming months?

Scott -- we are evaluating a number of different alternatives.

Equity is not one of those.

We believe that we have ample access to the credit markets, and our primary focus is on the bank markets.

We are in reasonably advanced conversations with folks, so our level of confidence around bank capacity and interest in the part of the world is high -- and specially for our brand and our projects.

Okay.

The rates you are discussing are within the range of what your previous expectations might have been?

Yes.

[John Chang], Oak Creek.

Yes, you guys mentioned the commission rates in the first quarter.

Is it safe to assume that, at quarter end, they are higher than the 1.13% that you reported in the quarter?

Yes.

When you talk about I think doing more to reverse the decline in VIPs, is one of the levers to pull commission rates?

Because I'm just trying to understand what other levers there are besides just paying more to the junket operators.

Brad?

You want me to -- certainly, the driving factors what we pay these guys to bring business in -- as we mentioned, I think credit is going to certain junket reps, not to all -- is something that helps drive and helps them with their business.

So I think those people who we feel comfortable with and to who (sic) it's a meaningful asset to help them along, bring business to our property, we will look of that.

Certainly, there's operational issues in how we run our place and how we complete the experience.

So I would certainly rank being competitive in the commissions as number one.

We have to be competitive.

We've tried in the past to remain below the given rate.

We are just finding that, in this current environment, we're going to have to be aggressive.

[Karen Mott], [Odi].

Yes, good afternoon, gentlemen.

I have two questions, please.

My first goes back to the comments and the statements they made by the Macao government, because I believe there was a separate statement that seemed to suggest that they were trying to constrain the number of tables and slots that they were going to give going forward.

Do you view that as a set [limitation] to the limit of 40 casinos?

Does it change perhaps your plans for the makeup of your remaining sites there, sites five through nine?

No, I think the bottom line is that they will control the slots and tables of the current operations that are there now while they then review, for example, the service agreements that have essentially set up sub-sub-sublicenses that are not controlled or not rationalized, shall we say.

They are not suggesting that, on a going-forward basis, that those individual places don't have an appropriate mix of tables and slots that go with them.

No one is going to spend billions of dollars without additional capacity in more destination-type places.

I think, if you read between the lines, what you see it is, I think as Sheldon suggested, they are saying they don't necessarily like the old Macao style proliferation of the casinos that don't drive visitation from further away.

Those that are what you would call cannibalistic, or are call it leeches from those casinos that drive first-class visitation from around the region I believe are going to be controlled and frowned upon.

The future of Macao, our destination-style casinos like exist on the Las Vegas Strip -- and that's why when Francis Tam talks about additional casinos, that they are 29 now, and you do the math.

That's one more casino on the peninsula and ten casinos on the Cotai Strip for the kinds of casinos that are more like what are on the Las Vegas Strip.

So I think it confirms the vision of government that, in the future, they are going to encourage destination-style, multi day-stay places that drive visitation from further away.

I think that's what to read between those lines.

They are not going to discourage additional capacity for the billions that are spent in those style of casinos.

Okay.

My second question is with regards to infrastructure.

You've obviously identified that you need that ferry to drive mass volumes in the Venetian.

But as I look at your pipeline over the next three-plus years, you are trying to more than double, almost triple your footprint again.

My question is, what additional infrastructure commitments do you need?

Because what I'm worried about is that there is obviously a differential between when you build and when the infrastructure follows that allows you to fill that build.

Is that an issue for you?

The key thing about ferries is the scalability of ferries.

The fact is this temporary, this temporary facility that's on the [Pak An], that's at the foot of the Cotai Strip.

If you understand the geography, that's a three-minute ride directly down a four-lane highway to the Cotai Strip.

If you look relative to Peninsula Macao, the streets are narrow.

You can't change it; it is what it is.

I think the government is recognizing, by saying additional developments in Peninsula Macao are not going to take place, because it's just too crowded.

How do you move around?

How do you get around?

The beauty of the Cotai Strip and that ferry terminal at the foot of the Cotai Strip is, as the new ferry terminal comes online, more and more capacity comes online.

Now, as you look down the pike about the additional capacity on the Cotai Strip, ferries are simply a process of ordering them long enough in advance to be able then to deliver them, and then those, as I say, are ultimately scalable.

Then you can center the different destinations.

You can have higher frequency of service, etc., etc.

That's why we keep dwelling on the idea of ferries.

But this current ability to connect to Hong Kong is just the beginning.

There are many more places -- Shenzhen, others up the Pearl River delta, the airport at Zhuhai which is currently underutilized, connections the to the airport in Hong Kong, expansion of the Hong Kong -- or the airport right there again in Macao -- because that airport is like a minute and the half from all of the hotel rooms and the new hotel rooms on the Cotai Strip.

So the scalability of the ferry operations is the lowest-hanging fruit, but additional space, I guess you would say, apron space at the airport that increases capacity there, too.

We're confident that, with the right combination of scalable ferry service and the expansion, the opening of the new [Pak An] ferry terminal which are well before all of this new product comes online, will make that transportation capability and the infrastructure there married directly with increasing capacity on the Cotai Strip.

Okay.

Then just coming back to my first question, I understand what you're saying about them wishing to get -- to upscale and to improve the quality of Macao; I entirely understand that.

But as I understand it, they are only giving permits to the new style American quality casinos.

That is the shift from 29 to 40.

So I wonder.

Why are they making a separate statement about constraining the number of tables and slots machines if they are only giving permits to American style, quality casinos.

Can you see my --?

I wouldn't necessarily say "Americans style".

I would say international style.

Sorry, okay, international.

But you know, these are all good projects.

I wonder why he has to specifically make a comment about constraining tables and slots when you're the only people allowed to build new (inaudible).

Because, look what's happened.

The smaller, old-style Macao casinos, quite frankly, sap the power required to drive the investments.

So that's -- if you read between those lines, those that have been granted to the older-style, less-attractive, more regionally focused places are -- the communications there are they will be discouraged, there will be discouragement, if that is such a word, of adding more capacity in current places, capacities granted to the places that are more destination-style casinos.

At this time, I would like to now turn the call back over to management for closing remarks.

Thank you very much, again, for listening in on our conference call today and participating in it.

Again, I want to apologize for the technical difficulties at the beginning.

We had an interesting quarter, shall we say, and there are things happening in the marketplace and Macao that we are reacting to as we speak.

We still are very bullish about the long-term direction for Macau, about the encouraging comments by government in terms of the development of the more destination-style casinos in the future.

We are very bullish about what's happening in our developments in Singapore and how Singapore is in fact coming along.

Daily, we walk through the property here and look at the traffic counts and watch what's happening with the ramp-up of the Palazzo, so we're very confident that the combination of the Palazzo and the Venetian here will continue to make this the destination place in Las Vegas overall.

So, we appreciate your participation today and we look forward to next quarter's conference call.

Thanks again for your comments and your questions and we look forward, again, to interfacing with you in the future.

Ladies and gentlemen, thank you for your participation in today's conference.

This concludes the presentation and you may now disconnect.

Have a wonderful day.