永利渡假村 (WYNN) 2006 Q3 法說會逐字稿

Good afternoon and welcome to the Wynn Resorts Limited Third Quarter Conference Call.

Joining the call on behalf of the company today are Steve Wynn, Chairman and CEO of Wynn Resorts, Ron Kramer, President of Wynn Resorts, Jack Binion, Chairman of Wynn International, Marc Schorr, COO of Wynn Resorts, John Strzemp, CFO of Wynn Resorts, Andrew Pascal, President and COO of Wynn Las Vegas;

David Sisk, CFO of Wynn Las Vegas, Kim Sinatra, SVP and General Counsel, Matt Maddox, Treasurer of Wynn Resorts, and Samantha Stewart, Vice President of Investor Relations.

Now, I would like to turn the call over to Mr. Kramer.

Please go ahead sir.

Thank you, Nicole, and welcome everyone.

We are broadcasting this conference call live on www.wynnresorts.com where you can also find the earnings release which we issued earlier today.

Before we begin, I need to remind you that today's conference call contains forward-looking statements that we are making under the safe harbor provision of federal securities laws.

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

Please see today's press release under the caption forward-looking statements for a discussion of the risks that may affect our results.

In addition, we will discuss adjusted property EBITDA, which is a non-GAAP measure.

A reconciliation of this measure to the most comparable GAAP measure is included in our press release.

With that, I'd like to turn the call over to Steve Wynn, who's going to spend a few minutes giving you an update on the company's performance and then we will open the lines up for questions.

Steve?

Good morning, everybody.

We're scattered, our group this morning.

I think Marc and Jack and everybody are in China.

I'm in Tokyo looking at Mt. Fuji on my way there.

And the rest of the guys are in New York and Las Vegas.

As usual with these quarterly reports, it seems like the main function that they serve is to review the Company's business for the past 90 days, taking note of any trends that seem appropriate or significant as it relates to our shareholders and other investors that are institutional or individuals.

I think the numbers speak for themselves.

We had all of our parameters and measurements in Las Vegas were satisfactory if not delightful.

I think everybody heard that somebody won a lot of money in Las Vegas during that quarter, but in spite of that, our whole percentage was normal and we exceeded our performance a year ago.

We are all very preoccupied with two major things this season.

One of them was finishing the drawings on Encore and getting the loose ends tied up as that building takes shape and climbs to the 4th or 5th floor.

All of the minutia and details of the public area and the things that give it its personality have to be cleaned up and finished so that we get a final count on the budget and stay on schedule.

The other thing that occupied our time during this period was of course the opening of the Macau Hotel and that was an experience that we'll all remember.

Very exciting, very challenging, as we stepped into a new business.

And when I say a new business, this the first opportunity that any of us have ever had to deal with what is commonly referred to as dead chip program in China.

Our colleagues in other companies, as I look back on this, did what I think might have been a more prudent thing by opening their regular casino first and then the VIP casino second.

We did it all at once with enthusiasm and learned very quickly about the enormous avalanche of transactions that are associated with non redeemable chips and the levels of activity that we experienced at our building which are quite astounding, really.

I think that our per unit performance in September exceeded everybody else's but I certainly know that it did in October.

These numbers are public and it's no secret what we win per unit or per machine or per baccarat table or per VIP table.

But we seem to be performing disproportionately to our size and that trend is continuing.

And the casino regulators of Macau regularly make these numbers available for those of you who are particularly curious about it.

It's sort of like New Jersey.

They give out a lot of data about what the Galaxy or the Wynn or SJM or the Sands do.

And you can get those numbers, but suffice it to say that as expected, our win per unit is enormously higher than our competitors and we are still at about half stretch.

Phase one commenced on September 6th.

We have about 212 or 213 tables and just under 400 slot machines add in less than 90 days.

For Chinese New Year we add another 139 or so, hundreds more machines and then as we go through the spring, the game total and the facilities total in terms of retail, food and beverage, and other entertainment attractions, climbed to full stretch at Wynn Macau.

So that during the spring and the summer we continually get larger and I think more competitive with our, the offerings we give the public as we stretch from block to block in our 16 acre location in the center of Macau.

So we're very happy although challenged by the assignment that Jack and I think Scott Peterson - - Jack Binion's on the phone and Scott Peterson, the CFO of Wynn Macau is also on the call, are you not, Scott?

I'm here, Mr. Wynn.

Yes, and so Jack and Scott are there as well as the team from Las Vegas along with us parent company types.

So our yields per table and our casino revenue in the third quarter exceeded our competitors substantially in Las Vegas.

In spite of our size, we were able to outperform in terms of casino revenue, hotels that had 50% more rooms than we did, than we have, and we're very, very happy with our performance.

We're looking forward to the day when we're at full stretch in Las Vegas at 4,800 rooms.

We're some months away from that, but it's on its way and I think at that point, we'll be ready for the golf course.

But I think those are generally my feelings at this moment.

I guess we could make a fuss over the numbers comparatively, but we don't want to be gloating or anything so we'll just let you ask questions and we'll start.

[OPERATOR INSTRUCTIONS]

Oh, incidentally, our cash reserves are I think around $1.3 billion in unrestricted money and the stuff in Hong Kong is gathering interest at the rate of $125,000 a day.

And if I can remind everybody the parent company has no debt.

Who's going to be the first question?

Sir, your first question comes from Bill Lerner with Deutsche Bank.

Thanks.

Hi, Steve.

Just the first one, you actually mentioned this kind of public secret about Vegas and this one player that I think hit you in September for the normally - -

September and August.

And August, okay.

So as it relates to that situation, or despite that, you held particularly well.

Can you just maybe give a little bit more color around that?

If we had normalized that situation, how much stronger things would have been in Vegas?

And then maybe a follow up.

Well, we still held 22%.

We were a point high I would say.

We have an awful lot of big players in Las Vegas.

And that is no more obvious than what happened in September, what's continued to happen in October and November.

I mean, we're the kind of a hotel that can take a $15 million hit from one player and sort of shrug it off.

Because we have so many of them.

And frankly, that's as simple an answer as I can give you.

I mean, at the end of the day, at the end of the day, regardless of volatility or fluctuations, for the past 40 years, my casinos have held around 21%.

That's been a consistent number.

We've had some quarters we were down, I remember once it was 16 because all 4 or 5 of the Mirage properties got a hit in the month of June.

But generally at the end of the year, we're at 21%.

And we want our best customers to win.

The only way that a casino can make more money is to have more bets being made.

And the people that make the biggest, that make all the bets are the best customers.

So when someone is going to win, we want it to be our best customers.

So we were delighted in August and September when major players had a run of good luck because you know sometimes it goes the other way for them.

And we were able to overcome it rather easily.

The activity you're talking about took place in the last week of August and the first week of September, right when we were opening Macau.

And we opened Macau incidentally and the first 4 or 5 days we got smacked by our best customers and in 23 days we didn't have a chance to normalize.

We did in October, of course, but in casinos that have the level of activity that we do, volatility is something that pretty much should be ignored.

You figure that we're going to be at around 20.5 to 21.5, and you calculate the performance of our company, and you'll be accurate almost all the time.

And that's what's happening here, that's all.

That's helpful.

And then just a follow up on Macau.

You mentioned these numbers that are out there in the marketplace and when you take a look at these numbers in Macau for October, they're quite telling, and I think is suggests something like 12% share for you guys and you get back into - -

11.5.

11.5, okay, back into a number something like 80 million or plus in revenue for October.

So that accelerates certainly as it should after your first 25 days.

But when you extrapolate it out for a year and you think about the types of margins that could eventually do, the numbers get pretty big.

I was hoping you could give a little more color around that type of development.

Well, Ron, this is not a fourth quarter report and we - - this was a very delicate time for us.

We opened up with all the confusion, all the extra expense, all of the - - and I mean confusion.

I mean a good dead chip program - - Jack Binion looked at me and said, oh, the cage thing.

I remember the second or third night he said, the cage thing is really, really spectacularly difficult for our people at this moment.

And Jack was down there with Scott Peterson almost full time.

And if Jack had had more hair, he probably would have pulled it out.

And so when you look at our September numbers, you're looking at a ridiculously abberated performance.

Even though we made a few million bucks, in no way is that any kind of indication of that enterprise's financial performance.

October is more like it.

But you know, we are learning.

I think Jack said we're doubling in our knowledge everyday.

It would be fun to have Binion make a comment about this because without us starting to do the fourth quarter, I think Jack's impressions are the most important right now.

I think you said it all Steve.

Well, Scott, do you think I did?

I mean I want to be forthcoming here.

You know, people like our place.

Let's, frankly, it's just that simple.

If you look back on all the years we've been in business, I'm going to ask my friends in the investment community, has there ever been a time when one of our places did not outperform the competition?

Whether it was on Fremont Street or on the strip?

Why would Macau be any different?

I mean, we are really playing catch up in terms of understanding of our customers and the market place.

The Sands and SJM, they have time on their side, and we respect that advantage.

There is nothing in the world like experience.

But what is fortunate is that we are not new at the game and so our uptake on the market, our ability to adapt and change our own programs quickly and decisively is pretty determined.

We made changes almost immediately in the way we configured the floor, we ordered 500 more slot machines, we did a whole bunch of things that as we learned where our margin was.

And the Sands and SJM, of course, have the advantage over us in that regard.

But I assure you that that advantage will shrink rapidly.

The other point I'd make is that with the opening and as part of the historical that there has always been a growth market for every time a Wynn property has opened in any market.

And that's the same thing that we see happening in Macau.

Look, everybody has got numbers that they can look at.

I think if you look at the performance on the strip where everybody is putting their best foot forward, I think you get a pretty fair idea of what to expect in China.

At least if you're comparing American companies.

Okay, thanks, guys.

Your next question comes from Celeste Brown with Morgan Stanley

Good morning or good evening depending on where you are.

Can you discuss what sort of an adjusted EBITDA would have been for your 25 days in Macau?

No.

I don't think it's possible to reconstruct it.

Well, I think, Steve, normalized - -

Are you talking about just changing the casino percentage for example?

Yeah, just slot machines.

We sold $1,550,000,000 worth of chips in 23 days.

And held and kept 1.85% of them.

The Sands and our competitors do 2.5 to 3 if they play lucky.

But the math says it should be 2.5.

We won $28 million in the VIP program, it should have been 42.

Take the junket commissions and take a bunch of other things and you can adjust a bottom line upward by x millions of dollars.

But you can't change the fact that we weren't together in the regular casino for those 23 days.

We didn't have the machines right, we had a bloated expense line during that time, we had huge nonrecurring expenses during that time.

I think that you ought to forget about September, Ma'am, and I have.

And anybody that really wants to over analyze an opening month, I think is wasting their time.

So with your permission I'm going to move past it.

I have no interest in going back to September anymore.

Okay, I guess Bill sort of eluded to this without giving us sort of a - - I'm not looking for what you're expecting for the fourth quarter, but just in terms of normalized margins for your property, and the Sands does the high 30s, is something close to the low 30s more appropriate?

I don't - -

We're not going to get into the specific items.

Okay.

And incidentally, it's too soon for us.

We are not ready, and I'm giving you our own internal feelings.

I think I'm speaking for Jack and Scott and the rest, and John Strzemp when I say we're not ready to understand exactly what those margins are.

They are certainly better than anything you have seen from us so far, but as to where they're going, remember, The Sands does not have a hotel, nor the range of food and beverage or retail that we do.

So we have a different kind of revenue structure than they do.

And so I'm not sure whether a direct comparison with The Sands is a place that we look for our own edification.

And so I can't suggest that you do it either.

Okay, and then just one final question on Macau.

Were you at all surprised by your mix in your first 25 days, mass versus VIP?

No.

Wait, I take it back.

Yes, yes.

The most successful casino in terms of revenue in the state of Nevada is Wynn Las Vegas in terms of the drop or the handle per table and the win per table.

And we do over $5 million a day in handle 365 days a year at the Wynn Las Vegas property.

Our regular games in all cash, the non VIP section of 180 or so - - Scott, right?

About 180 tables?

165.

165 non VIP tables at Wynn did more business per table than all of Wynn Las Vegas, the Wynn Macau tables.

That stunned us.

The level of our I guess you call the non VIP, non junket business in our hotel.

And that's continued.

We're really surprised about that.

And I know Jack is talking about all kinds of programs that underscore and take that to even further.

Okay, just one final question and you probably don't want to answer this one either, but there's been a lot of press about you looking at Atlantic City.

Is it premature to talk about it on the call?

Oh, I think so, yes, Ma'am, I do.

We - -

I'll try to do better next time.

It's okay.

I'd ask the same questions if I were you.

It's an interesting market.

If you recall, the [Borgatta] deal was a model of what I, what we did at Mirage Resorts with Monte Carlo.

And our friendship with the Boyds allowed us to do the same kind of a deal with Borgatta on property that we acquired in Atlantic City.

We gave them a piece of land and ended up with half the place.

MGM is happily enjoying that now.

But we predicted that any hotel built in the modern era without the what I would call the influence of the regulators in the actual design of the place, would result in a design that was more friendly and sensitive to the public.

Borgatta is such a place and we predicted that any hotel built in the modern era would dramatically outperform anything that was done in the first phase of Atlantic City's construction which is basically the late 70s and early 80s.

And sure enough, the Tunnel and Borgatta have lived up to that expectation and I believe that MGM and other people are going to go further in Atlantic City.

And I think that Atlantic City is probably on the cusp of - - the potential I should say, exists for Atlantic City to become fashionable and exciting in terms that it has not been in the past.

I think that market can be broadened.

I believe that Governor Corzine, I believe the mayor, the political leaders of the community are feeling very up tempo about the place.

A number of companies have made investments in Atlantic City.

My friend Dan Lee, the folks at Morgan Stanley, I mean a lot of people are sort of kicking the tires in Atlantic City.

We'll see whether good taste and imagination prevail.

Probably Atlantic City's best days are ahead of it.

Okay, great.

Thank you.

Your next question comes from Joe Greff with Bear Stearns.

Hi, everyone, how are you?

Two quick questions.

I was hoping you could give us a little bit more color in Las Vegas.

Do you think, I guess the third quarter results speak to the strength of the high end?

Do you think it speaks to share shift where maybe you're gaining share at the expense of your competitors?

And then my second question relates to Cotai development.

I was hoping you could give us an update in terms of where that stands either internally, whether you have designs at this point, or how you're thinking about Cotai in general?

Say that again?

Designs on what was the last part?

On Cotai development.

Cotai.

We noticed that our strength in Las Vegas was on non casino and casino revenues.

I'm not familiar with all of the rest of the market and how market share shook out for them.

But basically we've marked our progress against hotels with lots more equipment in terms of rooms and that sort of thing, and we've been very satisfied that the old saw, the old antidote that it's not the dog in the fight, it's the fight in the dog is what is prevailing as it always has in Las Vegas.

Size isn't always the final measure of success, but the quality of the guest.

And those are revealed by average room rate, win per tables, sales of food and beverage, retail sales per foot, all those usual measurements sort of tell you that who's staying in the hotel and how long people hang out and whether they're having a good time or not.

And in the end of the day, that's what makes these places successful.

As far as Cotai goes, we were, with the cooperation and the help of the government, able to make an adjustment in our real estate.

We had 54 acres that was split into 2 pieces that were not quite the same size but close to it.

I think 30 and 14, 30 and 24, or 29 and 35 or something like that.

Anyway, the street that divided our property was a challenge in terms of the way we were able to link all of our development on that property.

And we asked the government to reconsider and there was an opportunity by adjusting some boundaries and some parcels, for that to happen with the help of the government of Macau.

And I'm very, very pleased to say that they responded and gave us an opportunity to do just that.

And we reduced our size to 52 acres, but it's one huge contiguous piece now.

And that has given us the opportunity to revisit some aspects of our design and make it more competitive and more potentially more powerful.

And we are in the process of doing that now, Mr. Greff, and that's where that stands.

So, and we are going to resubmit that drawing under the new boundaries that the government allowed us to have and proceed along the way.

We've done this at the same time that we've been rushing to finish all of the details of our existing hotel.

Remember, we are still in construction.

We really opened up about half the place.

So we're not near done yet as I said earlier in the conversation.

Okay, great.

And then one final question.

Maybe it's for you, Ron, but anybody can respond.

Given your very liquid balance sheet position, do you have any ideas in terms of near-term usage of the cash?

Nothing that we're prepared to talk about, but obviously we have a tremendous amount of liquidity, $1.4 billion of unrestricted at the end of the quarter and we'll continue to look at how to best maximize our balance sheet going forward.

Good enough.

Thanks guys.

Your next question comes from Harry Curtis with JP Morgan

Hi, Steve.

I'm wondering what in the last month, month and a half, you've learned on the hotel side in Macau?

What's the type of customer that's staying there?

What feedback have you gotten on their interest in staying in Macau longer?

If you could give us a bit of color on how you expect that side of the market to evolve.

Jack and Marc are there.

I'd like them to comment on that because I've been away for 3 weeks and as I say, every day is a learning experience in Macau.

Okay, in the hotel revenue, the occupancy has been approximately 98% total.

But more important in what we're learning, Harry, is the volume that the restaurants are doing.

And the volume that the retail is doing is surprising us of the amount of covers and the amount of revenue.

Much greater than we expected, much more per cover.

When I said 98% in the resort, that's the resort rooms.

With suites and everything, it's 75.9.

So 76%.

Yeah, and that's for the - -

Well, what we do is we keep the suites open for the high end customers.

The management of the room inventory - - Harry, here's another example of we talked about dead chips being a new experience.

The management of suites, now here's a market that has primarily in the past been a daytrip market.

So we didn't mount a big resort advertising campaign.

We wanted to see the first 90 days we were open, what would be the demand for the suites from our high end customers.

So we deliberately backed off from doing the kinds of things we do in Las Vegas before we open to underwrite occupancy.

With 600 rooms we said it really does depend on who is staying in the rooms.

Well, so we keep the suites empty and it is fascinating to watch how the junket agents and the VIP room folks and the VIP room customers, how they change their mind every 5 minutes.

You know, we'll stay tonight, hold the room, and then they say, no, if they're lucky, they stay, if they're unlucky they leave.

Or sometimes if they're unlucky they stay, if they're luck they leave.

And you take 150 suites, 160 suites, and you always keep 40 of them or so.

You really don't know where you stand every day.

And that represents that occupancy switch.

So you're running a casino with a hotel in it.

Now I don't think that - - and that's been the common description of Macau is a place where you run a casino with rooms upstairs.

And we're learning that many of the things that we evolved to in Las Vegas are probably true.

And to that extent, I would say, usually if we mention our competitors we want to do so to make ourselves look good, but I think that the Sands, the Venetian project, which is more on the current Las Vegas model, and our place are beginning to show that there really is a market for this.

You look at our occupancy at 75 or 76% and it will fool you.

Because really what we're talking about is 50 rooms that would make a big difference.

But that's something that we're doing on purpose because we're not exactly sure of our footing.

But people are shopping, people are eating and enjoying the same things that our Asian customers have enjoyed in Las Vegas over the years.

So the behavior is not surprising, it's consistent.

What is surprising is that the expectation was so much different by the street, that maybe SJM was the final measurement of Macau.

And I think that SJM and Venetian, the Sands people, ourselves, we're all learning that human behavior is not really that different culture to culture.

And we're also seeing significant up - -

Harry, can you hear me?

Yeah, go ahead.

I think what's really surprising and the best thing that we did in the month of September was the 86,000 covers that we did in our restaurant.

The most surprising factor was the 23,000 covers that we did in our fine dining restaurant at about $53.00 per cover.

Now that's really, really strong for the Macau market as you're aware of.

And Harry, let me add that as time goes on to emphasize what Steve said, the percentage mix of gaming and non gaming, although it does not closely align with Las Vegas, every day the propensity for non gaming is growing.

Just like the government wanted.

You must hand it to the Chinese.

They decided that they wanted to alter the market peacefully and quietly but dramatically.

Edmund Ho's campaign to broaden the market's appeal and change it to a destination resort, you may not see it if you look with a microscope, but if you step back, this is happening as sure as sunrise in that town.

And so as a quick follow up, when you mentioned the 98% occupancy, how many rooms does that encompass?

440 of our 600.

We've got 160 and 440 is the suite and regular room breakout, Harry.

And so it's the 440 that you're referring to?

Marc was talking about the 440 and when you say that you're keeping half the suites empty, that changes.

You play in this game of you want the room or don't you?

You know?

They run upstairs and they run back downstairs and it's very interesting.

All right.

And, Harry, something that's also very important, the market especially in the non gaming has grown significantly in October versus our first 25 days of September.

Okay.

Excellent, thanks a lot guys.

I mean, we've blurted out everything else about this place, Ron, we've blurted out everything else, I mean, you want to do this one time talk about October to mitigate what happened in September?

Yeah, I think we should.

I don't know, Scott, did we make 19 or 20 million in October?

19.5

Okay, for the young lady that was asking about October, 2.3 million in September and 19.5 million in October and we still didn't have our feet underneath us and we didn't hold 2.5% of VIP, we held 2.3.

So we had a 25% margin, right Scott? 25 or 26?

Yes.

In that range.

And we really are trying to find our - - I was going to use an off color remark.

I better not in these services I'll read it in the paper.

We're really finding our way in the dark here.

And we've got, every day that goes by Jack is changing the place.

He's being very quiet on the telephone today, but he and Scott and Marc, we're fixing it every minute.

And we're watching this and adjusting.

This is a game of adjustments now.

So maybe that clears up all this murky - - you want to know what happened when you saw the market share, what did it translate to, and the numbers we're looking at in October are that.

Yeah and that growth of the non gaming all across the board, significant increases in hotel occupancy, [inaudible] all the metrics says they're continuing to show growth away from the gaming sector.

And as I say, we're at half stretch and we don't think October is our good moment.

I mean, we're still dissatisfied substantially.

And so there's the trend if you want it.

At least now you can talk about some numbers beyond 23 days.

You can talk about 53 days.

Was that helpful?

That young lady that we spoke to, I forgot, early in the program.

Yes, okay.

So Operator, do we have any other questions?

Yeah, Ron, once you gave out the October number in regard to Macau, I think significantly it was also the increase in the total room occupancy from 78% to 83.

I mean that's showing how the market is adjusting to the Wynn property.

May I stress to all of our - - there's a lot of strangers including our competitors on the telephone, it's a sport now.

I want to stress something in plain language.

Especially if my own big shareholders like Barron and Marsico and Fidelity are on the telephone or Alliance, we are moving in Macau.

We're satisfied with everything.

I don't think we've ever been on a steeper learning curve in way whole 40 years.

I know Jack feels - - Jack, don't you feel that way?

We're learning.

We're learning.

And so don't make too much of the numbers either way.

Take a look at the big picture.

And let's try if we can to stay off short term thinking.

One of the reasons why China is so successful as a country in some of the decisions they've made lately in their history, is that they aren't short term.

And as a company, we are not short term.

And we're honored to be in Macau.

We think that we're in a very healthy environment and privileged to be there.

And I think you have to take the long view.

I think that other American companies that are in China are doing exactly that and I think that we're all value added players in that community and I think that we're doing what they hoped we would do.

And I'm not just speaking about our company.

And I think the results are going to be very exciting.

Operator, do we have any other questions?

Yes.

Your next question comes from Jordan Laycob with Marsico.

Hi, congratulations on a great quarter.

I was curious if you guys could speak to the higher valuations we've seen over the past couple of days in the Four Seasons transaction and if that has changed any of your thinking about the value of your stock or the franchise value that you're creating?

Well, you know, I'm a big fan of Izzy Sharp.

I stay at Four Seasons and I've always thought that they did a wonderful job and that they had carefully, slowly and meticulously created a brand and a public trust that if you really wanted the best, you could trust Four Seasons to give it to you.

That's exactly what the Wynn Company is about.

Wynn resorts is - - what do we ever say to anybody in business in our advertising and everything else?

We're saying, trust us.

We know who you are and we k now what you want.

We may not be perfect every time, but you can count on us to try and give you what you're expecting and not disappoint you.

Now that isn't as flashy as come companies but it is brand building.

And I think the results of our company in Las Vegas have been what is commonly referred to as a positive response to a brand.

Not necessarily acute, strategic, flashy moves for the moment, but basically long term brand building.

The Four Seasons transaction is a reflection of Izzy Sharp's common sense and the way he built that company and the greater value that he is receiving is a recognition of the fact that such things are difficult to do.

They take time and consistent application of a little bit of inspiration and hard work to get there.

I love the Four Seasons transaction because I feel a kindred spirit with the Four Seasons.

It's a company I would have loved to have owned ourselves some day.

I think that we were a perfect match.

If there was a comparison to make, I'd like to think of Wynn resorts as the Four Seasons of gaming.

So I'm glad that the Four Seasons values have been recognized in the form of this offer.

I don't know whether Izzy wants to sell it or not, I presume he does, but I hope he's getting what he wants.

He does.

Okay.

And Prince Alwaleed has been a shareholder of his for quite some time.

And incidentally, our own shareholder, Ron Barron of Barron Capital is a big shareholder of Four Seasons as well.

I don't know if Tom Marsico is, Jordan, are you guys Four Seasons owners?

Yes, Steve, we are.

Okay, so there's common ownership between us.

And obviously the value of the brand is reflected in the price and building the brand is something we're very focused on here.

If Jordan's on the telephone, between Mr. Okata, Jordan, and myself, we're talking about almost 2/3 of this company.

Thanks for answering the question.

Just a quick follow up.

Steve, has there been any movement at all from the Macau government on potentially changing or lowering the tax rate?

Either stratifying it with the VIP commissions and then also has there been any movement at all on the bad debt issue that we've talked about in the past?

I've been too busy to be able to give you an answer on anything like that.

I know the government looks at all of this stuff and they are taking stock of what's going on.

Comments have been made by Stanley Ho, I know in the paper, and I think the government is monitoring everything about these new hotels.

We just had Galaxy come online with is it called Star World, Ron?

Yes.

The Star World is the place next door to us that's been open for a few weeks.

I think the government is measuring everything.

And again, Jordan, I think the government is on a learning curve here.

So what their future behavior will be is something that I'm not in a position to predict.

And what their thinking is at the moment is something I'm not up on.

Maybe I'll get a chance to find out while I'm in Macau, but I just think everybody is bright eyed and wide eyed at this point, learning about what new kinds of facilities mean to the public and how the public in South China and all the coastal provinces respond to new facilities.

Great, thank you very much

Your next question comes from Larry Klatzkin with Jeffries.

Steve, thank you for giving the October number, that is appreciated.

Can you talk - - a couple things.

Can you go over the expansion?

It sounds like you've moved up phase two in Macau and is the budget the same?

And exactly how is that now going to open in stages?

What should we be using?

[Speaks Mandarin].

I just said no problem in Mandarin.

I'm showing off, Larry.

We did move it up.

The first thing Binion did when he got to Macau was put the builders on 24 hours so they could get more equipment quicker.

And as a result of that, parts of phase two that were scheduled for the spring are coming on for Chinese New Year in a few months.

So we did move up our work in Macau.

And we put our foot on the floor just about as aggressively as money and human efforts could permit.

We are holding back nothing in this last third of our development in terms of money.

We're in 800 and we're going to spend $1.2 billion.

But the last third doubles our capacity.

So the budget for the last part is up to $400 million now?

Well it was $1.2 billion altogether.

It's always - -

The budget is the same, $1.2 billion.

And you're going to end up when you're finally done with 850 slots and 350 tables?

More.

I think more.

Ron, what should we be modeling for number of units?

We haven't put out an exact number other than 119 additional tables we'll open in February.

Are you sure it's 119 or 39, Ron?

Scott?

It's 119 here, Steve.

They made some adjustments because of the construction wall and the future construction.

Okay.

So it's 119 in 10 weeks or something.

And Ron, I don't know if you're willing to do this, just for analysts to do their work, any way to give what capital interest might be next quarter, depreciation, corporate?

Just some basic stuff that's not really giving away your operations?

Yeah, I think you should continue to use the numbers that are consistent with where we are.

Okay.

And then can you give the slot win percentage for Macau and Vegas?

Have we been doing that?

No, we haven't.

We have not.

No, we don't want to give our slot percentage of win.

Next question, Larry.

Okay, that's fine.

And then I guess the last thing is when do you guys expect to get firm with the government in Cotai so you can go out and announce something?

I mean, any feeling for what the timing may be?

The way it works here is that you have to submit a blueprint, a layout of your facility.

And as I told you, when I was there last, the government allowed us to make a change that was very significant in our favor and I've been rushing to try and figure out how to take advantage of that.

And you know, it's a high class problem to have because as you learn what's going on in your facility for the first time, you'd like to have that wisdom, if I can use that term, be reflected in the next drawing.

So I've been pondering the information that we've been receiving and trying to have it reflect in the work that we're doing architecturally.

You know, we've always been a little slower than the other guys.

I don't want to use the word ponderous but I'd like to think that we're more contemplative when it comes to design and a little bit more studied in how we lay out and how we dish up our attractions to people, believing that this process produces the best possible product at the end of the day.

Unfortunately it does lend itself to really - - the creative process doesn't accelerate the way construction does.

So I'm a little slow.

I got a lot of help from the government in giving us a tremendous option that I wanted to have there and I'm now just trying to figure out how to get it down on paper to make sure that we've lived up to our potential there.

That makes sense, Steve.

I guess the last thing is just October of Vegas.

Any way to hear from you on that?

Or no way?

Now you guys are really - - you figured if you've got us on the run, you may as well keep it up huh?

We had a reason for tipping October because of the shortness of our reporting period in Macau.

I think if we start doing the first month of every quarter, we could get you in trouble.

What I mean by that is to tell someone what a third of a quarter is, without the other 2.3, is to create a misleading expectation.

And I think as much fun as it would be to talk about it, I don't think that we'd be doing a good job if we did.

Okay, that's a good point, Steve.

Well, thank you very much

Your next question comes from Joe Faz with T. Rowe Price.

Hey, guys.

There's a shareholder.

Hey, Steve, yeah.

I appreciate you not mentioning [cross talk] Hey, we try to keep a low profile, so I'm glad you didn't mention me in those comments.

Your cover is blown.

Now we've got about 90% of the company on the telephone.

Quick question on Encore.

In the press release you guys mentioned that you're considering some certain enhancements.

Can you talk a little bit about what they might be?

And then also it sounds like you're going to push it out to early '09 on the opening.

The enhancements that you're thinking about, we're always saying what is it that when you walk in the building will make you go, oh my goodness, here's another new thing.

And I think we found some of that.

It took a long time to do it.

It caused us to alter some things in the public area and I'm not sure if the budget impact is significant, but let me put it this way.

On a - - what's the budget, Ron?

$1,740,000,000.

What?

$1,740,000,000.

Yeah.

I don't think that what we're talking about either way is plus or minus more than $100 million.

I think it's less than that.

So the enhancements are not profound or really exciting financially more than they are in terms of what they were.

What they did do is cause us to hold some of the drawings until we got these problems, until we got these ideas really sort of nailed down.

And I'm happy to say that I think we did do that a couple weeks ago.

Great, thanks, Steve.

Encore is on the fifth floor or something.

They're cooking with the high rise.

That's all done, all the big stuff is done.

Those drawings, they've been out for quite some time.

That building is going very fast now and I believe they're going to start the garage and those things.

The things that we talked about enhancements were things that were in the podium level, the low rise portion of the building and were not really significant architecturally so much as they were interior design and that sort of thing.

Next?

Your next question comes from Jeremy Cogan with Banc of America Securities.

Hi, good afternoon, good morning.

A couple quickies here for you.

As it relates to the mass market in Macau, Steve or Jack or anyone, I was wondering if you could talk a little bit about when we look at the October numbers, have things changed measurably at the mass tables kind of from September to October from a volume standpoint?

Scott?

Jack?

Our drop is up 10% and since the Galaxy opened we've actually had greater level of foot traffic through our casino than prior.

And that end of the - - that's the phase two end.

We don't really get the benefit of our neighbor until this spring when we open that corner.

Got it.

And just as a technicality, I know you said you don't want to go back to September, but just so that we all kind of understand how the VIP Rolling Chip Program works, as was explained on a recent conference call, companies sometimes think that they'll get to the same revenue number in VIP, it's just a function of how much drop you end up having of a day, whether it looks like you're playing lucky or it looks like you're playing unlucky.

It seems like the commission numbers kind of move around.

So the way that I look at your numbers, it almost looks like you might have ended up paying $7 or $8 million initially in commissions than you would have if your hold had been normal, kind of in a normal environments.

So I just want to make sure that we're all kind of looking at this the same way.

I guess sometimes it helps and sometimes it doesn't and it can get pretty - -

Well yeah, this is a relevant point you brought up.

There is a significant difference when you look at us compared for example to the Sands.

We follow a different model in our relationships with the VIP end.

A different model than we had when we opened in September.

And the Sands follows a model that we used when we opened which was to pay approximately 1% of the turnover up or down, just tip sales, to the agents.

And then there's some money that goes for comps, but more or less 1% of what is commonly referred to as a 2.5% game or 40% of the win.

And that was whether the customers won or lost.

We don't do that anymore.

We are on a system that is more closely related to SJM where we pay 40% of the win.

We don't pay on turnover.

So that was a switch as of the beginning of October then?

It was the beginning of November.

We changed some of it in October and we changed the balance of it on the first of November.

Okay, that's helpful.

And then at it relates to Cotai, I think the last call, Steve, you said that you thought possible still to have the Cotai development opened by the end of '09.

Should we still be considering that timeframe based on what you had earlier said about the design process, the land, etc.?

I'm not clear on a date for Cotai and what I'd really love to do is not answer the question until I can be intelligent about it.

It's too murky.

If I get my ducks lined up and everything breaks right, then I find out from my builder what a schedule is like.

And it might be '09 and it might not be, I just don't know, I'm sorry.

That's okay, thanks a lot, very helpful.

Your next question comes from David Anders with Merrill Lynch

Thank you.

Hey, Jack, maybe you can answer this, or Steve.

Are you starting to see any kind of cross play or - - when you look at your high rollers in Macau, are they recognized guests in many instances?

Or are they new guests?

That's number one.

And number two, did Golden Wheat really juice up October or how do we think about what that impact was on those first 30 days?

Jack?

Steve, why don't you answer that? [cross talk] quite a few customers that play in Vegas to come here.

One part that I do feel qualified to answer, but the rest I'd rather have the Macau guys talk about, about Golden Wheat, but I will tell you this.

We have very, very strong Asian play at every hotel that we've ever operated since the day Mirage opened.

And that continued at Bellagio and it continues at Wynn.

Many of our customers were from Hong Kong and Taiwan and Senjen from Mainland China and from Malaysia, Singapore and all over in Japan.

They are playing in Macau as well and so yeah, we've got crossover play.

But mainly the crossover play is that our American customers that were Asian are also playing at our place in Macau.

In regards to Golden, this is Marc.

In regard to Golden Wheat, yeah Golden Wheat was strong.

But most of our business, and the strongest part of our business was in the latter part of the month.

No question about it, it was good.

That's great.

Thank you.

This is all the time we have today.

Are there any closing remarks?

No.

Thank you all for joining us and we'll look forward to speaking to you again after the end of the year.

Thank you for participating in today's teleconference.

You may now disconnect.