永利渡假村 (WYNN) 2006 Q4 法說會逐字稿

Good afternoon, and welcome to the Wynn Resorts Limited fourth quarter conference call.

Joining the call on behalf of the company today are Steve Wynn, Ron Kramer, Marc Schorr, John Strzemp, CFO of Wynn Resorts, Andrew Pascal, President of Wynn Las Vegas, and Scott Peterson, CFO of Wynn Macau. [Operator Instructions]

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

Please go ahead, sir.

Thank you, Melissa, and good afternoon everyone.

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

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

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

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

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

The reconciliation of those measures for the most comparable GAAP measure is included in the press release.

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

Steve?

Hello, everybody.

Nice to see another quarter go by and have a chance to talk to you.

You've got the numbers in front of you, so the only thing that I really can do in this context is comment about what I see in them and what I take from them and I think parts of them that I think are instructive and enlightening.

There has- - let's see, the best place to start, I'm particularly interested in talking about Macau for just a moment, because I noticed that some firms put out some information about Macau and the opening of the Grand Lisboa and that the general casino, or the mass marketing, was somehow negatively impacted and that all of this was going to spell doom and gloom.

So, in order that those of you who take a real serious interest in our business and are investors, as opposed to short sellers or other forms of kibitzing, I will tell you that, as far as we can see, the mass market is doing great and our trend, since we opened the hotel- - and now I'm going to go right through the fourth quarter and into the first- - has been up.

Our mass market win per table is probably the highest in Macau.

We don't have as many tables as some people, but since the Lisboa and all through our history, the mass market has been growing slightly.

And that trend has continued up through and including yesterday.

So, with the opening of our neighbor, the Grand Lisboa, we saw no diminution whatsoever in the mass market.

So, to the extent that that piece of information was being circulated, it was false.

Our market share in Macau has grown since we opened.

I was particularly delighted to see that we're, for the month of February, at our own all-time high, as our marketing efforts start to swing into gear, both on the mass marketing- - and, incidentally, our mass market numbers, which I say have been very positive and consistent, are those that we've achieved without the focused mass marketing, marketing efforts that are about to begin under the direction of Marc Schorr and Grant Bowie in Macau.

So, we're very optimistic about that.

Our VIP business has grown.

We are experiencing, both in Las Vegas and in Macau, high hold percentages.

Now, some of those higher hold percentages are impacted by, you know, the luck of the draw, so to speak, you know, good luck at the tables.

But, I need to point out a trend that is obvious in our company and has been in companies that we've operated in the past- - and I'm speaking for the moment about Bellagio, which consistently held the higher hold percentage than its neighbors.

And Wynn Las Vegas is continuing that tradition and is consistently holding high.

And there's a thing that needs to be observed about our type of operation.

When you spend the kind of money we do on buildings and you build fanciful places, that people really like, that cater supposedly to the high end, these places have an advantage.

One of them that's very significant in the casino is that people stay longer, they play longer.

And so, places like the Wynn Las Vegas and they tend to have a higher hold percentage consistently.

So, in this quarter and going forward, we're going to change our normal range to 20 to 23.

We held for the year last year in excess of 22.

And that has been consistent month in and month out for us.

So, we want to draw our investors' attention to the fact that it can expect as a regular aspect of our type of market share that we have a higher hold percentage, due primarily to the fact that people play longer.

And they play those games that are more lucrative, like baccarat.

Number two, the kinds of places that we operate aren't at the very instant they opened, sometimes not as clear to the public.

When you rely upon environment and having superior experiential moments, then you're dealing with detail.

And when you do, people don't always see that the first five minutes.

It takes awhile.

That's, that factor of timing is important and has always been important in the kinds of buildings that we build and the kinds of organizations that we manage.

So, what happens is tomorrow is always better than today and the day after tomorrow better yet.

Because as people experience our hotels and they experience a level of service and the training of our staffs, they begin to get very comfortable and they have a high expectation of consistency.

It promotes return visitation and it's the reason that we have the highest room rate in Nevada and the highest win per machine in Nevada and the highest win per table in Nevada on a normalized regular basis.

Time is our friend with our program and that is proving to be the case in Macau and as our market share climbs, as we begin to get more and more people into our own personal program.

An interesting comment- - and again, I'm going to jump into the first quarter, because there's an anecdote about it that I think is interesting for those of you who have a real interest in this company.

We run our own junket program, as well as doing business with three other junket organizations, and that junket program or our dead ship program, whatever you want to call it, under the direction of our own senior executive, Linda Chen, we give credit to the same people in China that we've been giving credit to for the past 20 years, starting with Mirage and even the Golden Nugget before that.

And, like most companies, in our business we have a reserve for doubtful accounts that we accrue every day when we issue markers.

But in China, when Linda started giving credit in our own program, she kept the credit terms on a very short string, very much like the junket operators do in China.

And we've been collecting in roughly around a two-week window.

But, in the month of January, we reserved several million dollars for, because we did so much business as a reserve for doubtful accounts.

And now, we've got to put the money back in this quarter because we collected every dime in January.

These are happy sort of unique situations, but it's interesting because we're on a fascinating and wonderful learning curve in China in Macau.

Every month has been a wonderful surprise in which we double our previous or prior knowledge.

And we're enjoying this experience immensely.

I also want to point out that, as much as I enjoy the fact that we compete successfully, whether it's in China or in Las Vegas, and have for decades, I want to point out that the reason that we've been so successful both in Mirage resorts and here is not in spite of our competition, but because of it.

Would Mirage have been any good were it not for being next door to Caesar's Palace?

Would Bellagio be any good when we built it if it wasn't in the middle of wonderful Las Vegas?

Would Wynn Las Vegas be able to be in such a dominant position in terms of its per unit performance even though we're surrounded by construction.

We have no walk-in compared to the other hotels.

We've got Palazzo being constructed as a noisy steel job, a very exciting building, but it's under construction now on our south.

We have our own Encore Tower being constructed on the north.

We've got the Stardust closed across the street and a shopping center that closes at ten o'clock at night.

And yet, we've been able to achieve per unit performance in excess of our neighbors.

We can't wait until the Palazzo is finished.

We can't wait until the Venetian opens in Macau.

We have to nod in respect to the Sands organization and Sheldon Adelson because of the courage he's shown in opening the Macau market with full power and gusto.

This will mark the future.

These kinds of projects mark the future of Macau.

And, as usual, hoping that our competitors thrive and prosper, we will step in and build a better mousetrap.

That's what we do.

And we'll capture the top end.

So, we're delighted with what's happening in China.

We're anxiously awaiting, as we construct more and more of Wynn Macau, we anxiously engage in the planning process for Cotai and are looking forward to the opening late this summer of the Venetian so that that chapter starts to be written.

We're also waiting for the construction projects of our neighbors here in Las Vegas to mature, because we estimate that there will be tens of millions of dollars of additional value in EBITDA that will accrue to us when Palazzo and the Stardust and places like that are rebuilt, as well as our own hotel, which is on the 15th floor.

Encore is up 15 floors now and it's, oh, 22 or 23 months out, something like that.

And things are feeling very good in Las Vegas today.

Both cities, Macau and Las Vegas, are struggling with the same challenge, that of infrastructure.

There are just so many people crammed into relatively small spaces.

As big as China is, the cities and the areas seem to be all over-crowded.

And happily, Las Vegas is such as place as well.

And I know that our politicians and our political leaders are struggling, both in Macau and in Las Vegas, to deal with this.

But the gaming industry seems to be able to generate crowds faster than the public sector can keep up with the infrastructure.

I guess you could call that a high class problem, but now it's probably a good idea for us to take questions.

[Operator Instructions] Your first question comes from Larry Klatzkin with Jefferies.

Hey, guys.

Couple of questions.

One, as far as, it looks like you're going to have more slots and less tables at, in Macau, than you originally planned.

Am I seeing that right?

No, we're going to, at full stretch, with the exception of the lobby VIP casinos, which are I think 30 tables, 28 or 30 tables, we will be by the 4th of July at almost 500 tables and 1200 or 1300 slot machines.

And we never plan on having any more.

That makes us- - and, incidentally, I think that makes us a very good size over there, you know, 500-odd tables and 1000 to 1500 or 1800 slot machines, we think it's a very healthy number.

But, of course, we're getting $400 a machine with- - we have, I think, 8% of the market and, Samanta, what is that ratio of our, the percentage of our equipment to the percentage of our revenue?

Tables, it's about two times than our slots.

Yes, we've got double, you know, a fair share would be that you'd have the same percentage of revenue that you do of equipment.

And in every category we have multiples of our market share in terms of multiple, of how much equipment we had.

And incidentally, in Atlantic City, when we were there, they used to publish a number of what percentage of the average you had.

And when there were five casinos, we had 140% of the average in our win per foot.

And as they opened up the other four, three or four hotels, we went up to 168%.

Our market share increased with competition.

So, we really like to do well when there's more places.

And that's true of the slots.

So, we don't have less of the equipment, Larry, we have, we're right on target for what we said we wanted.

Now, for the Diamond Suites, should we assume the same kind of budget and size as what you have right now?

Or is it going to be cost over to the left because of shared facilities?

Well, the Diamond Suites is a tower.

And it's still in the development stage and we haven't published a budget for it.

But it's going to have its own gaming floor and everything else, right?

We finished design development.

It's 40 floors, 10 suites a floor, 400 suites.

The smallest one is 1000 square feet.

It's a beautiful piece of business.

We've never done anything quite like it.

It's quite a surprise.

It's a unique thing.

But the pubic area, 90% of the public area of Diamond Suites is open this year by the 4th of July.

Our animated new feature, our lobby, which is sort of this year's volcano or dancing waters or pirate ship sinking, our animated lobby and all of those games, which are about 230 and 240 games, they open up this year in five months.

What's left of Diamond- - the showroom will be done this year.

What's left for Diamond is its new own underground garage, its rooms, two restaurants, some more retail and two VIP casinos, each with about 14 or 15 games and catering.

But the rest of the general casino for Diamond is on target for this year and was part of our original budget.

All right.

As far as the golf course plan goes, I know you submitted some plans into Las Vegas.

Is there anything you can hint to what you're thinking about that?

Well, we're thinking about a lot of things for the golf course, but I think that we're at a stage in that where I would be sharing aspiration more than fact with you and I'm subject to changing my mind.

We make drawings and work on schemes that are very exciting to us, but as we watch the other things going on in Las Vegas, there are so many radical changes and exciting projects that are being tried by the other fellows up and down the street, that we just can't help but relishing the chance to see how some of them work before we commit ourselves.

After all, there hasn't been one single moment since 2000 when we haven't been in major construction in two cities.

At the present moment we're in construction with major projects in both Las Vegas and in Macau.

So, I don't feel like we're dragging our feet.

But I also don't feel like we're up against a wall being pressured to break ground every 20 minutes on some other, you know, crazy scheme that we haven't thought through.

We've never been the biggest and we've never been the fastest, but what we've always been is the best.

And I like that niche.

We're going to stay there.

So, I'm not ready yet to fill in the blanks on the golf course.

All right.

Last thing, corporate expense, Ron, it's like 15 before options.

Are you going to continue that forward?

Is that kind of the new level with the Macau open?

No, I think you should look.

There were some non-recurring bonuses that were in the fourth quarter.

Better to look at an average [over the year].

All right.

And luck, I figure, using the holds in the prior year, you've got about $26 million extra in Vegas from holding better than 21% from last year?

Little less.

For the 4th quarter, it's about 10 million.

Ten million.

In EBITDA, yes.

In EBITDA.

All right, thanks, guys.

Your next question comes from Harry Curtis with J. P. Morgan.

Hi, guys.

Can you hear me?

Yes.

Oh, good.

Steve, can you talk about the design difference between the, in Macau, between the expansion that you opened recently and the original casino floor and what improvements have you made?

What's been the customer reaction?

And what do you envision for phase two of the expansion?

Well, what happened was, Harry, Marc Schorr increased our casino from 231 games to- -

To 250.

To 250.

We did not open the expansion for Chinese New Year because it would have only been half of the expansion.

When I went there the two or three weeks before Chinese New Year, two weeks before Chinese New Year, I decided that the punch of our second part of our casino was so linked to the entrance, that I didn't want to show the public the surprise until we had it all finished.

So, I postponed using the expansion, although it's there with the carpet down, until June.

And so, the numbers that you're going to see for us in this quarter that we're in now are with the original space.

Plus 106 slot machines.

Plus 106 slot machines.

So, these numbers and this increased market share has nothing to do with the new expansion.

We haven't used it yet.

That's yet to come in 2007.

So, can you talk about the differences between?

We simonized it, which is a weird sounding thing to say.

You want me to verbalize what the place is?

Yes, what's simonized?

I made that up just now.

I don't know what that means.

You know, it has a look of its own and to describe it I think would diminish it.

You know, we don't do things like our neighbors.

So, I want to have everybody have a little anticipation about what's on the other side of the wall.

It's cool, it's different, it's us trying to be original and to offer the public a choice that they haven't had before.

We're not a commodity in this company.

We have a very distinctive voice.

And our casino will reinforce that.

So, I'm going to duck the question, because I don't think I can do a good job with the answer.

So, at the end of the day, going back to your original comment about there being no decline in the mass market, that really is applies-to-apples compared in terms of the amount of gaming capacity today versus, say, two or three weeks ago?

Yes.

Okay.

That's great.

Thank you.

Yes, we did more business with the same equipment.

So, whoever the yahoo was that said the mass market was going down obviously must live in Arkansas or something, you know, but he's not been around Macau.

I think that answers my question.

Thank you.

Probably a hedge fund guy with a short position or something.

One of those guys.

Your next question comes from David Anders with Merrill Lynch.

Great.

Few questions.

Steve or Ron, could you give us maybe, is there any way we can think about timing for Cotai for you?

That's number one as far as when the project kind of could be open.

And number two, could you maybe discuss a little bit?

It seems like the hotel guests are a whole new animal for Macau.

I mean, we have the day trippers on one side and we have the VIPs on another.

Could you maybe help us understand who's staying in your hotel rooms and what their gaming worth is?

Who wants to take that question?

Marc, what's the occupancy in our hotel in Macau?

The overall occupancy for the fourth quarter 2006 was 81%.

The standard room occupancy was 94% and regular rooms were 61% occupancy.

Standard or suites?

Suites.

It's 61%.

Say it again, will you?

Regular rooms was 94%.

Suites were 61%.

For a blended occupancy rate of 80.6, that's for the year.

The year.

For the year.

And for the quarter, the fourth quarter alone, the occupancy was 82%.

Standard rooms were at 95.3 and the suites were 61.3.

We're holding the suites for, you know, junket guys, the high rollers.

And a lot of them will hold the rooms.

They don't stay in them.

They stay downstairs and they don't sleep.

So, the occupancy of the suites seems, is in fact not as low as it seems, because they run upstairs.

They don't use them, but they're committed to them.

It's one of the peculiarities of the market is the players want to spend all the time gambling.

Yes, but the rate is just wonderful.

The blended rate is 248.

Yes, we've got a higher rate than we ever anticipated on the rooms.

The suite rate is running at 409.

On weekends.

409.

On the standard room, it's 244.

244 on our standard room.

And as I say, we're running 92%.

But, I also want to point out quickly, so there's no misunderstandings.

The junket operators, they pay for typical rooms as well, as part of the allowance that we give them.

So, that part of the occupancy is sort of subsidized indirectly by us when we give an allowance for comps to the junket operators.

Cotai.

Did I miss part of the question?

The timing for Cotai.

Oh, the timing for Cotai.

We submitted our revised drawings to the Department of Public Works.

Grant Bowie submitted them right after when, the day after Chinese New Year.

And so, we're awaiting that action from, approval from the government to make the next steps.

These are very ambitious plans that we're talking about.

And I've got to finish design development and get that organized.

I don't have a ground breaking date today.

All right.

Thank you.

Your next question comes from Celeste Brown from Morgan Stanley.

Hi.

Good afternoon.

Maybe, Ron, could you discuss the budget on Encore and why it increased versus the last time that you, I guess, put it in a filing?

And what your expectations are going forward?

Is this the last of the increases that we'll see?

I think I'll start off- - this is Steve.

I'll answer part of it.

The increase in Encore, first of all, the budget that we published when were a million seven-fifty or a million eight.

A million eight.

Was, yes, was based, because we hadn't finished the revisions, was based upon an original budget that had to do with the program at the outset.

We didn't update that budget until we finished all of the design developments and well into the working drawings.

And at that point, we recalculated the scope of the project, the amount of square feet that we're building, what the real final, final shape of all the spaces was, and what those spaces were comprised of.

And so, what we had that occupied about 50% of the increase was scope change.

And the other half was, the other half of the increase is what we will call as a heading, inflation of construction costs.

And the reason that we know them now and we didn't then is because during the interim we went and entered contracts for concrete, for steel, for sheetrock and other such things.

When we did, for the first time in the arc of this program, we actually had agreements with the purveyors, the subcontractors, and the suppliers of concrete, steel and whatnot, and we had fixed the prices, the per unit prices of what we were going to pay on this job for the balance of the job.

That is to say, inflation per se was over.

As bad as inflation has been in the construction market in Las Vegas, once you enter into the contracts, you have now locked in the extent to which you are a victim of inflation.

And now we know exactly how much that inflation is quantitatively for material and per unit cost of things like rebar and carpeting and stuff, especially petroleum-based and metal-based products, which have been hit the hardest by world demand and shortage of supply.

Labor in this market has jumped precipitously in terms of its per hour cost.

Trades are being paid above union scale in some cases.

Las Vegas is the hottest construction city in the United States of America, probably, except for China, maybe in the world.

There's a shortage of good help.

The various builders are competing with each other to try and get the best subcontractors and the best groups of employees to work for them.

It's a very critical situation here.

I've been doing it for four years in Las Vegas.

I've never seen it like this.

I remember, we used to be 15, 18% cheaper than New York City and I think we're that much more expensive than New York City now.

The changes taking place here in Macau in terms of construction are dizzying [technical difficulty] you see them up close [technical difficulty] profound alteration of the Las Vegas environment, more than profound alteration of the Macau landscape.

So, that's what's hit the construction costs in the nose.

Are you in search of more technical information, ma'am?

No.

I don't think I would appreciate the technical information.

You know, I don't know whether our competitors have published all their final budgets, but you really don't know until you have the drawings and go to bid.

I think we are at the 60% level of final construction documents in our hotel.

The high rise is frozen up.

You know, we're on the 15th or 16th, we're pouring the 16th floor of that tower today.

And so that's bought out.

The public area and that stuff we just dealt with the steel fabricators, so we were able to finally know exactly what we had to pay.

Next question.

Your next question comes from Joseph Greff with Bear Stearns.

Hi, everyone.

I have three questions for Steve or Ron.

Steve, you mentioned that in Macau, through yesterday, that mass market trends had been doing great and trends have been up since they opened.

Both, I guess, market share, revenue growth and VIP has been strong.

Can you talk about maybe directionally if you want to give specific numbers in terms of EBITDA margins, how you see those margins trending?

That's my first question.

And then, the second question is with respect to either future projects in Vegas, whether or not that's Encore or beyond on the golf course, in terms of maybe having a change of heart in terms of building a residential component?

And then, my third and final question relates to Japan in terms of commercial casino legislation.

What's your sense there in terms of timing and appetite?

Okay, Joe, can I go in reverse order?

There's nothing active on the table in Japan at the moment.

So, we can get that straight.

That can change in a month or a week.

At the moment, there is no initiative on the table in Japan.

We continue to believe that something does happen in Japan, we're very well positioned there through our relationship with [inaudible].

And other people.

So, the next thing is, have I changed my thinking on a residential component for the golf course?

We felt, and the plans that we've explored, all of our iterations of the golf course include some office and some apartment buildings, not condos, but apartment buildings.

Really special high end stuff and so I don't know if, what impression you had, if that's changed towards, away from or towards the uses that we would put our 160 or 170 acres back there and the water rights that we own.

And finally, you asked me about EBITDAs and I don't want to get into any extensive discussion of the first quarter, because we're not done with it yet.

I don't know what's going to happen in March.

And any numbers that I'm looking at now are skewed by Chinese New Year.

February is a lusty time over there.

And I do, I can see January and I can see February, and that's the reason I made the remarks that I made earlier.

And I'm certain of those numbers, both from our own casino and for Sands and for Galaxy and for SJM, as well.

The next one that comes on line will be PBL's place on Taipa, the Crown Casino, which is their smaller development, compared to the one that they're going to build on Cotai, called the City of Dreams.

They're our next door neighbor on Cotai.

So, as far as EBITDA margins go- -

We don't give forward guidance.

We don't.

But you say generally though that you're seeing a ramp up of margins without giving a specific number?

You mean in our own building?

In your own building.

Our margin's improved since we opened.

Great.

That's helpful.

Thank you.

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

J. Cogan.

Yes, hi.

Most of my questions have been answered, although just as a follow up to that last one.

Hi, J.

Hi.

Good afternoon.

As a follow up to the last one on the margin question, if I remember correctly the last call you said you did about 19.5 in February in Macau and a 25% margin, understanding the different businesses there, VIP versus mass for example, I was curious that, if the whole margin for the fourth quarter was a little bit lower than that, was it a function of mix, or were there other kind of expenses that you were incurring?

Possibly they continue or maybe they're gone.

I was just curious, you know, if you could maybe help us understand that a little bit more, for the quarter and then to the comment that the margins are improving for the first quarter, too.

I think in the first quarter, J, it was 25.

Okay.

Maybe I did a, I thought it was closer to 23.5.

Maybe that was just- -

25.

23.5.

Yes, that's what I thought the number was.

You know what, J?

Our whole percentage, when we first started, was lower.

We were at less than 2.5 on the VIP.

And so, our margins were skewed by our start up confusion and the fact that we hadn't made our relationships with the guests that we are enjoying in January and February.

Now, you, if you notice, if you look at October, November, that our whole percentage was less than the Sands?

Remember seeing that, J?

In regards to your market share in Macau?

No, I'm talking about whole percentage on VIP gaming.

The turnover, the normalized turnover is between 2.5 and 3.

We were holding 2.2, 2%.

Sands was holding 3, sometimes 4.

Well, the, part of that is not luck.

Part of it is length of play.

And people getting to know the place and liking it and not leaving and staying longer.

So, our whole percentage, as we went past the first three months, went into the more normal ranges that the Sands has enjoyed and so our margins went up.

Are you getting me on this?

Yes, I wish we had the same level of detail on the data you're talking about.

If you'd like to forward to us, be our guest.

But, I think I hear what you're- -

You've never seen one of those reports?

I thought maybe someone might have slipped it to you, the government probably.

It shows each of the hotels, what the turnover was, what their whole percentage was.

Haven't you see that one?

I can imagine.

Well, it's not a secret.

They circulate around town.

I thought that this was a public information.

Oh, I guess they just give it to the licensed concessionaires?

Oops.

I shouldn't have said anything.

Anyway, anyway.

Our margin increased because we've normalized casino operations.

Is that a clear answer?

Yes.

And so, like this place and like the others, when you get to know the customers, when you sort things out, when the staff quiets down, when you get to learn how to process the chip roll, when you get to know all the new tricks associated with Macau, like, you know, the redemption of the chips and the buying of new chips, the inundation of the casino cage with transactions that comes as a physical shock to an American operator.

Until you get used to it and adjust your staffing.

Once all those things happen, you get more hands out, people are much more satisfied, they don't jump up and leave and go across the street.

They like the taste of the noodles.

They get a kick out of your help.

They think your rooms are terrific.

They like the lighting.

And the next thing you know, you've got the top joint.

And that's where we're headed here.

We always- -

And all of that is, even in consideration, I think I remember the last call, you said you had changed your VIP model so that you're paying commissions on a percentage of revenue going forward, rather than as it relates to volume.

I thought when it related to volume that would skew the margins up even more.

But you're saying even on the new model, you still started with lower margins and they improved.

No.

Whether you give 1% of the turn, of the sale of the chips, let's just say that mathematically baccarat, it's a 2.6% [gate], including the tied bets and the balance.

If you pay a guy a commission, discounts to customers, like we do in Las Vegas, based upon the chips he buys, then you get 1%.

That would be 40% or so of the win.

But you give him the 1% whether he wins or he loses.

It's just on the bet.

The other technique is just to give a 40% when he loses.

Right.

That's on our revenue.

We switched to that model.

Exactly.

Now, it doesn't make any difference whether you give 1% on turn or 40% on the win.

Your margin doesn't improve unless you win more money in absolute dollars.

So, when the whole percentage improves, you win more money.

And so your revenue number goes up, regardless of what system you're using.

Because, let's face it, in the end, they're pretty much the same.

If you want to know what's better- -

I get it.

So, as you move through the quarter and your hold improves, your overall margins actually on a consolidated basis actually deteriorate because of the mix.

But, not that it's bad.

It's just that it's a function of the type of business on a relative basis compared to mass.

I think I get it now.

We can talk more about it off line.

As the margin deteriorates, it improves- - I wasn't quite following you.

All I'm saying is this.

We're paying a commission.

No matter what system you use, money is being given back to the players.

That's why we've got double taxation there.

We're giving the money back to the players.

The money that the junket operators get, 90% of it goes back to the players, just the way we give discounts in Las Vegas.

But, the government reports it on a gross number, not on a net number.

And so the figures, when you compare Las Vegas to Macau, they're misleading.

The Wynn in Las Vegas is reported by the State of Nevada and by guys like us to you in the investment community on the net cash.

We pay gaming tax on cash.

We pay taxes on markers when we collect them.

If we give a guy a discount, the discount comes off before we report the win, you know, before we report the gaming tax.

In Macau, the number is before the discount.

So, we have a misleading comparison number between the two jurisdictions.

But, in any case, whether you give a guy 40% of what he loses or you give him 1% of the chips he buys, that's the 40% number.

The only way you get more revenue is by having more activity and you win more money.

The margin doesn't change.

The volume changes and therefore the win changes.

And that's what's caused our margin to go up, more activity in the casino, more revenue from the tables.

And it isn't directly associated with the technique that we have of discounting.

It has more to do with the amount of money we've been winning in absolute terms.

Okay.

Last question and, understanding I've used up quite an amount of time here, but is there any additional updates as relates to longer term projects?

I know you didn't talk about breaking ground or timing on Cotai, but any incremental thoughts on the scale and scope of Cotai?

What it could be?

What it could cost?

What it could return?

And then also Atlantic City, for example, any thoughts on some of the stuff longer out?

I don't, the first hotel/casino is being built for three billion or more, is Venetian.

We spent 800 million on the stuff that we're talking about today.

And the- -

Well, with everything [inaudible].

Now, when we add phase two this summer, we'll be at a billion two.

That's not three billion dollars.

So, the return- - and the return on investment has been dandy, as you know.

You can see the results.

You can judge our, we're telling you our EBITDA, you can see where we're headed with this kind of business on an investment like that.

It's a better return than you get in Nevada.

But, when you escalate, when you take a giant step up, like the Venetian is going to be a case study of, then you really are moving into a different category.

And we'll go to school on this, even though we're planning a place that's perhaps more ambitious in some respects than the Venetian, we'll go to school on the returns as we see how our friend Sheldon does when he presses the launch button, which they say will be in August.

I think they're going to have, you were on the call, but I didn't hear, but I think they're not opening the retail, but they're opening the hotel and convention and casino.

And so, we're going to get a very big picture of this.

And I'm not, I'm not, I'm still designing Cotai, so I'm not doing projections yet.

So, I think that probably the next big piece of information you're going to get is from Sheldon Adelson and Bill [Widener] and friends.

Okay.

Thanks so much.

Your next question comes from Robin Farley with UBS.

Great.

I've got two questions.

The first one is Singapore, actually, and by most accounts that's a settled market.

But can you please clarify if you are still in discussions of any kind with the Singapore government?

I guess there's been some kind of mixed views on that.

And then the second question is on margin and, let me try and ask it a little differently.

You've talked about your margins and how they should be going up.

On the last call, you talked about October margins being 25 to 26%, so we might have assumed that with continued ramp up the full quarter would be maybe even above the 25 to 26% range.

And it looks like it came in just below 24%.

Even adjusting for mix, obviously different types of margins in the VIP business versus the mass market, can you talk a little bit about maybe are the margins in mass or VIP, is one of those areas still not, still struggling a little, or didn't do as well in October, didn't do as well as the quarter started off initially?

Well, I wouldn't use any words like struggle or not do as well at all.

I don't see it that way.

I say that the margin, when so much of the business is casino versus non-casino, the margin is impacted critically by your hold percentage.

Which was normal in the quarter.

We would say that our margins are comparable to our competitors, but since we know everyone is listening in, we'd rather not comment on the specific numbers.

We did much more VIP business toward the end of the year and that has lower margins than the general casino.

So, our VIP turnover business was greater at the latter part of the- -

Until we open up phase two, we have a limit on how much we can increase our general casino business, because we have a limitation of the table seats.

Marc found 30 seats, 30 tables- - 20 tables- - and took us from 230 to 250 here during- -

We're at 256 as of last night.

We were at 256 last night.

So, we just recently in the last couple of weeks added, you know, 10% more games or something like that.

But, the big jump for us comes later this spring, in a few months.

Well, we're only March, April, May.

We'll start opening all those games in June.

We've got the help.

And then we will have a more balanced mix, Robin, in terms of margins to compare the mass market or the general- - we call it the general casino, with, but when you get a precipitous jump in VIP business as we've experienced lately, it impacts the margin negatively, but it impacts the bottom line affirmatively.

Sure, the mix would have an impact.

But, on the VIP business specifically or margins in the 10 to 15% range?

To the left you call it.

I know you guys call it- -

Fourteen.

You're asking me a question, do it the way Marc does it, fourteen.

Okay.

In terms of development opportunities, you know, we're very focused on Las Vegas and Macau.

And so, I don't know if that's adjusting Singapore at all?

There's nothing to address.

We're very focused on Las Vegas and Macau.

We like Singapore.

Lovely people there.

We maintain friendships with Singapore.

But last time I read the newspaper, they gave up the casino licenses to- -

By most accounts, that is- -

To [KGM] and the Sands hotel casino company.

That's by most accounts what the situation is.

So, great.

Thank you.

Your next question comes from [Mackie Farkas] from Paradigm Capital Management.

Hi, thank you for taking my call.

I guess my main question is, with all of the development going on in Macau especially, do you feel that the powers that be there are making the appropriate preparations in terms of their infrastructure?

I mean, if there are going to be significantly more hotels and traffic and people, do you think that the government there is doing all the right things in order to ensure that actually getting there and leaving there is an easy and, you know, as pleasurable as can be expected experience?

I mean, that's been one of the things that's been great about Vegas.

It's very easy to get there.

It's very easy to get out.

We have a very, very clear understanding of what the answer to that question is.

The government under Edmund Ho there is spending money on infrastructure and quality of life issues for that city, which is under a rapid escalation of demand.

They're spending money as fast as we're paying it in taxes.

That's saying a lot.

They're at it hammer and tong there, trying to catch up, as they are in Nevada.

With the speed of that parabola, so it's not a big place and it's the object of this incredible transformation.

Believe me, you haven't seen anything yet.

It hasn't even really started there.

I mean, MGM- - and the Grand Lisboa has a thousand rooms next door to us, they aren't open yet.

They just opened the casino two weeks ago.

MGM is building 600 rooms and villas on the other side of us.

It isn't open yet.

Stanley Ho's wife, Angela, is building a casino on our third side, the New World, that's under construction. [Pansy] Ho, who's getting approved by the Gaming Control Board while we're on the telephone here, all three members approved her as we knew they would in their MGM deal.

Pansy Ho, next door to MGM directly opposite our restaurant, [Wing Lai] on the boardwalk, is building the Mandarin Oriental.

There are four hotels within a hundred meters of our hotel, not to mention the Diamond Suites under construction on our block.

That's our block.

You know about Cotai.

It, the ability of Edmund Ho's government, of the SAR's government, to keep up with this is almost totally, totally taxed.

But to say that they are at it would be an understatement.

The construction, the municipal and public works construction is almost as vigorous as the private sector construction there.

Roads, bridges, roundabouts, new traffic lanes.

Airplanes.

Airplanes, flyovers, new ferry terminals, helicopter pads.

I mean, I must say that as much attention as the investment community is spending on Macau, unless you've been there lately and seen what's going on, it's hard to verbalize it without sounding very hyperbolic.

No, I understand.

I guess the last thing is there was an article recently in Bloomberg Magazine talking about, obviously not in your case, but that occupancy is at 75% overall, hotel occupancy.

There's a reason for that.

You know, that's the kind of statistic that gets written about without explanation.

And that's the trouble with most things in the country about China.

A little bit of knowledge is a dangerous thing.

Right.

So, why- - there are two things about occupancy that you have to say.

First of all, the existing product base has been awful.

It bears no comparison whatsoever to the new stuff.

It's the difference between the most humble, old, crummy drive-in motel and Wynn or Bellagio or Venetian.

The new stuff, thousands upon thousands of rooms, not only are the best in Asia, but are comparable or bigger than anything in the world, except Las Vegas.

So, first of all, what's being offered to the public and to suggest or to think that the Chinese people are not discriminating would fly in the face of every speck of information we have. [Yves Carsell] told one of my partners- - Yves is the Chairman of Louis Vuitton- - that the Louis Vuitton store in Wynn Macau is the best per foot in Asia.

Can you imagine a Louis Vuitton store, picture this, folks on the call today, picture a Louis Vuitton store in a hotel or a mall or a shopping arcade and there are so many people trying to get into the 4,000 or 5,000 square feet- -

Only 28.

Or 3,000 or 5,000 square feet, that they have to put stanchions up in the hallway.

There's a queue to get into Louis Vuitton, because the store is inundated with people.

That's what's going on now.

So, to suggest that the Chinese people are not discriminating is to make a totally erroneous observation.

So, first of all, when the products are lousy, why would anybody stay in a lousy room?

And finally, because there are so few of them in many of these places that have the low occupancy, there are holds on the rooms for the junket operators.

As I said earlier, a lot of times you have these rooms that you're holding and the guy reserves them and then the guy doesn't go up and use them.

So, we don't charge him for it.

But, that's what's happening.

There's- - the occupancy figures are misleading.

Let's take a typical hotel like ours.

Marc told you, we're at 90-odd percent for the typical rooms, at $248.

95.3.

95.3.

So, I think it's a little too soon to make a statement like that.

I think the real test you're going to see is when the Venetian opens up, with 3,000 rooms on line every day.

Now, we'll see the depth of that market.

There's a real insight.

When MGM is open next to us and Diamond and we have- - and the Grand Lisboa's new room is beautiful- - when we have 3,000 or 3,500 new rooms in one block downtown and another 5,000 in one block at Cotai, now we'll begin to see about rates and occupancies in a form that Bloomberg can write about a little bit more.

Glad to hear it.

Glad to hear it.

Thank you so much for taking my question.

Your next question comes from Edmund Blake from Pinnacle Associates.

Hello, Steve.

I have three questions.

One is what is your status with respect to Atlantic City?

Two, what, have you had any discussions with Branson in Macau?

And also, with all of the rooms opening up that you've described in the short run, could they be over-capacity in the number of rooms available for the numbers of people that would be coming initially?

That last question is the $64 question.

It's not a question that really concerns me, because I'm a niche operator.

I have the top end.

So, I don't worry about that.

It's a question I'm sure Bill Widener and Sheldon Adelson are asking themselves and I think that, you know, time is going to be the answer to that.

They're doing everything on earth that you can do to open that market with robust energy.

Shopping, conventions, exhibits, you know, concert halls, showrooms, suites and rooms, big, big casino.

All of these things that are so fascinating that have helped develop Las Vegas are coming to bear in Cotai.

And we'll see about it shortly.

With regard to your first two questions, one was about Atlantic City.

We do not have anything going in Atlantic City, except an abiding interest in that market.

And confidence that that state is being led by probably the most gifted, intellectually the most gifted man as governor as they've ever had, with the Governor Corzine.

Where that leads and if it translates to leadership in the marketplace of Atlantic City, political leadership in Atlantic City has been an illusive concept for the past 30 years.

Illusive.

And it's probably resulted in stunting the growth of the community.

Planning, you remember the aggravation we had transforming the marina area into a viable destination, which has now redefined the city.

You know, we brought the Boyds in to build Borgata.

We insisted on an infrastructure change, the tunnel.

We paid for half of it.

And that's caused a whole resurgence of interest in Atlantic City, just as we predicted.

The neighborhood that we were supposed to be destroying is now prospering beyond all historical standards, because there is a park where there was an ugly street with through traffic, there is now a park on top of that tunnel for children to play in.

But it was a five-year struggle to get something as simple as that infrastructure done in Atlantic City.

New Jersey is not an easy place.

It is an exciting place and a place that we have an abiding interest in.

But, unless there's political leadership, Atlantic City is always going to be a place that creates a very big challenge for a developer.

I'm hoping that Governor Corzine will give ourselves and other people a window or a door to go through to make Atlantic City keep the promise.

But at present time, all that is speculation.

I don't have anything further to comment.

The last part of your question was Richard Branson.

I am proud to say that he is a friend of mine.

We celebrated the opening of his place together.

He is a fascinating, charismatic man.

I read, but did not speak to him, about his interest in Macau.

And so whatever Rich has in mind, he hasn't shared it with me as of this moment.

But, I think that Richard Branson, like Sheldon Adelson and Kirk Kerkorian and the Lloyd family would be a very exciting addition and, of course, my friend Jamie Packer and his partner, they're welcome additions to that city.

I don't know what Richard Branson has going.

I know that he's not a concessionaire or a sub-concessionaire.

Perhaps he is going to do some kind of management deal with somebody.

But, he didn't share that with me.

As you know, we operate on our own account.

Thank you.

That's it, I guess.

Talk to you next time, everybody.

See you later.

This concludes the Wynn Resorts Limited fourth quarter conference call.

You may now disconnect.