永利渡假村 (WYNN) 2008 Q1 法說會逐字稿

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

Joining the call on behalf of the Company today are Steve Wynn, Marc Schorr, John Strzemp, Matt Maddox, Andrew Pascal, President of Wynn Las Vegas, David Sisk, CFO of Wynn Las Vegas, and on the phone, Ian Coughlan, president of Wynn Macau, and Scott Peterson, CFO of Wynn Macau.

(OPERATOR INSTRUCTIONS) After the speakers' remarks, there will be a question and answer session.

(OPERATOR INSTRUCTIONS) Thank you.

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

Maddox.

Please go ahead, sir.

Thank you, Molly.

First, I'd like to remind everyone this call contains forward-looking statements that may or may not materialize.

They are predictions about the future and should not be relied upon as fact.

For further clarification, please review the full disclosure in our press release.

Now, moving on to the results.

In the first quarter of 2008, consolidated property EBITDA was $197.8 million, a 4% increase over the first quarter of '07.

In Macau, we generated EBITDA of $129.4 million, an increase of $50 million, or 64%.

In Las Vegas, EBITDA fell 38% to $68.4 million, primarily due to table hold percentage of 19.9%, which was approximately 8 points below last year's hold of 27.6.

In Macau, we generated over $1.4 million EBITDA per day in the first quarter, a 31% sequential increase from the fourth quarter of '07, and 62% over the first quarter of last year.

As the Macau market continued to grow at an accelerated rate of 60% plus during the quarter, Wynn Macau gained market share in the VIP, mass and slot markets, as our property continued to solidify its position as the destination of choice for high-end customers.

Now, more than ever, we believe that quality products and customer experience are the key drivers of our success in Macau.

To that point, in December '07, we opened the expansion of Wynn Macau, which had been carefully designed, not only to expand the facility, but more importantly, enhance the overall experience.

Thus far, customer reaction to the expansion has been exceptional and has translated into strong results.

Let me give you a few examples.

One, table games mass market drops increased 19% over the last year and 17%, compared to the fourth quarter.

Two, VIP turnover doubled to 163 million per day, compared to the first quarter of last year, without increasing commissions.

And three, our slot handle also doubled, when compared to last year, and was up over 18%, compared to the first quarter.

Comparing our results to the market, in general our win per table increased year-over-year to $16,200, which is 80% more than the market average in Macau of $9,000 per table per day.

Our slots also continued to outperform the market, as our win per unit of 310 is more than two times the market average of 140.

In fact, we believe our 1,240 machines generated more revenues than any other slot floor in Macau in the first quarter.

Our non-gaming revenues in Macau increased 42%, driven by RevPAR growth of over 17% and retail revenue has more than doubled with the additional 11 new outlets in the expansion.

We believe that the Macau results continue to affirm the strength of our customer focused business model and our brand in the region.

Turning to Las Vegas, as we mentioned during our last earnings call, the Las Vegas market is more resilient than other markets, due in part to the international component of the revenue base.

However, this market has been affected by overall economic trends in the United States and in the first quarter we experienced some softening in our domestic business volumes in both gaming and non-gaming, which results in more volatility in hold percentage.

In the casino, our table games drop and slot handle both decreased around 3% during the quarter.

In table games, we held 8 points less on $533 million in drops, equating to a $40 million revenue reduction based on last year's hold percentage.

And traditionally in Las Vegas, the first quarter hold percentage is one of the strongest of the year, due to significant high end credit play.

In the hotel, RevPAR decreased approximately 4%, as we experienced the softening in the convention and transient segments.

However, convention room nights did improve throughout the quarter, and forward bookings in the convention segment appear to be in line with last year.

In addition, we experienced an increase in our suite RevPAR, driven in part by a 26% increase in room nights from international customers.

In short, in Las Vegas, we're implementing cost savings initiatives from employee scheduling to purchasing to help offset the slowdown in domestic business.

In light of that, we firmly believe in our business model and focusing on the high end segment and do not plan on sacrificing service levels or announcing any layoffs to drive short term results.

Finally, I want to quickly address our balance sheet and liquidity.

Our net debt at the end of the quarter was $2.1 billion, equating to leverage of 2.9 times.

In addition, our projects under construction, Encore at Wynn Las Vegas and Encore at Wynn Macau, are fully funded at the subsidiary level.

The strength of our balance sheet provides a significant financial flexibility for the future of the Company.

With that overview, I'll turn the call over to Steve Wynn for some additional color on the quarter.

Hello, everybody.

We have these conference calls and I often wonder what they do besides repeating what we publish in our financial statement.

But this year and this call, I'm going to try and do something a little different.

And I'm going to try and put some perspective on what's going on.

This is about the third- - the sixth time I've been through slowdowns in Las Vegas in my 40-year career and I think it might be helpful just to put a little bit of depth and perspective on this.

The thing to look at more than anything else, I think, is non-casino revenue, first of all.

And for the year-to-date we're at $270.7 million versus $264.3 million last year.

So, non-casino revenue is not down- - it's even or up slightly.

Our occupancy is 96%.

Last year it was 96.5%.

Our average rate this year is $301.

Our average rate last year was $311.

So, we're off ten bucks.

Not a big deal in my opinion.

In April - - and I'm going to talk about April today.

I don't usually like to get into the next quarter, but we're going to make- - we're going to do this, because we just finished a month and I want- - I know everybody that invests in the Company is interested in trends.

So, I'm going to do something that I'm not necessarily going to do every time we have a conference call, but I'm going to discuss April, both in China and America- - and the United States.

In April, our room rate was $309.

Last year it was $313.

Our occupancy was 96.6 this year.

It was 97.5 last year.

You wouldn't exactly call that devastating by any means.

I would add that we have more comp revenue in our occupancy, because we're pressuring the casino to make up what we're missing in some of the normal transient business.

In the casino, the trend has been a little different.

We've lost some domestic business, which gives sort of a floor or a steady kind of grind to our hold percentage, so that when we deal with the bigger international customers that we enjoy here, we see more volatility.

That was especially obvious, because last year we had a very high hold percentage.

Our average was 25 and change for the year.

Last year on over $2.25 billion in handle -- I think we were the only company in the history of the Nevada ever to break through $2 billion in handle -- we did- - we went through 2.25.

I think we did 2.60.

And we held over 25%.

We have a higher hold percentage than our neighbors and other hotels because of our international component and statistical anomalies and statistical changes take place all the time.

And we were down just below 20 for the first quarter, which made about a $40 million difference.

Handle was only slightly off for the first quarter, but in April- - so, our year-to-date numbers, I wrote them down here, and in April, for example, non-casino revenue was 68.8 and this year- - and it was 68.9 last year.

So, again, if you compare non-casino revenue, $270 million versus $264 million last year.

So, non-casino revenue is in pretty good shape.

Our occupancy, I told you, was 96 this year, 96.5 last year.

In April- - I gave you the room numbers.

I was also looking at the expenses.

In the first quarter, it cost us $2.4 million, $2,411,000 a day, to run Wynn in Las Vegas, and last year it was $2,440,000, almost the same.

And this year we're carrying Spamalot, which is about $45,000 a day.

And last year we weren't.

So, the rest of our expenses have gone down.

Our margin's around 27% and it jumps between 27- - it stays pretty much there to 30.

The slot machines have gone down from, in our year-to-date, from $60.4 million to $52.7.

That decline is especially noticeable in the quarters, in the low end.

But it's a few million dollars before gaming taxes.

And finally, doing these casino -- I'm going to include April.

Now, for four months, table win was $204 million out of $671 million in drop.

And last year, it was $250 million on $725 million in drop.

So, you can see that the table handle went from 725 down to 671, about a $54 million change on $725 million.

It's a number, but it's not a huge number.

The hold percentage, however, last year was 25.2 for four months and it was 20.3 this year.

So, there's a 5% difference in the hold.

And on $670 million, it's a number.

In April, however, we saw the Wynn rebound.

We just finished a month where last year we won $46.9 million.

This year we won $50.8.

So, these things bounce around a little bit.

And volatility is part of the story of a casino that deals to top end like we do.

The trend in Macau is a lot steadier, because they don't have the same situation economically.

And our earnings have been increasing in Macau, even though we're the lowest payer of commissions in the entire market.

And again, in April, we went- - our earnings went from $32 million to $43 million, another 33% increase.

And table drop and VIP turnover, in spite of the fact that our competitors have increased their commissions, our- - the delta between us and the rest of them has continued to be very large.

We get a lot of questions about the commissions and a commission war, or a junket war, in Macau.

We have a wonderful relationship with a group of junket operators who are terrific people that work awfully hard and hustle the business with tremendous energy.

We're very mindful of the contribution they make and we want to take good care of them, because they introduce us to all the nicest people.

And it's a very good thing for us.

Our junket operators are concerned about irresponsible or desperate behavior by people raising their commissions and have come to me and said that they're very glad that the government is taking an interest in this.

There's a larger context of this issue of junket commissions in Macau.

The health of the businesses in Macau relates directly to how well they can pay their employees, how aggressively we take care of our properties, how active we are in the community.

All the things that the government of China wanted to accomplish and the government of Macau wanted to accomplish have to do with creating a healthy industry in Macau.

And so, in order for that to happen, the government is quite right in saying that they're going to take a look at the amount of tables or games, the amount of commissions paid.

And I think that everybody who is involved with the scene over there is glad to hear it and is encouraging the government to exercise restraint on some of the operators that have inferior products and who think that maybe by raising the commissions or buying business, they'll be able to improve their situation.

In the short term, it sort of works.

But we know from years and years of experience in Nevada and elsewhere, that when you try and buy business, you can't really do it, because if your competitors copy, then the lowering your price or increasing your commissions is worthless.

If, for example, the Wynn Macau were to raise its commission rate from 40% of win to 45% of the win, we'd be flooded with junket operators that are at other places, which would hurt the other places.

And everything we do in Macau we try and be a good neighbor.

And we try and fit into that neighborhood in such a way that we get along with the other people, especially in the community, and our competitors.

So, we have not raised our commissions.

We would never do it, unless it was a last resort, even though we could afford to do it.

But we won't.

And at least I don't see any reason to do it at the present moment.

We're able to keep our market position handily and keep it growing, without bending over and being the cheapest guy in town.

As a matter of fact, it's inconsistent to be the cheapest guy in town and also have the highest quality product.

We don't need to do that.

That's one of the safe harbors that we feel we have in designing these buildings and staffing them with people that are highly trained, that we don't have to make that kind of gesture, that people are willing to pay for value.

And value can be defined as quality at a reasonable price, just as it can be defined at Wal-Mart as the lowest price, always the lowest price.

We're not Wal-Mart.

And I think that what was wanted or what was desired by the government of China and Macau was to have better properties.

And I think that's what they're going to try and do.

And that's where we fit in.

And I think that's why we got our concession in the first place.

So, we're going to try and behave in a consistent way.

In my career, I've never had a layoff, either in the Las Vegas or anywhere else.

And we don't intend to do it.

We consider the morale and a feeling of security that our employees have is the most important asset the Company owns.

More than our buildings, or even our concessions, is the morale of our employees.

And when you do layoffs, everybody that's left says, "Who's next?" And that's completely negative and counterproductive to what we're trying to do.

So, no matter what the short term fluctuations in the American economy are, I am telling anybody who's interested in our company that under no circumstances, under no circumstances, will I give any consideration, even for a second, to changing our service levels or disrupting our workforce.

Now, I guess if that helps anybody understand us, then we'll take questions.

(OPERATOR INSTRUCTIONS) We'll pause for just a few moments to compile the Q&A roster.

Your first question comes from the line of Bill Lerner with Deutsche Bank.

Thanks.

Hey, guys.

Two questions.

One, Steve, could I just- - love to get your thoughts on Encore strategy.

I know we've talked about this in the past.

But, if this weak external environment extends into Christmas, how do you position the property, especially since early [optics] are important.

And then I just have a follow up.

Well, Encore is positioned slightly above Wynn.

The rooms are bigger.

The spaces are more intimate.

The rooms are all suites.

It has a bigger spa.

Even though it only has 2,000 rooms, it has a bigger spa than Wynn.

It has beautiful convention and meeting space, a pool that's very reminiscent of St.

Tropez and [St.

Croix Cinq] for those of you who would like the afternoon beach scene and dining and club scene.

It- - Encore, is a departure in many ways from everything that anybody has seen in Las Vegas before today.

It's a casino, for example, that on all sides is surrounded by glass.

It's got natural light everywhere.

It is designed with a floor plan and a physical appearance, very much like our Macau casino, that is unlike the rest of Nevada that has large open casinos.

Encore is chambered, very much like our Macau casino, which has been received wonderfully by the public.

So the Encore project took two and a half years to design.

We always are slow at design.

It's a completely self-standing, separate hotel.

It's not an annex.

And it is designed to be a Mobil Five-Star hotel, hopefully, and a Michelin hotel, and a AAA Five Diamond hotel.

If we succeed in doing it, we'll have 60% of all of the Mobil Five Star rooms in America in one building.

So, we're positioning Encore that way.

And if the market is soft in December, well, the market will be soft in December.

I don't care.

My organization, my colleagues and I, are paid to run hotels in good times and fair times.

We're professionals.

That's what we do.

I don't give a damn about the short term market implications.

This is not a company that gives a damn about short term markets.

And I have shareholders that own the vast majority of this company that are long term investors.

And they agree with us that the best program is the one that takes the long view.

So, whatever December is, Las Vegas is going to get treated to a spanking, shiny new, completely original hotel.

And in the long term, it will take its place here and have more than its market share, just like every other building we've ever built, whether it's here, or downtown, or Macau, or in Biloxi, Mississippi.

I hope that answers your question, Bill.

That's helpful, Steve.

And when do you start taking reservations for Encore?

I don't know the answer to that question.

Andy is here.

June 15th.

Pardon me?

June 15th.

We're taking reservations on- - June 15th, is the beginning.

We've opened our application process I think now.

It's internally.

Internally.

We do external- -

We do our own people first, transfers within the Company.

July 1st.

This is a lot easier than opening Wynn.

We've got a culture now.

It's never been stronger, actually.

Our feeling of family here is wonderful.

And we are giving all of our inside people the first crack at everything.

That's our job.

Okay.

Thanks, Steve.

July 1st for everybody else.

Your next question comes from the line of Dan [Geary] with [Wintergreen] Advisors.

Hi, guys.

Thanks for the time.

Congratulations on a real nice quarter, especially considering the news from your next door neighbors yesterday.

You guys have done such an incredible job creating shareholder value by focusing solely on and really dominating the super high end of the market.

Taking a long term perspective and looking out five, ten years, does this position become harder to maintain?

And how does your thinking change as you grow from a relatively small company, property-wise at least with only two properties, to a much larger business operating five or more properties?

Thanks.

Well, that's a really good question.

Who knows what the future holds?

You know what?

In answering your question, the best view that we get of the future is through the rearview mirror, I think.

And what we know about the destination resort business is clearly established.

That it's all about one thing and one thing only- - all of the razzmatazz and jazz we hear about facilities and everything else doesn't amount to a hill of beans.

It's customer experience that determines the longevity and the endurance of these enterprises.

Look at Caesar's Palace, all these years.

Look at Bellagio's performance.

These places that are built like the three little pigs, houses of brick.

I once did an annual report that said, we build houses of brick.

And they endure.

And the only thing that we can hold onto in a world of extraordinary change is the simple fact that, if we take very good care of our employees, who will in turn take good care of our customers, we keep our facilities clean, then we'll capture the business of people who want to go on vacation and get treated well.

And eat good food and shop in the right shops and have fun.

That's the only thing we can hold on to.

Everything else in the world turns upside down every 24 hours, if you pay attention to the media.

And I don't trust that anyway.

I trust the simple long term truths.

And, as we get bigger, we'll never ever give up trying to be the best.

We're under construction in two buildings at the moment, both called Encore, that are next to our existing properties.

And we have plans for things on the golf course and we have plans for Kotai that are consistent in every way to everything we've stood for during my career, starting with Mirage and Bellagio and all the way through to this place.

Next question, please.

Your next question comes from the line of Celeste Brown with Morgan Stanley.

Hi, good afternoon.

Steve, I was wondering if you could just discuss a little bit more, just why the Macau- -?

You've been able to hold your position.

You've been able to increase your share.

Is it that you've- - have [blended] in that market for so much longer?

Is it something in particular you do for your customers?

And I'm sure that- - I don't want you to give everything away, so your customers- - or your competitors can copy you.

But if you can just help us understand, that would be great.

You know, Celeste, when you say, don't give anything away to our competitors, we talk to them all the time.

I'm in a business where, if we get a good idea, we show everybody that good idea as quick as we can.

We roll it out on the floor.

All you've got to do to understand Wynn is to check into our hotel and stay in it.

Talk to our employees.

I encourage anybody who wants to make a third-party investigation of what's going on in this industry, come to Las Vegas or go to Macau.

And without any executive being around, any suit, walk up to an employee- - they all speak English over there- - or walk into one of these places here, up and down the Strip.

Talk to an employee, ask them what it's like to work there.

Look at the floor.

See if the place is clean.

See if it's well lit.

Stay in a room.

Talk to a PBX operator.

Talk to a porter.

Eat a meal.

Act like a guest.

And you'll know everything there is to know about us.

We don't have any secrets.

And we don't even try to keep any secrets.

We share our- - I was at the Milken conference and talked about our human resource program yesterday, very candidly, publicly.

This is not a business of secrets.

As a matter of fact, that's sort of a waste of time.

When you're in a service business, you take your best shot right out where everybody can see it.

And, Celeste, you've spent time in our hotels.

You know what we stand for.

Honestly, darlin', I don't have anything up my sleeve.

Thank you.

Your next question comes from the line of Steve Kent with Goldman Sachs.

Hi.

Steve, in previous press releases you've talked about other development opportunities and you said you had submitted an application to the government of Macau for concessioner land in Kotai, just that usual verbiage.

And I noticed it wasn't in this time.

Is there something different that's happened?

And also, given your history and given that you've lived through a couple of recessions in Vegas, what do you expect for RevPAR growth for the balance of the year?

Well, with regard, Steve, to the first part, Kotai is proceeding.

We didn't mention it, because we don't have anything startling to reveal, because we're in design development very intensely now on Kotai.

We've made up our mind what we're going to build there.

I've said it publicly.

Nothing's changed.

I say we're going to build the fanciest hotel in the world in Kotai.

It won't be very big.

It'll be 1,500, 1,800 rooms, something like that, all suites.

And we're going to build this beautiful hotel on Kotai.

And now what's left is for me to turn that kind of conversation into three dimensional reality with my colleagues.

And I'm not done yet.

But I'm dying to finish the job and get it to where I'm ready to price it and break ground.

I'm hoping to break ground on Kotai before we open Encore a year from this Christmas in Macau.

Encore Wynn opens up this Christmas.

Encore Macau is next Christmas.

And, incidentally, the Encore Macau tower is, without any doubt, the fanciest thing, the most beautiful thing that I've been involved in my entire 40-year career.

It- - the smallest room is 1,000 square feet.

There's been talk about Four Seasons and other fine hotels that Sheldon is building on Kotai and Shangri-La and Four Seasons are tremendous additions to the marketplace.

I want to congratulate the Sands organization on getting such wonderful brands to come to Macau.

Those are all really good things that are happening.

And we've picked up on that spirit in building the Encore project next door, on our back corner of our Peninsula property.

And it's 400-odd rooms, the suites and villas and spa and new ideas.

And that will be ready a year from Christmas.

And it's the fanciest thing we've ever done.

And in Kotai, we're going to take some of the things that we've developed that are new for Encore and we're going to take them further on this wonderful 52 acres that we've got, where we can do wonderful things with landscaping and the integration of interior and exterior environments that we can't do in a purely urban environment downtown.

So much for the first part of your question.

And so, we didn't mention it, because we didn't have anything really material to tell you.

But it sounds actually, Steve, that you're further along on it than- -

I am, I am much further along, Steve.

Okay.

Good.

And I've got the room component in pretty good shape, but it is iconic architecture.

It's a building of rather extraordinary appearance.

So, we'll do all of that at once when we're ready.

You asked about RevPAR for the rest of the year, Steve.

Could you repeat that part of the question?

Yes, what I said was, Steve, that, because you have been in Vegas for a couple of recessions, I think you have a unique perspective.

So, given what you're seeing, you've seen the first few months of the year.

You're reading the same papers we're reading.

What's your feel for RevPAR deceleration and business trends from here through the balance of the year?

Well, let's- - I don't know about RevPAR.

Can we talk about profitability?

Sure.

Okay.

EBITDA is the- - we ought to say again and again, as Bill [Widener] has said, we report and talk about these EBITDA numbers with our chest puffed out as far as we can get it as an industry.

It's- - I suppose it tells you how much money you can afford to pay in interest.

But the public needs to understand that the profitability, the real profitability of these businesses are much, much less than these puffy EBITDA numbers.

Interest expense is very large.

And depreciation - - I know office building guys and shopping center guys and apartment guys, they get to spend part of the depreciation.

But believe me, in my 40-year history and in the history of every other gaming company here- - Kirk Kerkorian would agree with me - - we spend depreciation.

It is a real expense.

And when you take the profitability of a hotel like the Venetian or Wynn or Bellagio or any of us, it is a much smaller number when you subtract depreciation and interest and amortization.

We have to pay back the people who lend us the money eventually.

It's a much smaller number.

But I know that the Wall Street folks, you all like to talk about EBITDA.

And it's bouncing around.

It was a big bounce with hold percentage in the first quarter.

And we won't see that again, because we were so high in the first quarter.

We made more money in April than we did last year, this year.

So, EBITDA looks fine in April.

What will happen in May, June, July?

Gee, I just don't know, Steve.

You know, I don't know how deep the market softening will be.

I know that as long as the government and the campaigns, they're worried about the declining value of the dollar against the euro or the pound and that helps us in one respect.

The gaming industry is a huge exporting industry.

We try to explain that to folks in Washington.

We're an exporter.

And when you make it tough for people to get into the country, when you inhibit, then- - we're like, we offset a lot of Toyotas.

And so, when the euro is up, a lot of guys from England come here and play, think they're making bets in pesos.

And when they lose, they find out it's not exactly pesos.

But we're benefiting on that sector, but we're being damaged on the domestic side.

I don't know how deep it's going to be.

And I don't know how long- - what this dollar delta is going to be against the euro and the other European currencies.

But it certainly helps our international business to a certain extent.

We've got a baccarat tournament here and I think this weekend we've got over $100 million in customers here.

And it just started today.

Give you an idea of the kind of swings take place in this- - the last day of the month in April, we won 7 million in Las Vegas.

I mean, this is just a bouncy kind of business.

So, I'm not- - I'm willing to discuss trends, but I'm not willing to make predictions, especially in this environment.

Okay.

Thank you.

Yes.

Your next question comes from the line of Dennis Forst with Keybanc.

Good afternoon.

Little less esoteric.

I wanted to ask Matt about the income tax.

You had a benefit of $4.7 million.

Matt, where did that come from?

And if you could walk us through where it's going to go.

Absolutely.

I think last year we were closer to 20% effective tax rate.

And this quarter it was a benefit in large part due to two things.

We were able to deduct Encore pre-opening expenses estimated for the year, which we did not have last year.

And the second piece is the larger than expected contribution of foreign earnings, Macau earnings, which are not taxable in the United States.

So, you take those two factors together, combined with a lower hold percentage, a lower domestic EBITDA, our tax benefit- - we actually had a tax benefit in this quarter.

What is the tax rate going to look like for the year, more or less?

I would say that it's going to be somewhere in the neutral range, depending on what ends up happening.

Or, no benefit, no provision, depending on what happens in the United States.

Okay, maybe ask it a different way.

How big is the Encore pre-opening going to be for the year?

$80 million.

Eighty.

And it was- - it was what in the first quarter?

It was only $5 million?

Around five.

But taxes are estimated based on full year.

They're not- - and then you have to go back and allocate them per quarter.

So, I would just- - this is a tough thing to model.

We usually don't get into forecasting.

But I would say, for this year, we should look at just a no benefit, no provision.

Okay.

And isn't it fair to say that the table hold was not out of line with long term trends?

And that last year was really more of an anomaly?

Well, I'm going to step in.

Okay.

Good, Steve.

Thanks.

The only hotels in the history of Nevada that have ever been close to $2 billion have been Wynn and Bellagio.

And I don't think anybody broke through $2 billion.

We went through $2.25 billion.

260.

$2.260 billion.

At that point, you have to say that statistical anomalies are off the table.

How big a sample you want?

And we held 25.2.

And when you look at each month, they were all in the 20s, except for one.

So, I'm beginning to think that the kind of mix we have here tends to be a little different than our neighbors.

Now, I could be wrong.

But, I'm schooled by our own experience.

And when you do $2.25 billion at over 25%, you begin to wonder.

A lot of it has to do with the way we structure our casino.

We have distributed the money more evenly among the people that are at the tables serving the guests, meaning the team leaders and the dealers.

There was a lot of publicity about the fact that the team leaders got a share of the tips.

Well, that's because they're serving the public exactly the way the dealers do, by standing there talking to our customers, paying attention to their needs, schmoozing with them, talking to them, giving them free drinks, keeping track of their play.

And these teams that we created at the table, our hold percentages jumped when we did that.

From the day we did it, on September 1st, when we opened Macau, for the last quarter of the previous year and the entire year last year.

I remember saying that we were holding 19.9 through August 30th.

And we ended up holding 21% for the year, because September, October, November, December were so high.

Now, my dealers were a little short tempered about it, because they thought it was a takeaway.

But we told the dealers that, if they acted as a family at the table, as a team, a service team, that the tips would get back up to where they were before.

And on most occasions this year, that's almost exactly what's happened.

The dealer tips are back up to being terrific, where they're the most high paid people in the state of Nevada, our dealers.

And so, when we look at hold percentage and we look at the team approach to our customers, I have to think that there's a relationship there.

There's no other explanation for it.

Okay, thanks.

Lastly, on property charges and other, what's included in that $24 million number?

The main charge of about $20 million is related to Spamalot.

We elected with the producers to close Spamalot in July of this year.

And in that- - and so we ended up writing off all the costs associated with that, that we were amortizing before.

So, out of the 24, I believe 20 is related to Spamalot.

Thank you.

Your next question comes from the line of Larry Haverty with GAMCO.

Hi, Steve.

Great presentation.

A couple of days ago your significant investor, Aruze, put out a press release that they were considering doing something in the Philippines, I guess about $2.5 billion, and your name was in the press release in kind of a strange way, the Wynn Corporation.

Could you bring us up to date on what is or is not happening there?

Well, first of all, I love Kazuo Okada as much as any man that I've ever met in my life.

He's my partner and my friend.

And there is hardly anything that I won't do for him.

Now, we are not at the present time an investor, nor do we contemplate, an investment in the Philippines.

This is something that Kazuo Okada and his company, Aruze, has done on its own initiative.

He consults me and has discussed it with me extensively and I've given him my own personal thoughts on the subject and advice.

And, to the extent that he comes to me for any more advice or input, all of us here at the Company will be glad to give him our opinions.

But that's short of saying this is a Wynn Resorts project.

It is a Aruze project.

Is that helpful, Larry?

Yes, it's just- - it's a large amount of money and I'm wondering if he does it, will he be taking some of his pretty substantial profits in your company, do you think?

Have you discussed that?

Well, if I can remind you, Larry, and other people that are listening, we filed an amended 13D over a year and a half ago in December, that expressed and explained in detail the shareholder agreement between myself and Mr.

Okada.

We have what is commonly referred to as a lock-up.

Neither one of us can sell any shares to anybody without the other's permission.

That's in addition to a right of first refusal that we share and a vote for the board of directors that I hold on behalf of Mr.

Okada.

So, we don't anticipate and we have said so publicly with a Hart-Scott-Rodino filing and with an amended 13D that our stock is for sale at any price, but that we would purchase this company on weakness, on price weakness, up to 100%.

So, that's not a new public statement I'm making.

We filed Hart-Scott-Rodino in '06.

And I think that anybody who's short selling this company ought to keep that in mind.

We would love to see a buying opportunity in this stock, love to see a buying opportunity in this stock.

Yes, that's very helpful, Steve.

Thanks a lot.

Your next question comes from the line of Larry Klatzkin with Jefferies and Company.

Hey, guys.

Couple of questions, just housekeeping.

You had a little bit, it looks like a bad hold in Vegas.

Could you quantify what the effect might have been?

Did you just join the call?

No, but you didn't give- - you really didn't give a number.

You said- -

About $40 million - -

You're saying 40, because that seems- - okay.

All right.

(inaudible) 40, as before the gaming tax of seven and three quarter.

Okay, and then- -

That would be casino revenue and, since we don't change the overhead, it would probably most of it go to the bottom line.

90%.

90% of it.

Okay.

Matt, corporate- -

And that's pretty much the delta on the earnings.

Oh, the delta from last year, but if you're using a normal hold, I come with a much lower number.

I come about 11.

Well, you can use what you call normal.

I've tried to explain that on numerous occasions of what's normal around here.

And what's normal to you may not be the same thing.

All right.

That's fine.

Matt, on corporate expense pace?

Can we use the 11 you did this last quarter?

Yes.

It will grow in line with how it did in the past.

I think it's a pretty good- - it's a pretty good number for now.

Okay.

Steve, you now have a big block of rooms when you open up the Encore in Vegas.

You've had limited ability to really extend who you target with a small block of rooms.

Now that you're going to have a real block of rooms, any chance you're going to expand who you go after?

Maybe go after some high end convention customers, or any other kind of a segment of the market?

Good question.

Andrew.

Andrew, how are you going to fill those rooms?

The way we fill these rooms.

We're going after every segment.

So, we've always tried- -

Can you hear him?

I can hear him.

You can?

Okay.

I'm not sure what, where the microphones are.

Speak up, Andrew.

No, I'm saying.

We're going to fill those rooms the way we fill these rooms.

We're going after every segment of the market.

So, you speak to the high end convention and group business.

I mean, that's who we've gone after and appealed to here.

So, this is the kind of place that over the course of the year with seasonality, we've targeted all kinds of customers and we've been successful getting them.

So, as Steve alluded to, Encore is an entirely new resort that represents our best thinking and design work and it's going to stimulate new interest in this market from new customers and appeal to the ones we have.

One thing that all of our customers have in common is more money.

Okay.

That I believe.

And then, Steve, the last question.

You probably don't have an answer for it.

But any hint on what you're planning on the golf course long term?

Yes.

We've coalesced our thinking on the golf course.

And it's one thing to coalesce our thinking.

It's another thing to execute the blueprint.

But we've decided that we're finally prepared to leverage this unique incredible physical location we've got where we straddle two of the most dynamic exhibit centers on earth- - the Las Vegas Visitors Convention Bureau, to our immediate east on the adjacent property, and the Sands Expo Center on the adjacent property to the south.

We have 4,800 or 4,900 rooms here in a few months and we want to go to 10,000.

So, we're planning two new hotels of approximately 2,600 rooms apiece that will straddle a 1.6 million or 1,800,000 feet- - depends on how you count it- - of exhibit space that is extraordinary in the sense that it's surrounded by lush landscaping and water, because all of the back of the house is below it, so that it can be infinitely divided from below, because there are elevators and lifts that come up all the way from underneath.

And it's on a large water feature that's a part of our- - we're going to reallocate our water, our wells, our water company that we use for the golf course to a more broad-base use for the hotels and the water that will be used in our fantasizing the meeting and convention space that we're going to build.

But that exhibit and meeting and convention space will resemble no other meeting and convention space anywhere else on on earth that we know of, in the sense that it will be very glamorous and it will also offer our clients an environment that has heretofore been unavailable to them.

Both of the new hotels will be completely integrated with the exhibit space.

And when I say completely integrated, I mean that you will walk out of the lobby down a 150-foot corridor into the exhibit space.

The layout of our property lends itself to such a beautiful arrangement.

We intend for the exhibit space to move down our property some 2,000 feet to Paradise Road from an area approximately 550 feet east of our villas, so that there will be a large lake with fountains, like Bellagio, that will entertain both hotels and the convention and meeting space.

And we're going to do the fountains in a new way for the golf course development.

And I think when we're done, we will have this wonderful non-urban environment of 10,000 rooms that people will be able to enjoy when they come for conventions and meeting space.

And, of course, we'll be an adjunct facility to our neighbors on the south at the Venetian and the Palazzo, and our neighbors at the Las Vegas Visitors and Convention Bureau to the east.

And we're thinking that we'll fit in very nicely with- - and so, there's a big problem here in Las Vegas.

When folks go to the convention bureau, they stand in long lines to get taxi cabs to fight their way back to the other hotels in this tremendous crush of infrastructure logjam that we have here.

And it happens when the shows open every morning at the Convention Center and when they close every afternoon at five o'clock.

Well, now, everybody will be able to go from their 10,000 rooms into the exhibit space or to the Sands or to the Las Vegas Visitors Bureau without having to get into a taxi cab.

Just get into one of our underground trams that will shoot them, free of charge,-right to the door.

So, we're going to take the convention business to another level here, I'm hoping.

And in the process join hands with our wonderful neighbors, the Venetian folks and the Las Vegas Convention Bureau, to make this just irresistible for all the conventions and folks that come from around the world to Las Vegas.

We'll get some- - and we'll get some new ones.

We're going to put a little more pressure on Orange County and Orlando and the Javits Center in New York and McCormick in Chicago.

We're going to flex a little Las Vegas muscle with the convention business.

Wow, that sounds pretty good.

Do you have an idea of timing or budget, when that might happen?

Not yet.

We just started doing the drawings about two months ago.

We were provoked into doing that when we heard that our neighbors next door were going to build a new facility on some property they own next door to us and expand their own inventories.

That gave us the encouragement and showed us that- - their leadership showed us the way in which we could play a more relevant role in this process.

All right.

Thanks, Steve.

I wish you good luck with that.

Your next question comes from the line of Joe Greff with Bear Stearns.

Good afternoon, everyone.

Steve, you hammered home the point that your property is very international and that's giving you a buffer.

I think, in fact, you used those sort of comments at the Milken conference this week.

What percentage of your business- - I don't know if you want to look at it in terms of room nights sold or overall revenues or casino volumes- - are foreign or outside of the U.S.?

Oh, well, if you talk about non-casino, that's one thing.

If you talk about the casino, namely the table games, then it's quite something else.

But, I remember a number from the first 12 months of this hotel.

I remember when we first opened this place, we were the first company ever to win over 600 million the first year of Wynn.

And it was 200 million in slots, 200 million in table games and 200 million baccarat.

It was a third, a third, a third.

And then, I think it grew.

Matt, Andy, do you know what it was in '07?

(inaudible) The international was about 50% of our table games.

Yes, international was 50% of tables.

So, and I don't know the number offhand for slots.

And slots, 500,000 a day or something we do with the machines.

It's fairly close to a third of our gaming revenue.

I think an interesting statistic is that the international business accounts for about 27 to 28% of our occupancy right now.

Did you hear that?

That's up from- -

I got that, yes.

If you take 27 or 28% of 20- - we've got 2,700 rooms at 95- - 2,600 rooms.

You're talking about 5 or 6- - it's the same as having a 500 or 600-room hotel that's 100% filled everyday with people with foreign passports.

And that's up from about 19% last year.

And it's increased, yes, about 19- - from 19.

I'm repeating what Andy said, because I'm not sure if you can hear him.

But I think that's a reflection of the value of the dollar, wouldn't you think?

Great.

And then one final question.

I'm out of packet here, Matt, with the press release.

But did you guys buy back stock during the first quarter?

We haven't been- - we don't- - we don't- - the answer is, yes.

We repurchased 2.4 million shares in the first quarter.

Look, look.

We issued 4.4 million shares for $660 million and promptly distributed it, which was really nice for us shareholders, in a return of capital.

We have now bought back, at $50 or $60 a share, every one of those shares that we issued.

50 or 60 less, yes.

For less money.

For $50 or $60 less, we bought it all back, thanks to the volatility of the stock market.

Good enough.

Thanks, guys.

Your next question comes from the line of Jane Pedreira with Lehman Brothers.

Hi, good afternoon.

I know you're in the early planning stages of the golf course, but at this juncture, can you give us any preliminary thoughts on how you might look to finance it?

Whether it would be in connection with the existing bonds?

Or would it be a separate financing?

Yes, well, I don't know how much fingertip information you've got on our structure, but Ron Kramer, when he was president of the Company, and Matt Maddox, everybody, worked very diligently to give us a lot of flexibility in the future.

And this coming year the golf course gets released from our collateral package.

In 2009.

In 2009, in seven or eight months, we get to take back the golf course free and clear.

Now, I know most of you have some sense of real estate values in Las Vegas.

Everything's paid for.

It was all laid off on the original cost of Wynn Las Vegas.

Our land costs are zero.

And so we've got this 150 acres back there, maybe 170 acres, we're not using.

So, we've since bought the Chamber of Commerce and a bunch of other things.

We own all this property in fee simple absolute at no cost and it comes out of the collateral package next year in six or seven months, eight months.

And what do you think it's worth?

$1 billion?

$1.5 billion?

$2 billion?

I was going to say maybe a $1.5 billion.

Okay, well, that's equity, isn't it, in a way?

Yes.

And, plus we've got cash flows.

We also have a $1.5 billion of excess cash on hand right now.

And you take Wynn Las Vegas, if you project the cash flows, when you run your model, you'll see that from a financial standpoint, we're in very, very good shape.

We don't need to borrow any money, if that's what you're thinking.

We're in really good shape.

Nice feeling.

Sometimes I wish I had been a little more courageous, like Sheldon.

He did a better job than I did.

I was more conservative when I was putting the company together and we went public at a quiet time in '02.

And if we had gone public a year later, two years later, we would have gotten five times, ten times, as much money.

But- -

Oh, it's only money.

It's only money.

Well, anyway, anyway.

The net result is the Company's footings are a mile deep, a mile wide.

We've got all kinds of flexibility.

But developing some rooms on the golf course and convention center is way, way within our reach.

That's not a stretch at all for us.

Okay.

So, it sounds like you could either do it with the existing bonds in place, or release the collateral and try to get it done separately.

You're right.

If you look at our indenture, you can either leave the collateral in place and then you'll need to revisit the issue with the bond holders, or it can be released and separately project financed with cash flow and excess cash on hand.

So, that is the conversation that is not happening in 2008, given where we are in the design.

And we are in a very fortunate position of having lots of excess capacity on the leverage side and lots of excess cash.

The strategy is for us to get our plans in order by Christmas, when we open Encore.

So, that when we hit '09, we're ready to dig in, both on Kotai and the golf course.

I don't know what order that will be, but that's my job for the rest of the year, is that- - those two things.

The work on Encore Las Vegas and Encore Macau is complete.

Now, it's just a question of execution.

Every fabric has been selected, every piece of furniture, everything is done.

All the department heads are selected.

We're on target.

So, that the thing that -- the design part of the Company that I am very active in is- - are into Kotai and the golf course.

Jane Pedreira; And so, would you expect the golf course to take another year or two to finish the design and then you would break ground maybe in a couple of years?

Yes.

Yes.

Yes, ma'am.

Okay.

All right.

Thank you very much.

Sure.

Ladies and gentlemen, we have reached the allotted time for questions.

Do you have any closing remarks?

No.

These conversations take a long time.

We try not to be long winded about it.

I hope it's constructive and we'll look forward to the next one.

Bye.

This concludes today's conference call.

You may now disconnect.