永利渡假村 (WYNN) 2008 Q4 法說會逐字稿

Good afternoon.

Welcome to the Wynn Resorts Limited fourth quarter 2008 earnings conference call.

Joining the call on behalf of the Company today are Stephen Wynn, Marc Schorr, John Strzemp and Matt Maddox.

Andrew Pascal, President of Wynn Las Vegas, David Sisk, CFO of Wynn Las Vegas.

And on the phone are Ian Coughlan, President of Wynn Macau, and Scott Peterson, CFO of Wynn Macau.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions).

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

Maddox.

Please go ahead, sir.

Thank you, and good afternoon.

I just want to remind everyone that we will be making forward-looking statements under the Safe Harbor Federal Securities law, and the statements may or may not come true.

With that, I'm just going to turn the call over to Steve Wynn for commentary.

I think that most everybody has been hearing from various companies up and down the Strip, and there is no good news.

Business is tough in Las Vegas.

I don't want to be the bad news bearer, but speaking for our own Company, we are in the mode of protecting our culture, protecting our employees, and seeing this thing through, but it's not a very good time to make money.

The only good news is that -- that I see, is that we've got $5 billion worth of assets in Las Vegas, but we only owe $2.8 billion against it, so we are underleveraged, and we have a strong balance sheet.

But I'm not nearly satisfied with the kind of money that the available for us to make as a profit.

I think this is a period in which we are going to have to adjust to the fact that you are basically conducting a holding action, and hoping that your capital structure allows you to do it.

But people with money that say at a hotel like ours are being very careful if they have money.

It may be one of the reasons why some of the lower-end places perform a little better, the slot joints, than a high-end place like Wynn or Encore.

So I will answer questions, but I think you remember we did have a conference call early in February in which I explained that we had made a decision for December and January to leave ourselves at high staffing levels.

First of all, in December because we were anticipating the transfer of so many employees over to Encore, we were carrying extra help in December, and that inflated our expenses, which exacerbated the lower earnings in EBITDA line, along with the low hold percentage.

So we had two things going in the fourth quarter, and we left the business in that mode for the opening in January, and we kept the hotels in Las Vegas at that level through the Chinese New Year, the first week in February, and made rather dramatic changes in our operating expenses and our staffing levels during the first quarter, which I think will be somewhat beneficial when we review the first quarter in the Spring.

But I won't go any further with that, except to say the business levels in Las Vegas are [punky] and weak, it is the only word to use.

I mean, Andrew Pascal, who runs Wynn and Encore, is sitting here, and maybe he will share his overview about this with you, and I think probably it's a good idea, Andrew, why don't you -- what are your impressions?

So I mean we've talked about a few things, I mean we -- recognizing how were -- we had a softening market in the latter part of last year, we were focused on opening Encore, but we could see and feel that the clientele was very definitely shifting.

So we changed our strategy in December, we got far more aggressive in terms of our rates, looking to drive occupancy, that was our first focus, and we learned a lot about how to fill up a complex with 4,750 rooms.

As we talked about in February, we then started to shift our attention to --

Excuse me, Andrew.

We also learned a lot about how to not fill up a complex.

That's very true.

So I mean there were a lot of things that we did that were worthwhile, and there were customers that we would love to have back, and there were some things that we did that didn't translate to any kind of profit contribution.

So we are refining how we fill our hotels, and we are focusing on the cost structure, how we are going to make money with the people that are now coming, understanding that it's a very different mix of clientele.

So we announced that in February we had anywhere from $75 million to $100 million in cost savings that we were looking to achieve.

With the measures we've taken in the last two weeks, we are currently pacing at picking up $250,000, so that gets us on pace, and we think there is more room.

So we are working at every aspect of our business model, trying to optimize revenue and lean out our expenses.

Business in China is a far more optimistic scenario, even though the economy in China has been touched, as all countries have, by what is going on in the world today.

Our businesses -- our EBITDA's off by 10% or 12% over there, but that's not a very big number to begin with, and I'm happy to say that we are very comfortable.

Ian and Scott are on the phone.

Ian, nice to talk to you.

Scott, if you or Ian would like to say something, I think -- you know, you stayed up late for this call.

Why don't you go ahead?

Given the general economic climate, we've had a satisfactory start for the year.

We've had decent volumes, particularly at weekends and over the two Holiday periods that we experienced in January and February, and our (inaudible) to market share has been positive, it is over 17%, and we've had some success stories in our slot program, which is ahead of last year.

Retail is ahead of last year.

So it isn't all doom and gloom.

We're also about to roll out a cost efficiency program similar to Wynn Las Vegas, which will definitely impact our bottom line in a very positive way for the remainder of the year.

So it isn't like Vegas at this point, and we are cautiously optimistic for the first quarter.

Scott, you want to add anything to that, Scott Peterson?

No, I think I that sums it up.

Our -- some people have commented on our margins are down a little bit, but the mix of business has shifted a little bit, but we are happy with the way things are working out so far.

Okay.

Well, for those of you who are on the conference call, our competitors as well as our Investors, we will take your questions.

(Operator Instructions).

Your first question is from the line of Joe Greff with JPMorgan.

Hello, everyone.

I want to make sure I heard you right, EBITDA down 10% to 12% in Macau, is that any one particular segment that's down more than another segment, or can you sort of amplify that comment, please?

Year-to-date, it's -- this year it's down 4%.

Okay.

Looking back at the fourth quarter promotional allowances as a percentage of gross revenues, it was a bit higher than the year-ago level.

Can you talk about that a little bit?

Is that (inaudible) Encore?

Sure, we are digging deeper to try and get -- we go chasing the customers a little bit, you know, trying to get them to come back.

You know, it's counter-intuitive for them to come and take resorts when their businesses and their -- the television is so negative, and so we press them a little, and we try -- and since the FIT business was off a little bit, we looked to fill the hotel with people we knew that spent money, and we gave them special consideration.

It's a typical thing to try harder when business softens.

Sometimes it works, sometimes it doesn't.

But that's the reason, Joe, that you saw the comps go up.

Okay, great.

And sort of a --

(Inaudible) in hard times.

A bigger picture question, and maybe Andrew can chime in.

I guess, what's the City of Las Vegas doing to, I guess, position itself as sort of not this boondoggle market, that legitimate conventions can go there and not necessarily be fearful they are doing something wrong?

And obviously we've had some high-profile conventions move out of Las Vegas.

Yes, you know, the -- President Obama, you know, in what amounted to a slip of the tongue, I imagine, just a conversational nuance, said he doesn't think the people who received benefits from the Government should be going on junkets to expensive places or Las Vegas, and he used Las Vegas as a metaphor for wasteful spending in effect, which stigmatized the convention business that could come to Las Vegas.

I'm sure that the President didn't mean to stigmatize the convention and meeting business of Las Vegas, when it was conducted by companies that weren't on the Government dole, but the effect that it had, for example, there was one particular convention we had currently, it was $5 [billion] worth of business.

This Company was as far away from needing help from Uncle Sam as you can get, but the Chairman of that company decided that he wanted to avoid any appearance of profligacy, so he canceled the $5 [billion] worth of business at our hotel and paid a $3.3 million -- $5 [million] worth of business and paid a $3.3 million forfeiture.

We are not happy with the $3.3.

We would rather have had the people and the $5 million.

But it was direct result of the comment made by the Administration, by the President.

However unharmful the President's intentions were, it just gives you an idea of how sensitive the public is, and how sensitive businessmen -- there is a feeling of a pound of flesh against business that's come out of the current Administration early.

There is an exact a pound of flesh kind of mentality that we are seeing in the new Administration that I hope is misleading as we go forward, but it's caused us some trouble here, and we have hundreds of thousands of employees in this industry, more than the automobile industry, and I hope that the -- Uncle Sam recognizes that, and that the rhetoric that is used is more considered in the future because it's demonstrated -- it has been demonstrated to us that it can have unintended consequences.

End of presentation.

Joe, it's Matt, just to clarify, when Macau EBITDA was down 5% in the fourth quarter, that was the number that we were referring to.

5% in the fourth quarter.

Yes, I made a mistake.

I was reading the wrong number.

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

Hi.

Just a couple of things.

One, Ian, did you say -- you said you were going to start to roll out cost savings in Macau, and maybe you could give just a little bit more detail on that?

And I thought that's a little bit different than what you said even a couple of weeks ago.

It didn't sound like you felt like you needed to do that a few weeks ago.

Then, Steve, maybe you could talk about -- I mean, you're clearly the market leader, and best property, and you -- can you talk about what you're trying to do in setting Las Vegas room rates even as late as February, as just the past few weeks?

And I noticed that occupancy was much lower in the fourth quarter, is that part of the program, and is that one of the -- maybe the mistakes or something?

I think you mentioned like you learned something over the fourth quarter, is that one of the things that you want to try and rectify?

Maybe just talk about rate versus occupancy, and then maybe --

Steve, I think Andrew is perfectly focused on this, and I think he could clear this up.

And as far as the question you asked Ian, I just came home this past week, Ian unfortunately had a family sadness, but what we did in Macau was to re-examine a bunch of things that didn't impact our culture or our employees in any way.

We did no layoffs, we did not change our work hours, we didn't need to do that, but we just found ways of saving $40 or $45 million.

Based on what we experienced here --

Yes, based on things that we learned in Las Vegas.

So if our EBITDA was going to be off by X, we were able to mitigate it by point something X by saving the $40 million-odd.

And that's a run rate, Steve, or is that a start, where you -- where do you think that's going to --

That's a run rate.

Okay, that's a run rate.

Thank you.

Then the question on Vegas.

Andy, I think that there is an interesting question.

Why don't you answer that about room rates?

Okay.

So, I mean the key lesson that we learned in the fourth quarter is that we can't hold our room rate.

For a long time, it's always been our philosophy to kind of set the rates and to price our property at the top of the market.

We have been able to command that rate in the past, and we started to see occupancy suffer more dramatically in the latter part of the fourth quarter.

So where ADR for the quarter was only down 6%, overall occupancy was down about almost 15%.

So as a result, our RevPAR was down even more.

So we clearly said look, we've got to make sure, particularly in this phase of opening up a new resort, that we keep this place fully occupied, energized and alive, and so we said all right, we are going to get aggressive with our rates, and we're going to look to exploit new channels and try lots of new things.

It's what we alluded to earlier.

So that's what we have been doing, and learning a lot about, okay, which of those tactics are successful and are going to drive occupancy with customers that are worth having, and which ones are not.

So the key thing we learned was we couldn't just continue to hold to a rate premium that was fairly significant relative to the rest of market.

We needed to get more aggressive than we have.

Okay, thank you.

Does that answer your question, Steve?

Okay.

Your next question is from the line of Bill Lerner with DB.

Hey, guys.

Two questions, the first I think for Matt.

Matt, when if at all do you think you would be in a position to reverse those stepped-up net reserves, if your collection experience had been better than you originally reserved for?

Maybe it had something to do with the receivable [season]?

And then I have a follow-up.

We examine that on a quarter-by-quarter basis, and if you look at overall right now Las Vegas is over 50% reserved and Macau is over 65% reserved.

So we actually did reverse a little bit in Macau, because our reserves exceeded 80% during the quarter, so we had to.

Our collection experience has not changed materially in either area, so we are going to continue to analyze it every quarter.

We are conservative, right, and it's reflected in our capital structure, it's reflected in our attitude towards credit.

When the Chinese market and the American market is wobbly, we did not want to become the bank of last resort to our customers, you know?

So consistent with everything we always done in the planning, design and operation of our businesses, and our capital structure, we behaved exactly the same way with the credit reserves.

Now if we've over-reserved, we will have a clearer picture of this as we go into '09, and then we'll make the adjustment, Bill, as soon as we can.

We have no choice in the matter.

Our auditors would make us do it.

But they were sympathetic to our sensitivity when the matter was raised by myself at end of the last quarter.

And they said, okay.

And then in the third quarter as well, they said right, we don't blame you, Steve.

And I said to Mark and to Marc and to John Strzemp, look fellas, let's be really cautious here.

We could get surprised.

The world is in a spot that is unfamiliar to everybody, and we should be -- let's take the high road, and be safe.

Maybe we were too safe.

That's a nice position to be in.

But we will take a good look at it, Bill, in the first quarter.

Thanks, Steve.

Then a follow-up, I guess for Steve, just in trying to analyze or estimate what might happen to your margins in Macau, if anything, once these commission caps are ultimately -- or ultimately if the commission caps are put in place?

Did you ever actually raise [junket] commissions?

I know your collective [junkets] wanted you to, of course.

We didn't.

No, we were the only ones that didn't.

We don't have to lower or do anything.

We are down there where the cap is.

It's our competitors that were higher.

We never went up there with those guys, we didn't have to, which was nice.

You know, you got a better facility, you don't have to reach -- you don't have to try as hard, generally speaking, and in Macau that is -- we are very fortunate, we are enjoying a favored position with our clients, with the customers, the repeat visitation to our property is extraordinarily high, and in order to get anybody out of the -- Wynn Macau, you've got to bribe them to get them out, and that's what our competitors try to do.

Now that's -- it's a policy that is not productive, trying to buy business when you are already being -- you know, have narrower margins.

It's just a philosophy that backfires.

So we sat still, let the other guys take their best shot, and we managed to hold off any real assault on our business.

Okay, that's helpful.

Thanks, Steve.

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

Hi, guys, good afternoon.

Matt, I was hoping you could comment on, one, the potential tax implications, if any, from moving cash to the US from Macau, and secondarily, or two, I guess, can you continue to move cash, and what would those tax implications be?

Thank you.

Okay.

So Celeste, so if you look at our Company, and I have discussed this in the past, we have actually moved money back to the United States.

In our press release, you will see we have over $600 million at the parent Company.

We have had, because we are a development company, large net operating losses, and as well we have faced a significant amount of foreign taxes.

So we have foreign tax credits and net operating losses that allow us to move money between our subsidiaries fairly efficiently.

I'm sorry, what was the second question?

Then, can you continue to move cash back to the US -- so if you generate cash in Macau and need it in the US, can you continue the move it?

And then, do you have enough tax credits that that would also be tax efficient?

I want to jump in on that one, Celeste.

We will remain conservative.

We have an Encore Macau scheduled for completion next year, and we are primarily interested in our investments in Macau.

So moving money is of secondary concern to us, as opposed to concentrating on our investments in China.

Okay.

I don't know if that answers your question Celeste, but that's what I want to tell you.

But I guess the question, Steve, is if you need to -- I understand that focusing on China is very important, but if you need to move it back to the US for whatever reason, would that -- could you do that tax efficiently, given how much you've already moved back?

Well, you know, we would have to examine all our relationships and the regulations in China at the time, as far as taxes and other capital requirements that are built into our concession agreement, and I don't think at this time that speculation of this kind is productive.

I'm sorry, but I think that we've done the appropriate thing permitted by our concession agreement, and current tax probity in the United States, and as we go forward we will try and take advantage of whatever seems the right approach at the time.

Okay.

Thanks.

Your next question is from the line of Larry Klatzkin with Jefferies.

Hey, guys.

Yes, I have -- never mind.

A couple of questions.

One, can you just talk about the (inaudible) in Vegas?

I'm calculating that it might -- after gaming taxes be about $33 million, and hence you really were not that bad in Vegas as it seems?

Yes, if you normalize the whole percentage, there's another $33 million.

Okay, so you would have been over $60 million in Vegas if that was the case?

Yes, $61 million.

Yes, but you know, not only were we a little unlucky, if that's the right term when the whole percentage is low, but we believe that we are seeing changing patterns of behavior at the table.

People are being more cautious.

When they win, they are playing for shorter periods of time.

A blackjack player gets up, or a Baccarat player gets up at the table, and he jumps up and leaves if he is a winner.

Where before they said, oh boy we've got the house's money, let's play longer.

That worked to our advantage.

This mentality works to our disadvantage, and I think tends to be a little bit of a depressant on the whole percentage as we go forward, while this mentality is in play.

But still, 15 is low in anyone's book.

Sure.

Then the free cash, Matt, you have right now, that you're not obligated to toward Encore, Macau, or whatever?

It's around $1.3 billion.

We have $1.6 billion on hand now.

So about $1.3 billion of free cash.

Then the last thing, Steve, visa restrictions seem to be coming down.

What are you seeing for that, and also this casino group forming?

Do you think there is better rules coming for Macau for you guys?

I had a lovely conversation with Stanley [Ho] that was fun.

He explained that he believed it was time for the casino association to exist, and that he would be obliged and graciously accept being the Chairman for the first year.

I shared with him my feeling that that was certainly appropriate, and that we would support that, and that we would be glad to be part of any association.

He also mentioned that everybody had agreed except for the Sands, and -- but that didn't stop us from agreeing.

And the Chief Executive of the Government thought that it was a constructive thing to do.

So that's that.

As far as the visas go, there has been a slight relaxation on group visas.

There is some talk of -- in the paper, I might add, of some relaxation on individual visas from Guangdong Province, which as you know the center of that, the capital of that is Guangzhou, and that's where we are.

We are really part of --except for the fact we are an SAR, Macau is part of Guangdong Province, and that's a very powerful part of China financially.

So usually when things appear in the paper in China, it usually signals a change.

It has in the past, because the Government doesn't let things leak there unless they are considering it.

Now to say that just because it is in the paper that it was allowed to be there, and therefore is a signal or a presignal of government action, I think would be getting a little off the mark.

I think you have to wait in China to see what the Central Government or the Provincial Government decides.

In Guangdong Province, the government operates in perfect synchronicity with the Central Government of Beijing.

So we will see.

But it was in the paper.

And Lawrence Ho actually in his call this morning said that before all the restrictions came on, you could go once a week, and he could see it where you could go every day if you want, which would be the best it's ever been for Macau.

Well -- who said that?

Lawrence Ho.

He did?

On his call this morning, yes.

He is a young fella, and a smart guy, and if I were Lawrence Ho I wouldn't be predicting what the Chinese Government is doing until they do it, and that's an American talking.

I think that trying to give you guys rosy pictures, and all that kind of jazz, on these conference calls is real disservice.

I think what we ought to do is discuss what has been, and be candid about what we think may be.

As far as Wynn Resorts go, we are guarded and concerned about the weakness in the Las Vegas market.

We feel less concerned about China at the moment.

But if anything we've learned, it's that things have a way of taking negative turns rather quickly in the world today, and I think that we ought to be very conservative about what we say and more conservative about how we run the Company.

Well, thanks Steve.

Hopefully this all comes true, and it's an upside for Macau.

That will be nice if it's true.

Your next question is from the line of Susan Berliner with JPMorgan.

Hi, good afternoon.

Matt, I had a question for you.

I was wondering if you could go over, on the Las Vegas bank facility, exactly where you ended on a leverage covenant, and if you could also remind us what we should including over the next year, all the add backs?

Sure.

From now through June on the leverage side, we actually deduct Encore project costs off of debt.

So net-net is only around $500 million on the leverage covenant until June 30th.

Right, okay.

Okay?

June 30th, what you do then is you annualize the first six months of EBITDA in '09 against total debt, and that ratio is I believe 8.25.

And you ended the year at -- I'm sorry?

At 8.25, 7,75 in September and 7.5 at the end of the year.

Okay.

Great, thank you.

Sure.

Your next question is from the line of Dennis Forst with KeyBanc.

Good afternoon.

I had a couple of questions, first on capital expenditures going forward.

You've got to pay off another $200 million of Encore, finish up Macau Encore and maintenance CapEx.

What kind of number is that going to add up to this year, Matt?

As we've put in there, we have about $200 million to go.

That was at 12/31, and that number is already down to $120 million today, on Encore at Wynn Las Vegas.

Encore at Wynn Macau, the number is in the neighborhood of probably $200 million to $240 million this year, with the balance being in 2009.

And maintenance CapEx is tending to run around $35 million to $40 million at the properties.

That's $35 million to $40 million per property?

No, combined for 2009.

Really?

$40 million for the three properties combined?

Because we just opened Encore, and Wynn Las Vegas went through a significant amount upgrades --

And we're conserving cash.

Yes, and we're conserving cash.

Okay.

Sounds like you are doing a good job of that.

Same old story, you know, conservative.

Yes.

Next on Encore, I think the numbers that you put in the back of the press release exclude anything from Encore?

The win per slot, the number of tables and slots, et cetera, does that all exclude the nine or ten days of Encore?

No, Encore is included in all of these results because it was nine or ten days, it was not that material to the earnings.

But we look at Las Vegas as one property, 4,700 rooms, and that's how we are going to report the results.

Okay.

And the number of tables and the number of slots and everything --

We look at it as one property simply for financial reporting purposes, but they operated as separate businesses, and they are separate businesses.

Okay, but the $281 average room rate is the combination of the two properties?

Yes.

$281 -- yes, you are right.

Okay.

The reason is because of the weighted average number of slots and tables then, and it looks pretty small because it's just ten days in the grand scheme of the quarter.

Okay, and how many tables and slots does Encore have, so we'll have it for the first quarter numbers?

98 table games, and just over 800 slot machines.

Terrific.

Okay, thanks a lot.

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

Steve, before the conference call there was a development with Northern Trust.

They apparently sponsor a golf tournament, and took a number of companies -- or customers on planes out to the golf tournament, and took them to a rock concert, and 17 members of the Congress have, in fact, protested.

And this little development that you talked about earlier in the call has potential right now, I think, to spread, and if you look at financial services in autos, you are talking about close to 20% of the GDP that Congress is likely to start regulating their business behaviors, things like the Buick Open, and stuff that you would do in the normal course of business.

Clearly you couldn't have known about this, but is it possible for people in the luxury business so be responsive to Congress, and somehow stop this -- what looks like burgeoning class warfare, before thousands of people lose their jobs in this industry?

This is a much bigger problem than just Las Vegas, Steve.

Did Northern Trust take money from the Government?

Yes.

Well, I think that Congress has a right to ask, and Northern Trust has the responsibility to behave in a way when they are on the Government payroll or the Government dole, to do the kind of fiscal discipline that we are doing with our own Company here, and we are far away from being a Government-sponsored Company.

So I don't think that's our problem.

What I don't want to have them do is characterize Las Vegas as a wastrel or wasteful place.

It's profligate, no matter what reason you go there.

So when I told you about the business we lost, it was a company that was one of the healthiest companies in the United States of America, much more healthy than the Government of the United States of America.

That is disturbing to me, when a Chairman of such a company feels intimidated, and that is -- if that is that class warfare, or that -- as I mentioned earlier, that Capitalism needs to be punished, if that is part of this mentality of this Administration, we are in for a worse time than we expected.

President Obama got swept into office on a wave of optimism about a better future.

If we are going to have increased welfare Government, we are not going to create jobs, and we are not going to get out of this recession quickly.

If we really have an intelligent, brilliant, sensitive Government that understands how the country works, job creation is at the smaller business level.

I mean, everybody is letting everybody go.

I created 4,000 or 5,000 new jobs here, does that make us a bad guy?

How many new jobs does Uncle Sam create?

Zero.

So I'm saying to myself, look, there are certain times when the rhetoric from Washington is appropriate, and if Northern Trust is taking money, then they don't need to go to a golf tournament, not that this point in their career.

I would have to agree with those Congressmen.

On the other hand, if this kind of rhetoric is not very enlightened and very sophisticated, it can lead to an unintended consequence, like the cancellation of a wonderful company's educational forum, where they teach salesmen the new programs.

They need to go somewhere to do that.

Las Vegas was the cheapest place for them to go.

It's the most -- the greatest value for conventions and meetings in the United States of America.

We consistently are the best value because we've got slot machines and crap tables, we can afford to sell rooms -- finer rooms for less money.

We give better meeting facilities in terms of technology, and in terms of the services available to the delegates.

We serve the convention and meeting public the best of anyone in the United States of America.

It's more accessible, too.

We are more accessible in terms of our airport.

And for that to get torqued or perverted because of political flap jaw would be -- or political impetuous speech, would be unfortunate.

Let's hope that the Government grows up and does a good job, and gets us out of trouble, instead of putting us in a deeper hole than we are in already.

Thank you.

Your next question is from the line of David Katz with Oppenheimer.

Hi, afternoon all.

I wanted to go back to -- I know that a number of weeks ago we had some discussion about cost-cutting, and there has been discussion about cost-cutting on the call here.

But if you could just talk us through some of the contingency plans you have.

I guess what I'm struggling with is, things have gotten to a certain level, and then we found ourselves very quickly, 30 days later, at some lower level.

And what is possible in a pretty short amount of time, I think, has been difficult for us to keep up with.

And so how are you thinking about the next level down, if in fact there is one?

Well, you're right about things changing quickly, and hopefully that could go either way.

But, you know, we haven't been there before, this is new territory for us, and I would love to be categorical or self-assured.

But there are times when it's very difficult to be self-assured in an environment of such rapid change.

Our political leadership is on the line.

The direction that we get from Washington is going to be the most important thing in restoring consumer confidence.

I don't mean to go on, I will address your question technically.

But the political leadership from Washington was completely lacking in the first $350 billion or $400 billion they spent last year.

So that money went down the drain, and didn't produce the kind of result it was supposed to, and theoretically there was supposed to be smart people on the job paying attention to this, like the Secretary of Treasury, and people like that, the former Chairman of Goldman Sachs.

You think, well, they ought to know what to do.

Well, it got away from them a little bit.

This last stimulus program that has come out of Washington was more of a welfare program than a real jobs creation program, in spite of what the President says.

Fixing bridges and roads are technically demanding jobs that require technical help, good drawings, and substantial lead time.

That may be a proper thing for us to do as Americans, to fix the infrastructure, but to think that it's a quick-fix job program is a naive and insincere, and incorrect statement.

So when we see these kind of things, it doesn't tend to reinforce our strength or our conviction that the Government is going to come to the rescue really intelligently or efficiently.

What the Government can do is issue regulations usually, and if they properly enforce them they can get the private sector to behave in a predictable way.

But the Government running a jobs program leaves me completely unimpressed, and I think that history will prove that to be true.

As far as what we do at the next level, Andrew?

We make contingency plans, and we sit around and we say where can we save more money if we have to?

But we are going to protect the culture here.

We are going to protect our employees and we're going to protect our service levels, so that we remain consistent in an inconsistent world.

That's a very valuable thing to do.

It doesn't add to the best short-term results, but it has the very best long-term results.

So I don't think I want to discuss what we do when we go to the next level.

We are professionals.

We will react, if we have to.

But I don't want to be hypothetical about stuff that we haven't done yet.

Okay, thanks for your thoughts.

Your next question is from the line of Robin Farley with UBS.

Great, thanks.

I've got one Vegas question and one Macau question.

On Vegas, I wanted to ask about your occupancy strategy.

You covered a lot of it.

I guess I just wanted to clarify that -- you know, it sounds like your expectation or your strategy is to try to get occupancy back into the 90% range in Q1, and I'm just wondering if that's the case even with Encore -- with the room inventory increase from Encore?

Is that -- am I interpreting your comments correctly?

Our comments, if I can summarize what Andrew and I have been pointing towards, is this.

In the fourth quarter, and things we did for the first half of January, showed us that occupancy in and of itself is not the answer.

We need people in our beds, in our rooms, that can afford our restaurants, and our various other amenities.

If we don't have that, then our non-casino revenue expectations per occupied room would blow up.

That's no good.

So it isn't enough to get to 97% occupancy, we can do that quick enough.

If we've got the best rooms, all we have to go to do is the lower the price, and Expedia and Travelocity and Hotel.com jump up and down with glee, and so will the wholesalers.

But we need to be still discriminating about the kind of people we put in our rooms.

In some cases, Robin, it may be true that we will do better with 88% occupancy than we do with 93%, depending on the quality of the person that's in the room.

In this type of facility, unless our restaurants are used, our showrooms and our higher-limit tables, our model doesn't work as well.

So we have to be constantly vigilant about the quality of our guests.

I think that's what Andrew was alluding to when he said we learned a lot with some of the stuff we tried in the fourth quarter.

We filled the hotel, and I was responsible for making him do it.

I'm not sure he wanted to, but I said look, what -- I don't want to see an unanimated opening for Encore.

Fill it up, regardless of the price, and I have retracted that statement.

We are past that point, and we are not hunting with a shotgun, we are hunting with a telescopic rifle again.

Okay.

Great, that's helpful.

Thank you.

Also just a question on Macau, and this may not be good information, but it sounded like there was some scaffolding, some construction maybe on your Cotai property, and it may be an observation from someone who didn't know exactly what property was yours, but is there anything going with your Cotai property in Macau?

Robin, did you ask is there anything going on in Cotai?

Yes, it looks like there is something going on on your property, but maybe it's not as much as it looks?

We put up a fence to define it, and we built a warehouse because we are putting our model rooms for Encore in there.

That's what is going on there.

Okay, great.

It's -- it's subordinating the stuff, it's support -- excuse me, it's supporting what is going on in the Peninsula, Robin.

That's the activity you are seeing.

Okay.

Great, thank you.

Your next question is from the line of David Hargreaves with Sterne, Agee.

Yes, sir.

I'm sorry, can you hear me okay?

Yes.

I wanted to find out if there is any -- I think a lot of folks lose site of the fact that Vegas is such an important global destination.

I'm wondering if there is regions or patches of geography you haven't reached out to in a number of years that you're renewing your efforts and focusing on?

The answer to your first question is, are there regions we haven't explored, the answer is no.

One thing you can pretty much count on is that the gaming industry in Nevada, and elsewhere, has beat the bushes.

Now, having said that, everybody is reexamining their databases and going back and looking at the people who have been to our properties and our neighboring properties in the past, and renewing our call and invitations for them to come enjoy the new and the latest developments in Las Vegas.

I think that not only is Wynn Resorts staff doing that, but I'm sure that the MGM and the Sands, and all of the other fellas up in the [Harris], people up and down the Strip are doing to same thing.

Yes, they are out there.

But there aren't any places that have been untapped, if that's what you are asking.

So at the beginning of the call, you talked about some of the lower end properties.

You alluded to some of them doing better, could you elaborate a little bit on what you're seeing?

I think at the regional slot places like the riverboats, they are having less of an earnings decline than a high-end strip motel, and I think here on the Strip, I was talking to one of my buddies that runs a couple of places that you would call middle or lower market operations on the Strip, primarily slot-oriented, and their earnings -- their EBITDA is less than our EBITDA.

Are you all right?

Sound like you are choking there.

Did you hear me?

Yes, sorry that wasn't coming from my end of the phone.

I'm not sure who that was.

Okay.

It sounded like someone was having a hard time.

In terms of what we are seeing in terms of trend with table hold, is it to be expected now that since perhaps you've got a different category, or maybe the composition of visitation is changing, is it to be expected that the whole percentage might be a little bit lower going forward?

Yes.

In a word?

Yes.

Okay.

Thank you very much for taking my questions.

Your next question is from the line of Mike [Stredcast] with Longacre.

Hi.

I was just wondering when you guys compute a hold at 15%, is there any -- in that number, are there any top numbers in that whole percentage?

No.

That's just straight by -- just straight luck that, for example -- is there any losses for -- business losses included in that, such as a big casino?

No.

No.

Okay.

Thanks.

There are no further questions at this time.

Are there any closing remarks?

No, ma'am.

Thank you, everybody.

Thank you all for participating in today's conference call.

You may now disconnect.