永利渡假村 (WYNN) 2009 Q3 法說會逐字稿

Good morning, and welcome to the Wynn Resorts, Limited third quarter 2009 earnings 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; and on the phone, Ian Coughlan, President of Wynn Macau.

Now I'd like to turn the call over to Mr.

Maddox.

Please go ahead, sir.

Thank you, and good morning, everyone.

First, I just need to remind everybody that we will be making forward-looking statements under the Safe Harbor federal securities laws and those statements may or may not come true.

So without further ado, I am going to open it up for comments by Steve Wynn, Chairman and CEO.

Well, actually, it hasn't been too bad this quarter.

We were even in Las Vegas and up in Macau, and although I can't say that I'm noticing that everything is overwhelming, I'll say this, that in the fourth quarter at this time in October last year, as the wheels came off in September, and we were getting ready to open Encore, we were saying, boy, this is really tough timing.

Fortunately, we had a capital structure where it didn't make a lot of difference but we were going to spend money to open the hotel and we were going to open it into a yawning chasm of the recession, and we thought that 2009 was going to be really horrible, and we thought that we'd feel it in China, and it was looking that way in the fourth quarter and we'd certainly feel it in Las Vegas and it was terrible in Las Vegas.

In the first quarter, although because we were involved in the opening of Macau -- of Encore, rather, in Las Vegas, it sort of confirmed our worst fears.

The second quarter wasn't much better.

In the summer and -- in the summer things started to change.

Macau picked up and in the last few months Las Vegas, because of our high end business, has -- and I'm spilling over into October a little bit, but to give you a general impression, if things continue the way they are, we are going to equal or beat 2008 in Las Vegas, and we are going to equal or beat last year in Macau.

All things considered, that isn't as bad as it might have been, and so it's one of these things -- if, for example, in Las Vegas with Encore we had achieved our average room rate of $300 with a 91% occupancy, our revenue per occupied room would have resulted with normal margins in $150 million more annually in EBITDA at the rate we are going, it would have been $120 million to now, and another $30 million [equally] in the last 20% of the year.

So that's the kind of thing that we see, room rates are still down because mid-week occupancy in Las Vegas has been severely compromised by the convention and meeting market.

I've been speaking publicly about some of the reasons for that, but basically what's going on is people, the businesses in America are down, and they are cutting back, and it's affecting Las Vegas.

The room rates for everybody including us are down, and that means that the people who come here are spending less for their rooms and they are spending less for everything else whether it's retail shopping or playing slot machines or other miscellaneous activities.

Because of our position in the market we enjoy a more well to do trade, and we get the benefit of that, and we do get spillover from Macau with our Asian business.

We, again, I've spent a lot of time during the road show talking about our capital structure.

It's the backbone of our marketing.

It allows us not to be doing layoffs or bouncing our employees around or playing with our customer service levels.

That protects our franchise until hopefully the economy improves, and the government begins to help revive the U.S.

economy in ways that really are effective.

In 2008, for example, to talk about capital structure and what it means, there's such a focus by the press.

So many people on this call, our competitors who are on the call, and the press focus so intensely on top line numbers, market share, EBITDA.

We forget for a moment with all the rhetoric that it doesn't really mean a thing.

What matters is how much money is left.

You have got to pay interest.

You have really got to pay depreciation.

In our business the carpets wear out, the equipment has to be replaced.

Depreciation is a real expense in our business, and when you don't spend it, you are hocking the future.

You are losing the kind of environment that gives these businesses their franchise.

So that's why in 2008 with so many hotels and casinos in China, for example, after depreciation and interest we made more money than the whole gang put together.

I don't know if that is going to be true in 2009 but it was true in 2008.

Bigger is not better in our business.

Better is better.

And the amount of interest that you don't pay allows you to have more left over for improvements, for taking care of your employees, for growing in a controlled and measured way.

One other thing.

I remember talking to a very bright journalist in Asia who said that our market share, they publish these gross Wynn numbers in China.

We don't do it in the USA but it's very important and the same point applies.

Very often you see numbers like market share.

And somebody said our market share had dropped from 17% to 14%, and the suggestion was that we were losing our franchise.

And quite exactly the opposite was true.

The way you measure the effectiveness of a casino resort, whether it's in the United States or any other market, is this way.

You look at the percentage of equipment in the marketplace that each operator has, and if the percentage of cash generated by that equipment, the win per unit per table is 100% of the percentage of the equipment it has, then its fair share is neutral.

If the percentage of cash generated by the equipment is less than the percentage of the equipment than the casino, it's at a deficit and has less than the right market share.

If, however, the casino has a revenue in excess of 100% of its percentage of equipment in the marketplace, then its effectiveness, its real market share has exceeded its fair share, and that measures the effectiveness of each organization.

And in fact, in Macau, as nine casino hotels have opened, our premium over fair share has grown.

I say that not so much to toot our own horn because the numbers speak for themselves, but to focus people who care about analyzing what goes on in these companies, to focus on the things that matter.

If you have 12 hotels, you have 12 sets of interest, 12 sets of depreciation, naturally you will have more top line revenue.

But the amount of money that gets to the bottom line is quite a different story in many cases.

So I'd concentrate if I were trying to analyze these companies on what was left after depreciation and interest was paid.

And there is where capital structure plays such a critical role.

So companies that are paying higher and higher interest rates are on a path to having a negative fair share kind of ratio, and companies that have good capital structure and run their business properly are on their way to increasing their franchise, and the franchise is measured by that premium over fair share that you get of the cash.

That's the end of my comments other than to say Encore in Macau is completely budgeted and under control, and we will finish it.

We've opened some parts of it in the last few days.

We will finish opening it in April.

Everything is paid out of cash flow.

We are completely confident of the cost of Encore and it's a little under our budget, and it is the most pretty and beautiful thing that we've ever built.

It's 412 suites and villas.

It has casino space both general casino and VIP casino space.

It was the first building that we had the luxury of building in Macau where we could take advantage of our experience the past three years, what we have learned about our customers.

And we took our time to do it until after we did learn about our clientele.

And the building was specifically designed to meet what we considered to be the real, real sensitivities of the people who come to Macau who spend the real money.

And so I say it's the prettiest thing we've ever done and that may be very nice for a design magazine.

It certainly is another demonstration of the wonderful gifts that Roger Thomas has, our Chief of Design.

But more importantly, in 100 cunning ways, it is a place that will ingratiate itself to the customers that matter most to us.

It has two or three new restaurants and retail space, and it has a spa that is completely unique, as far as I'm concerned, anywhere.

So we are going to get a chance to enjoy the benefits of Encore Macau starting next spring, and I think Matt, Andrew did I cover everything?

I think so.

You did.

Okay.

Then we'll take questions.

Are there any questions?

Operator, do we have anyone in the queue for questions?

Absolutely.

(Operator Instructions) First in line is Joe Greff.

Good morning, everyone.

Steve, you touched upon the high end business in Las Vegas.

You didn't quite say it this way, but I'll say it.

It has improved.

Can you talk about the domestic high end volume and the trends there, have we seen the bottom and is that improving?

From what we know and from what we see international high end has been pretty strong.

And then, Andrew, maybe can you just talk about how do next year group convention meetings look and if you can touch on 2011, and then with CityCenter opening up in less than a couple of months, how do you change the marketing or have you changed strategically the positioning of your properties, if at all?

Thank you.

There you go, Andrew, you can try and wrangle that whole --

Okay.

So your first question, how is the domestic high end business.

We see it kind of trending as it has over the last six to nine months.

That's where we've experienced probably the most significant softening.

To your point, the international business has held up well, and I think we are a bit encouraged by what we have seen more recently, but that high end domestic business just has not returned.

As for the convention bookings going forward, I think that the dynamics of that business have changed just like every other segment.

Bookings windows have gotten far more compressed.

We have been obviously very active out in the market.

What we are hearing is that people are going to start putting back into their budgets their group and incentive travel but they are going to wait through the first quarter of next year to see how things further stabilize and then they'll start to release some of that money to spend in the second quarter and throughout the balance of the year.

So as of today we haven't really seen any material change in the rate of pickup, but we remain somewhat --

Excuse me, Andrew, in the last couple of weeks I've had two important cancellations.

I've seen it still go the other way.

Net Jet cancelled their big poker tournament and we had another one.

So the intimidation factor in Las Vegas is still in play, unfortunately.

I think that is definitely true.

That is another thing that we heard in the marketplace is that while people are starting to spend more money on these group and incentive travel plans, that they are still a bit reluctant to come to Las Vegas because of the stigma that it carries.

They don't want to be exposed to or deal with the scrutiny --

And the stigma --

That's right.

Is based upon the comment that was made during the early parts of the recession by the administration that said that they didn't want the people were getting government help to be spending it on junkets to Las Vegas.

That remark has affected most of the destination resorts that had any kind of fantasy to them, like Orlando or Las Vegas actually, when he said Disneyland or Las Vegas.

Your last question, I think, related to CityCenter, and what are we doing to plan for or account for the potential effects of CityCenter.

I would say we just are focusing on the fundamentals.

Our firm belief is that if we continue to focus on delivering a great experience, we keep our employees feeling comfortable and safe, and they are well prepared to extend great service to our guests then we'll do what we can to retain that business.

We know that there is not a lot that we can do to overcome people's curiosity.

So there's going to be a whole bunch of people that go and check it out and we hope that we live up to the challenge of the comparison between what it is versus what we've created here and what we offer.

So for us and what we are really very focused on right now is just the fundamentals.

Next question.

Thank you.

Next question comes from the line of Rachael Rothman.

Hi.

Good morning.

I was wondering if you can touch a little bit on the sequential increase in the operating costs that we saw between the third quarter and the second quarter and maybe what led to that?

And then --

In what market?

I'm sorry?

You are talking about in Las Vegas or --

Just generally, yes.

It's in Las Vegas.

If you could talk about Las Vegas that would be great.

And then if you could talk maybe about going into 2010, any perspective on further cost cutting initiatives and maybe the impact of CityCenter and your ability to drive further margin expansion would be great?

Thank you.

The part about CityCenter, here is how this works.

It always works exactly the same way, so you can watch this through these color glasses.

People go and look at a new hotel.

I'm certainly going to do it.

Friends of mine built it.

And then if they had been solicited properly, they stay there.

At that point, they are treated to an environment that's got to do with all the physical aspects of the place and how they are treated by the people who work there.

If all of that comes together just right, then they have a positive guest experience.

They are most apt to try it again and tell their friends and that's how you build a franchise.

If, on the other hand, the physical aspects of the building rub them the wrong way or are not convenient or don't allow the employees to deliver first-class service, the employees get agitated and nervous, the customers don't get what they want, and the whole environment tends to be a little on edge.

And that tends to make people go back to where they are more comfortable.

That is what happens with people who are adventurous and like to change.

Then there's a whole group of people that are comfortable in a certain kind of hotel and they don't want to change at all.

So we are going to have a percentage of people that sort of experiment, and it will really depend upon the other fellows and how the direct comparison of our place versus their places shows up on those fronts in the manners that I've described.

We don't really know how they will do, but if you believe that, in the common sense that I've tried to express just now, then you'll realize what we have realized that the only place that we can make money is in our own hotel and the only way that we can compete with Caesars Palace, the Venetian, Bellagio or Aria is to do a better job in our own hotel.

And really what they do is irrelevant.

And if they cut price because they are desperate, if things don't work out right and certainly there are a lot of hotels that get desperate and cut prices in my neighborhood.

When they get desperate and cut prices, naturally that has an effect.

But usually it's short-term because people that get desperate and cut prices.

One of two things happens.

They wake up and stop doing it because they get smarter or the management disappears and a new group comes in that takes a saner and more long-term approach.

But once again, what we are left with is how we run our own business.

You can do the cost cutting if you want, Matt, or Andrew.

Okay.

So on the expense front, the quarter-over-quarter increase in expenses is about half of it can be attributed to utilities and property taxes and other licenses.

The other half can be attributed to seasonal hires, our staffing up, things like our pool areas, and headline entertainment expense that we incurred in the quarter which drove further revenue.

Next question.

Next question comes from the line of Cameron McKnight.

Good morning.

This is a question for Ian or for Steve.

Can you walk us through some of the different segments in the VIP and mass markets in Macau and just explain to us where you are positioned in those subsegments versus your competitors?

Then I have a few follow-ups.

Ian, you can do that, but I'm not really interested in this call or any other call in getting into the interior discussion of our marketing strategies.

Keep that in mind.

It's wonderful to cooperate with the investment community, but we are not giving lessons to our competitors.

Go ahead, Ian.

In Macau, we command the high end of the market.

We have a very strong VIP support base.

We also have a high functioning mass market and we continue to market to both of those markets in the way that we have done in the past.

It's all about quality.

The market over the summer has seen some, quite frankly, aggressive and chaotic discounting more as a City of Dreams defensive strategy in some of our competitors, and we don't get dragged into that.

We don't buy our business.

We continue to focus on preservation of brand and enhancement of what we offer.

We have more VIP facilities opening in a month's time and we'll continue to command that part of the marketplace.

Good answer.

Right, thanks.

As we approach the opening of Encore, can you comment on what you expect in terms of additional cost that that will add to your Macau business?

Frankly, looking at the marketplace with 600 keys we are quite constrained.

We have the opportunity to sell an awful lot more accommodations than we are able to do currently.

Our third quarter occupancy was hitting up around 90%.

So our Encore accommodations can't come fast enough for us.

It will allow us to capture a larger market share in the mass market and we are competing with people that now, some of whom have 3,000, 1,800 rooms, 1,200 rooms, so we really need Encore to open up.

We are not concerned at all about Encore being a success.

Okay, great.

And perhaps for Matt or Steve, what do you intend to do with the proceeds from the IPR?

Try and figure out what to do with them so that they don't get completely slammed by a dollar that is getting creamed.

I mean, the dollar is being -- is being slaughtered because of our deficits and impending government spending.

The biggest concern we have about our investments and the safety of our employers is federal government policy that may result in further deterioration of the dollar, huge deficits that make our assets worth less and shrink our reserves of cash and that is a problem that all companies have.

What we try and do, I guess, as a hedge is to get out of the dollar, which is a heck of a thing to say.

But take a look at what has happened to the dollar.

A year ago against the euro we were $1.25.

Now we are $1.50.

If you're holding dollars your stuff is worth 20% less.

That's an amazing decline, and unfortunately, that's true against things like Brazilian money and all other currencies.

America is paying the price for these deficits, and we are holding cash to be used to protect our employees, to protect our shareholders, to give us a chance to take advantage of the future, and expand intelligently.

If our asset base is eroded radically by these huge deficits and the resulting damage to the dollar, then our Company and all other companies large and small in the United States are really severely compromised.

I'm afraid that it's that simple.

And this isn't a political speech.

It's just a statement of economic fact, and we have to deal with that as businessmen.

And it's tough, tough.

Okay.

Great.

Thank you.

Next question comes from the line of Larry Klatzkin.

Hi, Steve.

Couple questions.

One, you have accumulated quite a large kitty of cash and, in fact, you are probably the safest gaming investment there is.

Just under $3 billion.

So what attracts you?

You can really do anything you want and given the condition of the market pretty much do whatever you want.

Is there some market that looks more attractive to you.

Would you look at another international market?

Buy something back in Vegas or is there anything you are thinking of?

Outside the United States, seems to be, Asia seems to be a safer investment at the moment.

The uncertainty in the U.S.

economy is devastating.

As I just said a moment ago, our asset base has been contracted because of government deficits, and I'm as much of a Democrat as I am a Republican, but we are now talking about national policy, and it impacts all of our decisions.

We don't know what's next.

We don't know what is the next shoe that is going to drop.

It introduces for ourselves and every other business enterprise in the United States of America an element of uncertainty, and that is a very difficult thing to deal with for us.

There are so many wonderful opportunities in America, but when you don't know what tomorrow is going to look like in terms of taxes and regulation, then it becomes very difficult to make a long-term plan and to answer the question that you just asked me.

All right, that's fair.

Now, it looks like they might have put some visa restrictions back on Macau.

Is there any feel where the government is going with this?

Is this a temporary thing?

Do you think it's kind of -- what's that?

Is Linda on the call?

Linda Chen.

No, she's not, Steve.

She's not.

But, Ian, you want to give the latest update on what you are feeling as far as visa--

I think, frankly, all of the talk about visa restrictions is becoming quite an irritant because it's going on on a weekly basis.

It's anecdotal commentary in the media and a lot of it is for shock value.

And at Wynn Macau, particularly, when we look at the 51% of the visitors that come into Macau, they are from mainland China, 40% of that 51% are on individual visitor schemes and 21 of the 49 cities are in Guangdong, and that seems to be the area that people talk about where the visas are being restricted.

And it leaves 28 cities where visas aren't being restricted.

And we had a very, very active, busy October holiday, and the period after the October holiday was a classic lull after the storm and business has been picking up again.

So October is looking promising for everybody.

It's a bit too early to comment and, frankly, commenting on it week in and week out -- we've had very sustainable growth in the marketplace.

We've had a very, very sustainable recovery through the summer and most of the businesses in the city should be pleased with where things are at.

We don't feel uncertainty in Macau.

That's good, that's good.

And then anything with Singapore starting to open up, do you guys even bother to take any kind of marketing or something?

No, no.

That's a question that came up during my road show.

What about Singapore?

Please understand this.

If the central government felt that there was a threat to its gaming revenue or its position as a destination resort, the city of Macau, they could change the visa program for Singapore in 10 seconds, which they won't need to do, because in China, the amount of people that want to come to Macau is so gigantic and overwhelming that it's necessary for them to keep complete border and passport control at both SARs, Hong Kong and Macau.

That is why they have borders and visas because if they did not, the streets of Macau and Hong Kong would be overrun by visitation from mainland China.

The central government of China in four seconds flat can change a visa policy in nine cities that are the size of Chicago and you wouldn't be able to walk in Macau.

The notion that Singapore is somehow a threat to Macau because they have a better tax rate for junket operators is a notion conceived by someone who doesn't understand how the --

No, and I challenge how many of those junket operators actually get licensed in Singapore anyway.

That is not to say that Singapore won't be successful because of business in its own area.

So please don't confuse my remarks.

No, I understand.

The Sands and KT Lim's company from [Genpeng], as I understand it, are built [very in].

I saw the Sands project when I was there on the road show a couple of weeks ago, and the two structures look very imposing and dramatic at Marina South.

I did not see KT Lim's place at Sentosa, but that is a special market unto itself.

It's a three and a half hour plane ride from Macau.

It's sort of like almost going coast-to-coast in the United States, maybe from Detroit or something to Las Vegas.

But Singapore can be very successful in its own right.

But to be a threat to Macau is not a thing that we are worried about.

All right.

I'm glad to hear that.

Thank you very much, Steve.

Sure.

Next question comes from the line of David Bain.

Thank you.

Can we get your outlook on Cotai and if there is any potential timing on a buildout there?

From a design concept also, how would this be different from your offerings in Las Vegas and Macau if you do?

We are working on the project in Cotai, and I've said on the road show and I want to repeat it on this phone call, that until we are finished and we've made the changes and we are satisfied with the end project, we won't discuss it or show it.

First of all, because it's best not to show something until you feel they've finished the job of designing it and, secondly, we'd like to give our competitors the least amount of time to learn about it.

Okay.

Also, if you were to win Aqueduct, can you give us a sense how that plays into the Wynn strategy?

One of the negatives arguments I hear is that Wynn is always the most premium property and premium gaming jurisdiction.

Seems like Aqueduct is in a different category.

Does this suggest a change maybe in the growth strategy?

I really don't want to discuss Aqueduct per se.

We prefer to talk about deals we made, not ones we haven't.

But we are a Company of professionals that operate the business of gaming establishments, some more ambitious than others, and our sensitivity to customers is the secret of our success.

And the sensitivity to any customer is a sensitivity to any customer.

So it would be improper to think that we can only deal to one kind of customer.

We do prefer, when it comes to hotels in destination resort cities, to cater to the top end of the market.

But I want to remind you that when we were in the Golden Nugget downtown, we made more money than, substantially more money and grossed more money and netted more money than all of Fremont Street establishments combined.

Okay.

So the question you are asking me is a direct result of the foolish kind of publicity put out by our competitors in an attempt to undermine our posture in this process in New York, but it doesn't really make any sense if you think about it.

Okay.

And then I know you've spoken kind of in granular terms to some of the visa policy changes, but just in your sense, when you speak to government officials, do you sense any potential positive or negative additional changes in the near term?

I think that the central government in conjunction with the government of Macau takes a good look at what's going on in the marketplace, the amount of traffic going through the borders, the visitation patterns, the effect that it has on the people who live and work in Macau, and they ask themselves is our government policy increasing the standard of living and making a better life for the people who live in Macau while it accomplishes the goal of making a destination and resort city of Macau.

Those are two goals.

Sometimes they are consistent and sometimes they are not.

What happens with this visa program is that they use it to balance the interest of these two items.

Okay.

It does change from time to time.

The last time when the visa restrictions were tightened was when the city was really markedly overheated and the people who worked there couldn't afford the rents on the apartments because the landlords in this frenzy of speculation were raising rents by 100% and 200% in the same two three-month period.

And although people had very good jobs with us, their standard of living was declining.

Okay.

That's interesting.

Thank you.

Next question comes from the line of David Katz.

Two questions.

One, your corporate expense came in a little bit lower than what we were expecting and what has been running and if we can talk about the drivers there and take maybe a forward look at that?

And then my second question is on the new facility in Macau, the Wynn Macau, if you could give us some thoughts or some forward-looking information on how you expect the profitability of that incremental supply to ramp, that would be helpful?

Thanks.

In respect, David, to the last part of your question, there was a good deal of information published during our road show about the impending arrival of Wynn Macau, and I think that everything you would want to know is spelled out with big backup in those documents that Matt and I, correct me if I'm wrong, that Matt and I thought were pretty accurate.

Would you say, so Mr.

Maddox?

Yes, that's right, Steve.

Okay, as far as corporate expenses, Matt, you can deal with that yourself.

On corporate expenses, really it's just due to the cost savings initiatives that we put in place at the end of last year and largely the payroll cuts that happened from the Chairman all the way down, the 15% payroll cuts and the reduced bonuses.

So I think that is the majority of the corporate expenses.

When we cut the bonus program, we started with me.

Okay.

And so what we are seeing here of $8.9 million, is that, Matt, something we should consider within a range of a run rate going forward?

I don't want to make projections, David.

As you can see in the second quarter I think it was $6.7 million.

So sequentially it's gone up a little bit as we look at various programs and developments.

So I wouldn't assume in this time that's a good run rate.

Okay.

Perfect.

Thank you.

Next question comes from the line of Robin Farley.

Thanks.

Yes, I had a couple of questions.

One is on your comment about the dollar and kind of wanting to get out of the U.S.

dollar.

Just given that the Hong Kong dollar is tied to the U.S.

dollar and the pataca, the Hong Kong dollar, just wanted to understand what you might be implying about investments in Asia regarding that comment?

And then, secondly, your comment, I know you made a general comment about the value of your assets, but can you comment specifically on interest either, and there are a lot of partial projects or even just land with strip frontage in Las Vegas?

Robin, I can't understand you.

You are speaking too softly.

Would you repeat the second part a little louder, please?

Sure.

The second question was there's a lot of available in Las Vegas in terms of projects partially complete or just land available with strip frontage and I know you made a general comment about assets, but can you comment specifically on interests that you might have or not have in either strip frontage, either partial projects or land available for development, that kind of thing?

Second part first.

Until we understand what is going on in this country, we will not be expanding anything here, period.

As to the first part to your question, we have converted to U.S.

dollars all of the money that we generate in Asia for the past few years.

Matt can comment on it, but I want to stop doing that.

Robin, we are looking at various cash management alternatives overseas, not just in Hong Kong dollars, but in other jurisdictions.

We are looking at a comprehensive international program to get the best returns.

Okay.

Great.

Thanks.

And then just the final question.

On Las Vegas when you look at that little sequential uptick in expenses as your revenues have upticked a little bit, you mentioned some of the things were seasonal hiring and the headliner expense.

Can you give us some color on what to expect going forward?

In other words, how much of the cost reduction that we saw earlier this year is going to be sustainable sequentially or how much of this other kind of little pickup can we expect?

Well, one thing that is going to impact the Company on the expense line and on the revenue line even more is the arrival of Garth Brooks in the fourth quarter.

This event of Garth coming out of retirement and doing 15 weekends a year in Las Vegas is a big deal.

He was the most successful solo performer in the world at the time of his retirement when he went to become a full-time dad 10 years ago or so.

He has five years to go before his youngest daughter goes off to college at age 18, and he's vowed that he would take them to school himself every morning and pick them up every afternoon.

And, by golly, he does exactly that every day.

And we got him to do this by first buying him a jet for several million dollars so that he could come and go from Tulsa, Oklahoma every Friday and go home on Sunday.

And that has worked out great for Garth Brooks and for ourselves.

And I think it became obvious, we sold the first 20 shows completely in less than six or seven hours on Saturday.

This event has an incredible impact on the Company.

People are calling and coming that haven't been to Las Vegas in a long time, and they cover the full spectrum of people.

Brooks is more than a country singer.

He's a crossover artist of enormous popularity, and the most, Robin, the most complicated part of our business, the most esoteric and difficult to predict part of my business for the last 40 years has been entertainment.

It's very tricky.

It's very expensive.

The safest thing in the old days was to put in a show that cost a lot of money, but could be amortized over a long period of time because it operated for years.

And that's the program that we followed at MGM -- I mean at the Mirage before and after it was sold to MGM.

it's the program that we followed with Le Reve in our hotel.

But having said that, the most powerful and the most compelling, the most desirable of all forms of entertainment is the fascinating power and charm of a great individual performer on a stage, charming an audience with his -- with his performing artistry.

Brooks crosses all the lines he performs.

Everything, as he reviews the history of his own performance, of his own arc of growth in the music business, he goes from Ricky Skaggs to Boz Scaggs, from James Taylor to Bob Seger, from Billy Joel to Elton John.

He does the whole gamut and it's quite extraordinary, and people that have seen the show find it incredible, and I'm one of those people, and I've been doing this, going to shows and nightclubs with my father since I was 10 or nine years old.

So Brooks is a category breaker, and he's coming on the first weekend he performs is during the National Finals Rodeo and then he's here again on New Year's, but that will be in the January, first, second and third.

So we will have him once in December and then we will have him in January and in February and in March and all this stuff.

And naturally the expenses of Garth Brooks will be reflected in our internal operating statements and our quarterly expense loads.

But so will the impact of his being in that theater, which has been quiet except for Beyonce in July and August.

It's been quiet since Danny Gans passed on.

When we went to the dressing room, when Garth came to see the room, I took him to see the dressing room.

It was only two weeks after Danny had died and unbeknownst to me the family hadn't picked up Danny's belongings.

No one had been in the dressing room since Danny Gans died and when I opened the door Garth and I walked in and there were all the photographs and everything.

It was a very dramatic moment.

But now it's Garth Brooks' dressing room.

So we'll see that sort of thing.

And that kind of a thing has a pretty big effect on the Company and on the top line and on the bottom line and the expense line.

So let's hope that we made a good decision.

Outside of entertainment expenses are there other areas or would you expect the expenses outside of that and gaming taxes to remain at current levels?

Andy?

I think things will continue to trend as they have last quarter.

Kind of up low single-digit?

You know there was trend in the rate of increase or trend flat?

I'm saying trend flat to where they are now.

So our current expense rate is kind of what we anticipate going forward.

There will be some benefit in terms of utility expense --

Last quarter included Beyonce, Robin.

Great.

Thank you.

Thanks.

Next question comes from the line of Dennis Forst.

Good morning.

I had a question for Matt about upcoming quarters with the income statement.

Now that Macau is 75% owned, how will you back out that portion of the contribution that will go to the minority shareholders, Matt?

The way that it is disclosed now is slightly different than in the past.

You actually go down to the net income line 100% and then underneath the net income line there will be net income attributable to non-controlling interest and then net income attributable to Wynn.

So it won't actually show up in the income statement but it will be right underneath.

And then you'll see the 27% of the Macau income there.

But it will be in the income statement, won't it?

It will.

But I'm saying it will go to net income first, as opposed to in the old days you had minority interest before net income.

Now you go all the way down to net income at 100% and then underneath that you break out what net income is attributable to non-controlling interest and what is attributable to Wynn and that will start next quarter.

Yes.

And then on your net debt, I think you had something over $4 billion of gross debt.

Yes, it's $4.2 billion, roughly.

And $3 billion of cash.

Correct.

And actually a portion of that gross debt now is attributable to the minority shareholders in Macau, maybe $350 million, $400 million?

You can look at it like that.

The 27% of $1.5 billion in Macau.

Yes, that's exactly how I was looking at it.

And you do the same with the -- Wynn Macau has roughly $1 billion of cash of that $3 billion.

The $2 billion is with the parent Company and its immediate subsidiary.

Okay, so then we have to give that $1 billion a haircut also, 27%.

Correct.

But the $2 billion of cash is owned 100% by the parent.

Got you.

The next question, any timing on the development at Cotai?

We've said before during the road show that we want to get Macau, Wynn Macau open in April and we don't want to overshadow anything.

So we're going to concentrate on Wynn Macau and keep our powder dry on Cotai till then.

Okay, so we expect the Encore then in early spring?

And then we'll hear maybe on a second quarter result --

I didn't say that.

When I'm done with my colleagues designing Cotai, we'll share it with you.

I'm not going to tell you what the date is because I don't know.

Okay.

Last question, Steve.

You know more about Las Vegas than anybody.

After CityCenter opens, would you expect any other capacity to come on in the next couple of years?

You have to ask yourself what will become of Fontainebleau -- it's looming next to us.

It's fully erected as far as the structure goes.

It's clad in this blue glass.

The podium part is unfinished, and the walls aren't on.

It's open to the environment.

I've never been in it.

I don't know what stage the interiors are.

It's disconcerting, as you can imagine, as disconcerting as the see-through building across the street that was going to be Echelon Place.

Those structures, parking garage, energy plant, the frame of a high-rise or two sit there in the desert and very much the way on Cotai some of the buildings associated with the Sands sit as see-through structures that have been abandoned for the moment.

And when you look at Echelon Place and you look at Cotai, at the Venetian, and at the people from Galaxy, next door to the Venetian, with unfinished buildings, and you look at the Fontainebleau you are reminded of the chaotic state of business, some businesses in Las Vegas and around the world.

Yes.

What about Cosmopolitan -- getting back to Vegas?

Cosmopolitan is another impending disaster.

It's being funded by a bank at the moment.

I don't know that there is an owner except for the bank, and that sits next to CityCenter crammed in between it and Bellagio.

The landscape in Las Vegas is troubling, and it's rife with uncertainty, and these uncertainties have nothing to do with national policy of the government.

These have to do with other factors that would have occurred anyway.

So couple that with uncertainty in the business environment in America -- hello?

Yes.

It's tough to understand what is going on.

My 40 years in Las Vegas is not serving me very well at the moment.

Okay.

Thank you.

This does conclude today's question-and-answer session.

We've run out of time.

Please go ahead with any closing remarks.

Very nice talking to you all, and if you are out here or you are in China, we will be glad to show you around.

Thanks very much.

Thank you for joining today's conference call.

You may now disconnect.