永利渡假村 (WYNN) 2010 Q3 法說會逐字稿

Good afternoon, and welcome to the Wynn Resorts Third Quarter 2010 Earnings Call.

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

(Operator Instructions) Now, I would like to turn the call over to Mr.

Maddox.

Please go ahead, sir.

Thank you, and good afternoon, everyone.

I would just like to remind everybody, that we will be making forward-looking statements, under the Safe Harbor Federal Securities Laws.

And, with that, I'm going to turn it over to Steve Wynn, for opening comments.

Okay.

So, we had a nice quarter, made a couple of hundred million dollars in Macau.

And, we made -- And, not bad, in Las Vegas either.

I'm -- This is the first time in a conference call, that I'm going to say, I believe that we've seen the bottom in Las Vegas.

And, I don't know, how fast it's going to get better.

But, I don't think it's going to get any worse.

And, we had a really nice October, too.

And, we had a record-breaking, October in China.

So, business is pretty good, actually, all the way around.

I think, with two months to go, we're over $900 million in EBITDA.

So, speaking after my 40-odd years, first year we're going to go well over $1 billion in profit, in EBITDA, at least.

Although, I stress again, that this EBITDA number, which is what everybody likes to flash around, is sort of a fake number, because, you have to pay your interest, so a lot has to do with what you make, is how much money you owe.

And, depreciation isn't something that can be discarded.

The more hotels you have, the more depreciation you've got, and the more money, you have to spend taking care of these places.

Which reminds me that our remodel and upgrading of the whole Las Vegas facility, -- the Wynn Las Vegas facility, is proceeding greatly, and the public is receiving it well.

It's caused our room rates to go up, in the newly, remodeled and refurbished rooms.

Our Baccarat is closed until Christmas, it's being reconfigured.

And, we opened a restaurant, a few days ago in Las Vegas, called the Lakeside Grill, which is jumping and doing big business for us.

And, our nightclubs continue to be, as a group, probably the most successful on the planet.

We're going to do, $150 million, or $160 million in nightclub business, in Las Vegas and make 45%, profit or something.

So, generally speaking, we like the way we're configured and we're happy, that things aren't going to get worse.

I think, the election today, is a great moment, in stabilizing, what has been overwhelming, uncertainty and fear of this Administration by businessmen around the country.

And, I think that the message, that the American people, are sending to Washington tonight, is clear, decisive rejection of the policies, that have put us in this position, lately.

And, so I think, that we're going to see a more positive -- more consumer confidence, after tonight, as the Administration, sort of gets put in its place, about overwhelming, government control and ridiculous spending, and stuff like that.

We were damaged, as a Company, by the Healthcare Bill.

We have the -- We have been the victim of, 8% escalation, of healthcare costs, in our insurance program, and we self-insure.

We are a Healthcare Provider.

And, we have never, touched the benefits to our employees, or raised their costs of their contributions and co-pay and such, since, we opened this hotel, five years ago.

We've just -- We've just taken the hit, on 8% a year.

As a result, of this ridiculous, 2700-page fiasco, that this Congress passed.

Our escalation of healthcare costs, is going to go, closer to 11% or 12%.

Thank you very much Congress, for all the help.

They made it tougher on large businesses, small businesses.

They've made it tougher on unions.

In many cases, the Culinary Union Contract with us, for example, calls for a fixed contribution or cost of living escalation, every year, to be put into healthcare or wages, whichever the union wants.

And, when it goes to -- when it all goes to healthcare, the wages can't be increased.

Or, to put it in even worse -- in even a worse situation, the amount of money, that we can give the union, to cover their healthcare escalation, doesn't equal what the union has to pay out, on its policy to our employees.

So, the Healthcare Bill, was a fiasco, across the board.

We can only hope, that maybe, when the new legislature re-convenes, they will somehow, undo the damage that has been done, by this ill conceived piece of legislation.

Which, is very important to companies like ourselves, which employ and insurance tens of thousands of people.

But -- So, I think, that the election is a very positive moment.

And, maybe, we'll get some relief, from the government, in the months ahead.

The President, as you know, told everybody, not to go to Las Vegas, in more or less terms, and that didn't help us.

And, so, all of this is going to get cleared up, I think, now.

And, we're feeling terrific about China.

Now, I think I'll finish my part of this meeting, before we get into questions, about Cotai.

My design partners and I, have been working on an average of six hours a day, as many as 12 this summer.

But, six hours a day every week, for months now.

And, maybe, it was because of experience.

And, maybe, it was because of opportunity.

But, it's gone much faster, than it usually has and we have a plan, and we have our building drawn.

We haven't finished construction documents for bidding.

But, we're ready to begin, and we will, -- we're doing soil testing on the location of the Tower, as we speak, in China, it has begun.

And, site clearance, begins in a few weeks.

And, we're off to the races, with the Cotai Project, which is a stunning, remarkable piece of business.

And, it's been the most fun, the most challenging, and the most rewarding experience, of my 42-year career, in this job.

And, I believe, that it's a break away property, physically and conceptually and operationally, compared to any other, facility of its kind, in the world.

I'm very, very proud of it.

And, we're going to be showing pictures and models, in a few weeks, as we complete renderings and other visual studies, that will allow us, to explain this hotel to the public.

But, it is a dilly.

And, it's going to be the photo-op of China,-- of China's gaming scene, in much the way, that our other properties in the past, have become, the photo-op of each community.

It will introduce concepts and ideas, into the Casino architecture and Casino, organization of parts, as they relate to the whole, that have not been seen before.

So, I'm very happy.

And, then we'll also introduce concepts, in terms of a room product, that have not been seen before.

Now, I know, I'm creating a lot of expectation, with that kind of talk.

And, I wouldn't be doing it, if I hadn't seen the building.

And, knowing that we could keep that promise.

On a phone call, like this, it's not possible to create -- to show you pictures.

But, they will be available, soon enough.

And, I think that since, everybody has sort of done, what they're going to do, it will be tough, for everybody to copy it.

Now we'll take questions.

(Operator Instructions).

Your first question comes from Joe Greff of JPMorgan.

Hello, everyone.

Steve, on the Cotai project that you just discussed with us, what is your expectation for a timeline?

When do you break ground, when go you think you'll open, and what sort of CapEx are you talking about.

And another question Macau.

We've been hearing and reading a lot about heightened competition for the junket business and I guess some others in the Macau market upping their revenue share arrangements.

Can you talk about that, and if there is a reaction from you all, or just what you are seeing in the marketplace, that would be helpful understanding that.

Okay.

We made forward-leaning statements, or whatever they're called, so I'll tell you.

Some of the other fellows, a little desperate about their performance, and they've been trying to buy business.

I guess in order to make an impression for an IPO or something.

It's a scheme that doesn't work very well, they increase the top line, but they don't increase the bottom line.

October was the month we ever had, we made over $90 million last month in Macau, and so they don't really lay a glove on us.

We've got our own customers, and you've all written about the fact that we tend to be resistant to such change.

Our fair share increases.

That comparison of the percentage of tables to the percentage of money, compared to the percentage of equipment.

Our fair share improves.

Our competitive posture improves with competition, it doesn't deteriorate.

We like the fact that the market is strong and growing, and vital.

We would prefer that the competition adhere to the rules, but we'll leave that to the government, but we run our business, based upon creating a good experience for our customers, and that's what pays off.

So with regard to Cotai's cost, we know what the building looks like now and where all the parts are, and how they relate to one another.

We don't want to publish our estimated budget for the building till we've had a chance to finish certain parts of the back of the house that we have to place, and then we'll do a final take-off, and then we're going to budget the footage.

And I'll do that and have the budget by the next time we have a conference call, in three months, but it's a little early for me to say it, but I could say it's between $2 billion and $3 billion, probably closer to $2.5 billion, but I'm not sure.

I would like to finish doing the whole takeoff.

We'll break ground and we'll actually get started, because you remember it's a land fill.

We'll be working on the site and what is the beginning of the construction of the project within a few weeks.

We'll do site clearance immediately, we're doing the test borings this week, because we know the exact location of the high rise.

We'll be cleaning up the site and starting the remediation.

Remember, it's a dump in effect, it's a landfill.

They dump all kinds of junk in the ground and they put dirt over with and then the ground settles unevenly because of the unstable base, and in order to put our foundation base, we have take that stuff out and go through it with pilings and other forms of foundational structure.

And all of that will be done during the year of 2011.

We're underway.

And we'll finish and be open for business in 2015.

So four years from now.

That's what the whole thing takes.

And we'll show you the building in great detail, probably next time -- the end of the next quarter, we'll start showing all of the pretty pictures and stuff that my Board saw today.

We had our Board meeting a few minutes ago, and I showed the building to the directors, enjoying it, as we have been.

Does that answer your question, Joe?

It does.

Thank you, Steve.

Your next question comes from Carlo Santorelli of Wells Fargo.

Steve, I was wondering if you could comment a little bit about your strategy for Japan and how you see that process playing out.

I just came from one room talking about Japan after the Board meeting.

The situation in Japan has come to the point where a committee or interparty committee, cross party committee has been formed to study the matter, and to advise a report to the Diet.

And our people have just spent a couple of weeks in Japan, and we are following this situation carefully, exploratory committees, or individuals are visiting Las Vegas in the near future, and they're visiting Macau, Singapore.

You can imagine that all of the companies that have an interest in international gaming are queued up, making their best moves and creating their best relationships and doing all of the other finagling and maneuvering that they could possibly do, and we're included in such a group.

Where it ends up is murky at best at this moment.

They have to accept the budget, and in a parliamentary form of government in Japan, it could fail or be accepted.

It could cause a crisis that could require an election and there could be a change of power, a continuation of power, there could be a consolidation of power by the Democrats or the LDP, and the players could change and the attitudes could change.

Matt, what did you tell me that the average lifespan of a prime minister in Japan is how long?

I think in the past five years, it's been about one year.

They've had five in the last six years.

So the situation in Japan is provocative, as inviting, as potentially wonderful as it might be for the citizens of Japan and for a company that could be of service in the construction of such an industry, like ourselves or any of the other fellows.

We're not quite clear on a schedule or the exact description of a chain of events that would lead to the development of an industry like this in Japan.

There are some very influential and intelligent men in government in Japan that feel that it may be appropriate do this, and that's encouraging.

And of course everybody knows who they are and is trying to put their best foot forward.

That's it.

Thanks, I appreciate it.

Your next question comes from Shaun Kelley of Banc of America.

Hi, good afternoon, guys.

Just a quick question again to go back to Cotai.

Wondering if you could talk a little bit more, maybe, about the -- just kind of the land concession there.

Is that something you need before you're going to feel comfortable putting a lot of capital into the ground there, and maybe timing around that?

And then also just your thoughts on financing the project, maybe for Matt.

Thanks.

Well, I'll talk about one part of it, because Kim Sinatra is here.

It's a strange thing for Westerners to understand how it works in Macau sometimes, but you lease the land with the ground rent from the government for a specific purpose, and you must comply with that purpose when you ask for the concession, and the amount of money you pay for the concession is directly related to the purpose and the amount of footage and the description of the footage on the property.

They commit to the property for you in advance and allow you, in our case, to put a fence around it, to build a warehouse.

The final lease payment is determined by the publication of the plan in the Gazette.

Prior to that time, you're encouraged to go ahead and begin.

And we do, and hotels are built that way.

Sometimes the Gazette process trails, but, in all cases, you are given instructions by the government in advance on what to do and what you're allowed to do, as we have been given in the past two years.

So that's why there's a warehouse and plans, and our procedure has gone all the way to the end of the regulatory process to execute the final lease, and that will happen in the next several weeks.

But as far as the commitment that you have to use the property and do your project, you get that way in advance, and we got that, and it comes in writing, as a matter of fact.

That came quite a while ago, so that there's stability.

There's predictability there.

Again, I stress, it's not like here, where nobody knows what to expect tomorrow, because of our particular political problems we've had in the past two years with this administration.

But in Macau, it's not that way at all.

I mean, there's rules, and there's procedures, and you follow them, and then you go about your business.

About the --

On the financing.

Yes.

As you've seen in the press release, Shaun, we are talk about Wynn Macau Limited being a regular recurring dividend-paying company with a target yield of 1% to 3%, so if you run through the math, you'll see that's anywhere in the neighborhood of less than 50% of the cash flow stop when I think about financing it, we'll probably put an extra add on to our bank facility down there, once we really know what the final budget is, and then use the substantial free cash flow, but what you get with Wynn Macau is you get both the dividend-paying company and the growth of Cotai.

So we want to be able to execute, and will execute both.

Great.

Thanks, Matt.

Sure.

While we're at it, the board of directors today voted a special dividend of $8 a share, payable on December 7th.

Another piece of good news associated by our extraordinary capital structure and our cash flows, still leaves us with a huge amount of excess capital, and the freedom that many of our competitors don't enjoy financially.

But it's good news for our shareholders, who we believe should be the principal beneficiaries of this Company's activities, and that has been our pattern ever since the inception of Wynn Resorts to take the interests of the shareholders firsts, and considering the whole picture in this country, it was a good time for a special dividend.

Your next question comes from Mark Strawn of Morgan Stanley.

Hi, guys.

One question on Las Vegas.

Sounds like you're calling something of a bottom with maybe a slow recovery.

As you look at the core segments to your business, are there any segments that you see outperforming at this stage, any segments that are consistently weak, perhaps?

I'll take it.

So -- I mean, I think we've talked in the past couple of calls about the one segment where I think we're starting to see more stability, and that was hardest hit coming into the recession was the conventioning group business, and so we've seen that improve, I feel pretty good going into next year, the amount of business that we currently have on the books committed.

To give you a comparison last year coming into this year, we had about 35% of our convention room nights on the books, and going into next year, we have about 65% of our convention room nights on the books.

So we're happy to see that segment will return to 18, 19% of overall occupancy, also we're seeing some rate improvement, that was the hardest hit in terms of the segments, in terms of the overall rate decline, and we saw that bottom out and we're starting to see some rate improvement there as well.

So I think about the different segments, I would say the convention segment is the one showing stability and signs of growth.

One second.

I was just, for a second, while Andy was answering that question, and I mentioned the dividend a moment ago.

After the dividend, this Company throws off cash flow that's almost half as much as our total debt, net debt.

It's a very comfortable position to be in.

I just thought I would mention that.

I love that ratio.

I try and keep it conservative like that.

We don't worry about coverage of our interest payment, we worry about coverage of our earnings compared to the total debt.

We like it when our earnings are half of our total debt.

That keeps us in a very strong position, and that's after we pay $1 billion or more dividend.

So, what's the next question?

Your next question comes from David Katz of Jefferies.

Good afternoon.

So many things have seemed to be going right in Macau, and clearly this is a happy release and a happy conference call, and not to spoil that in any way, but what should we consider that could potentially go wrong?

What are the biggest concerns or issues we should think about going forward as we model out the next couple of years, particularly in Macau?

What concerns you?

You want me to hypothetically think of everything that could go wrong on a conference call?

Who do you think you're talking to anyway?

You have no chance of me doing that.

You do that.

That will give you something to do.

I'm not going to do it.

You understand the market clearly enough.

Why would I hypothecate about stuff like that.

Fine, then, if I may turn it around as it relates to Las Vegas, and talk about some of the issues that could drive the market higher.

You made a comment earlier which I think we took note of, that it shouldn't get any worse.

What are the issues as it relates to air traffic, as it relates to the overall business climate, that you would recommend we keep an eye on in plotting the trajectory of Las Vegas getting better.

That's a great question.

Thank you.

We are a top-end operator.

We cater to better people with the five stars and the five diamond service and the Michelin.

We are a niche operator.

We try and have the best hotel in every market that we're in.

That means our customers are discriminating, well to do, very intelligent people, and they have money, and in the United States of America, and people with money have been in the defensive crouch if they run a business because of the administration in Washington.

It's an antibusiness, socialistic, and aggressively antibusiness.

We've never seen anything like this in our life, where there's a cross hair printed on the back of anybody that creates jobs or makes money.

My customers, my guests, are frightened of these people, and so they're clutching their bank rolls and hiding out.

Now, what's going to affect Las Vegas and companies like MGM and the Venetian, and myself, our gang, will be -- the phrase they use is consumer confidence, but its absence of fear.

Once the businessmen and all of this cash in America is being held on the side.

It may be a couple of trillion.

It's locked up.

Unfortunately, most of it is being lent to the government at no interest in treasuries, between the family and the company, we have probably a couple of billion dollars in treasury bills with no interest.

Nobody wants to take their bank roll out of their pocket, because they don't know what's going to happen to it.

The minute that this election is straightened out, and this administration is properly put in its place, I believe there is going to be a change if consumer confidence in America, and if they're smart enough in Washington to not fuss with the tax rate that we enjoy now, you will see businesses heave a sigh of relief, and there will be a lot of unexpected good things happen.

If this money that's on the side comes out, it's not only good for Las Vegas, it's good for America.

And if we get some people in there that stop squandering money in the government, we'll be in even better shape.

And we have some intelligent leadership on entitlements, there will be a wave of confidence and optimism in America that will radically and rapidly change the deal drums that we're in.

One of the problems we've got is that people who are in elected positions in Washington do not have the intellectual fire power to deal with the problems or understand them in America today.

The damned farm system for Washington is the state legislature.

For example, that really affects our business.

We have been told over and is over again by the President that everybody who has $250,000 a year income or more is a rich person that should pay their fair share.

Presumably because we're not now.

Well, the fact of the matter is that the personal tax rate is the business tax of small and medium businesses in America, and the people that are making $2 million and $3 million and $4 million in subchapter S corporations or proprietorships or partnerships, they're paying their taxes as individuals, they're subtracting their income expenses, and then paying the tax as ordinary tax rates, and then opening up shops and new offices with what the balance of the $2 million or $3 million or $4 million or $5 million they're making?

And incidentally, they are not really making that $2 million or $3 million or $4 million or $5 million, usually 25% or 30% of it is tied up in inventory or accounts receivable, and yet in spite of this overwhelming truth, the President of the United States and leaders of the parties that support him, keep calling everybody who files a tax return with $250,000 or more a rich person.

It is a total and deliberate misstatement of the structure of the American economy.

It's a form of hypocrisy that defies understanding.

It's also an insult to the intelligence of the American people.

An insult which I think is going to be answered as this day proceeds very clearly by the voters.

But this kind of foolishness and hypocrisy has to stop, and that's when people will come to Las Vegas, spend money, go shopping, and do all of the other things they do that will loosen things up.

And we call all of this consumer confidence.

Right now it's consumer disgust and fear -- when our leaders in Washington are guilty of blatant hypocrisy, anybody with a brain in their head is frightened by it, and I think that when that disappears, if it does tonight we're going to see a much more optimistic frame of mind in the United States that will directly benefit Las Vegas.

And if Harry Reid survives his challenge and his election, I think Harry will go back to the Senate with a different flavor, and I think maybe Harry will be in a position to help Nevada more than he has in the past with a different constituency in the Senate, and it will be good for Las Vegas.

Those are the things to look at for this town.

We are very much a sounding board for America.

Thank you.

If I could ask one more very quick one, if you don't mind.

With your financial strength and the Cotai project which you discussed earlier, are there any other areas or markets or projects that you would consider between now and Cotai opening, since it's a few years away, and you do have the strength to pursue things?

The answer is yes, but I think it's probably a pretty good idea to keep our cards close to the vest and talk about deals we've made, instead of ones that we want to make.

Okay.

Thank you very much.

Sure.

Your next question comes from Tom Marsico of Marsico Capital Management.

Hi, Tom.

As a long-time shareholder, I would like to express our gratitude of the execution and transparency that you have provided for our shareholders in the money that we manage for our clients.

I think that the $8 dividend, we bought stock back again to 19 on the -- during the terrible periods of time that we went through a couple of years ago, and I think in total now, this is about $24 of dividends that we've received.

I commend you for taking a public stance as far as what was happening in Washington.

I think that you definitely, as you always have, understood the feelings of your guests, who are the citizens of the United States, and of the world, and you definitely tapped into a feeling that people were frightened and scared, and I hope that you're right, if we see some difference as a result of the election tonight.

But I would just like to say on behalf of our clients, your leadership, execution, and transparency of the Company has been terrific, and we applaud you.

Thank you.

Tommy, thanks.

We went public so that we could have shareholders like you, and our other strong institutional shareholders, and Ron Barron and others.

And it's been a source of strength, because the institutional shareholdings that a Company like ours hold when we're lucky enough to enjoy that kind of institutional join which is, it gives a stability to the base of the Company that would otherwise be impossible.

And incidentally, Tom, I don't know how, since you and I are talking to each other in front of everybody else, I don't know, after tonight, how this administration could possibly interpret the mood of America any differently than what the results are clearly going to show, which is a rebuke, a rebuke and refutation of this move towards massive government expansion, overcontrol, and ridiculous, ridiculous is the only word for it, spending.

And I don't know how this President, or any member of that administration, or politician, regardless of party, could stand up and not get the message from the citizens of this country that stuff doesn't go.

It's got to change.

Democrat or Republican.

And I vote both ways.

It's got to stop, or America is headed for problems -- one of the reasons I'm so angry about this, and there's no question I am, is that I have always had a sort of protective attitude toward my employees.

I consider us a family, and I have always thought that we, as a Company, if we stayed healthy, we could protect our employees in every way possible, and now I see the government destroying the value of the dollar, lowering the quality of life and the standard of living for the working class of America, the very people that they are supposed to represent.

And sure, we're going to give paychecks out, but they're going to be $0.60 on the dollar pay checks, and all of these people are coming up for Social Security and Medicare, they're going to get paid with $0.60 and $0.70 on the dollar dollars.

I've heard the President say that the middle class has gone down and the rich get richer.

The reason the middle class relative position deteriorates, if it does at all, is because of the government, not because of people that create jobs and build companies.

It's because of the government.

And what's happened is now that the American public has awakened to this miserable truth, and they see right through the phony rhetoric.

And if that's true, we're going to get a different kind of leadership in Congress that recognizes what it takes to run this country properly, using common sense.

And that's the reason that I think that this stinging rebuke that the President is going to get tonight has to have a proper effect on him and other like-thinking hypocrites.

Your next question comes from Cameron McKnight of Buckingham.

Good afternoon, thanks.

Steve, would you mind commenting on some of the general macro trends you're seeing in China and as it relates to your business.

Are you seeing more customers, or more spend from a similar number of customers?

More customers, longer stays, everything that the Government of Macau intended to happen in Macau is happening.

Here is a government with a plan, with a common sense plan, and they employed experts to execute the plan, a bunch of us that do this sort of thing.

Instead of it being a day trip market, the length of stay has elongated, the amount of spending on non-casino has increased.

The total amount of visitation has grown at a steady, wonderful pace under the control of the government.

Employment is stable, earnings are stable or growing.

It's another example of solid political leadership in the local Macau government level, and in the policy direction and support that the central government in Beijing gives Macau.

I've been there nine years, and the contrast the last two years between this and China is something I've commented on publicly before, but it's even more clear at the very moment that we're speaking today than ever before.

I mean, everything that they wanted, by opening the monopoly situation in 2002, has happened right on mark.

Very Chinese.

Have a program, outline the program, and stick to it.

That's what they do over there.

And if you're part of it, you're fortunate, and we are very fortunate to have been allowed to participate.

Great.

Thanks.

And switching gears over to Las Vegas.

A few quarters ago in 2009, you commented that the win rate on table games was impaired because of shorter time on device, and over the last couple of quarters, we've seen the whole percentage start to come back.

Are customers feeling more confident, or is it something else going on with the mix of business?

Well, as we've raised our rates, and our hotel rates have started to slowly climb again, we're getting that visitor that is more well-rounded and got a deeper pocket, too, so they play longer.

Andrew can comment on it, or Marc Schorr is here.

Either one of those guys.

Really, this is the ballpark they live in every day.

I've been a customer, I've been a player.

It's as simple as that, that's what we're seeing, just better play in the casino.

It's improved over the last year.

And Andrew, it's sort of distantly related, the room rate, isn't it?

We've seen more stability in our domestic segment of our market on the gaming side, so that's helped a lot.

Especially the last two quarters.

Domestic business the last two quarter has been better.

I think it's all anticipation of this election to be honest with you.

It's been pretty clear what's going to happen in Washington for four or five months, and I think that has to taken hold.

The perception of the government on this economy cannot be overstated.

The psychological impact that the government's policies have had has been a major factor in prolonging the recession.

Great.

Thanks very much.

Your next question comes from Grant Chum of UBS.

Good morning, good evening, thanks for taking my question.

Steve, just a question on the casino side in Macau.

As you look at the configuration of the VIP and mass market capacity in Macau, do you have any sense of whether we should expect you to add more junket partners over the next six months or so?

Yes.

And related to that, what's your feeling now on credit extension environment in Macau.

You've been cautious since middle 2008.

What should we expect from that going forward?

Okay.

the boss lady is here, Linda Chen, and I'm going to let her deal with this, because since she graduated Cornell, I won't say when, it's been her issue with us.

Last year.

So first question on the junket, yes, we do have plans to add more.

We are capacity constrained, as you always know, Grant, you know our property very well, but we're looking to add two or three more junkets within the next year.

We have one actually coming up before the end of the year.

As far as credit, you and I have had this conversation.

I think the worst mistake someone could make is use credit as a marketing tool, and to buy the business, and stability, whether it's credit, or incentive for short-term purpose, and there are operators, whether they are trying to boost up their revenue for whatever purpose, that they go in and out of increased commission or credit --

Linda, could you speak a little louder and a little slower.

I want them to understand the point you're making.

Start that explanation over again.

On the credit.

So what I think a lot of operators do, whether it's with credit or incentive, which is commission, is they use it for short term purpose to increase revenue, to increase market share, so obviously they go hand in hand.

One is giving more incentive, which is commission, back to the customer to bring the business.

The second is, you need credit, you need to give them facility to get the business.

So they use both of them hand in hand to gain short term market share.

Whether it's for IPO, or they're trying to do different purpose to gain that short term market share.

However, the danger with that is, first, we believe in stability.

Obviously, if you know give something more away on the commission, then you have to cut something back, whether its salary, or renovation dollars.

So you're taking -- there's only so much dollars in the 100% that you can give away.

So if you're giving it too much away on the commission, then you've got to cut back other places.

That creates unstable business model for the whole operation.

But second, it's not good for the customer, where you're going in and out.

Today I'm giving you more, and then tomorrow, found out that it's not a profitable business, now I'm going to take it back.

It doesn't buy long term loyalty with the customer or the junket.

And that's what we do well.

People always talk about market share.

They said have we lost market share?

Actually with the growth of the whole Macau market, we've maintained our market share quite well, and that speaks a lot with even additional tables from Encore.

So our penetration level has actually increased with additional tables.

People don't look at that, they just keep saying as a whole, market share has decreased.

But in a growing market, that's grown 60%, maintaining market share is already a lot of dollars, and we maintain a very healthy business model where we take all of those additional business to the same profitability down to the bottom line.

And we don't owe any more money.

Yes, and we haven't over extended credit.

We do credit by junket, by customers one on one.

You can't take credit as an overall picture, say it's going to increase 20% credit to get more business.

It doesn't work that way.

You have know your customers.

it's based on can that person, that junket pay, or can they sustain their long term collection efforts.

So it's hard for an operation to come in and say I'm just going to go buy the business.

It doesn't work on the long term.

They can do that for month to buy the business, once they can't collect, can't turn that money around, the business goes away, and we've seen that happen in Macau.

For example, she's used the phrase short-term advantage.

The reason it's short term is because you don't make any money, you get bad debts and what happens is the companies fire the dim-witted executive that did it.

I've been watching this for 42 years, and you see one president after another get dumped.

One marketing guy after another get switched, and then a new guy comes in, for a new lady comes in, and sanity returns, and the bottom line returns, and they realize finally and irrevocably, there is only one way known to mankind to increase business, and that is by increasing the quality of customer experience.

This market in China is a repeat market.

They come once a week, and the quality of their experience is the only thing that matters.

Consistency is what they depend upon, predictability is what they want.

Just like everybody else in life.

Predictability, consistency.

When you get the short-term thinking nitwits jumping around, it just means that pretty soon there will be a new name on the business card.

We've been watching it for 42 years.

I mean, it's very difficult, it's almost unimaginable that you would need to explain at this day and age that all the casinos in Macau were paying the right amount of commission, that is to say the most amount they could give and maintain a stable business.

And then some yahoo shows up and says we'll go up by 20%, we just discovered Juicy Fruit.

It is the dumbest thing I've ever seen.

We watch this happen, because there is always a new dumbbell, and then there's an ex-dumbbell, until finally they end up with someone who knows how to run the business profitably, and they pay attention to what really does increase market share or market penetration, and that is the quality of the customer experience.

And that is all there is to say about this subject.

And if you see somebody giving more money away than the rest of us can give to attract customers, more promotional allowances, then you are looking at the walking dead.

Call that person a zombie, because their days are numbered.

Your next questions from [John Oh] of CLSA.

Hi, Steve.

This question goes back to Cotai, and I know that it's a bit impatient, but to the extent that you can share with us on Cotai, assuming you will continue to leverage on the Wynn branding, what are some of the key elements of this new property that you will inject, and also how should we think about cannibalization of the existing Wynn Macau?

Well, the second part of your question is an interesting one for the moment, cannibalization.

When I sit down with my colleagues, and although my name may be on the sign, the projects belong to all of us, and are a reflection of all of us, not me.

And when I sit with them and see who are we going to be in Cotai?

And can we afford to have the two places?

Are we just going to cannibalize the one we've got?

The answer comes back from Linda and company, and Ian and company, and JD and Doreen, and Frankie Jao, and all of my colleagues, no, Steve we're not going to cannibalize it.

This market grows.

We're right on schedule.

Each one of the things we built, we built in due source.

We let Sands goes for with the one that they built, the down and dirty quick one, the Sands.

We took our time and then we opened Wynn, and then we took our time and we added that tower at Encore, and our penetration got better.

We didn't cannibalize anything.

We increased our fair share.

We planned and took our time, and we're ready now to build, and we're starting to build Cotai, because we knew, understanding market rates of growth, and seeing that the operation of our competitors, and learning from that, that we would arrive at a date of opening that would allow us to achieve parity with our operating on the operation on the peninsula, and grow intelligently with our feet underneath us, gathered up and collected, like a good show horse that goes over a jump.

Collected.

So I think that we're going to make a lot of money on Cotai.

I think we're going to have 10,000 or so, 12,000, 15,000 employees, and it's going to be a very stable, happy experience, because we did it in due course.

We didn't try and do it all at once.

We didn't think of being master of the universe.

We thought only of one thing, how do you build with a solid foundation a steady predictable long-term business?

And be a useful part of the community, to be welcomed as a good addition to the community?

To sort of be part of keeping the promise of the plan, in this case, of the Government of Macau.

And that's a slower more carefully studied and considered process.

And that's why our third hotel is going to open up in four years.

The first one was in 2006.

The second one was in 2009 or 2010, and the third one is going to be in 2014 or 2015.

That's the arc of our development in China.

But those hotels will be there forever.

Long after I'm gone.

When my time is up in this world, those hotels will still be wonderful, viable businesses, providing security for their employees and the people that run them, and the shareholders.

And as far as giving you more information about what Macau looks like, I want to do to that when I've got the pictures.

I've shown it to -- all of us here know what the hotel looks like and what it has in it, but to dribble it out conversationally in this format, I think there's better ways of us doing it.

I think we probably will call for an investment conference, one in China, one in Las Vegas, that Matt and I will put on with Linda and Ian and the guys, and all of us, and actually show what we're going to do.

We'll have a model, and we'll unveil this beauty to our joy and to the chagrin of our competitors.

I have one word to explain what I've seen of Cotai, and I think it's just irresistible, is the way I would describe it, if I was the customer.

Yes.

It's the best work we've done in 42 years.

What is fun is that previously the best work we had done was the Encore in Macau.

But you see, we get the chance to do this.

Think of the wonderful serendipitous coincidence of opportunity and timing.

We're in the right place at the right time, and we're the right company, with the right experience, to build the nicest hotel in the world.

Think how lucky we are to be in that position, and to know that we can afford to do it right.

I am so grateful for this position we're in, in Macau, that I can't say it enough times.

How many developers have been given the opportunity to build really remarkable places for people to visit the way those of us in this industry in China have been blessed?

And for that matter in Singapore.

KT Lynn and Sheldon Adelson's operations are enjoying a tremendous opportunity to create wonderful places, because Asia has offered up this moment historically to our industry.

It's wonderfully exciting.

And I think that all of us, whether I'm speaking for Sheldon and KT, my friend KT Lynn at Gentin, Resorts World is the name of his company, or whether speaking for my gang here, my family, we're all feeling very grateful and excited about being alive and participating at this moment.

Great fun.

Don't want to screw up the opportunity.

Sorry, about no more information about Cotai.

I would rather do it when I can show it.

Okay.

Thank you.

Your next question comes from Janet Brashear of Sanford C.

Bernstein.

Thank you.

Two questions.

The first is relative to Cotai and the pictures.

It's a little unusual to hear you showing renderings ahead of time, versus secrecy that's been around some of your other designs.

I'm just curious to what the -- what has caused the change in modus operandi there.

And second, a question for Linda, perhaps.

As you think about the VIP market in Macau, it's obviously grown over the years as a percent of the total to over 70%.

Do you see it staying at that level, growing more, or receding as a percentage of the total.

Thank you.

First answer, we have never been secretive about our projects.

We have the Cotai model, the -- excuse me, the Wynn Macau model on display the day that we had the groundbreaking.

We had a three-dimensional model, I showed it publicly.

Had pictures out.

We had a model of Mirage on display at the Golden Nugget before it was even starting construction.

We had the model of the Bellagio on display.

I'm sorry if you misunderstood, but we have never kept it secret.

What we do is, we don't discuss it until we're finished designing it.

But once we finish designing it, we shout it out.

In to this place, we displayed it, but nobody came to see it.

We were at the Desert Inn, and people used to go into the Desert Inn and never be heard from again, and for five years, that applied to us.

But we have never kept projects secret.

We have avoided discussing them until we had them finished, I think that's what you may be --

I think I was thinking more of Encore Macau, where there weren't tours or whatever, until it was open, and then --

We couldn't get in there.

It was such a small site, we couldn't get in.

That's what happened.

But we had a model of Encore Macau on the Wynn Macau model.

We attached it, and we had it on display upstairs in the executive offices, and showed it to everybody.

Anybody could have seen it.

Once we design the hotel, we show it.

And if somebody wants to -- I remember going -- I remember going to Atlantic city this past year, I was making a tour of various jurisdictions to learn about what was going on in America, because I hadn't done it in so long, and I was walking out of the Borgata, which I wanted to look at, and there next door was Harrah's with a curved tower and an asymmetrical roof, a very poor homely copy of the Wynn Las Vegas, and I called up Gary Lovin, and I said, say, man, have you no shame?

And the building was in the wrong proportion.

In order to do what we do with our building, it has to be horizontal in its proportion or it doesn't look right, and this one was vertical, so it just looked like a tall rectangle with a point on one end, and he gave me an answer, he said, well duplication is the sincerest form of flattery.

I found that a relatively unsatisfactory answer, I think maybe someone should try and do their own thing instead of doing bad copies of other things, but we do give the boys a chance to louse up what they think we're doing, but they're always one hotel behind.

And it reminds me of a story when Waylon Jennings met a kid that imitated him as a singer, and he told the kid, "Listen, I know you're a nice kid and you sing good and you're good looking, but if you do Waylon Jennings, I'm already doing Waylon Jennings, and you've got to be yourself if you want to be successful in life, because I'll tell you something, son," and the boy's name was Wendell Atkins, he said, "Wendell, if you do me, you're always going to be one record behind."

And I thought that was a funny remark.

I was standing there when the he said it.

So if people copy our hotels, they're always one hotel behind.

That's okay with me.

Linda?

The mass market on VIP, I think so far we've seen a tremendous growth in mass market.

It's because until all the new casinos opened, there weren't good mass market products, so that is the obvious market where it can grow the fastest, but the good news is I think is both markets are growing tremendously, so in the future years to come, we hope that both markets maintain about the same percentage, but keep growing as the new to product comes into market and new visitors are staying longer.

So they're bringing new -- more visitors in town and they're staying longer, which benefits both segments.

Until this recession, the history of Las Vegas has answered your question for you.

Las Vegas always grew, not in spite of the addition of capacity, but because of the addition of capacity.

It was the developments themselves that allowed the market to grow.

And I think that China Macau is showing the exact same profile, and as usual in a more magnified sense because of the amount of people that are available, but that's what Linda thinks and -- Yes, the market grows because of the development, not in spite is of it.

That was the last question.

Thank you, everybody.

We'll have more stuff for you next time we get together, and hope you all have a nice Christmas holiday and a nice Thanksgiving holiday on behalf of all of us.

Thank you.

This concludes today's conference.

You may now disconnect.