永利渡假村 (WYNN) 2011 Q4 法說會逐字稿

Good afternoon, and welcome to the Wynn Resorts fourth quarter 2011 earnings call.

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

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

Maddox.

Please go ahead, sir.

Thank you, and I thank everyone for joining us this afternoon for our fourth quarter conference call.

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

With that, I'm going to turn it over to Steve Wynn for opening remarks.

Today is a particularly delightful day for us because about an hour and a half ago we opened up to the rest of the word our brand new Wynn Resorts website, which we have taken a great deal of time to make beautiful and special and ultra user-friendly.

Anybody who's on the call wants to see our best effort, go look at our new website and check out Garth Brooks, he does a video himself.

A lot of great things on the website, but it's brand new and we launched it an hour ago.

Mike and Mr.

Weaver and our company and everybody else have been on this for months, and we're very proud of the product.

As far as the last quarter and the last year, we got two hotels, really, the Encore Wynn Complex with 4700 rooms and the 1000 rooms in Macau, and between the two of them, they managed to produce a cash flow and EBITDA of $1.63 billion, which is not bad for two buildings, and we are very proud of our staff for the good job they did.

I checked with the Gaming Control Board, and interestingly enough, our casino, Wynn in Las Vegas, at $776 million last year was the all-time historical record for a gaming license facility in the State of Nevada's history.

It exceeded the previous record of $764 million, which coincidentally and delightfully enough, was held by Wynn Las Vegas in 2007.

So all in all it was a good year.

A lot of international business in America.

A robust and wonderful season in Macau.

I guess you've got the numbers, ask the questions.

We're all ears.

(Operator Instructions)

Your first question comes from the line of Carlo Santarelli with Deutsch Bank.

I had two questions.

First, I wanted to discuss with you guys how you're thinking of the balance sheet and cash flow here over the near term.

If we assume the bulk of CapEx for Cotai is probably a few years away yet.

Then my second question is, it looked to me in the quarter like OpEx, nongaming OpEx, at Wynn Macau went up.

I'm wondering if there was any incremental expense creep or if that more had to with the distribution of where you maybe played lucky on a rev share basis or with your junket customers.

Thank you.

Linda, you want to answer that question?

Linda's on a collection trip.

You can do it.

Sure.

For the quarter in Macau, you are saw operating expenses, excluding taxes and commissions, go up to about $1.5 million from $1.350 million.

The vast majority of that was bad debt expense, which was, for the year, fairly flat but it bumps along throughout the quarter.

So what you saw in the quarter was a little bit of pickup, and so that was really the story in Macau, and there's a little bit of incremental payroll expense as well.

In terms of our balance sheet and cash flow, I think what we've done in the past that continues to be a good indication of what we'll do in the future, we look for new projects.

We find them.

Finance them conservatively, build them, and with our free cash flow we've had a very generous dividend policy.

Every year that's decided on a case-by-case basis by our board of directors.

Your next question comes from the line of Joe Greff with JP Morgan.

Steve or Ian, this question is for either one of you or both of you.

In Macau, can you just talk about the competitive dynamic there?

We saw last night with one of your competitors have some initial success in what they would consider their junket re-affiliation initiative.

Are you seeing either any direct or indirect competitive pressure from that?

Then I have a couple of follow-ups for Matt.

I'll answer that question.

Do we feel any competitive pressure in Macau?

Oh, my goodness, we sure do.

To the credit of our competitors, when we opened up in '06 in September, we were sort of in a category of our own, physically speaking, and we matched that with a service level that was, I think, sort of new for the town, and we were rewarded appropriately for those initiatives.

Our competitors, I think to a certain extent, got tired of always seeing our yields per foot and our yields per table as high as they are, and have paid more attention to what we do and we see their designers and their executives trooping through our hotels almost on a daily basis, and to their credit have done some beautiful work.

The casino hotels and the gaming spaces and the restaurants and the offerings that are being put forward by Galaxy, by the Sands, and by City of Dreams, and SJM are really terrific.

Everybody gets smarter, and everybody gets sharper, and that makes us all work harder.

We take that all into consideration, of course.

I got a smile on my face.

We get to go last in Cotai, and maybe we'll have some new moves to show our friends, but in the meantime, they're doing a damn good job, and we feel it all the time.

Have to stay on our toes to hold our position.

You have some follow-up question, sir?

Yes.

Steve, you introduced the topic of Cotai development.

Obviously there was nothing in the earnings release and there's nothing out of the Macau market.

How are you thinking now in terms of timing, or is it really the status quo from where we were just a few months ago?

Well, we are working assiduously on the perfection of all of our drawings and specs which are part of the process of developing a new hotel.

We don't waste our time as the clock ticks down on the way the government approvals roll out.

Our best process is to just keep our chin down, pay attention to the things that we control and that are under our direct supervision, and of course as licensees or as concessionaires in Macau, we await governmental action when the government thinks it's appropriate.

So I guess what I'm trying to say, if I can address your question, is that nothing much has changed except we're working in Macau on the Cotai project, doing the kind of things that are necessary for it to be completed in the future, and a lot of that get done in anticipation of the government taking its final action.

That's fine.

Then, Matt, if we were to normalize Macau hold there on both the IPMS, where would we end up with a normalized EBITDA run rate, and then if you could help split out the cash balance between Macau and Las Vegas/corporate, that would be great.

Thank you.

Joe, we usually don't give the exact number.

We held a little higher in VIP at 3.18% instead of a typical 2.95% to 3.0%, and then in our mass market, if you actually look since Encore opened, every quarter we held, I think it was 29%, 28%, 28% and then this quarter was 30%.

So we continue to hold quite high in our mass market casinos since Encore's opened.

Normalizing it is hard with just a little over a year and a half under our belt, because we continue to hold quite well there.

And the cash balance split, Matt?

It's about 50/50.

Your next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch.

Just wanted to ask about Chinese New Year.

Obviously a lot's been made about kind of the macro situation in China, but wanted to get your thoughts on what you guys are seeing on the ground as far as just general levels of activity and excitement, both in Macau and Las Vegas.

There's plenty of business in Chinese New Year, both over there and here.

The levels in Las Vegas were a little less than they were last year, but that's because, I think partially a reflection of the calendar, and the calendar, incidentally, has been against us since New Year's, American New Year's, because last year, we had the perfect rollup with the long, long weekends and the maximum duration of vacation time for our guests.

This year the calendar reversed on us, and this is the shortest type of arrangement when stuff drops on Saturday night.

The calendar plays a big role on these things, like Chinese New Year and American Christmas, New Year.

Again, I think probably it's because Asian customers have so much choice in Asia, as well as the United States, that this business gets spread out a little thinner.

That's why we hope the market continues to grow.

That's helpful.

Then just one on the Las Vegas RevPAR, that came in a little bit below the market averages, and I think you guys have generally been price leaders in that market, so just curious, did you find it harder to push rates in the fourth quarter, and kind of how are you thinking about 2012, just on the room side for Vegas?

Marilyn?

Right.

I don't know if that's exactly...

I don't know, our hotel revenue was up 11.7% and our ADR was $250, and so we had more rooms.

We only had 1% of our rooms out of service this year versus 9% last year.

We have a consistent strategy of identifying lodgers who are going to stay in our hotel, eat here, and go to the shows and shop here, and so we were pleased with the increase that we had in RevPAR.

We can always be bigger, but we achieved greater than last quarter, and we were down a little bit from the third quarter, but third quarter is a monster quarter sometimes.

We had good convention business in the third quarter.

If I can add to that, I think you ought to step back.

When an Encore Las Vegas went from $270 million last year to $430 odd million.

$440 million.

$440 million, if that's not robust growth, I don't know what is, and that involved improvement across the board.

In fact, out of the $160 million or $170 million of EBITDA increase, $60 million or so came from the casino and $110 million came from nongaming in EBITDA increase year-over-year.

The hotel tripled in EBITDA.

It was...

Hotel, retail, everything, performed better this year than it has in the past.

So we're quite satisfied with that.

I'm not sure we quite understood the origin of your question, but I hope our answer is helpful.

It is.

Your next question comes from the line of Mark Strawn with Morgan Stanley.

One quick follow-up in Macau.

You mentioned the new competition that's entered the market on the VIP side.

Are there things that you're doing specifically, whether it's maybe changing over tables over to more VIP tables or signing up more junkets to start to drive that business incrementally?

Yes.

The answer to your question is yes, to all of the above.

It's a fine line on these calls between answering your questions and sharing strategies with our competition.

They're doing very well without our help, and so the answer is yes.

We understand the competition, we feel it, we see it, we really enjoy the fact that the market gets better.

In the long run, the most important thing about Macau will not be so much the amount of construction and development that takes place in that place, but more importantly, the quality of the things that are built.

I saw Galaxy when it opened.

I thought it was terrific.

They went and spent a whole bundle of money since they opened, on yet again on tweaking the place and making it better, and I mean big money.

I don't have access to their internal financial numbers, but I can tell you that they made some serious upgrades in their very first year of operation.

I think it's true also of the Sands, that literally hundreds of millions of dollars have been spent in making Four Seasons, Venetian, and those places even better.

That portends a better future for the market, as Macau takes its place as the real center of tourism and excitement in the Pacific.

We're watching all this.

We're playing in that game.

We've got the experience, the capital, and I think the staffing, the people, to stay right up there and hold our position.

That doesn't mean that it's true every single day, but it positively is true over the long run.

You can take any period of history of gaming in Nevada or Atlantic City or Macau, and you will find that our facilities and our people generally outperform room for room, table for table, anybody else in the business.

We're a younger company than some of our competitors.

Remember, that we started in 2000.

We didn't have a facility open until April 28, 2005.

We weren't in Macau until September, the first week in September of 2006, and yet this year, our increase was almost, I guess $0.5 billion almost, our increase in profitability of those facilities was almost $500 million.

Most people would call that really getting along, but it's hard.

It's very, very difficult.

We're up against smart people who know what they're doing and have gotten smarter each season.

Your next question comes from the line of John Oh, with CLFA.

I have two questions.

I'll start off with along the same vein of competition in Macau.

Could you maybe then paint this in the context of CapEx and OpEx going forward.

Should we expect any fresh level of spending to potentially keep your properties more up to date with some of this new, fresh competition that has come out which has been faring pretty well amongst the VIP players?

You talking about In Macau or Las Vegas?

In Macau.

We're constantly tweaking Macau.

We're left now having developed all of our 14 acres on the peninsula.

We're left now with rather subtle adjustments within the building itself, and I don't think that any of those numbers rise to the level of conversation on a call like this today.

Yes, we're coming up on the five years and we'll redo the rooms but they were already better than most of them in town.

Encore's new, but the Wynn's 600 rooms will be redone shortly in a manner consistent with what we did in Las Vegas, which was quite a nice upgrade and very well received, as you could tell by our rates.

Marilyn's taken perfect advantage of the wonderful look of Wynn in Las Vegas.

So everything's pretty new in our company.

We keep everything bright and shiny to the best of our ability.

It's one of the main reasons we're so conservative about our balance sheet, so we can always stay fluffed up.

Great.

My last question is on incremental projects in the United States, and we've read about your intention to do something out in Massachusetts.

Could you tell us, how do we balance that potential CapEx outlook in some of these states in the US versus the ongoing CapEx commitment you have in Cotai already, and how do we then view that versus your cash commitments of your annual dividend of $0.50 per quarter, and also the trend of special dividends that we've seen in the last two years?

How do we tie this together and just have a view of what's going on with respect to the appetite in the US?

That's a very good question.

You sound like a member of the board when you ask a question like that, and it's a proper question.

That's why we call the extra big dividend special, because there's no guarantee that they will always be there.

They're special.

Our regular dividend, we approved one yesterday, of $0.50 a quarter is another story.

That we have every intention of keeping as a regular dividend.

When you talk about new jurisdictions, and we're a company that is a primary concessionaire in Macau, and we own 50-odd acres, or we have access to 50 acres of developmental land in that community.

When we talk about our investment and the return on it, you get a certain picture that's very attractive.

When you talk about jurisdictions in the United States such as Massachusetts, the calculation has to be very precise, the capital investment has to be appropriate, and management is called upon to make careful distinctions about opportunities versus costs.

That's a challenge for all of us in this room, Mr.

Maddox, Mr.

Strzemp, Mr.

Schorr, and the rest of us.

That's what we do in the parent company, and we pay careful attention to that as these processes move step by step forward.

As you know in Massachusetts, for example, there's a threshold issue of local community approval.

That's concomitant with the calculations that is have to do with investment and return on investment.

I think the way I would put it, to respond to you directly, is that we look at our capital, we look at our debt, and we say, okay, what are our opportunities, what can we afford to do without compromising our balance sheet, and make sure that our investments have a proper return on invested capital?

Last year in Las Vegas, and in the previous months preceding that, we spent $80 million or $90 million remodeling this hotel.

We redid our baccarat, we built the Beach Club and Surrender, and all of those investments had handsome, stunning returns.

So we were able to invest money in the United States within our own facility that made sense.

Building new hotels in the United States is a complicated issue at the moment, and is very, very dependent on the political environment that shapes the opportunities we have, and we're engaged in a very spirited national debate about economic priorities and the role of government and regulation.

We're particularly sensitive to any kind of regulation that involves financial institutions.

We're certainly sensitive to issues of health care because we insure all of our employees.

All of these factors weigh heavily in our calculations, and it's an ongoing process.

I guess that's about all I have to say on the subject at the moment.

Your next question comes from the line of Kenneth Fong with JP Morgan.

I'd like to ask for Wynn Macau, what is the casino receivable in the fourth quarter compared to third quarter, and particularly on [betted] expenses, what is it (inaudible) to, regarding to Macau, and then my last question is, for the bad debt provision, is it a function of your account receivable going up, or you are seeing the credit quality basically deteriorating on the customer side?

Yes, that's not the case, though.

Our bad debt provision was basically flat year-over-year, and if you look at where we are, we continue to be well north of 50% reserved on our receivables.

We have the most conservative policy out there, and year-over-year, which you'll see in our balance sheet when it comes out, you'll find our bed debt reserve as a percentage of receivables is flat.

We have not seen anything to date that has caused any alarm in Macau or here in Las Vegas as it relates to receivables.

And finally I want to add, for maybe the 50th time in these kinds of conversations, we are a company that absolutely does not use credit as a marketing tool.

We give credit to appropriate parties in appropriate amounts, and in the 44 years that I have been doing this, we have never once, in any company that we've managed, Mirage Resorts, Golden Nugget before that, and Wynn, we have never, ever exceeded our reserve.

We're a company that thinks that credit and marketing are two separate subjects.

The alternative to that strategy is very disastrous.

Just to be clear on the earnings release, you see a provision for doubtful accounts of $33 million for the full year, compared to $28 million, and actually that increase is actually all at Las Vegas, and it's because of additional play and credit issued in Las Vegas, not because of the quality of the credit.

Macau has been relatively flat year over year.

Your next question comes from the line of Harry Curtis with Nomura.

Two quick questions, one for Marilyn.

Marilyn, if you could give us some thoughts on how you expect Las Vegas trends to look in 2012 versus 2011, and any hard data on bookings, what sort of expectations you have for pricing lift, convention demand, that kind of thing?

Then Steve, very sensitive topic, not sure what you can say about the [Ocata] relationship, but do you have any sense of what the end game here is on his part?

I'll go first, Harry.

We've enjoyed Mr.

Ocata's participation in the company for all these years, I think it's 12 now, and we wish him well.

We have a sharp disagreement, the entire board of this company and, in fact, the board in the Hong Kong company, we have a sharp disagreement with our colleague with regard to the Philippines.

We have expressed our conviction that it was not an appropriate business opportunity for us for a couple of years now.

For reasons that are best known to Mr.

Ocata, he has not enjoyed that disagreement, I guess that's the proper way to put it, and it's created a problem for him in that it expresses itself, I would guess, in dissatisfaction with our decision.

The decision is unanimous among all of the board members, and when it's been communicated to Mr.

Ocata at various board meetings and privately by myself, he finds that stressful.

We've also taken a very strong opinion about not wanting to give the impression that Wynn Resorts was the developer of the land that he's acquired in the Philippines, and this has created some stress between us, unfortunately.

How it ends up, I don't know, except that Wynn Resorts doesn't nor, and this is a unanimous opinion of the boar of directors, that we are not going to go in business in Philippines.

Mr.

Ocata may choose to do so, but he does so without the organizational support or the financial support of the company that he's an investor in at the moment.

Harry, I guess that's about the best way to put it, and I think that the publicity that's attended Mr.

Ocata's dissatisfaction is, unfortunately, a reflection of his frustration with that decision of the board.

Steve, is he so unhappy that it makes sense to make him an offer that he can't refuse?

Well, Harry, I think we're getting a little ahead of ourselves.

I think the most important thing for us to say today is that we respect Mr.

Ocata's opinion and his ability to direct the affairs of his own operation at Universal.

It used to be called [Erusa].

It's now, I think, I believe he calls it Universal Gaming and Entertainment, and he has to take full responsibility for what he does with that company.

I will take full responsibility for what we do with this company, and that is the way it will remain.

Okay.

Why don't we move back to Vegas, then.

Okay.

There's Marilyn.

You want to talk about the convention business, and in 2011 we had a really break-through year in our convention channel, and we see 2012 to be on a similar level in terms of convention channel revenue.

I know some of our competitors have talked about they're even seeing wider increases, but we had such a great year, we're hopeful that 2012 comes in at about that same level.

We are seeing the first quarter being pretty much flat.

January last year was great.

This year, February is great.

You add them together, they're equal.

We're getting a little more rate in the convention channel, but we are very cautious about July and August.

Every year, July and August are tough years to book in Las Vegas.

From the inquiries we've had, we anticipate that there could be deep discounting in the market.

Perhaps we broke out earlier in convention channel than competitors, but we are looking forward to a good year, but coming in about the same level.

So there won't be any mix lift that would allow you to raise your transient rates much?

Well, transient we're going to be pushing on transient.

As Steve mentioned, we have a brand new website.

We're seeing additional inquiries and bookings through our website, even prior to the new website being launched, and so transient's an important channel for us, and we are continuing to grow that.

We grew it quite a bit last year.

Marilyn, I would add this.

When you operate a hotel like Wynn Las Vegas and Encore Las Vegas or both properties in Macau, time is your friend.

Guest experience remains the only essential truth and power source of franchise in the industry that we're involved in.

When you give guests a better experience, when you give them a better product, time is your friend.

You pick up hotel guests and patrons on a long-term basis, one, two, three, 40 at a time, and that franchise grows.

That's why you see our room rates higher than our neighbors' and our friends up and down the strip, or in Macau, and that's the only thing left for us to do, Harry, is the basics better.

I wish we could go faster.

I sure wish we were in Singapore, that would have been great, but you remember that when Singapore came about, we were still, in '04 we were still eight months away from our first opening in Las Vegas, and a year and a half or more away from the opening of our hotel in Macau.

So we weren't ready for the opportunity in Singapore, but that's not true any more.

We have the capital structure, the organizational depth to handle growth and expansion as we go forward, but you have to just sort of sit on your thumbs sometimes and wait for it to come to you.

When the opportunities present themselves, we jump on them and we do a good job.

We're all young around here, so except for me, and we're satisfied with our progress.

That's it.

Okay.

That does it for me.

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

Just a question on the tax rate, Matt, what should we be thinking about for next year?

Also, I can't help but ask the question because I never heard it before, what is a collection trip that Linda Chen is on, and what do you do?

You go around and ask guys to pay their money.

Linda can't do that.

How does she do that?

You beg.

You crawl around and beg and cry and whine and plead to get the receivables.

That's what it is, Steve.

I'd rather have her do that then me.

Mark said we take them out to dinner and beg.

Typical, but we're getting good at it.

We've been begging for 44 years.

Tax rate, I think it will bear somewhere between 2010 and 2011 will be, I think is a good estimate each year.

This year we had a large reserve that we had to take back at December 31, because statute of limitations hit on 1048 reserve that we had.

So that's why you see a big credit in the fourth quarter.

We actually couldn't do it beforehand and there was some...

Is that because you over-reserved?

You just can't take it until statute of limitations expires, and so then you know it's finished.

So I would say it's somewhere between '10 and '11.

Okay, thanks.

That's about as much as I can give you.

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

I just wanted to circle back to your comments about Chinese New Year, and when you talked about it being down, I think that was just a Vegas comment.

So I wonder if you could talk a little bit about Macau, and there's unofficial market share numbers out there, and just kind of the change in January from Q4.

I know that can be due to just fluctuations and holds.

So maybe you could give us a little color on what you see happening with market share.

Well, as I say, the combination of calendar and/or market share can give you a different picture.

I think if you adjust everything, we're around 13% of the market.

The market's gotten much bigger.

There are a lot of tables and machines in Macau, for example.

We still focus on that other number, Robin, which is our fair share.

What is the ratio of our cash to our equipment in the marketplace?

We keep growing.

I don't know, am I responding, Robin, directly to your question?

I guess in general terms, and I guess I was hoping for a little bit more specific in terms of kind of Q1 and what you're seeing.

January was better this year than last year because we had Chinese New Year in it, in both places.

Right.

I don't mind saying that.

We had robust growth in January over previous year.

Now, to tell the whole story, we got to see February and March unroll, and frankly it will be interesting to see, but Super Bowl and President's weekend are in February this year.

Last year we had Super Bowl and Chinese New Year with a perfect calendar, so it was like a perfect storm.

We'll see how February rolls out.

We had a whopping month in February last year in Las Vegas.

I think the biggest one in our career.

We made $62 million in one month at Wynn and Encore.

Pretty good for 2700 rooms.

I don't think anybody does as well as we do, even if they have more rooms than we do.

As I said before, Robin, I wish we had more.

We build these things sort of one at a time, and patience gets the money, I guess, in our case.

Your next question comes from the line of Cameron McKnight with Wells Fargo.

Good afternoon.

Steve, wondering if you could comment on what you think about the macro outlook for China, and when you and Linda travel around the country, what are you hearing and seeing from customers that you speak to?

The businessmen with whom we have regular discourse in China, in mainland China and Hong Kong and Taiwan, are all feeling very comfortable about their country, the leadership of the government as it relates to managing the challenges that face their economies.

There's a sense of stability there that, at least, that we glean from, that we infer from our conversations with the folks that are robust businessmen in that part of the world.

So if you ask me what are we getting from them, we're getting a feeling of a good tomorrow, a healthy Chinese economy.

Everybody has challenges, and you can sit around and you can conjure up problems that could affect China, just as you can for the United States.

I think you look at the situation in real time, and you see that we're struggling in the United States mightily, and there isn't any signs of a mighty struggle in China at the moment.

Macro economics, if we're qualified to discuss such a subject, we're getting it through people, and of course we see it with our numbers, so.

Yesterday Sheldie, Sheldon Edelson, had his call and you got a sense of, I think you might have gotten that from him.

I don't know how our comments compare to his.

Most of you were probably on that call.

I didn't hear it.

Did you ask that question of the Sands folks?

No, I didn't.

Well, Matt, did they give their opinion on that?

They did not.

They did not.

Well, I've given you ours.

Is there anybody at our table that would like to add to that?

Ian, you're on the call.

You and Robert, how do you feel about that, Robert, Ian, what do you think?

I think the general view out here is steady as she goes.

There's a desire in China to maintain momentum, and there's a regime change at the end of the year.

So I think there's a desire to keep everything focused and steady.

There's a lot of chatter all the time about liquidity issues, about economic woe's around the corner, but everything seems to be moving steadily in the right direction.

There's a desire for stability always in China, and we're not seeing anything locally.

Chinese New Year was very strong.

There was a little bit of dampening because you had two New Year holidays almost back to back, but the general growth has been very good.

We've absorbed extra mouths here in Macau with Galaxy.

They didn't have Chinese New Year last year in Cotai, but the sentiment is pretty positive.

The growth levels in Macau won't be as significant as last year, clearly.

One of the things that is reassuring in this Chinese discussion, everybody knows what's going to happen in China next year politically as far as leadership goes, and no one knows what's going to happen next year in the United States as far as political leadership.

We probably tend to be a little more apprehensive and paranoid here than they are there.

That's another feeling I would get talking to businessmen in the United States that are, across the board, frightened and unsure of the future politically, and therefore economically and fiscally in the United States.

I don't feel any of that from our Taiwanese or our Chinese colleagues.

Nothing of that sort like we have in the United States at the moment,.

Your next question comes from the line of Tom Marsico with Marsico Capital.

I just wondered if you had noticed any decision making among the Chinese officials around the approval of new sites to start in Cotai as it relates to the change of leadership in China?

What are your expectations concerning building the new facility in Cotai as it relates to the change of leadership there?

Tom, we gather our information from public statements made by governmental officials on official public occasions, and the government of Macau, for example, has stated in statements to [Ledgeco] and other fiscal moments in their processes that companies, in particular SJM, Wynn and MGM, will be developing in Cotai.

Now, those statements we read in the paper, and we observed from the government in the past months.

They tend in that country to make their statements public and their policy statements public, and they don't really change or alter any of that privately.

That's pretty much the way it stands, as far as we know today, Tom.

Those statements made by Secretary Lau, Chief Executive Choi, and others.

The timing between the Gazette announcement and a formal announcement from the government varies depending upon projects and situation?

Yes, it does vary.

As I say, there's enormous public works going on in Macau.

The light rail system has begun, a host of new projects.

The university which, of course, got some publicity because of our involvement in education.

There's enormous amount of public works going on.

All of the projects, public and those concerning private companies, all go through the same departments in the government in the special administrative region, and they have limited resources and an enormous demand on their time.

So what happens is that things get handled in due course.

You're left with only one option, and that is to be patient and respectful of the process.

Understood.

Steve, a couple of years ago there was a lot of building going on, and there was concern about facilities for the workers to stay in Macau, and also the inflation that it was causing in that area.

Are the people in Macau, the government officials, comfortable with the level of inflation in the area as it relates to wages, as well as the number of workers that are available to work on these projects, given the extensive nature of the activity that's going on there?

The government has expressed its understanding and insight into the pressures created by public works and private expansion, and has recognized that, in principle, in terms of their discussions about allowing the labor force to adjust appropriately, as long as the people of Macau are fully employed, which at the moment they are.

They certainly observe the inflationary pressures that have been created by the rapid, massive expansion of the economy in Macau.

They ask us on many occasions to please be very sensitive to the needs of our employees, especially those line employees, who feel the pressure of rising costs for housing and such living expenses in Macau, and they ask us to please be sensitive to keeping our employees even and hopefully ahead of that curve by our treatment of wages.

We respond directly to that and all of us, when I mean all of us, not only Wynn Resorts but Sands and Galaxy and the other concessionaires, have responded appropriately to the government requests, which are always reasonable, I might add.

They do say to us, don't forget to take care of the people.

Don't forget to take care of the people, and we do, as well as we do in Las Vegas as well.

We gave, in the last two years, a couple of cost of living increases to our employees, as well as investing capital in our facilities.

So that's how it plays out over there, Tom.

If I could ask another question, getting back to Las Vegas, the changes that you've made to the entrance of the tower suites are terrific and the flow is a lot better, and obviously the big investment you made in Encore a year ago or so, are you anticipating any new changes in Encore to get that hotel to the level that you'd like to see it to be, Steve?

Yes.

We, in fact, are in the midst of some, we consider, very exciting options that we have available.

When we laid out, it's very technical a question, Tom, and I'm glad you asked if this is an appropriate time.

When we laid out Encore, that place was configured to anticipate a flow of humanity through the door on the west side, which is the Strip entrance.

Right.

That anticipated the rather dramatic development of the front tier property with the Plaza Hotel of Las Vegas, and Echelon Place by the folks at Boyd Gaming.

As you know, both projects were aborted, leaving empty property on the other side of the street.

Our performance last year, considering we're at the end of the Strip, is all the more remarkable in the fact we hold the record for the history of Nevada in gaming revenue, is all the more remarkable considering that we don't enjoy the kind of pivotal central location that Bellagio does, for example.

So we look at Encore and we say well, really the source of humanity on Encore is not from the west to the east as it is at Wynn.

It is, in fact, from the north, which is where our [porca] shares and hotel towers are located, is from the north to the south towards Wynn.

So we've got a casino, actually, that is 90 degrees off center in terms of its acceptance of the flow of people.

One of the things that Marilyn and the rest of us have been looking at, and Maurice Wooden and my colleagues in this facility, is to rearrange the flow of Encore and its gaming facilities on a different axis.

That also would allow us to employ a central entertainment attraction on the south side that would draw people through it.

Now, this conversation that you've drawn me into tends to be very technical about the way myself and DeRuyter Butler and the folks at Wynn Design Development work and take advantage of flow.

I think that it's something that we understand as well as anybody in the history of our business, and we've come to the conclusion that there is very little likelihood that, considering the political environment in America, the business opportunities, that we are going to see any robust development across the street on the other side of the Strip.

So we say, all right, that's the way it's going to be, let's just take advantage of it.

So we're thinking of some changes at Encore that would be very exciting and would work to our advantage.

Pretty much Encore's rooms enjoy a sort of a terrific a little niche in the market as a mini-suite hotel, and only in Las Vegas would we call a 2000 room hotel a mini-suite hotel, but that's what we are.

That's how that works, and so we look at that and we've got big eyes for it.

We also have a terrific opportunity, we're going to reconfigure.

You saw the lobby and the new high limit slot area is performing extremely well for us where Blush was.

As we strengthen the south side of Wynn with the new lobby and the new gaming area that opened up on Christmas, we're also considering an exciting new development for the space that was occupied by Alex's Restaurant.

Those are basically the kinds of manipulation of the Las Vegas property that we see looking ahead.

So the opportunity at Encore could be substantial if you come out with a good plan for the flow of traffic, in your opinion?

Yes, we're certain of that.

I think we've drawn a bead on it, and I think we've got it in our sights.

As a matter of fact, we're all pretty excited about it.

Thanks for your help this afternoon.

That's what we do, Tom.

It's nice to talk to you.

We have reached our allotted time for questions.

I would now like to turn the call back over to management for any closing remarks.

Marc, anything that you can think of?

John?

Kim?

Matt?

Ian, do you have anything you want to add, or Robert?

No.

Well, everybody should take a look at our new website, it's a dandy.

Thanks, everybody.

Talk to you next time.

Thank you for participating in today's conference call.

You may now disconnect.