永利渡假村 (WYNN) 2012 Q4 法說會逐字稿

Good afternoon and welcome to the Wynn Resorts fourth-quarter 2012 earnings call.

Joining the call on behalf of the Company today are John Wynn (sic), Marc Schorr, John Strzemp, Matt Maddox, Marilyn Spiegel, Scott Peterson, Gamal Aziz, President and CEO of Wynn Development.

And on the phone are Ian Coughlan, President of Wynn Macau, and Robert Gansmo, CFO of Wynn Macau.

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

(Operator Instructions).

Now I would like to turn today's call over to Mr. Maddox.

Please go ahead, sir.

Thank you and good afternoon, everyone.

Thank you for joining us today.

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

With that I am going to turn it over to Steve for some opening comments.

In the 45 years that we have been doing this, we have had a record of constant progress and growth that has hovered between 25% compounded a year and 30-odd-percent compounded a year.

The basis of that growth has been some fundamental ideas about who we are as a Company, the kind of services and people we employ and the kind of facilities we build and we have tempered those simple truths with a fundamental understanding that our balance sheet was a critical part of our ability to grow, maintain service levels and take care of our employees.

We approached the idea of growth and development with those thoughts in mind and we have been very fortunate to be allowed to participate in Macau and of course we have had wonderful history for the past 45 years in Las Vegas.

During that time our market share in terms of the top line, the gross revenue that gets so much attention on Wall Street has been a story of irregular progress onward and upward.

That has never changed in my career and I don't think it is likely to change when you are in a business that involves great capital projects that take three to five years to develop and open.

We are focused very heavily in the year 2013 and have been in 2012 on just such factors.

We began our project last year in May with preparation of the ground on the landfill known as Cotai.

We had 52 wonderful acres that had a great deal of challenge built into them because of water on the property.

It was an expensive, time-consuming process to get the property ready for hard construction.

I am happy to say that the work that was done in the last six months is completed and all of the governmental approvals have been given.

And the day after Chinese New Year in the next week and a half we begin the driving piles, the building of the foundation of the building and hard construction has begun in China.

We are 36 months out from the opening of our hotel on Cotai, which, in spite of the brilliance of the competitive construction and development that has taken place in China, and for those of you who haven't been to Macau, the new structures are quite wonderful and each of the companies has done a great job.

They are smart, they are well conceived projects run by men and women who know their business.

In that context we observe our competitors, as we have over the last four decades, and we design our next facility so that it will have a competitive advantage over our neighbors, which is quite a challenging statement to make.

We have taken a long time to prepare the project that is being built in Cotai and we are confident that the day that everybody gets to see it they will be amazed.

It represents progress and developments in our industry that have not been seen before.

And that is what it takes these days to get people excited.

The public is so sophisticated as a result of the work that our colleagues have done at other companies that it is a big hill to climb to get people to go wow and think that this thing that they are looking at today is better than anything they have ever seen before.

But we have been at it a long time.

We have a wonderful group of creative people that have been tested over and over again.

And so as the market grows in China, for example, our gross share of the market naturally declines because we have one project on the peninsula and our market share, as other hotels have opened, has gone to 9% or 10% and we don't focus very much on the top line because so much of it is noise.

We have 9% or 10% of the revenue but we have double the amount of EBITDA in the project and less interest than our expense.

So when it comes to taking home money we get very, very healthy and we are going to stay that way as we build new hotels in China and elsewhere in the world.

An example of this building houses of bricks -- if you read the Three little Pigs it has everything you need to know as a case study.

I remember one year we had a sketch on our annual report of three pigs, one sitting on the rubble of a house of straw, one sitting on the remains of a house of wood, and a chubby little pig sitting on top of a perfectly preserved house of bricks smoking a cigar.

And the headline on our annual report was We Build Houses of Brick.

Well, nothing has changed.

I love the Three Little Pigs as a case study and our hotels that we build currently and the ones that we are building in the future will represent houses of brick.

In Las Vegas, this intensely competitive market, we outperform the industry.

It is very difficult to do against such smart people, such clever people, but we enjoy the company we are in and we relish the challenge as we go forward.

So besides the performance of our Company, which in terms of earnings was very satisfying and happy for us, we adjust by a few million dollars EBITDA in the last quarter, the Street estimates were $5 million or $6 million higher than what we did, but in Las Vegas we were $15 million or $20 million higher than everybody thought.

That is the warp and the woof of the business we are in.

Having said that, I think my role in this Company is to talk about the future and the ideas that we hold.

We don't ever talk about the deals we haven't made, because it is really a waste of time.

We talk about the deals we have made.

At certain times like this morning or this afternoon it is appropriate to talk about our aspirations and the deals that we have engaged in fully.

I have spent months now designing the new concept of an urban Wynn.

An urban Wynn is a concept that is based upon these observations -- in the major cities of the United States, like Philadelphia and Boston, there are many hotels that get very healthy room rates in Boston, it is hundreds and hundreds of dollars to get a room.

And there are fine companies like Ritz Carlton in Four Seasons and others that are in those cities.

But we all know, as you do on this call, that it is uneconomical to build a really wonderful brand-new hotel in a city today because of the cost of construction and the competitive room rates that prevail.

So what does that mean?

To us it creates a wonderful opportunity.

Let's take Philadelphia and Boston for example.

You can't build a brand-new hotel in Philadelphia for the reasons I just said, but with the presence of a casino room adjacent to such a beautiful hotel you can build the best hotel in Boston, the finest project that the state of Pennsylvania or the city of Philadelphia where I went to school, has ever seen.

Rooms of 800 and 900 square feet or 700 square feet, beautiful suites, incredible restaurants with very talented chefs, entertainment areas that are fanciful, imaginative and new and exciting and fun to be in.

It has always been a truth in our industry that the driver is the non-casino attractions.

The gaming area is at best the cash register.

There is nothing unique about a slot machine or a blackjack or craps table or baccarat table.

In and of themselves they have no power at all.

The power rests in the experiential moment that people get when they are in the building.

So you take a place like Philadelphia where I went to school or Boston where my entire family is from and where I spent my youth in many cases; those cities can have a wonderful new hotel with an incredibly fanciful hotel, wonderful restaurants, entertainment and shopping.

And they can be supported and justified for hundreds of millions of dollars because of the existence of a gaming facility that is adjacent but not dominant in those environments.

People who want to gamble will find those rooms, will find those gaming areas and they will use them regularly, assiduously and have a lot of fun doing it.

We know how to do that, but what we specialize is in creating places that people want to go to for dinner with their families, to have fun, to go dancing, to see a show, to go shopping.

And we believe it is important to keep those two things somewhat separated.

There is an awful lot of talk about the concept of an integrated facility.

Integrated is a word that sometimes is misunderstood.

In the early days of Las Vegas, for example, integrated meant that every restaurant and every element of the hotel was adjacent to a slot machine.

We know today that that is not the most intelligent way to do it.

That people who are in search of hospitality, food, beverage, shopping and entertainment don't necessarily want to traverse a room full of slot machines.

And we have also learned that it is not necessary to force people to traverse a room full of slot machines and blackjack tables in order to have dinner or go to a show.

That those two concepts do very well when they are adjacent to one another, therefore integrated in that sense of the word, but separate and apart in terms of their experiential moments.

Those are the guiding principles of our development that are rooted in concepts like Philadelphia and Boston and those are the concepts that will be rooted in whatever we do elsewhere in the world.

We have a very established brand, people know in every jurisdiction who we are.

We don't need to sell ourselves anymore.

But what we do need to do in facilities that are prospective, such as Philadelphia, Boston or any other city -- and I'm not going to mention all the cities we are working in because those are deals that we haven't engaged publicly yet.

But our job in those places is to explain how we are going to apply our brand and our experience to produce a great place that is value-added for those cities that brings people from outside the region into those cities.

The places pay healthy taxes and they employ lots of people.

That is our selling point, that is our story and we will take it where we can make money in the future and we'll do so with great respect.

And we will do so with a lot of sensitivity to the communities in which we operate our business.

Those are the guiding principles of who we are; the numbers that we publish speak for themselves.

And I think it is okay to take questions now.

And Matt and Ian, Matt is here with Gamal and Marilyn, our leadership in Las Vegas is here.

Scott Peterson, our CFO, is here to discuss the details of our business if you are interested and asking questions, and Ian and Robert Gansmo, Ian Coughlan in Macau and Robert are on the call and I will open this for questions now.

(Operator Instructions).

Shaun Kelley, Bank of America.

Good afternoon, everyone.

Steve, I just wanted to start by asking about Cotai.

Obviously it is a huge milestone to get the construction approval to be able to move ahead there.

So could you just walk us through what a few of the upcoming milestones are here in terms of what some of the dates are around driving piles and kind of the next phase beyond that?

And in particular, what is the labor situation like with two other projects probably already kind of in the ground and moving on Cotai and the flexibility around labor in particular will be helpful?

Sure.

First of all, as I say, we started construction this week, which we would call hard construction as opposed to site work.

The foundation of Cotai, having dried out the property, which took quite a bit of time and $30 million, the next phase now is the creation of the foundation.

It is a landfill, as you know, and to give you an example if you like trivia -- the caissons that support the high-rise building, they are every 40 feet going sideways and they are four across the tower, one on each window wall and then two inside the building.

So these caissons are 10 feet in diameter and we have to hit bedrock.

And those caissons are columns of concrete reinforced with rebar in a steel casing and they go down in our high-rise at a minimum of 78 meters and at a maximum of 92 meters.

Give you an idea how deep these holes are -- the public area, the three levels of public area and the podium building are supported by piles which are basically either steel or concrete reinforced columns that are nails that are pounded into the ground, five or six at a time, brought together as if you put your fingers on the table spreading your fingers, the top of your hand would be the pile cap and then we drive all these piles, we put a cap on top of them and we rest the garage and the public areas on top of them.

That process of getting out of the ground and building the one layer of subterranean parking is going to take close to a year.

Once we get into that phase at the end of 2013 then we go up with the high-rise and the rest of the building at a remarkably rapid pace and we do more than one floor a week and go up 20 odd floors to full height.

So it goes very fast.

The trick is getting out of the ground and that will take most of 2013.

And then 2014, 2015 will finish the job and get the structures and the interiors installed.

So the labor situation for this phase has been handled already.

As you know, we are financed at less than 2% for this project and we were this past summer.

And finally, the government has been very cooperative in giving us the labor we need to do the next phase of our construction.

So I think that the government -- you have noticed, many of you, the rather slow progress of the approval process.

That has been a process controlled by the government specifically to meet the scale of labor that is needed.

And so the government, in controlling the approval process, has taken into account the kinds of labor approvals they are going to have to give us and they have done it efficiently and correctly and cooperatively.

So I don't see any labor problem in our future.

We have never had one in the past, I might add.

In spite of some of the publicity that has surrounded other projects, we have never had to struggle with labor, we have been able to get the help we need for our construction companies and for our subs and our buildings have pretty much proceeded on schedule.

We have no reason to think that this one is going to be any different.

I hope that is a satisfying answer.

That is great.

And then the second question was just kind of giving your prepared remarks around some of you are looking at new urban concepts.

I couldn't help but notice that you guys made a fairly high-profile hire relatively recently.

So we're kind of wondering as you think about the Wynn brand going forward -- to spin the question a little differently -- would you ever consider the hospitality business without the gaming element to it as you look at some of the larger cities and some of the needs that are out there?

Just curious on that.

I think my answer would be, no, with one or two exceptions.

I have for the past 10 or 15 years relished the idea of having a new hotel in London.

That city is probably one of the greatest places in the world for average daily rate.

And it is a city with -- as you know, with highly protected historical landmark buildings, it is very difficult to get a site in London that you can demolish and build anew.

If I had the chance in Mayfair or in the right location in London to build a hotel I think I would love to do it.

Of course you can always apply for a gaming license and put a small room of baccarat and roulette tables in there which would be fringe or icing on the cake.

But I would say that London is a great hotel town.

New York City is a whole story unto itself.

I am not sure if I'm as clear on New York in the non-casino sense as I would be in a place like London.

But generally speaking, you know we are in this business and that is pretty much where I want to stay.

We understand this part of it.

And what I really love about the gaming aspect is that the gaming room, however subordinate it may be, is still -- the revenue from such a room is still the thing that allows us to light up the city, bring people and build a new hotel, bring people in from outside the area.

In Philadelphia they have a group of casinos for example, some of them owned by friends of mine.

But basically they are boxes of slots.

They have a high tax rate per slot machine in Pennsylvania, but they have a much more reasonable tax rate for table games.

Table game business is not a big deal in that city at the moment.

As you know, many of those places were built before they allowed table games.

But our hotel is conceived as a hotel that we will be able to bring people from outside the region who will come for conventions or other reasons to Philadelphia to stay in our hotel.

And because I have beautiful rooms I can put a table player in there and take advantage of a preferential tax rate and get table business.

On the Acela Train it is 66 minutes from Penn Station to 30th Street Station and we are 10 minutes away from 30th Street Station.

You think about that for a minute, Philadelphia takes on a little different color.

And speaking as a Philadelphian as far as my four years of school at the University, I think that is a good idea.

We have this fabulous 70 acre site on the Delaware River and there is a brand-new $750 million interchange on I-95 that dumps directly across the street into our property.

A very, very desirable provocative situation and that would be done at about the same time our hotel is done.

I like that set up, but it is a casino hotel at the end of the day; it is an integrated destination as opposed to slots in a box.

Great.

Thank you very much.

Joe Greff, JPMorgan.

Good afternoon, everybody.

Steve, the Las Vegas results I thought were encouraging.

Can you share with us what you are experiencing thus far early in 2013 and share with us maybe what you are seeing on the group side?

And from a bookings perspective, last year in Las Vegas how you (technical difficulty) characterized the environment is being a little bit uneven with certainly strength in the baccarat nightclub segment and then room rates up and down depending upon what is going on in the city and share with us what you're seeing there that would be helpful.

Thank you.

I am going to let Marilyn deal with that because she is so competent and on top of it.

Joe, obviously the convention business is the one that allows us the most ability to forecast what is going on.

We feel really good about 2013.

We are tracking above in room nights, we are tracking above in rates and we are seeing the same kind of strength going on into 2014.

So that is going to lay the base and we hope that is going to really maximize a great hotel year.

Obviously we will still be focused on bringing in hotel guests who want to engage in every part of our non-gaming business.

Super Bowl is this weekend and we are heartened with the business that we have coming in for Super Bowl and Chinese New Year is right around the bend.

So we are very hopeful for a great first quarter.

Great.

Steve, you've spent a decent amount of time on this call talking about urban Wynn, Philadelphia and Boston and other cities that you didn't mention.

When you look at your return thresholds, return on invested capital criteria how do you think about those things?

Good question.

Take a place like a Philadelphia, you spend $800 million or $900 million or $1 billion, you borrow 6 -- you borrow $650 million at great rates today.

Good idea to borrow money at these rates, and you put up $300 million or $400 million in equity and you make $175 million.

We can't get a return on equity like that.

And if you can get that kind of a return on equity you ought to keep building those details.

It lays a base of a long-term franchise.

Once you get one of these hotels that is up and running and established, their future is better than their past.

Tomorrow is better than today and the day after tomorrow is better.

That is the whole point of this.

I don't trust slots in a box.

That is why I have never done a riverboat or a racino.

Not our business, not interested.

But a hotel, a place that has the full range of services that people learn to like and even people that don't gamble who live in the city go to dinner.

We get tremendous average rates in our restaurants.

We make money with our restaurants.

There is nothing wrong with that in cities like Philadelphia and Boston.

With all those kids in college, all of the people visiting Boston from around the world, I love the Boston market.

I think it is a terrific opportunity for our Company to make a great contribution to the touristic profile of those cities.

Bringing people from outside the region into the region and creating places for the people who live in the city that are fun to go to week in and week out, even if they are not hooked on a slot machine or a gambling game of some kind.

You know, these values would apply to any major urban center like Toronto, like Dallas, Houston, Atlanta, Chicago.

We could be a very good neighbor in those cities.

We could make a significant contribution to the tourism, the employment and the revenues that those governments enjoy with our brand.

And whenever possible we will take our story to those cities.

We will put our cards on the table, we'll present a project that is appropriately designed with as much excitement and originality as we can muster in the hope that we get picked.

These processes -- very often these processes are political in nature and factors come to bear that are not things within our own control.

But I am always excited and anxious to put our cards on the table, make our presentation and hope that we will get accepted for who we are.

But we avoid hyperbole.

Last week I got a phone call, my office -- it was on a weekend and I was in Sun Valley, Idaho.

And my secretary said tomorrow will you please accept a call at a fixed time from the president of Forbes Five-Star Rating Service?

I said sure.

I got on the phone with this wonderful man and he said, Mr. Wynn, I wanted to give you the good news in person before we release it publicly.

But we have just added Encore Macau, the hotel and the spa, each with a five-star rating.

One of the only four or five stars in China was held by Wynn Hotel and Wynn Macau Spa and now you have two hotels in Macau, both of which have received five-star ratings in the hotel and in the spa.

You enjoy five-star ratings in Wynn Las Vegas with your spa and your tower suites and now you have also got five stars in Encore Las Vegas and Encore Spa.

That means that you have got four hotels each with five-star ratings in two locations.

That gives you 40 stars, and to use his words precisely, that is the most on the globe.

Well, I said I am sure excited to get this phone call, have all those five-star ratings complete across the board.

They are very important to us, they tell the public who we are, they are consistent with our aspirations and our brand and thank you very much for the phone call.

And that was this past week.

That is where we are going.

A little slower, a little more meticulous, but it builds a base on which this Company can enjoy a franchise in longevity.

Great, thank you.

Matt, one final quick one.

How much of the $2 billion in cash at quarter end was held in Macau?

75%.

Thank you, guys.

Carlo Santarelli, Deutsche Bank.

Thank you.

Marilyn, if I could just follow up on the prior question as it pertained to Las Vegas and some of the business that you are seeing, especially in the first half on the group convention side and out into 2014.

Do you feel that is more Wynn specific or are you seeing that more broad-based across the market and you guys are getting an ordinary share of that?

I wish I could tell because you don't know what your competitors are booking.

We have a confined amount of meeting space and we enjoy a position to be next to the Las Vegas Convention & Visitors Bureau.

So we find ourselves to be the host hotel now of many of the conventions that used to be housed closer on Paradise Road, so that has been great for us.

There are a lot of hotel rooms between Las Vegas -- to the Venetian, Palazzo and the Wynn.

And so we see many of the very high end conventions coming here.

So we see a lot of technology, we love technology, we see pharmaceuticals and those conventions are great.

They access and utilize every part.

Yesterday our entire spa was sold out with massages and today our entire golf course was sold out with golf.

So I don't know what the rest of them are doing, but we have to wait for each quarter's earnings to find out.

Great, that is helpful.

And for Ian or Robert, just quickly, I know you guys opened your second floor VIP room not too long ago.

I was just wondering how the reception has been to that and if the incremental tables actually have come online.

I see the number actually trended down a little bit sequentially by about four tables and I was just wondering if we should expect to see the full 504 being deployed on a go-forward basis.

The new junket space on the first floor has been performing very well, but it is tables that have resulted from a reshuffling of tables elsewhere in the building.

So it isn't necessarily 14 incremental tables.

It is 14 tables that we are getting higher yield out of by removing tables from elsewhere on the property.

So it is part of our continuing efforts to increase yield from our existing gaming units.

And we are having a very healthy January in Macau, even though last year Chinese New Year was in January, we are beating last year and without Chinese New Year we are going to have a $100 million month -- I guess I am giving some advance notice.

We are going to have I think a $100 million month in Macau.

Great.

Thank you, everyone.

Felicia Hendrix, Barclays.

Thank you.

Ian, while we have you and we know you are awake there early this morning, Steve spoke earlier or at the beginning of the call about focusing more on profitability than revenue market share.

And along those lines I was definitely pleasantly surprised by the margin results that you guys produced in Macau.

Margins were flat year-over-year despite lower revenues, obviously mix always plays a role but your margins were still better than we were expecting.

So in spite of the competition, just wondering if you could talk about what kinds of things you are doing in Macau to offset the dilutive impact of the competitive environment and especially since that is going to persist for some time?

The big focus that we have being six-year-old and being almost at capacity in terms of the facility is the enhancement of service quality and the maintenance of the facility and the reinvestment in the facility.

Which I think now that everybody has revealed their new junket rooms, their new mass-market high limit areas, it's going to come down to service, quality and delivery.

That is going to be the tone of 2013.

We certainly had efficiencies in FTEs which are down fairly considerably on the same quarter last year, but none of it has been at the expense of service.

It has been through some very good technological improvement in our gaming systems.

It is understanding our business better.

And we will never sacrifice service but we will continue to look at how we can improve margins.

We had last year an interesting experience.

Marc Schorr came home and said, Steve, I went to see the new VIP slot room at Galaxy.

Boy, did they do a good job.

And you know, all we have done basically is put our high limit machines in a certain area so that customers could have a convenience.

But we don't have a high limit slot room like the one you've built in Las Vegas that produced such stunning results for this year for us and is currently producing great results for us in Las Vegas.

He said we need one.

I said okay, Marc, you are right.

We have to catch up with the other guys.

And so we sat down and we designed a drop dead high limit slot room.

When is it going to be done, Ian?

It is being done in three phases so we don't impact our current business levels.

So phase one has just completed, phase two will begin after Chinese New Year and finish in mid-April, and phase three, which includes the addition of private slot suites, will finish in August of this year.

So there is a case we had to play catch-up because the boys down the street got smarter and they really do in China.

But to give you an idea, I think we -- did we open Miumiu, Ian?

It opens next week, Steve.

Okay, here is a space that we repurposed.

To give you an idea about the vitality of the Chinese market, you will all get a kick out of this.

We had 2,000 square feet, we had a very big coffee shop and buffet, it was too big for what we needed.

So the front of it, which is adjacent to the lobby and across from Louis Vuitton, was 2,000 feet that was easily -- the coffee shop was separated into two chambers, one that opened onto the pool and had a buffet and the one in the front opened up under the shopping arcade.

So we took the front part, the 2,000 square feet, and we said okay, we're going to turn it into retail.

2,000 feet.

I made a deal with Prada and they paid for 2,000 feet.

Dig this, $6 million a year, $500,000 a month for 2,000 feet.

Welcome to Macau.

Steve, I also think it is important that (multiple speakers).

Just started paying rent.

I think it is important that everyone also understands that we are using our capital to improve our resort by doing every room, all the hotel suites are in a remodeling phase right now.

Yes, the hotel is five years old, it is six years old, it's time, as we did in Las Vegas, to do the refurbishment.

And we are going to follow the plan, the decorating because the Wynn Macau is the same size room as Wynn Las Vegas.

We are going to use the scheme that we have here and it has been well received down here.

We upgraded our interiors and made the rooms much more beautiful on the second time around, even better than they were when we opened, which was great.

And we are going to use that decor and that scheme in Macau and that is going to come up now.

Great, thanks.

And if I may, Gamal, I wanted to welcome and congratulate you.

And I know it is early but hopefully maybe you can talk to us about some of your thoughts about your new role and your view on the current growth of the Company?

Thank you very much, Felicia.

This is really an opportunity to expand the brand at a time where there is a great sense of confidence in the future.

And I know that Steve has shared with you a couple of the opportunities that we are pursuing.

We are pursuing others and with the goal to succeed in going beyond what we have been doing.

There is a tremendous reception to the brand just in my first 10 days and having visited Philadelphia and Boston we see a tremendous appreciation for our participation in this market and a hunger for what we do.

So I expect that in the next few calls we will be sharing with you what we are working on, but for the time being, as Steve has shared, we are working on Boston and working on Philadelphia and we will continue to grow that list.

Great.

Thank you very much.

Cameron McKnight, Wells Fargo.

Thanks very much.

Good afternoon.

Steve or perhaps Ian, we have seen a fair amount of macro indicators in China improve over the past couple of months.

When you guys sit down with customers what is the pulse you are getting and what is the sense you are getting in terms of people's outlook?

This question was asked of us in previous calls last -- in 2012.

And the suggestion was made that China was precipitous on the edge of an adjustment, some words were even as strong as collapse.

And we said that based upon our conversations with our clientele, which represented a broad range of businessmen from every part of China, that we didn't feel that.

We didn't think that was going to happen and we thought that the central government was alert, responsive and responsible.

That has been a pattern for the past 12 years as far as I have been able to perceive in China.

And so we were positive in the face of questions that had negative implications.

Now you see a robust growth rate in the Macau market and people are talking about China differently.

Nothing has changed, just the conversation changed.

We didn't see a problem before and I don't feel one at least on the level that we've operate.

We don't feel that there is a problem.

We feel a sense -- I speak to Mr. Adelson and I speak to Jim Murren and we all sort of agree that the news in China is healthy.

The news in Asia is healthy.

And most likely to continue so that is the kind of feedback we are getting.

I would be happy to share anything else, if I had it, with you.

But there is a possibility that I am being a Pollyanna and that my exposure is limited so that I don't get a big enough picture.

But on my Board in China are a couple of very, very well-connected very sophisticated men.

Allen Zeman is building projects in five major cities.

He is a Vice Chairman of the Macau Board from Chengdu to Guangzhou to outside Singapore with Jeffrey Katzenberg and Steve Spielberg and in four other cities.

And he spoke to me the other day, it was my birthday and he gave me a call and he was breathless with the expansion and the excitement in the cities of China that he himself was experiencing with his business city by city, party secretary by party secretary, mayor by mayor.

Allen was glowing.

Bruce Rockowitz is the President of Li & Fung, the largest sourcing company in the world.

He has been named on Barron's magazine as one of the 30 best CEOs in the world.

Bruce Rockowitz is on my Board.

Jeffrey Lam and Nick Sallnow-Smith, they have been in government and President of Hong Kong land.

Nick and Jeffrey say the same thing to me.

So I don't think that I have got blinders on or that I am stuck in a corner somewhere, but I don't claim to be a macro economist.

But I haven't heard any predictions of doom or big cloudy forecasts that I read about in the United States last year and I think today some of those clouds have gone away, people have a more accurate view.

One of the problems we have in the United States is generally speaking, even amongst sophisticated segments of the population, the understanding of modern China, of the Peoples Republic of China is way, way behind the curve.

China has progressed politically and economically, commercially far beyond where people are giving them credit for today.

It is a very sophisticated place and as near as I can tell very well led by the government.

They tend to be practical, they tend to be very empirical and alert and quickly responsive.

Maybe it's an advantage of their form of government and -- but it is clearly the case.

I hope that is helpful.

Great, thanks very much.

That is very helpful.

And then just as a quick follow on, Steve, you last spoke about competition in the market in Macau about six months ago.

Do you sense the level of competition has increased since then or remained relatively the same?

Murder tough -- those guys have blood in their eyes.

I mean, how would you like to compete with Francis Lui and Packer and the Ho's and Sheldon Adelson?

I mean these are tough guys and they are paying attention to business.

I don't know about anything else, but I have got to tell you that the guys in the gaming industry in Asia are triple sharp, they haven't missed a trick.

I was listening to Sheldon's call yesterday.

I mean you don't get numbers like that unless you are on your game and it is true of Galaxy.

Those companies are not American -- maybe we don't have as much visibility as we should, but I have an awful clear sense the Lui family and Francis Lui that runs the family's business, he has brothers that run their business in San Francisco in the United States.

The father is one of the leading property men in Hong Kong.

That whole family controls Galaxy and they are on their game.

I think the competition -- it is very, very tough but it is very healthy.

I told you that Marc Schorr comes home and says, uh oh, we are a dollar short and a day late on the high limit slot room.

We have got to kick it.

Well, we don't get to talk about that for months or ignore it, we have to respond now, on the spot.

No kidding around and we've got to bring our best game to the table.

So I like it that way, to tell you the truth.

We had a long history of being in competitive environments.

Fremont Street, we made more money than all the other places put together.

Atlantic City, we made more money the first quarter we were open there than the other four places combined.

The strip, we have always had the best hotel on the strip in Las Vegas.

We broke -- we had the largest win in the history of Nevada after Caesar's Palace was Mirage its first-year, broke the $400 million level.

Then the first year of Bellagio broke the $600 million level of gaming revenue.

In 2007 we broke the $700 million level at $724 million in Wynn.

Last year we broke the record again at $770 million for the history of gaming in Nevada with $770 million with Wynn and Encore and we did it again this year, $766 million or something like that.

Better than last year if you adjust for whole percentage.

So in each case we have always functioned in very competitive environments and our competitors have lifted our game.

They have forced us to really reach.

That is a healthy thing for the communities such as Atlantic City or Las Vegas or Macau.

It is a healthy thing.

What is not healthy are monopolies.

Monopolies cause people to be slobs.

They don't pay attention to business.

They take everything for granted -- their employees, their customers.

That is unhealthy.

It doesn't lead to a better future.

That's not the story in Macau today.

Macau is on the move and as good as it looks it is going to get better with these projects that are under construction and that have come online.

You haven't felt the full impact of some of the places that have just been opened in Macau.

We haven't felt the full impact of the efforts of Adelson, his company, the Sands.

We haven't felt the full impact of Galaxy.

We sure as hell haven't felt the full impact of Wynn yet.

So the future looks pretty good to me.

There's a couple of factors in Macau, Steve, that are also being slightly overlooked.

One is that for at least the next 24 months there is no further casino spaces opening, so everybody has time to stabilize, understand the market better while it is still growing.

The second thing is the development of infrastructure in Macau.

It is going to be completely transformed in terms of the arrival experience for customers or ability to get around town.

In the next four years it will be remarkable what is happening here with new ferry terminals, connectivity via bridges to Hong Kong.

We have got high speed train connectivity into Zhuhai and we have our light rail system which is being built all around town right now, the phase one, which tackles two sides of our property in Cotai.

So the city is going to be transformed.

We are at the first stop in Cotai from the ferry terminal and the airport.

This stop is right in the middle of the lake that we are building that is roughly the size of Bellagio.

And at the bottom of the escalator from that monorail, from that light rail system we have put a double [mire] gondola car that has music and air-conditioning.

And the people get in the gondolas and they go around the fountains into the hotel looking at the fountains and looking down at our pool area while the music plays and the fountains dance.

We are meeting in many, many new ways the challenge of our neighbors and hoping to get the folks that are in the other hotels to also experience our own and all of this is such great fun.

Fantastic, great.

Thanks very much.

Robin Farley, UBS.

Great, thanks.

I wanted to ask you what kind of impact you may be seeing from the partial smoking ban at the beginning of the month.

You mentioned what a great month it has been, a $100 million month in January.

I wonder if you could give us a sense of how much of that is coming from VIP resurgence versus the mass market just to get a sense of how the smoking ban may be impacting things and how VIP may be resurging.

Robin, I would like to have Ian and Robert Gansmo deal with that if I may.

Sure.

On the 1st of January the new smoking law came into play which banned smoking in 50% of the square footage of casino space in the city.

Frankly looking at the numbers, anecdotal evidence, consumer feedback, it has been very marginal in terms of effect to the business.

We haven't seen anything at this point that makes us unduly concerned.

We have worked very closely with the government, as have our competitors, to make sure it was as smooth a process as possible.

And the Chinese consumers seem to be readily accepting of the fact that we have dedicated smoking zones and they have received it fairly well.

Clearly for employees, it has been a huge boost for them.

Incidentally --.

So far, so good.

Incidentally, in anticipation of the worldwide issue with secondary smoke, all of our junket rooms in our Wynn club, our highest part of our gambling and Macau, are rooms that overlook on our lake and our fountains and each of them has exterior terraces for dining and smoking outside.

That ability for all of our junket rooms to have exterior smoking terraces and restaurants that are indoor/outdoor dining, that is a new wrinkle that we have put into -- I'm just touching a few of the points, that is a new wrinkle that we have put into Cotai that all of our high limit games are waterfront, all of them.

A lot of fun there.

Think about it, both in being a spectator to the music and the excitement and the lighting system that is all new, it really isn't like the Bellagio, it is far more advanced.

But coupled with the fact that you can be outside watching it and while you are outside on the terrace having a cigarette or having coffee.

If you look up over the fountains you will see the people arriving in gondola cars cruising by, looking down at the same thing that they are looking at before they enter the building and take the escalator into our shopping arcade.

So this business of smoking is something that isn't going to go away, nor should it in my view.

I think that despite the fact that I smoke cigars on occasion, I think that for people who don't smoke, and the evidence about secondary smoke clearly indicates that governments are going to be more and more fastidious about trying to deal with this subject.

Thanks.

The January growth has been balanced throughout all settlements, so it wasn't heavily weighted to VIP any more than it normally is, so we have had healthy growth in all sectors.

And do you want to talk about last year and mass market?

Yes, sure.

So if you notice there has been a lot of expansion in the market on the mass and VIP side and we have continued to grow our mass-market business.

Our penetration in the mass market is still 1.25 times, our tables relative to our revenue, and on the marketing side we are running very smart programs, so it is extremely profitable.

Our mass-market business continues to perform very well in Macau.

Thomas Allen, Morgan Stanley.

Thanks for fitting me in.

One of your competitors said yesterday they plan to open their new Cotai property at the end of 2015 and you might have other properties opening around the same time as yours.

Would you want some kind of buffer between openings and if so, for how long?

And then a second question on the Cotai opening.

How confident are you in receiving approval for extra tables from the government for that property?

Thanks.

First question, would I like a buffer?

Yes, by about 20 years, but I'm not going to get it.

I'd like them to leave us alone for 20 years, but that is not going to happen so that is the world we live in.

We are living in it today.

Nothing is changing.

And the second part of the question was --

(Inaudible - microphone inaccessible).

Will we get our tables for our hotel?

Yes, we will.

Our plans, our tables, our casino layout has been approved by the government.

They don't let you build a building and not give you tables in China.

That is part of the approval process.

They look at the whole picture and then they take that into account.

Thank you.

Thanks, everybody.

If that is the end of the questions we will look forward to talking to you next time.

And this concludes today's conference.

You may now disconnect.