永利渡假村 (WYNN) 2013 Q4 法說會逐字稿

Good afternoon.

My name is Dustin and I will be your conference operator today.

At this time, I would like to welcome everyone to the Wynn Resorts fourth-quarter 2013 earnings conference call.

(Operator Instructions)

I will now hand the call over to our host, Mr. Lewis Fanger, Vice President of Wynn Resorts.

Sir, you may begin.

Thank you.

Good afternoon, everyone.

Joining the call on behalf of the Company today are Steve Wynn, Matt Maddox, John Strzemp, Kim Sinatra, Steve Cootey, and Scott Peterson here in Las Vegas.

And dialing in from Wynn Macau we have Gamal Aziz, Ian Coughlan, and Robert Gansmo.

And with that said, let me turn it over to Matt.

Thank you.

And good afternoon, everyone.

Good morning in Asia.

Before we get started, I just have to remind everybody that we will be making forward-looking statements under the Safe Harbor and federal securities law.

And those statements may or may not come true.

Steve?

Opening remarks?

The numbers always, as usual, speak for themselves.

In terms of interpreting our impressions of our own operations, for two hotels to have cash flow of $1.8 billion-and-change is very satisfying.

What is most paramount in our minds these days are two principal objectives.

Number one, to launch the Wynn Palace in 22 or 23 months, with the same kind of success and finesse and energy that we have dedicated to its planning these last two years before we broke ground, and then last year that we've been constructing it.

Foundations are finished, everything is on time and on budget.

In December of 2016 we will make a campus out of it.

And in January we will be training and will be open this week in two years.

We believe that the hotel is preemptive enough.

It's an all suite hotel.

It's preemptive enough that when it debuts in two years, it will become the photo op and the conversation piece of Asia.

That's quite a statement to make in view of how elegant and how well conceived our competitors' hotels are.

But we are fairly confident since we've seen them and we've seen our own product that, using capital and experience, we've taken the business to another level.

We've also been planning phase 2, and that nearly doubles what's in the Palace.

We will be talking about that in quarterly reports coming up in the year, in the calendar year 2014.

We will be very specific and we will be showing pictures and describing phase 2, shortly.

But today, the second thing that I wanted to mention, that occupies fully our focus and concentration, is to see to it that the Peninsula Hotel, Wynn Encore, does not become a stepchild.

Many of the hotels that were on the Peninsula were done in another period of time with another set of principles and priorities.

Cotai represents the best efforts of everybody.

But when we built the hotel on the Peninsula and opened it in 2006, we took our time and decided that it was going to be a preemptive hotel.

That we would forgo early arrival in the market to have a more powerful entry later.

Now, that had advantages and disadvantages that are obvious.

We gave up income early and settled for more income later.

But, that hotel is, in every respect, preeminent in terms of its yield per table, per foot, per dollar of investment, any other kind of metric you want to put on it.

The Peninsula Hotel is, just this past week, again, both Encore and received five-star status in rooms, in its restaurants and its spas.

Which is quite something, because there are only four or five of them in all of the People's Republic of China.

And we are the only one that has that distinction in Macau, along with the three hotels in Hong Kong -- the Peninsula, the Mandarin Oriental and the Four Seasons.

If we continue to invest and reinvent the hotel on the Peninsula, it will maintain the kind of performance that it demonstrated this year, which was over $1.3 billion.

From a 1,000 room hotel that cost $1.5 billion, that's a lot.

And we are not willing to let that become 50% or 60% or 70% of what it is today.

So, we have reinvested.

And we opened, as a matter of fact, three days ago a whole new section on the top of the escalator on the second floor.

That is going to be very well received during Chinese New Year.

And we have drawings in, and we are awaiting final approval to start the construction on a very dramatic reinvention of the west side of the casino, which is towards MGM in Macau.

My point of all of this is that we do not intend to give any ground up with the Peninsula property against any competition at Cotai, whether it's our neighbors or our own building.

That's a big priority to us.

I think that we've got the understanding and the experience to do it.

Now, I will be glad to answer questions about the money.

But, we are very pleased with Las Vegas.

We are the market leader in every category.

Regardless of how many rooms other people have or how many hotels other people have, our hotel made $483 million in cash flow.

Nobody was within $100 million of that on the Strip, no matter how many rooms they have.

It's the same story in China.

Ounce for ounce, foot for foot, our earnings were exceeded by the Sands property, the Venetian, by $50 million-odd.

They have three times as many rooms.

They have 250% more machines.

They 50% or so -- 40%, 50% more tables.

But we do 80% more of their earnings at $1.324 billion.

So, size matters to a certain extent.

But as our bigger properties come online in Cotai, we will narrow those gaps radically and rapidly.

But, we do have to wait until these projects that are under construction and under design, now, mature.

But we are very happy with our position in the market.

And this year satisfied us in every respect.

I will take questions, now.

And so will everybody else on the call.

(Operator Instructions)

Joe Greff with JPMorgan.

Hello, everyone.

Steve, Macau mass tables in the fourth quarter, up35% year over year, and up 22% sequentially.

Pretty good in relation to what the mass market did in general in Macau for the quarter.

Can you just talk a little bit what's driving that?

Are you marketing differently?

Are you utilizing the room base differently?

How sustainable is this?

Joe, it's a very good question.

In the first quarter and the second quarter, we lagged in the mass marketing in Macau.

We always do lag because we never lead the market in discounting or marketing aggression.

One of the reasons is because we think in terms of our bottom line.

Until we see a major opportunity in the market, or we perceive that our lag is too much, we tend to be slow in reacting on this level because we are so protective of margin.

But we decided that we had to make some adjustments during the second quarter last year, and we instituted those in the end of the summer.

And the fourth quarter shows what happens.

We still didn't exceed the market.

We didn't even equal it in many regards.

But the minute that we start to get close, then the business runs back to us and you see outperform the market, as we did in the fourth quarter.

We like very much the idea of waiting before we make an adjustment to make sure that if we do it we are not going to affect our margin.

And until we see the competition affecting our margin, we don't react.

So, we tend to lag, as we did this past year.

Now, in terms of slot machines and -- for example, I like to compare us to the market leader, which I consider to be the Venetian, in many respects.

I have great respect for the work they've done, as I do for Galaxy, on Cotai.

All of the guys, including Melco have done a great job.

But let's take the hotel that we looked at with regard to slots.

They have almost (inaudible) as many slots and we won more money with 900 slot machines than the Venetian with 3,000 rooms to our 1,000.

Our slot win was, in absolute dollars, greater than a powerful competitor of that sort.

So that maybe can explain to you, Joe, why we lag.

But when we do decide to make the move, we've done enough research that our feet are on the ground and we get a positive result that you observed in the fourth quarter.

It really started at the end of the third quarter.

And we timed it with our new slot room, which opened this year.

And we opened a new premium area in mass.

So, you saw the impact of all of these things together in the fourth quarter.

And there's more of that coming on the Peninsula Hotel, before the opening of the Wynn Palace on Cotai.

More of that coming.

Great.

Thank you.

Last night we heard from the Las Vegas Sands guys that they felt a little bit more positive about the Las Vegas Strip market.

They've generally been maybe more cautious to less optimistic than others on the Las Vegas Strip market.

How are you feeling about the room pricing environment this year?

Obviously city-wides are going to be up nicely this year versus last year.

Can you just talk about the room pricing environment, please?

It's very interesting.

I didn't hear the call but I'm very impressed with their results.

The management team over at the Sands Resorts, they have got their feet on the ground.

They know what they are doing in all respects.

So I'm glad to hear them say that.

For ourselves, we are noticing an uptick in convention bookings this year.

We saw an improvement in retail.

We saw an improvement in our hotel rate and our hotel occupancy.

They weren't stunning, but they were upticks, in single-digit stuff.

Which is one of the reasons why we made $483 million on the Strip with less rooms than our neighbors.

But our drop in slot machines, our coin-in and our handle in the pit, was about the same.

A whole percentage, was a little better than last year.

But I think that 2014 is going to be a year that will equal or exceed 2013.

I would not, however, claim that Las Vegas is booming.

I still am cautious.

We are feeling the impact of the Affordable Health Care.

It continues to hit us.

And we had to struggle to overcome it.

That hits us pretty hard this year.

And there's some other regulations that have to do with the way we run our business -- filings and reports and stuff.

Nothing that's come out of Washington has done anything but add to our operating expenses.

In 2015, for example, we will have the anniversary of our 10-year culinary contract.

As you may remember, we signed a contract for 10 years.

We have very good relations with the union so we've never had any of the interim union negotiations that the other fellows had.

But we will look forward to that in 2015.

So, I think 2014 is going to be fine.

Thank you.

Shaun Kelley with Bank of America.

Steve, I was just wondering if you could talk a little bit more.

You talked specifically about some of the premium mass and the reacceleration there.

But could you just talk a little bit more about maybe some of the specific initiatives that you guys took?

Like, if you were able to move tables and reallocate.

And just what kind of specific you were able to do in the quarter to really drive the improvement that we saw?

Shaun, I tell you, I love these quarterly calls.

I think it's important that public companies are forthcoming.

But, we are joined on these calls by our competitors.

Our marketing strategies are not something that, except in very general terms that I am comfortable in discussing on a conference call, those are management things.

And some of them are pretty inside stuff.

I respect our competitors, but I don't want to be giving lessons.

Sorry.

I think that's very fair.

Maybe if I switch gears, I think you said in the prepared remarks that you were looking at continuing to target some CapEx there at the Wynn Macau property.

Could you give us a little sense, maybe just a little bit more detail on what you're thinking in terms of timing and budget behind that?

Sure.

That's a great question.

When we built Encore, when we developed the east side of the building where the Tree of Prosperity is, and when we created the Encore Tower where the garage was, we made a strategic move.

We abandoned the bussed entrance on the south side of our property and moved the bussed entrance to the north side of the property so that the folks coming from the border and from the ferry terminal would be able to experience the Tree of Prosperity, and enter our shopping arcade from the new end.

Because we had the elevators for the main hotel at the other end.

That is to say, we had a significant change in the source of arrival, the point of arrival of the humans into the building.

That changed the character of the south entrance that was adjacent to the boardwalk, that faces MGM.

When we built the Encore casino, at the far southeastern corner of the building, that created one of the most powerful moments of income for us in the building.

But the west-southwest corner, which is closest to the boardwalk and the central shopping center, that got weakened significantly by the absence of the bus arrivals.

That end of the casino, therefore, has under-performed.

We use it for poker and other things now.

There's a Starbucks there.

But it's a place that gave us an opportunity to redesign and reconfigure.

We took quite a bit of time doping that out and creating drawings, and getting ready, and submitting those things to the city.

And we are awaiting final approval to do the demolition and the reconstruction, which we expect momentarily.

That will be a combination of additional mass space, but also very high-end gaming at a level -- at a level -- and this is the important part -- that equals or exceeds what we are doing in the Palace in Cotai.

The space that we are going to build will redefine the luxury level of that sort of thing in the Peninsula.

And will equal or exceed what we are doing on our own properties in Cotai.

I suspect that -- I think our budget, Matt --?

$65 million for that.

Ian, is $65 million right?

Robert?

It's in around there.

That's correct.

Just the one part is $65 million.

And this year we put into the building how much, Ian?

We put $35 million into our Wynn Tower upgrades and we put another $10 million into the new junket room that opened a few days ago.

We renovated the spa which was $1.5 million.

We then we also did the link, the mass area.

We did that physically.

We spent $5 million or $6 million.

So, over $120 million.

That's right.

It was $60 million this year and it looks like it will be a little more than that in 2014.

Another $60 million.

Yes.

So, we are pretty aggressive.

But the point I would make, Shaun, is I would say that it's not the money.

It is the thought and the creativity that goes into those expenditures that will define our success.

And hopefully, we will be hitting the target correctly.

I think it sounds great.

The last question would be just thinking more big picture.

Steve, obviously you guys continue to spin off a lot of cash flow.

You have a lot of flexibility when it comes to the balance sheet.

Would you ever consider investing elsewhere in Macau if you were to have an opportunity to pick up something that might be non-gaming, given how scarce real estate value is elsewhere, maybe for hotel rooms or for something that you think could continue to appeal to the guest there, as the whole market morphs more towards non-gaming over time?

First of all, we look for opportunities every month, and share our ambition in that regard with the government and other community leaders, to extend and increase our commitment financially to Macau and to the People's Republic of China.

Because, we've done so well in China.

The benefits of our Macau investment have been incredibly important here in Las Vegas.

When that hotel was two years old, because of the success, I was able to spend $2.25 billion to build Encore in Las Vegas.

That was strictly because of our investment in China that we were able to create 7,000 direct and maybe 14,000 indirect jobs here on the Strip.

I think the same thing is true for the Sands.

Were it not for our foreign investment and the wonderful opportunity give to us by the government to participate in Macau, our Las Vegas properties would look nothing like what they are now.

Nor would our employment at the Venetian, the Palazzo, Wynn and Encore be anywhere near what it is today.

All that is due directly to the fact that we were given the privilege of investing in Macau.

So, although I don't like to take issue with the President's statement about the globalization of some American companies, in the case of the gaming companies of Las Vegas, Mr. Adelson's and mine, in particular, Las Vegas has been the principal beneficiary in terms of employment and capital investment of our involvement in China.

I would like to take advantage of the money we make in China by investing more there.

Today, we are reinvesting in Macau more than we made there.

Our accumulated profits are being reinvested in Macau.

Phase1 and 2 will cost $8 billion or $9 billion before we are done on Cotai.

In addition to the $1.5 billion or $1.6 billion we've invested already.

With the help of the Chinese banks we've been able to continue to reinvest and build.

And I'm delighted to do it.

Our new projects on Cotai, phase 1 and 2, are going to be probably 10 million feet altogether.

Less than 3% of that is gaming.

95% or 97% of it is non gaming.

So even in the stuff that we are building now, it's mostly non-gaming -- hospitality, food, beverage and entertainment.

And it's true not only of ourselves, but it's also true of Venetian.

Now, I'm not here to be a spokesman for Venetian, but I know that all of us share a desire to invest as intelligently and as aggressively in China as is humanly possible.

And that's my answer.

Great.

Thank you very much.

Steven Kent with Goldman Sachs.

Steve, can you just talk about your projects in other markets, specifically Massachusetts?

The reason I always ask about this is I think about all the time you and your team are spending in that market.

How do you measure that time spent return versus the opportunity?

How are you thinking about these projects as you move forward?

Okay, fair enough.

Good question.

It's the kind of a question that we ask ourselves at board meetings and in management conversations every month.

We believe that the opportunity to build a destination hotel in the greater metropolitan Boston area, is a really fine business opportunity under the right circumstances.

The state of Massachusetts wants to increase employment, have some steady tax revenues, and they want those jobs to be stable and enduring.

We do, too.

So, we have filed our papers and expressed ourselves and complied with the law, and submitted to a particularly grueling background investigative process.

Which is now concluded.

We faced the situation against the Mohegan Sun folks and we are feeling pretty confident that the facts are overwhelmingly on our side to be successful.

In Massachusetts.

We've said that we are going to invest $1.5 billion or $1.6 billion.

And as is our custom, we'd probably $900,000 or $1 billion and put up $500 million.

That would be our kind of ratio to maintain our investment grade status that we've enjoyed in the past, and keep our interest expenses low and have control of our maturities.

If we invest $500 million, I believe we can make $300 million on equity in Boston.

Now, if you measure every business opportunity against Macau, you will shortly be nowhere.

52 weeks a year except Macau.

It's a stultifying thing, a wonderful thing to be in business in Macau.

But up to now, the returns of investments have been very large, which is why we are reinvesting so rapidly in Macau.

But, we can't judge the rest of the world by Macau.

I don't think we should.

I think we should take our investment opportunities on their own merits and we say -- what is the proper use of our capital.

Now, Steve, there is a second thing about this.

We have eschewed -- that is to say, avoided -- regional casinos, racinos and riverboats because we don't think they have the kind of growth opportunity or the chance for us to use our mojo, our skill set in attracting high-quality players.

Boston, Massachusetts is an international destination city.

Having the Wynn brand in Boston gives that casino a tremendous edge over everything else on the East Coast.

And we've made sure that we back that up with fact.

Our rooms would be better than any hotel that exist in Boston, Philadelphia, New York or any other metropolitan area in the eastern United States, including Atlanta, Georgia or Miami, Florida, or, Chicago.

The largest hotel rooms would be our 500 rooms in Boston.

Also, the physical description of the hotel and its public areas would exceed anything in any city on the East Coast.

That means we would have a competitive advantage.

And we'd be able to take advantage of the thousands and thousands of Asian and Mid-Eastern students who are in school in Boston, whose parents come to visit them on a regular basis.

Boston is a destination city for people around the world.

We have the customer base and the contacts to take advantage of it and bring international business to Boston.

Secondly, there isn't a player -- and I make this statement categorically -- there isn't a gambler, casino customer in the United States of America that doesn't know our brand.

There isn't a player in New England or Pennsylvania, New Jersey, Delaware or New York, that won't come to a Wynn if they can get to it if it's in Boston.

To the exclusion of the competition, in many respects.

Finally, a hotel of that caliber in Boston will also give us, in a manner similar to Harrah's, more access to people who will get to know us even better in Boston, and therefore may come to Las Vegas.

One of the things that we've seen with all the other conversations about Las Vegas, is that domestic businesses on the wane.

That is to say, that it's decreasing.

The amount of casino and slot revenue, domestically, is less now in this city than it was 10 years ago because regional casinos have cut into the Las Vegas pie.

It's not that Las Vegas isn't highly regarded and the destination of choice.

But instead of visiting here four times or five, they come once or twice, because they go to the stuff locally.

By us having a big presence on the East Coast, I believe that helps our domestic component here in Las Vegas.

That and the return on equity is my answer.

Okay.

Thank you.

Carlos Santarelli with Deutsche Bank.

A couple things going on internationally and across the globe.

Could you talk a little bit about how you guys are thinking about opportunities in places like Japan and South Korea, should they come to fruition?

I was in Seoul, Korea last week, as a matter of fact.

Since you mentioned it, I was there.

I went from Korea and Macau Street to Boston last week, incidentally.

Here's what we think about that.

Think about this.

We got a concession in Macau.

Why?

Was it crowded, intense competition?

There were 29 or 30 applicants, leading developers from Hong Kong, all the homeboys, and every major casino company from Australia to Las Vegas and the East Coast.

And, yet, we got the first concession.

According to the scores the government published in the South China Morning Post, we had the highest score.

And I got the concession at the time all by myself, at that time.

Why we got it wasn't because I knew anybody in China.

I didn't know anybody.

I knew Stanley Ho, but that didn't mean anything.

He was competing with me.

We got it because of Bellagio and Barrage.

We got it because of our track record and the kinds of properties that we had created in the past.

That is to say, we got it on the merits, the old-fashioned way.

Now, let's say that Japan decides to go for this two years from now -- and it won't be before that.

If they have anything this year it will be a study bill, and then the study bill will take up another year or so.

And then we will be in decision mode in 2016.

I have to tell you this.

That we understand what it is that makes people pick one company over another, if there's such a distinction has to be made.

It's track record and the quality of their existing projects.

In 2016, the world will see Wynn Palace, in Macau, right up close to Japan.

Just as the Sands Marina Bay is very much a model in Asia, I believe that the Wynn Palace, when it exists, and when people can look at it, touch it and walk in it, it will be the best and most coercive influence on people's decision.

You have to assume that if they make a decision in South Korea, a country that has the most educated and intelligent population in terms of most metrics of any industrialized nation, that if they make a decision in Japan or South Korea, it will be based upon an intelligent assessment of the applicants.

And let's say there's a limited license situation again, then I believe that we will be a front runner, or we will certainly be among the front runners, because of the work that we've done.

Because of our financial statement like Boston.

We just last week, they announced while I was in Boston, on the 22nd of January was the day that Forbes announced the five stars.

And the President of Forbes said that the five stars in your restaurants and hotels in Macau, and spas, and your five stars in Las Vegas in your spas and hotel rooms give you 65 stars in two hotels in these four properties.

And that's more than anyone in the world.

Those are real distinguishing characteristics.

And we intend to take that kind of competitive edge and stick with it.

When we talk about other jurisdictions, wherever they may be, what we will do is put our credentials up.

Credentials are constantly changing and you have to keep reinventing yourself.

But right now, I'm comfortable standing on our track record.

Understood.

Thank you, Steve.

And then I just had two quick housekeeping questions.

Matt or Robert, would you guys be able to provide the cash in Macau currently in that $2.9 billion balance?

And then, just in terms of the tables in Macau currently, it looks like 513 is the number in the release, obviously up from the average in the period.

But were there some incremental tables that came along with the new junket room that you guys spoke about earlier?

Yes, that's exactly right.

The junket room that just opened is the incremental sables.

You will see it on the VIP count, taking in the 513.

The cash is around, a little less than $1 billion onshore and the rest is offshore.

Great.

Thanks, much.

Felicia Hendrix with Barclays.

Steve, while we are on emerging markets ahead of (inaudible) on Japan, last night on the LDS call, I know you didn't listen to it, Sheldon made an interesting comment.

He highlighted the point that the onerous licensing process for a foreign company to partner with the US gaming operator could make the concept of having domestic partners challenging.

I was wondering your thoughts on that.

I'm sorry.

I didn't hear Sheldon's comments.

Was he referring to the idea of having -- was he speaking about Japan?

I don't know what you meant by hat.

I'm sorry.

Yes, in Japan, I think everybody is trying to figure out, and obviously the rules are written yet, but everyone's probably trying to figure out what and if the partnership structure will look like.

And Sheldon just made an interesting comment, saying that it might not be realistic, given how onerous it is to apply for licensing with a US gaming operator.

Onerous for a Japanese company?

For any foreign company and the process they have to go through.

Mr. Adelson is saying that if you partner with an American company, you might have to endure American scrutiny.

Correct.

Now I get the point.

Well, I think he's right.

Places like Nevada and Massachusetts, New Jersey, they have this process.

It's thorough.

(laughter) Sometimes frivolous, ridiculous.

One time, one of the jurisdictions insisted that we supply proof of ownership of our automobiles.

A marriage certificate from someone who had been married for 55 years.

Stuff that became ludicrous.

Our submission in Massachusetts was 18,000 pages and weighed 225 pounds.

I had some fun with it at our hearing, by saying I love it so much I take it with me wherever I go.

I'm sure everybody's going to read every one of the 18,000 pages.

I think that's the kind of thing that Mr. Adelson is talking about.

Whether Toyota (laughter) or Fuji want to do that.

On the other hand, it isn't clear that being a partner with an American company, for example in Tokyo or Osaka, would subject the Japanese company to the same level of scrutiny and filing applications.

Remember that the law says, for example, in Las Vegas and in Massachusetts, that if you are going to participate in the revenue of the local casino in Massachusetts or Nevada, then you must file suitability papers.

It does not say that if I have a partner in China, that that partner has to file papers.

It specifically does not say that.

So if I were to be partners with -- let's just pick Toyota -- if I was partners with Toyota, Toyota would not be required to be suitable in Las Vegas.

What would happen, is that if Toyota got in trouble and we were partners with Toyota, and Toyota's executives did something particularly heinous, then Nevada might say to us -- they are not suitable partners for you anymore.

But automatically being partners with an American company would not mean that any foreign company, Japanese, South Korean or anyone else, would have to immediately be licensed in America.

I know it happened in the case of Pansy Ho.

But Pansy volunteered to be licensed in Nevada and was found suitable.

The New Jersey people, in a moment of temporary insanity, decided they ought to license her father, or at least gave the impression they were doing that.

A ridiculous thing.

And I think they're going to change their mind and find MGM suitable again, from what I hear.

But that was an exception.

So, what Sheldon Adelson says is conceivably a problem, but I don't think automatically is a problem.

Okay.

That's really helpful.

Moving to Massachusetts, just a few things interesting that are going on there.

We read recently that you are petitioning for lower taxes there to get a similar rate as the tribe applying for the Southern license.

I was wondering if you could address that.

I think it's going to be a moot point.

There was a situation where the tribe, whose last part of their name is Wampanoag --.

Mashpees.

The Mashpees Wampanoag.

They are a tribe -- it's very interesting -- they had some tribal land that was close to Martha's Vineyard and the establishment in Massachusetts says -- oh, no, you don't, we don't want casinos in Martha's Vineyard, go somewhere else.

The governor was concerned that the Indians would get the tribe, would get a compact -- would not have a compact with Massachusetts, but would be allowed to have gaming and Massachusetts would get nothing.

So, the governor started to negotiate with that tribe for a compact.

They came to an agreement at 25% but the Washington Indian authorities said that's too much.

So, they reapplied, Massachusetts reapplied, with a new conditional compact that said 17%.

And apparently that passed muster in Washington.

But the Indians themselves had not yet got their land put into trust, which meant they could not execute on the compact that they had agreed to conditionally with the governor.

That put the state of Massachusetts in an awkward position.

Wait and not award the license in zone two, I think it's called.

Not award the license in zone two.

Wait and see what happens with the Indians.

In which case they then have a compact where at least they'd get 17%.

To that possibility, I raised the question -- well, how would it be if I had to compete with someone down the street within 60 minutes, and I had to pay 50% more for my profit than he had to pay?

I would be broke.

My casino would be in an intolerably disadvantaged position.

My employees' job security would be threatened.

And the tax stream from zone one would be completely undercut to the detriment of Massachusetts.

So, I said -- look, could we maybe have a situation where, if the Indians do get a compact, and you award the license to them, we will get the same rate that they get, after they get it, when they commence operations.

So, MGM and ourselves would pay 17% but you would have at a third person paying 17%, so you would still make more money.

Or, if you give the license to someone else and not to these Indians on a commercial basis, and they pay 25%, we would continue to pay, happily, the 25%.

So, it's a conundrum.

And it's a situation for which the Massachusetts authorities have no immediate answer.

Nor do we.

Except to say, that it would be folly to have two casinos competing with one another where one person pays 50% more in taxes than its neighbor.

That person would go broke -- and it won't be me, I can assure you.

Or Wynn Resorts, it will not be us.

On the other hand, I think the possibilities are more likely that Foxwoods will apply on a commercial level for that third license and agree to pay 25%, not with a compact with the state, but simply as a competitive operator like MGM and ourselves.

So, I think that point is going to go away, most likely.

But at the present moment, it's a bit of a question mark.

Very interesting.

And then, finally, just a housekeeping question.

It looks like you held a bit high in Las Vegas.

Matt, maybe you could give us a hold-adjusted number?

It's in the neighborhood of $20 million.

Okay, great.

Thanks so much.

Jon Oh with CLSA.

If I just look at Macau today, do you think Macau is capacity constrained?

As we look towards 2015 onwards, we expect several properties to be trickling in.

What do you think the supply addition will do to the market?

Do you think there's going to be any period of indigestion?

And what do you think margin levels are going to look like?

Do you think whatever profitability levels you're seeing today, is that going to be sustainable given that you're going to get a short period of supply burst coming in?

Let me dust off my crystal ball, which at the moment is murky.

The simple answer to your first question is -- supply constrained -- do I think Macau is -- no, I don't.

And I think you know why, what the answer to that question is.

I don't think it is.

The second part of your question is much more specific.

You'd like to know what we think will be the arc of revenue and market growth.

Matt Maddox is going to discuss that in just a minute, and so will Ian, who at the moment is in Singapore, or Robert Gansmo.

But I want to point out something else.

When you speak to us, you are not speaking to the Chamber of Commerce, nor to the government of Macau, the tax collector.

You are speaking to a company that thrives in competitive environments.

As a matter of fact, exists because of the competitive environment.

And seeks to capture the top end of that business very much the way a Louis Vuitton or Hermes would in retail.

So, we are not ever actually a reflection of the market trend.

There are always going to be people in the hotel rooms.

There's so many Chinese folks and folks in Asia that are visiting.

The visitation length is growing.

The frequency is being replaced, now, by new blood that's coming to the market every day.

We will always try and get the top end of the market, and we will build and market our buildings accordingly.

So, we are less focused on macroeconomic trends than we are on our ability to run our own business intelligently, and profit from our own experience.

I will ask Robert Gansmo and Ian to chime in on the part of your question that has to do with prognosis.

Go ahead, Ian, if you have any thoughts on the subject.

I've been in Macau for seven years.

As we look at new resorts opening, I've seen 10 new casino resorts open in seven years.

There's always been trepidation about whether the market will be able to absorb them.

And we've gone through various levels of critical mass development.

And people were expecting the Peninsula to suffer severely because of what was happening in Cotai in the phase 1. None of that came to fruition.

The market has remained strong.

And I believe that what's being built in Cotai over the next four years will all be very nicely absorbed.

There will be ramp-up periods for different properties, different people execute at a different level.

And, as you articulated a little bit earlier, Wynn isn't necessarily going to come in and fight with everybody in terms of quality.

When I look at what's being built in Cotai so far and what's coming up, the Wynn Palace will knock everybody out of the park.

So, I'm very confident that we will do extremely well.

One-fifth of humanity live across the border.

We are just starting to reach those people.

Well said.

Matt, do You have anything to add?

No, that's exactly right.

That's exactly right.

Okay.

If I can just follow-up with just one last one.

Just any thoughts on the Macau government.

Do you think that Macau has any room or space to add more properties beyond the six or seven in the pipeline today?

I'm trying to look out beyond the Wynn Palace phase 1 or phase 2. You did touch a little bit about some opportunities you are looking at, to invest in the market.

Is it foreseeable that you could be adding another property in Macau beyond that?

The government has complete control of the answer to your question.

And, do they have real estate?

On Cotai they do.

There's a whole golf course here.

Remember the golf course that Harrah's bought and sold and lost money on?

That golf course is not currently identified as a casino site.

But the government could change that.

The government can change a lot of things, if they decide that it's in the best interest of the community to do so.

I'm sure that as autonomous as the special administrative region of Macau is, that they collaborate and discuss this, as they do in Hong Kong with the central government.

So, I don't know.

Is it possible?

There are six licensed or legally authorized people -- the three primary concessionaires.

That is Mr. Ho's company and Galaxy and ourselves.

And the sub concessionaires of Melco, the Sands and MGM with their partnership.

There are six of us and each of us have more than one operation.

Sheldon Adelson's company has the most.

Galaxy is coming up fast with construction.

MGM has started, in the midst of building their second place.

And we are in the midst of a multiple property expansion on our land.

Then, of course, SGM is building.

I think that Melco has a tower going up now.

And then there's Studio City for Melco.

Everybody is trying to maximize their opportunity and they are being encouraged by the government because of employment and taxation.

If the government wants to go further, they will signify that publicly.

They have specifically said that the concessions are now frozen and will remain so.

They have specifically said that the land that's authorized for casino development is this piece and that piece and that piece.

They are very specific about identifying the real estate and they are not agreeing to add to it.

That's my input, based upon my conversations with the government a week ago.

But could they change?

For sure.

It's up to them.

They have complete freedom to do as they see fit.

Okay.

Thank you very much.

Robin Farley with UBS.

Could you give a little bit of color on the timing for Wynn Palace phase 2?

And then, also, just looking at your table mix at the Wynn property, it looked like earlier in the year there was a shift from premium, converting some of those tables to the mass floor.

And then it seemed like it's maybe moved back a little bit in this last quarter.

So I wonder if you could just comment on that.

Robin, I will talk about the tables.

If you notice, our mass tables are actually up to 219 from 203 average in the third quarter, and 199 year on year.

So, that's that new premium mass area that we opened in October, beginning of October that added those additional 15 tables.

So, the mix has actually shifted more towards mass.

And we just added this week, it's only three days old, is the new junket area.

You haven't felt that yet.

You will, starting next week.

Because it looks like from the 80 gaming machines that were taken out, that the tables that were added were basically incremental to VIP.

The mass tables I see went up by 2 tables since your last press release.

It was the VIP tables that had shifted down from Q2 to Q3 and then seemed to have shifted up a bit.

Why is this important, this level of detail?

And you're actually -- you're looking at the wrong numbers.

We added 15 mass tables on September 29.

You just saw the October announcement.

So, that's what happened.

Does it make any difference, really?

Just thinking about the profitability of VIP tables versus the mass and basically how you are yielding tables.

That's why I was asking about the shift.

I think you probably noticed the mass outperformed the market in the fourth quarter.

It was partially due to the addition of the tables, but it was also done to programmatic things that we did.

So, I think, Robin, that, besides the equipment total, the really important thing is who is at those positions.

Again, when the opportunity presents itself in these discussions in the gaming industry, whether it's on conference calls or smaller meetings, I can't stress enough that in a casino, it's all about who is sitting at a slot machine, who is sitting at a table.

How else could 900 slot machines at Wynn outperform over 2,000 machines at the Venetian, when there's 3,000 rooms instead of 1,000.

It's who's at the chair that matters.

So, whether we have 10 more junket tables or 10 more mass tables, what we are trying to do is match the whole experience of the building to the guest's experience of that total.

That has to do with the flow of the building, the adjacency of related elements within the casino.

You can take an array slot machines and tables in one arrangement, with regard to restaurants, bathrooms, doors bus entrances and all the rest, and elevators.

And you will get revenue of X. And then you could take those exact pieces of equipment, shuffle the deck and array them differently with regard to the adjacency elements.

And you can get revenue of 1.5X or 2X.

So, I caution you about our table mix.

And I really would love it if we could have discussions with the analyst about the organization of the casino.

Those are the things --.

I think people on the call understand it's more than just the number of tables.

It was just a question.

Did you have any color on the Wynn Palace phase 2 opening?

Sure do.

Working on it every day for the past 10 months.

It's two towers, two buildings.

It takes our total from 1,701 to approximately 1,500 additional rooms, every one of which has a living room, a massage room, and a his-and-her bathroom.

All suites, all of them, 100%.

When we say that we are going to hold our position and take it to another level, we are not just saying that like a developer yapping.

We are not kidding.

We intend to stake a permanent claim on the premium mass-market business in Cotai because we are going to build 1,500 apartments.

And we are going to give everybody who wants to go to the casino a living room, a bedroom, a his-and-her bathroom, and a massage room in every single room.

And they will be 1,400 feet, pretty close -- 1,370 feet.

So, there, I'm telling you about phase 2/ And it will double the capacity of the Wynn Palace.

Imagine if we get into a contest.

How would you like to have a his-and-her bathroom, Robin, and a massage room and a living room and a bedroom, and 80-inch television sets, and be able to buy that for $300 or $400?

Think that would be okay?

Do you think a gambler would like to do that, or would they rather stay in a Sheraton?

How long after phase 1, do you think?

Is that within two years of opening phase 1?

Two.

So, the competition has a little time.

We are always a little slower.

But I'm telling you exactly how serious we are about the competitive entries.

I was just talking about the rooms.

I didn't get into all the rest of the place.

Because what we are doing with deluxe -- that's a basic room.

That's the lowest level of accommodation in phase 2. Then we get into the entertainment and the food and beverage and the other attractions.

I promise you that we have given the same kind of attention and focus.

And we know exactly and have tremendous respect for our competition.

One of the reasons that we are doing this kind of work is because we respect them so completely.

We take nothing for granted.

If anybody wants to compete with us in 2017 and 2016 and 2017 and 2018, they better have their ankles taped, and they better have their game ready.

Because our Company is entering this competition with a firm desire to have the best performance of any given establishment of comparable size.

As we have in Atlantic City, Fremont Street, the Strip in Las Vegas.

There's never been a market where we didn't have the best-performing property ounce for ounce, table for table, foot for foot.

And I don't see any reason -- we don't see any reason to change our strategy.

Okay, thanks.

I will now turn the call back over to Steve Wynn for closing remarks.

Always nice to have these opportunities to discuss our business and to share our thoughts with our competitors who listen to the calls.

I'm sorry I missed the Venetians call yesterday, but I thought their performance was outstanding in all markets.

And I congratulate Mr. Adelson and his colleagues on such a good job.

Again, my last thought is, look how Las Vegas, its citizens and employees have benefited from the fact that the Sands company and the Wynn company and MGM are doing business and taking part in the global economy.

Were it not for our ability to take advantage of the global economy, all of the current energy on the Strip would evaporate.

Nevada in the United States has been the principal beneficiary of the globalization of the gaming industry.

And I might point out that last year our Company broke a record.

No company in the history of Nevada has won $800 million in gaming revenue, except our Company.

But of that $800 million -- a total of $800 million in gaming and non-casino revenue -- we did $853 million in gaming and we did $1.1 billion in non-gaming, for a total of $1.950 billion in gross revenue.

I have to tell you that this Company had at least $1.2 billion of international income.

That is to say, our customers brought the money from abroad into the United States, which offset a lot of imports, which offset foreign oil.

We are an exporting industry here in Nevada.

Especially because the Venetian, the Sands company, the Wynn company, and the MGM company have brought revenue from abroad into the United states, stabilizing, to a great extent, the employment base of this state.

And offset and improved the balance of payments of the United States of America.

Nevada is an exporting industry.

As much or more than the Walt Disney company.

And the fact that there is a Disneyland in Hong Kong and Tokyo has helped America, not hurt America.

Without a Sands Marina Bay and all those hotels in Macau that Mr. Adelson has built, and the ones that we are building, and have built, things would be much worse in America.

I make that point as my closing observation today.

Thank you very much.

Ladies and gentlemen, thank you for joining today's fourth-quarter 2013 earnings conference call.

We thank you for your participation.

You may all disconnect.