永利渡假村 (WYNN) 2014 Q1 法說會逐字稿

Good afternoon and welcome to the Wynn Resorts first-quarter 2014 earnings call.

(Operator Instructions)

Thank you.

I would now like to turn the call over to Lewis Fanger, VP of Wynn Resorts.

You may begin.

Thank you and good afternoon, everyone.

Welcome to the Wynn Resorts first-quarter 2014 earnings call.

Joining the call on behalf of the Company today are Steve Wynn, Matt Maddox, John Strzemp, Kim Sinatra, Steve Cootey, Maurice Wooden, and Scott Peterson here in Las Vegas as well as Gamal Aziz, Ian Coughlan, Frederic Luvisutto, Robert Gansmo, and Frank Cassella dialing in from Wynn Macau.

With that said I would like to turn the call over to Matt.

Sure.

Before we get started just need to remind everybody we will be making forward-looking statements under the safe harbor federal securities law and those statements may or may not come true.

Steve?

Okay, so you have got the numbers.

We are very happy with the performance of the company and as we start this year we are going to today perhaps a little differently than we have done in the past.

I am make a few general statements, but there seems to be a lot of appropriate interest in numbers and metrics at the moment in China as well as Las Vegas, because there is a feeling that change is in the air or that things are happening that are worth discussing in deeper detail.

I feel that today a little more than I have in other quarter, so my colleagues and I are going to take a moment or two and deal with some of those metrics.

But we had a healthy increase in Macau in our business.

We had a great year last year and we are up 16% in the first quarter.

There is some specifics about some of the data that is available and there are changes that take place every month and in the mass casino we will address that in just a moment.

But in China our VIP business is holding strong; we see no change.

We are very happy with what is going on in Las Vegas.

Construction in Cotai I will deal with; is on schedule.

We have got six quarters before the place is open and those numbers hit these conference calls after that.

So I think what we are going to do today is we are going to talk first about Las Vegas and some of the things that have happened in the first quarter.

And, Maurice, I will let you talk about that.

Thanks, Steve.

So in Las Vegas we actually felt the growth quarter over quarter, year over year in the first quarter from 2013 to 2014.

If you look at the hotel, the occupancy was up.

RevPAR was up.

By how much?

So occupancy was up approximately 12.6%, Steve.

The RevPAR?

RevPAR was up 12.7% and so our average daily rate was $275 and our RevPAR was $241.

And that made us the most profitable hotel in Nevada.

Correct.

Slots had a significant year-over-year increase as well.

If you look at it, we actually had some reduction of some of the units on the floor to just create better circulation and so the slot win per unit was up 26%.

The overall net revenue was up 7.6%.

And our performance on the Strip is regardless of size, whether we have less rooms or more rooms than anyone else.

Our profitability on the Strip was the highest, as it has been for quite some time.

We had a lower hold percentage in the first quarter by about $10 million, so if you add the $10 million back we are up in Las Vegas.

And we are pacing for a very good year in 2014 as this hotel continues to gather market share and sort of take its place as the hotel of choice on the Strip.

Also in the month of April, Steve, so as we continue to look forward into the year, we have seen great pacing.

We, again, are outpacing year over year our numbers and we have seen anywhere from -- we believe in the second quarter we will be 6% to 7% higher than previous year.

The reason I asked Maurice to do that and I made those remarks a moment ago, there has always been a lot of talk the last couple years from our colleagues up and down the Strip about is Las Vegas recovering.

And I have been a little reticent to say that we see it, but I must say that this year, for the first time, I am willing to say that I see Las Vegas getting a footing that it hasn't had quite as clearly in the past.

So I want to put myself in a category of guys that say I think Las Vegas is sort of growing into its additional capacity that was added in the past.

The opening of the City Center properties at the time that they did, as well as Encore, they came into the market at the worst possible time in terms of the national economy and so we were oversupplied for a while.

Finally, I think we are seeing this year that that supply is getting utilized properly.

So much for -- Maurice or Scott, unless you want to add something about Las Vegas -- I think I feel good about it.

Better than I have in the past.

Let's turn to China.

Matt, do you want to talk about that?

Sure, I will point out some things on our Macau results.

$384 million of EBITDA with a 33% margin.

Again, there were no [luck] impacts in direct or junket play so that margin is stable and what is interesting to point out is the flow through.

If you compare our flow-through from revenue to EBITDA with the competitors, it is very, very strong.

On the VIP side, 26% increase in turnover, 12% increase in win.

On our mass casino we continue to move new -- replace tables from poor performing mass areas into premium mass areas.

In fact, we are up to 62 premium mass tables.

We had 23% increase in mass revenue for the quarter.

However, if you look at April, with a lot of the changes we have made just in the last few weeks April is up 55% in mass revenue, taking the first four months of mass to over 32%.

So we are continuing to feel strong in that market and growing quite well.

Slots, again outpacing the market growth between 30% -- by 30% to 40%, so our slot win was up almost 13%.

I believe the overall market was around 10%, so we are continuing to take share in the slots business.

And all of this, the $384 million, just to point out, in EBITDA is about 25% to 30% more per position than any of our large competitors.

So we give more bottom line money out of our units than anybody else.

So there is 490-odd tables, 492 tables in the Wynn Encore 1,000-room complex on the peninsula.

We are six quarters away from going and adding another 552, so we are going to more than double our business.

And in terms of the mass premium business, the entire hotel is a suite hotel, which is going to give us a very nice position in Cotai as far as capturing a fair share, if that is a modest term this time.

Capturing a fair share of the premium market business and we will take our VIP business into that market as well.

So I am feeling good about the position we are in.

We are a little slower in our growth than some of the other guys because we started a little later as a company.

The fact that we didn't begin this company until 2000 and really get into business until 2005 in Las Vegas and 2007 in Macau has put us behind in our maturity and our evolution as a company.

Our age disqualified us from participating in Singapore, which was unfortunate.

I would love to be able to play that one over again, but we are okay now.

We are okay now in our capital structure, our organization.

Gamal and Ian are on the telephone from Macau.

Gamal, maybe this would be a good time for you and Ian to give some comments on the Cotai project and any observations you make about the peninsula, Ian.

Steve, thank you.

As far as Wynn Palace is concerned, I just visited the site early in the week and we are in great shape there.

We are making great progress on many areas of the energy center, the substation, the basement area, the casino area.

We are basically completing structures, facade walls.

And also walked many of the other construction sites and it looks like we are very, very much organized and right on target.

And many of the areas that were supposed to be completed are completed on time, so I feel pretty good about where we stand construction-wise.

Then also on the organization for Wynn Palace as far as the staffing and the leadership, we have brought on some incredible talent to be part of the opening and management of Wynn Palace.

I feel that our position in Cotai is going to be very powerful as far as the destination that we are working on and we are creating.

It is going to be a category killer, if you will.

Gamal, for the sake of the folks that are following us, are we having any trouble finding construction employees so far?

Not at all, we are right on target.

We have almost 2,000 construction workers on the site and we should be at 3,000 by the end of October, which is also right on target.

We are bringing them when they are supposed to be brought.

As I said, I walked the site and the level of activity is really outstanding, organized, clean, on time.

Unlike some of the other sites that I walked, there seems to be a little bit of disorientation, but it looks like from a labor standpoint we absolutely have no problems with that.

Ian, in the peninsula -- you are in construction.

I want to mention that we made a decision as a company -- myself and Ian Coughlan and Gamal and Linda and the rest of the gang -- that we wanted to make sure that when the Wynn Palace opened up in Cotai in six quarters that under no circumstances would the peninsula go to the back of the bus.

That wasn't an acceptable alternative for us.

And so we decided to energize and look at everything in the Peninsula to make it more than competitive with anything we were doing, even in Cotai.

To that end, a year ago we started planning and drawing a reconfiguration of the casino, the original Wynn casino on the peninsula in Wynn Macau.

That construction of new gaming areas has started and is underway and we are fully permitted by the government.

And we intend to open that for Chinese New Year, for the first quarter in 2015 so that the peninsula is going to have a rather dramatic reveal of new facilities a year before the Wynn Palace opens up.

The things that we are doing in the Wynn Casino in Macau and the peninsula are going to be -- I want to use the right word -- sort of startling in what they offer in terms of VIP gaming.

So we are taking and making every energy and every move we know how to do to make sure that in this wonderful market with such smart and clever competitors that we stay on our toes and that we react with agility.

We are calling upon all of our reserves of good taste and design originality to make sure that we keep up with very cool competitors that we have, who are a group of very smart men and women who are doing a wonderful job.

And I think, if I am not mistaken, in the next 60 months between [Anson Island] and Cotai and Macau's peninsula, that the Macau area once the bridge is finished will probably be the most robust destination tourist center in the world competing with Orlando, Las Vegas, and any other place on the planet.

I see the future of the Macau area, the South China area that is principally defined by Macau and [Anson Island] is probably the most exciting place to visit on the planet.

I think all that is going to be true within the next 60 months.

It is a credit to the government of Macau that they saw this coming and they have cooperated with the government of the Guangdong Providence and this whole [Anson Island] business that is underway.

It is quite extraordinary; coupled with the bridge -- if the investment community thinks that it has been exciting so far, you can strap on a seatbelt for the next 60 months because this is really terrific.

And I think, unless any of my colleagues have anything to add, we will leave it all now to questions.

(Operator Instructions) Joe Greff, JPMorgan.

Hello, all.

Thank you for the detailed information.

I thought it was necessary and I think it is perspective putting.

Of course, you are giving all that information and I'm probably going to ask you for more detail to add to that great data.

Particularly about your comment, Matt, about April being up 55% in mass.

Can you talk about how you are thinking about shifting tables or aiming to yield improvements in table productivity between VIP and mass?

When you look back at the 1Q of the 492 average tables, what is the split between mass and VIP?

Where do you think you can get that?

I know it is always optimizing in a moving environment and it is not static, but if you can help us understand that that would be great.

Sure.

So in terms of the table split, we had 213 average tables in the mass casino in 1Q.

Joe, it is really not how many tables you have in mass, it is are they in the heavily trafficked areas.

And so what we have been doing is converting some of our junket space on the Encore side of the casino into premium mass and reshuffling and we are seeing large increases in the premium mass business.

And April was a good example of that.

So it is really more about yielding the floor and having the right product in the right places and the team on the ground there is working very hard on this.

Also, while we are doing this construction project in the original Wynn casino.

Got it.

We are often getting asked by investors about the credit quality.

Obviously in the first quarter you actually had a contract expense reverse on the provision.

I am presuming that was in Macau or can you clarify or talk about that a little bit?

Sure.

It was a $5 million credit in Macau because we collected receivables that were fully reserved past 180 days, so it was no change in the way we account for things.

We just collected things that were 100% reserved.

You know we are conservative, Joe, and that happens quite often with us.

We tend to be a little skittish and nervous about credit reserves.

Then when the money comes in our auditors jump on us and make us make the adjustment.

Great.

That is all for me.

Thank you so much.

Carlo Santarelli, Deutsche Bank.

Good afternoon.

Matt, you spent a lot of time talking about the mass details and just would you guys mind or is it possible to break out now on an LTM basis or even in the quarter what percentage of your EBITDA at the asset right now is coming from your mass floor relative to your VIP floor?

We haven't given those numbers in the past and, of course, we have them.

Our competitors are doing it.

I think that -- I can tell you we do very well, that is why we make $384 million of EBITDA.

So we are not buying the business in any of those segments and it is flowing through.

Understood.

And just for clarity, I know a lot of times with the mass hold it always becomes an issue on conference calls.

Have you guys thought at all, and maybe if you can give us some other color around those thoughts, about potentially providing the window purchases in your denominator to give a better sense of how hold is influencing, if at all?

We are looking at the right metrics.

What I would tell you is just keep focusing on table win per unit and table win.

Because, you are right, there are a lot of purchases in the cages.

It is an interesting question to ask, but it doesn't get you any smarter.

At least we ask the question and we don't get any smarter; we don't care.

It is pretty steady win.

You know what the edge is in baccarat and it is probably a 24%, 25% game at the end of the day, but the drop or the purchase of chips, like the way we measure in Las Vegas, it is really not a productive exercise in China.

Just look at the win per table.

We have given up on that issue that you are worried about, that you are asking about.

We don't see it as relevant.

Understood.

Then just lastly, moving over to Las Vegas.

It looks as though the discounts and commission line was significantly down this quarter.

It looked a little bit like the 2Q last year when I recall you guys had a credit collection during that period.

Was there anything in the quarter in Las Vegas that may have been somewhat helpful?

It is axiomatic that when the customers get lucky the drop goes down and the markers go down because most understand what happens in Las Vegas.

The customers walk up to the baccarat table in the private rooms and we have a very, very, very strong grip on that kind of business in this town.

They walk into the table and they say to the boss: let me have $1 million and they have established credit.

We put up a table market, a lammer, a little round circle that is visible on television on our continuous taping and we slide the money across.

Now the guy plays, he goes up, he goes down.

He wants to go to dinner; he leaves the money in front of him.

There is no drop yet, there is no handle until -- remember handle in a Las Vegas casino is made up of cash in the box and credit slips associated with markers, as opposed to credit slips associated with chip returns when the rack is too full.

Markers and cash make up drop.

We don't have any drop unless the guy loses, which in many cases they don't sign the marker until they are ready to leave in two days.

They leave the money on the table overnight.

We lock it up with the case, but they are very superstitious about that.

So there is only a table lammer up.

So when a customer, let's say, plays for six hours and at the end of the thing he is up, down, up, down, a couple million dollars but he is up $1 million.

At the end of his play he slides the chips back and says take down the table marker and there is no drop, so there is no credit.

So when the win is down, credit is also down.

When the casino holds a higher percentage you will invariably see our marker -- our receivables and our markers go up.

But it is a peculiarity of the playing habits here and the tradition of Nevada that you are seeing when you see these numbers at the end of the quarter.

So when we say we are off $10 million in EBITDA because of the lower hold percentage, which is in the process of correcting itself as we speak -- it will be the same at the end of the year as it always is -- that is why you see that strange sort of number in the first quarter.

Then really quickly, just the extra Cotai parcels.

Have you guys put any more thought into how you are going to deal with that and do you plan on doing pilings for that before you open obviously Wynn Palace?

We have ground to cover in terms of entitlement from our government and we are hard at work.

We have made some submissions.

We are hard at work drawing.

I am working probably four days a week on it and I have been for the past several months, and we are excited about what we are doing.

It is all suites, all aimed at the mass premium.

Every room we are building in phase two is all living rooms, bedrooms.

Every room has got a massage room.

Every room has got a huge bathroom.

Every room has a living room and huge television sets.

There isn't a single-chamber room in any of our phase two buildings.

Everything are suites.

We are planting our flag at that end of the business and we are going to defend our ground strenuously.

Thank you very much.

Felicia Hendrix, Barclays.

Good afternoon, thank you.

On the peninsula regarding the casino floor construction there, is there any reason to be concerned that your mass gaming momentum could be disrupted by the construction?

No, no, construction has already been -- I'm sorry, Ian.

You can answer.

There is going to be no disruption to our mass casino business and you can see that we started the construction project on the March 24 and we had a record mass month in April.

So there has been no disruption.

We have made sure that we have mitigated any of the construction noise.

We have got a very innovative acoustic wall treatment in the casino which we have been testing on a daily basis and there has been no disturbance.

There has been very little fall off in the number of mass tables.

There seems to be a myth out there that we have lost a lot of mass tables in the casino.

We haven't.

It's in the single-digit in terms of (multiple speakers).

What we did is we hijacked the poker tables.

Felicia, we hijacked the poker tables to cover it.

Great.

Smart, of course.

It was an easy decision.

Moving to the Wynn Palace.

You have talked about and given us details about the rooms and how those are going to be focused on the premium mass market.

Are you ready to share the table mix at that property and how you are thinking about that in terms of percentage of your tables that will go to VIP and grind mass and premium mass?

Felicia, I think that you are in a position to make the judgment as well as we are.

We do the same thing that you all do: we look at our results.

We are moving and changing and adjusting tables just the way Mr. Adelson and [Mr.

Tracy] do or the fellas at Melco and Francis Lui and his people at Galaxy.

And our mix, the percentages you are seeing now at Wynn and Encore at the peninsula represents a pretty intelligent division.

We would be probably be pretty close to that again I would imagine.

Would you say so, Ian?

Is Linda on the call?

I think that you are right.

This is Gamal, Steve.

I think you are absolutely right.

We are monitoring very closely, but the mix will be similar to what we have here, and we also have the flexibility of moving from one segment to the other.

As you said earlier, Steve, the way we are building Macau is just going to be extraordinarily beautiful and you can easily move from one segment to the other.

For example, because of the complications of smoking, all of our VIP and high-end rooms and Wynn Club all have terraces that are on the lake.

They have indoor/outdoor space.

All of them.

Well, any one of these big so-called junket rooms can become premium mass instantaneously and they all have food and beverage.

They have outdoor balconies and they look at fountains, very much like Bellagio, and that kind of a thing.

So we have this tremendous flexibility of being able to turn --.

We made a decision in the design of this building; I think it is worth saying.

We had a front and we put a huge, complicated water feature attraction in front.

Now the question came up: who gets it?

A couple of our key restaurants, but what else goes on it?

Do we put atriums and other public attractions there?

Well, we put a gondola and we made a Disney kind of ride out of it, but we gave a lot of this beautiful space to gaming.

We put our best foot forward with our highest yielding customers and we have also done it in a way that it is convertible.

Flexibility is a very big thing in a market as dynamic as Macau and that was one of the challenges that we faced in designing this building, that it would be ready to move in any direction in terms of the way it functioned.

And that is probably one of the reasons why it took us so long to dope it out.

But it is finished now and I think that most of us are feeling pretty good about the flexibility that we have built into it, because we are facing a market that is, I say, dynamic and changing.

And our competitors, our competitors have lifted the game in a very intelligent and alert way, which has made us raise our game standard as well.

So we got terrific game flexibility.

Not only do we have game flexibility in terms of where we put -- about the amount of tables and whether they are in mass or they are in premium mass or in their junket or in our own VIP program, but we have got flexibility with positions for these groups of tables that are really double sexy.

And that will make a difference, that will make a difference.

When the smoke clears and the rhetoric stops, that will be a big deal.

That is fantastic color, thank you.

Steve or Ian or Gamal, when you think about those beautiful premium mass-oriented rooms, have you all thought about how you are going to allocate those rooms to the premium mass casino player versus have them being cash rooms?

That is a point, we are not sure.

You can take a look at our mix now and that represents our best decision, but I think Ian and Gamal and everybody -- they can talk about it themselves -- they may change their mind.

Well, I'm talking about on the hotel side.

Felicia, I will just give you an example.

Just in the last two weeks we sat down with Linda and we have migrated some of the VIP tables to premium mass with ease.

So as Steve said earlier, we really have the flexibility and the beauty of the space itself allows you to move from one segment to the next without any trouble or construction work or any of that.

This is really an ideal floor for us to move between VIP and junkets and premium mass.

I am sorry, Gamal.

I meant the hotel rooms in terms of --.

Every hotel room is a stunning, beautiful room and I think we have the different tiers of rooms to accommodate VIP, premium mass, and mass.

So we will be in great shape as far as (multiple speakers)

But will you -- what percentage will go to -- I guess I am trying to ask what percentage do you think will just be cash rooms versus giving them to your casino players?

We have got a cash room that is 700 square feet for that kind of customer, but the vast majority of the rooms are 900 square feet and up.

Now they can be cash or VIP or junkets, but there is 1,700 of them.

We only have 1,000 on the peninsula now.

These numbers that we are producing are only with a small room base of 1,000 and we are going to 1,700 in phase one and double that in phase two.

Felicia, obviously the entire inventory will be looked at with an eye towards yielding for the highest performance every single night.

And if you look at our performance in first quarter here in the peninsula, you will see that our occupancy has increased, our ADR has increased, our RevPAR has increased.

And that comes from an orientation of looking at these rooms and making sure that we are achieving the highest yield per room on every single night.

That same methodology, that same approach, is going to happen in Cotai.

We are basically going to give priority to the casino, but we will also be very aware of the extraordinary demand that is out there to allow some of these rooms to be sold to cash.

So our goal is to achieve the highest occupancy with the highest rate.

That is so helpful.

Thank you so much.

Shaun Kelley, Bank of America.

Good afternoon, everyone.

I just wanted to return to the subject on the VIP business, because we are getting a lot of investor questions about what is going on in the market there.

Matt, as we have discussed this in the past, I think you guys are pretty aggressive about your timeline in terms of settlement with the junkets.

And I was wondering if you could just give us any color, broad or specific, as to what you are seeing in terms of your collections with some of your big junket operators and kind of any change in behavior or lack thereof that you have seen?

Sure.

So what you call aggressive, I call conservative.

So we settle at the end of every month, and we do not roll anything.

We do not advance more than 30 days, and it settles at the end of every month.

We have had no issues with any settlements in any of the months, and we are not seeing anything that would tell us that it is coming.

In fact, we have the May Golden Week coming up here, and people seem pretty excited about it.

Thank you.

I think that is good.

Sorry?

I get your question.

We haven't seen -- no, no change.

Thanks.

I think that will be helpful for investors to hear.

Then to just kind of follow through on that then, could you give us your latest mass versus EBITDA, or mass versus VIP kind of EBITDA contribution as you guys are focusing and shifting a little bit more towards mass and premium mass right now?

Is that a statistic you could give us either for Q1 or maybe even for April if you would have it?

Yes, Shaun, people are talking about that a lot.

We are not putting those numbers out right now, but I can tell you there is a significant contribution from mass and slots to our EBITDA, as you know.

Great.

That is fair.

Last question would just be I think as people are looking longer term, they are asking us a lot about the theoretical cannibalization between your two properties.

Between what you're doing today at the peninsula and obviously the huge opportunity on Cotai.

So just could you just give us your thoughts on are you really approaching these or viewing these as two different markets and kind of how do you think about or answer that question of the balance between the two?

That is the $64 question.

If you look at the Sands versus the Venetian and Mr. Adelson's new places you see that the Sands' earnings are near nowhere near what they were when he was alone.

Therefore, you could make an inductive leap that they cannibalized the business.

That is not really what happened and it is not my job to talk for the Sands, but what I prefer, because I think the question comes up because of that comparison or maybe because of the comparison of the place next door to us, StarWorld with Galaxy.

But look here, look at this.

We opened up the Wynn and the other building years ago, the Wynn Encore facility has been existing for a while.

In the meantime, all these magnificent new hotels by Galaxy and Venetian and all the improvements made by Lawrence Ho have opened and what has happened to our earnings on the Peninsula?

They went up.

They went up.

That is to say the expansion of the -- the wonderful expansion of clever buildings on Cotai hasn't affected us in any way that is visible by any metric.

We are thrilled with the advance of our earnings right up until the moment that we made this phone call today.

Now if that is true, it means that if you are careful, if you really tend to your roses in a property like the Wynn Macau and Encore Macau which were built to last --.

I remember several years ago on an annual report back in the days when we actually used to print annual reports, I put a cartoon on the cover of the report and the cartoon on the left there were three pictures.

There was a house of straw with a little pig laying there in a collapsed mode and then there was a house of wood and the pig was collapsed and laying in a pile of wood.

And there smoking a cigar on the roof of a house of bricks was the smart little piggy that built the house of bricks.

I have always thought The Three Little Pigs was one of the greatest business case studies of all time and I put on the top of our annual report we build houses of brick.

The Wynn Macau Encore facility is a house of brick and it has held its market share against massive multibillion-dollar expansions on Cotai.

And it has done nothing but grow, as of this morning.

So when we add in terms of total footage and tables a rather small increment at Cotai we believe that our market share will continue to hold its own, both at the Peninsula -- and I know that Ian Coughlan, my Irish President, CEO in China, is a brutally competitive man.

And I know that he has absolutely no intention of allowing that building to be scavenged.

I don't if that is the right word.

You hear him cackling in the background there.

Am I speaking for you, Ian?

No, you are.

You keep writing the checks and I keep the place running, which is great.

There is room in the city for two awesome properties, Steven.

The rejuvenation of Wynn Macau will keep it at the top.

Gamal, what do you say to that?

I think we are in phenomenal shape and I think the question that you just asked makes a lot of sense, but if you see the level of demand in Cotai and you see what has been built successfully in Cotai and imagine what Mr. Wynn has been describing as Wynn Palace that we are going to open, you realize that we are going to have extraordinary demand for our property there without touching what is happening here on the Peninsula.

And I feel very, very good about what is happening as far as the diversion between the two and the profile of customers that they will attract.

Another thing about our Peninsula property that is worth remembering from time to time, we are very lucky -- and luck is the word for it -- that we were granted the opportunity to build on the site that we built on the Peninsula.

We are surrounded on three sides by Stanley Ho's building, Ambrose So, and Louis Ng and Angela they have a building across the street from us on the main boulevard and then they are on our right on 24 June I guess it is, the Avenue 24 June, with the L'Arc and StarWorld.

And then on the south MGM.

We are surrounded on three sides, so we are in this crossfire.

The Wynn Macau Encore facility has doors on every corner that face the doors of our neighbors and the distance that separates us is the width of a street.

This sort of criss-cross traffic doesn't exist in Cotai.

Everybody has to walk -- even you have to walk between the Venetian and the Four Seasons is a longer walk.

So even though all of us over there are building highly integrated facilities with retail, food and beverage, entertainment, and gaming, the distance you traverse are much greater than those in the Peninsula.

So it is the nature of the customer to like to change their luck and to jump from place to place and the junket operators, of course, have rooms in all the places.

The distance from MGM to Wynn is 70 feet.

Same thing with L'Arc and StarWorld and SJM.

These are some of the factors that play into the fact that our position in the peninsula is geographically, strategically highly protected and I think that is part of a reason we have grown so wonderfully in the last few years.

I think all these things play into the answer to your question is that we are going to hold our spot.

We are going to all of our EBITDA and then add to it in six quarters from now.

Great.

Appreciate everybody's feedback on that.

Thank you very much.

Robin Farley, UBS.

Thanks.

I heard your comments about how you haven't seen a change in VIP.

I wonder if you could give us the same color on VIP in April that you did for mass in terms of what your percent increase is.

And then I have a follow-up to that.

What did you say, Robin?

I'm sorry, you wanted color on what?

You gave a specific percent increase in mass for the month of April and I wonder if you could provide similar for VIP, given your comments that you have not seen a slowdown of any kind?

Okay.

Well, I know that our EBITDA is ahead again in April.

And VIP is up around 10% which is in line -- that is where it has been facing, so again we saw double-digit increase in VIP in April.

Matt, it is also good to mention that we outpaced the market in April also on the VIP, so we are in great shape.

Great.

Then I know you said there hasn't been a change in kind of the repayment cycle with the junkets that you deal with directly.

But I guess that wouldn't necessarily be the first sign of any kind of slowdown, so I wonder if you could talk about what you hear from further down the line of who junkets lending out to the agents on the (technical difficulty).

What concerns them about bank liquidity and their own personal liquidity?

Anything along those lines, not that it would be showing up in your numbers at this point.

I don't think -- if they have those kinds of thoughts, Robin, they are keeping it to themselves.

We haven't had that discussion.

Last time I talked to Linda and I asked her specifically about are they saying anything, what do they feel like, she shrugged her shoulders, no.

So we are not hearing it from them, if I understand your question.

Okay, thank you.

Robin, remember it is not a massive group.

It is a group of very successful people, but when you think of the demographics, the orders of magnitude of People's Republic of China and Hong Kong and Taiwan, we are dealing with a very creamy top end of them.

Even in the mass area we are dealing with the better group in terms of income.

Understood, but in theory a slowdown in liquidity could still affect their personal liquidity even at the highest.

They are prudent business people and they are watching macroeconomics in China just like we are.

And they are being careful and prudent and conservative at times and they have been like that for the 7.5 years that we have been operating so the song remains the same.

Chinese GDP has slowed down from 10% to 8% to 7%, but the number is so big 7% is still a robust number.

I think when we talk about the Chinese bubble, which is a subject now that makes the rounds on Wall Street, I am not sure that we are buying into that.

Generally speaking, most people I know in America really don't get China that much.

They are usually behind in their understanding of China, especially a lot of people that pontificate about it.

Many of them haven't been there.

I think one thing that is important to point out, the corporate credit questions and issues that people talk about in China are very different from the consumer credit.

And consumers in China and even in Macau are seeing their wages increased by 15% to 20%, so there is a very different story with the consumer then there is with these large -- with the corporate credits and so I wouldn't get those confused.

No, it is not confused.

Consumers and wages probably affects the mass market more than VIP, but -- anyway, thanks.

Jon Oh, CLSA.

Thank you.

If I can just ask you a question on your capital structure.

How do you think of it as it evolves over the next couple of years?

And as you expect the Cotai opening and another $4 billion to be spent on the second phase at Cotai, how do you think of the right amount of leverage that you are comfortable in the balance sheet?

We finished our financing recently.

The last tranche was a $750,000 -- $750 million bond.

We sold it at 5.09% with no covenants, nonrecourse to the parent, and that brought our total financing for Cotai to $3.850 billion and an average cost of 3.3%.

Or to put it another way, we rented the $3.85 billion for $125 million.

Now on one hand, as a businessman I am thrilled.

I never dreamt that we would see anything so tasty and wonderful as that.

On the other hand, it is a reflection of questionable fiscal and monetary policy in the United States that has artificially depressed interest rates because of quantitative easing by the Fed, which is also sort of killing the value of the dollar and the living standard of the working people.

So the good news is if you are a high-class borrower with a good credit rating, this is one of the most tasty seasons of all time for two reasons.

You are borrowing money at artificially depressed rates and you are most likely going to pay them back with $0.85 dollars.

It is a perfect storm for a business person, unless you look at the truth of the matter and the impact it has on your customers and your employees.

And that is a much darker story.

It doesn't lend itself to a sound bite, but for every businessman in America and any economists that has their head screwed on right it is an ominous situation.

But in terms of our moment in history, in commercial history and our projects in Cotai, along with our colleagues in the industry, it is nirvana.

Capital structure now is -- these are mostly at the Venetian and Wynn -- things of beauty.

They are lovely, better than you could ever want.

I mean they have got everything: low interest rates, long maturities, low covenants.

What else do you want?

I mean it is great, if you look at it from our point of view.

Look at it from the consumers' point of view or a working person's point of view, who is paying for all this, all this cheap money?

Well, right now the Fed is.

I thought Bernie made off to jail for that, but anyway that is my answer about the capital structure.

Okay, great.

If I can just follow-up with a detail that I think you had in your prepared remarks, you mentioned 552 tables in Cotai if I heard that correctly.

How much confidence do you have in that table count allocation for your Cotai project?

And maybe if I could think about it differently, what do you think is the minimum that you would need to achieve the kind of economics to be proportionate to the amount of investment you have put together?

I will answer your first question with one word: high.

My level of confidence in the 552, high.

We don't make these decisions in a vacuum, you understand.

(multiple speakers)

I don't know what else to say about this.

I have answered your question.

Steven Kent, Goldman Sachs.

Good afternoon.

Steve, could you just talk about the palace as to what will make it a must-see hotel?

You gave a little bit of color on it.

But I guess what I'm trying to get at, looking at what you have built in the past, is the focus to try and get all people in to see it or is it to target the high end?

Is it the ability to bring in mass market to see the property and play or the high end to stay and play?

And I think that is just a little bit different than what has occurred in Vegas over the years where it was really just to bring everybody in to see the hotels, and I feel like this is a little bit of a different strategy for the hotel.

Then specifically on Wynn Macau, occupancy of 98%, RevPAR at $331, the highest it has ever been.

How are you able to keep that Wynn Cotai fresh and attract that level of occupancy levels?

Maybe you could give some specific things that you have changed over the past six months that allows that to be the market leader?

The answer to that two-part question requires an investment conference all of its own.

We are ready to host it for you.

Thank you, but we have always tried to get everybody in to see the property.

Why else would you build volcanoes and pirate ships that sink and fountains that dance?

This time gondolas that go through the fountains and go into the building.

Atria on the north and south with floors that open and gorgeous, huge sculptures come up of Ferris wheels and merry-go-rounds and peacocks whose tails open and 25-foot tall all-floral sculptures of a Faberge egg that opens with a surprise inside that change every month in both atriums.

You would only do that if you were trying to attract the whole world.

Those are public entertainment attractions, that is just where we start with this attempt to attract everybody.

I have spent a couple of years designing this hotel with my colleagues so that it would be the photo op of South China, and it will be.

That is to get everybody in.

Then when it comes to the inside of the building, we make it user-friendly and irresistible, at least in our ambition.

Irresistible in terms of the user-friendliness for mass players, shoppers, diners.

We entertain; we made showrooms out of our restaurants with actual stages and walls that open and close with entertainment behind them in restaurants, because people shop and eat and gamble in China.

So they don't necessarily go to showrooms every night because it is the same people all the time, but they eat every time they come.

So I went and put the entertainment in the restaurants.

This is a new idea that we had where we made the restaurants the theaters.

The whole place is an entertainment platform.

And as far as the VIP, you heard us talk about it extensively earlier in this conversation.

We have gone to extraordinary lengths to make a high-end player, whether he is playing with a junket operator or he is playing on our credit or he is a cash player -- premium mass is the term everybody uses for this customer -- mass-market, high-limit player who's playing areas very much resemble a high-limit pit in Las Vegas.

We have open the door to everybody and that is the answer to the first part of your question.

To the extent that I had enough room on the Peninsula I tried to do it downtown Macau, but I only had a certain -- I only had 900 feet of frontage.

It was only a 14 acre site, so our ability to stretch out and do theater was a little bit limited, but we still have the Tree of Prosperity, that whole lobby and the fountains in the front.

When it comes to the second part of your question, which has to do with how do we keep our occupancy and our RevPARs dynamic, is that right, Steve?

Is that what you said at Cotai?

Yes.

It seems to me that the answer to the question is we will do exactly what we are doing on the peninsula: working every sector of the market, creating --.

Listen, the only thing left to do in the industry that we are in -- in spite of all the technology, in spite of all the imagination, the only thing left to do, and I don't mind being quoted about this and I don't mind saying it, because I know all my competitors are listening, is to do the basics better.

I will say it again, the only way you take this to another level is by doing every little thing better.

From human resources, every aspect of services, purchasing, interior designing including lighting, as well as the decorative elements and fixturization of the place.

Everything has to be better.

And the only reason our RevPAR and our EBITDA per table is better than the rest of the guys is because we subscribe relentlessly to that principle.

So if we build another hotel, whether it is in Japan or Boston or Las Vegas or Macau, we only have one move that we know how to make and we have always made it.

Think of the Golden Nugget of Atlantic City, out earned everybody even though it was the smallest place.

Out grossed and out earned everybody on the boardwalk in the peaked years.

Think of the Golden Nugget downtown, out earned and out grossed, had over half of the profits of downtown Fremont Street.

Think of the day that the Mirage opened.

We have owned the leading casino on the strip every single minute that we have been in business for 47 years.

Think of Macau, the most profitable place per foot, per table is Wynn Macau.

Obviously there is a common idea that is a thread through all of this, so what is Cotai going to be?

The most expensive, the most carefully thought out, and the largest place we have ever built in terms of gaming capacity.

Nothing new, Steve.

Same old stuff, but it has worked every single time without exception.

The most successful, largest grossing casino on the Gulf Coast is Beau Rivage.

Never has changed; we have never not dominated with a facility we have built, pound for pound, any market we have ever been in for 47 years.

But we have never had an organization as clever and as deep and as rich in talent as we do now.

All of this thanks to Macau, which has attracted wonderful people not just to our company, but to all the companies.

There is a lot of brainy executives, men and women, at work in Macau taking advantage of this incredible business opportunity that the government has afforded us.

As far as our own company goes, we have got a very simple track record that has been totally consistent.

In 1997 on the cover of Fortune magazine we were the second most admired company in the country.

The reason is that we only have total focus on every single detail of the hospitality business including the gambling part, which is only part of it.

And that is the answer to your question about RevPAR and occupancy.

Those are symptoms, those are affects.

The cause is our focus and our energy on the detail.

Thanks, Steve.

I appreciate that.

Harry Curtis, Nomura.

Just a quick question on Japan.

Steve, if you could assess your position there, please.

Very much like Sheldon Adelson's or KT Lim or Jim Murren's I would say.

We have our top people, including ourselves visiting Japan, meeting with members of the government.

They are visiting here in some cases.

We are meeting with business leaders in various companies, the big companies in Japan.

We are trying to understand the political realities of the moment and doing our best to position ourselves intelligently so that when and if we understand the business opportunity when it matures -- and I think it is well on its way to doing it.

I think probably the chances of it happening in Japan are greater today than they ever have been before.

I think that we are going to have a very clear understanding of the direction the market takes by June when the [diad] acts as I believe it may very well do on this study bill, which will then create a setup for the actual process which will take place in 2015.

I think there is some talk that there would be -- there is some people that would like to have facilities that aid in tourism and excitement up and operating for the Olympics in 2020.

That is an ambitious schedule.

The government will have to act with alacrity in order to allow something like that to happen in Tokyo, Osaka, or Okinawa.

So that is what is going on in Japan.

We are all doing the same thing.

We are all buzzing around there trying to get ourselves in proper position.

At the end of the day it will be a about track record; it will be about reputation, capital structure.

I think it should be anyway.

Who can do the job?

Who can prove they can do the job?

That is the question.

There is a couple of companies that can answer that question affirmatively it would seem to me, that have the capital structure to do it as well.

I think Venetian -- I think Sheldon is listening; he has paid close attention to this.

I know KT Lim is paying close attention to it.

I know that MGM is.

I guess Caesar's as well.

They have other problems as far as money goes, but maybe they will be in position when this happens to put their best foot forward.

But everybody is there.

I am sure that the Melco people, Packer and his partner, Lawrence Ho, will put their foot in.

We will see.

It is a little early, but it is moving.

That is it.

There are currently no further phone questions.

Thanks, everybody.

Speak to you next time.

Again, thank you for your participation.

This concludes today's conference.

You may now disconnect.