永利渡假村 (WYNN) 2014 Q2 法說會逐字稿

Good morning.

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

At this time, I would like to welcome everyone to the Wynn Resorts second quarter 2014 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks there will be a question and answer session.

(Operator Instructions).

Thank you.

Mr. Lewis Fanger, Vice president at Wynn Resorts, you may begin your conference.

Good morning and thank you.

Joining the call today are Matt Maddox, Kim Sinatra, Steve Cootey, Maurice Wooden, Scott Peterson here in Las Vegas, and we have Steve Wynn and the Macau operating team dialing in from Macau.

With that said, I will turn it over to Matt Maddox.

Good morning or evening for everyone in Asia.

Before we get started I just want 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.

So I go ahead and turn it over to Steve in Macau to get this started.

As usual the numbers should speak for themselves.

We're very happy with our business this past quarter.

I'm going to engage in a little different approach in a moment, but with regard to the most important thing in this Company, the progress of our construction on our $4 billion Wynn Palace Hotel in Cotai, I'm happy to say we're on budget, we're proceeding a pace, on schedule, and we're about 18 months out, and still feeling that we'll make Chinese New Year of 2016.

The most frequently asked question of all of us, whether in the United States or in China, is what about Cotai?

What about that Chinese market?

Are the vacillations of the economy in China changing anything?

How do you feel about your prospects of opening the Palace?

What about cannibalization, what will happen to the Peninsula when you open?

The very, very common sense rational questions that have come at us, and as we get closer they become more frequent, and I think that one of the things we can do on a conference call like this today is to give some really serious guidance on how people who have an interest in this Company, who are on this call, analysts, investors, and even our competitors, can address that question, and come up with a very predictable and rational answer.

In order to do that exercise with you today, I'm going to look at the past and at the present, as we try and understand the future.

And I've decided to use a mechanism to explain our Company and our business plan, by comparing ourselves to what I consider to be the most profitable company in gaming, The Sands.

They're our neighbors in Las Vegas, and they're our neighbors here in China.

And they're a very, very well run company.

We all admire them and enjoy being their neighbor.

But as is the case so often in gaming historically and currently, we have a completely different business plan.

One of the words that you hear so often in the press and in this industry is the integrated resorts.

And that word has been bounced around enough that we wanted to find that on our own terms.

When we say integrated resorts, a very important word to us, we mean that the entire place is held together, the enterprise, by a notion of who our customers are, and how we are going to appeal to them.

And then we make sure that every part of the facility is integrated in that concept, in that idea, from the facility itself and especially to the staffing of that facility, the kind of people we look to hire and retain as executives and employees.

And if we're right, and we've integrated properly, then retail, slot machines, food and beverage, room rates, and most of all, profitability, will reflect the truth or validity of that concept that is at the heart of our enterprise.

And as I say, the only, the best way to do that is to compare ourselves to The Sands, the most profitable company in gaming and with operations all over the word, including Macau and Las Vegas.

But The Sands has a different approach than we do, and we're going to define ourselves by giving some comparisons.

And these comparisons that we're going to give of our business plan versus The Sands, I think probably shed more light on what investors and analysts can expect about our Company as we go forward in the next 18 months and launch Wynn Palace.

First of all, in Macau, The Sands has ten times as many rooms as we do.

We have 1,000, they have 10,000.

They have multiples of machines, multiples of tables, multiples of square footage of retail being operated, and multiples of restaurants.

They're twice the EBITDA of our Company, a little better than twice.

We're approximately half as profitable in Macau as The Sands, with only 10% of the rooms.

I'm going to ask my colleagues here to give you some of the data that compares the performance of Wynn to its neighbor.

And let's start with retail sales.

Robert or Frank, do you want it take that?

Tenant sales per square foot at Wynn Macau was $17,000 versus Sands Group at $2,400.

And we get it take 14% of that as rent.

Let's talk about slot machines.

Wynn per unit slot was $105,000 versus their $36,000, close to 3 times theirs.

About 3 times.

How about the tables?

Tables, Wynn per unit $2.4 million versus their $1.5 million, 1.5 theirs

That ratio, they have 150% of the rooms in Las Vegas.

That ratio of 3.5, the yield, compare us to them we're at 3.5 times per unit better, about the same in Las Vegas where they have 7,100 rooms and we have 4,700.

Our run rate for the past six months through June 30th of Las Vegas is a little over $0.5 billion in EBITDA, $501 million, and July has picked up that rate both here and there.

Let's talk about average room rate in Macau for a moment.

Our average room rate was $334.

There's was average of $210.

$210 versus $334.

Right.

Okay.

The reason I mention that is that they make a ton of money.

But the approach that we take in each of these companies is quite different, one from the other.

We have integrated all of our departments under the notion that we're after a certain customer that has an awful lot of discretionary income.

We understand that customer both in America and in China.

And everything we do here with our staffing and the preparation of our facilities is directed at integrating everything for that customer anticipating their needs.

The good news is that we have these high yields, and we're profitable, probably much more so than our size.

But the bad news is that we're a little slower getting online.

In order to integrate these resorts and produce the kind of results that we're describing here today, we have to really grind on every aspect of our buildings as we build them.

So it takes us longer in design development.

Our detail is time-consuming.

I guess the best summary of what we do, and so our EBITDA per room in Las Vegas is what compared to our neighbors?

$34,000 versus $9,300.

3.6 times.

Okay.

And, Scott, in Las Vegas, how does it look?

Is it the same?

Yes.

That was Las Vegas.

Las Vegas, Steve.

How about Macau?

Macau EBITDA per room is $304,000 versus $80,000.

$304,000 versus $80,000.

Now, as I say, The Sands are the most profitable company in gaming.

And a company this has my complete admiration.

The point I'm trying to make here today is that when you ask what will happen to us when we double our tables and increase our rooms by 170%, we tend to have a very positive expectation about a project like that.

And that's what allows us safely to spend $4 billion on a facility in Cotai.

To summarize, I think everything about our Company is rooted in the principle of a story very old but still relevant.

The three little pigs.

We build houses of brick, and our houses of brick take a little longer to erect than some of the others.

But they are built for the long term, and we're seeing that now.

We're seeing it through this day, this last few days of July, both in Nevada and in Macau.

So having made that point, I hope that will be helpful in distinguishing our business plan from our competitors', and maybe be a little bit instructive for those people who are trying to understand what will happen when we open up in 18 months.

Primarily, we are making sure that we do not cannibalize the Peninsula.

Our occupancy is 98.4%.

We have more demand in the premium mass market than we can handle, and we do this on purpose because we want to make sure that as 2016 Chinese New Year rolls around in January, 18 months from now, that we'll be able to spread our wings and keep flying at the same altitude.

I think it's time, therefore, to take questions.

(Operator Instructions).

Your first question comes from the line of Joe with JPMorgan.

Your line is open.

Hello, all.

I have a question on the margins in Macau in the second quarter.

They were a little bit below what we expected, particularly given the relative growth rates of mass versus VIP.

Can you help explain were there any other one-time issues, any kind of hold in direct VIP business that had a negative impact on margins, or any kind of one-time labor expenses that had a pressure on margin?

Matt?

Sure, so Joe you are right on the labor side we had $21 million in additional labor expense.

As you know we announced the additional bonus that had not been accrued for in the first quarter in April.

And so about $6 million of that $21 million was one-time, but that was one thing that affected earnings.

Secondly, we did hold lower in the direct program than our life to date norm.

Are you able to quantify that direct low hold impact?

No.

I don't want to get into that.

We usually don't do that.

But I can tell that you that we did hold about 100 basis points lower than our norm in the direct program.

Got it.

And I mean just broadly, can you talk about the premium mass growth that you obviously talked about just a few moments ago, how much of that is really a trade down from the VIP into that premium mass versus from organic metric on newer mass premium players, or existing premium mass players wagering more?

That question is so complicated, I don't know how to answer.

Joe, you seem to be ahead of us on this.

We saw a slowdown during June in some of the junket operators.

Interestingly enough, it was the smaller, more thinly capitalized junket operators, but the bigger junket operators did just fine.

And then the business I can tell you because it's a public conversation today, that the business in July picked back up again in the junkets.

We're having a good month with our junket operators.

So however choppy it was in June, we're seeing that sort of flatten out again, and do better in July.

We're having the best July ever in the history of Las Vegas, and probably the best July in the history of Macau

And do you think Vegas is benefiting, do you think Las Vegas is benefiting from some of the Macau VIP players maybe going a trip to Macau and going to Las Vegas, or are we just hearing something that is very anecdotal at this point?

It's anecdotal at this point, Joe unless Matt or Steve or Frank or Robert or Gamal is sitting here.

I mean Gamal is very, very preoccupied with Cotai at the moment.

But the guys who are playing with the numbers, do you guys have anything to add to that?

And Maurice is here too.

We've been discuss that a lot internally.

Yes..

I mean we have the biggest share of Asia and Latin business in Nevada, and we have had since I built The Mirage and Bellagio and Wynn and Encore.

Nothing has changed in the last 30 years as far as our position with Asian and Latin players.

We've always been able to keep an edge in that area of casino marketing as long as I can remember.

It's going on 30-odd years now.

So, Steve, I'm sorry.

So --

Yes?

Steve --Yes.

In Las Vegas, we've been fortunate that every segment in the gaming area so all international, domestic and slots have been up.

And so it really isn't just where we feel like it's the contribution of additional parties, customers coming here during this period.

It's really all segments.

Well, there you are.

That was Maurice Wooden, Joe.

Let's take other questions

Thank you guys, that's all for me.

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

Your line is open.

Hi.

Good morning and good evening everybody.

I was just wondering, Steve, I think last quarter you gave a much better prognosis for kind of your overall outlook for Las Vegas.

It seems like that operating environment is continuing.

Could you just give us a little bit more color on what you guys are seeing right now in that business?

And then anybody who's online, any color on kind of particularly in the summer, Vegas suffers from seasonal softness usually do to less convention and group business, and what you guys are seeing on bookings for some of that corporate activity would be helpful?

Well, I mean we're knocking, I mean we've got a couple nights left.

We're pushing $50 million this month in Las Vegas.

I've never had a $50 million July in my business career in 40-odd years in gaming.

Maurice, I think this is your area.

So we actually have focused early in the year looking at the summer, and then obviously, now looking toward the end of the year as far as making sure we have all of our calendars loaded for opportunities.

And so summer is one where we dialed in, and we recognize that if we get contribution from all of the different environments, including hospitality, which is the retail, food and beverage, and then on the slot side, as well as the, again, gaming sides, we felt like this was an opportunity for us to be able to really take and hopefully accelerate what we were doing earlier in the year.

And what we've seen is continued momentum.

And we've been very busy, it's been a very active summer.

We feel like we have a very active calendar going forward toward the end of the year.

And so we're very optimistic.

We want to be the first company to break through a calendar year of over $0.5 billion in profit in Las Vegas.

Beginning to sound a little bit like Macau.

And in order to do that, we have to do $37 million a month for the last six months of the year.

Well, if we hit $50 million in July, that $13 million, we do that a couple of months we won't even need December.

I'm dying to do this.

I've got, all of us at the Company, we're watching this kind of stuff by the day.

I mean we run the Company long term, but we have such fun short term playing these kind of games, and setting these weekly/monthly goals for ourselves.

And so it helps, but I don't know what other color to give you on this.

No.

I think that's helpful.

And I guess just my other question would be a specific one in Macau.

So it looked like some of the retail and other maybe entertainment revenues were a little light versus what we've seen in the last couple of years.

Anything to call out on that specifically in Macau?

Was there anything in the retail shops, or anything that was seen?

You guys saw a difference in customer behavior there with any of the corruption stuff, or anything that might have impacted that?

Well, the corruption stuff, the idea that the central government is making a concerted effort to clarify to the citizens of the Peoples Republic of China that the government is not corrupt is probably a wonderful thing.

I know President Xi has made that an a centerpiece of his administration.

As far as whether we're feeling implications of that in our retail business, that's a very tricky question.

I don't know how to answer that.

Robert Gansmo, Gamal, any of you guys have a take on that kind of a question?

It was mostly in the watch boutique, it wasn't really across the board.

It was specific to a kind of buyer.

Yes.

We noticed a weakness in a watch boutique area.

Sometimes if there's a lot of publicity, I'm going to speculate.

There's a lot of publicity that China's going to have a slow down, or China's having this or doing that, people who live in China, businessmen read that, and just like they do in America, businessmen, they take their eye off their own business and they say well, I better pull back if that's going on.

I don't want to be the last one to react.

And they behave preemptively without actually having a reason to do it, other than the publicity.

We're getting that feeling here, that everybody has sort of over reacted.

The fact that the government is behaving in a very responsible and serious steadfast way is good news for everybody.

But it has a different effect on people emotionally, I think.

We see that in the United States as well.

I don't know if I can give you more on that.

No no.

I think that's really helpful.

Thank you very much.

Our next question comes from the line of Carlos Santarelli with Deutsche Bank.

Your line is open.

Hey, guys.

I just wanted to follow-up on one comment that you made, Steve, regarding July.

I thought you said you were having a record month as well in Macau.

Just given maybe some of the trends that we're seeing in the market through July, I think most people are speculating the market is probably down low to mid-single digits for the month, but you guys sound like you're having a pretty good go of it.

Could you attempt to quantify is that a share gain, and if so on the VIP side or the mass side?

I don't know if it's a share gain, but we haven't had a July as robust as this one since

2011?

Yes.

Since 2011.

This is going to be our best July, Carlos, and it's really across the board.

We were stabilizing on the VIP side, growing on the mass and slots, and it's going to be a great July.

And that's in spite of the fact that those guys at Cotai, namely The Sands and Galaxy and The City of Dreams, they have got really fabulous places, and they know how to run them.

I mean the competition, I said it last quarter, I'm saying it again, this is a very, very serious place.

The staffs at these hotels are all super pro, and we're enjoying this sunny season here on the peninsula, which everybody was predicting was going to be yesterday's newspaper.

Hardly the case.

Hardly the case.

Thank you.

Again, I want to point out that we have never as a Company in my business career, have never been in anywhere except in intensely competitive markets.

We thrive on the intensity of the competition.

It's almost, we do better when the temperature is hotter as far as competition goes.

Because all these wonderful hotels bring all these people to town, and then we get a crack at everybody with our program.

And so we're enjoying the competition here.

Understood.

Thank you.

And just if I could ask one quick follow-up on your table and slot counts in Macau, obviously both were down in the period.

Does that have anything to do with maybe some retrofitting for the smoking, or how should we be looking at the change in count?

I'm glad you mentioned that.

We're in construction on the whole south end of the original Wynn casino, and we're adding two really spectacular spaces that we decided we wanted to introduce into the market for Chinese New Year, one year ahead of Cotai.

So we took and closed half of that casino months ago, and started a very expensive $60 million, am I right?

Right.

Right.

$60 million presentation, and in order to make sure that Wynn Macau could hold its head up against even Wynn Palace, we decided to do this really gorgeous thing, which we're going to show everybody for Chinese New Year in January, one year before the Wynn Palace opens up, Wynn Macau is going to get a shot in the arm that will, it's going to be very important.

So we closed, we're doing these numbers with a big chunk of our casino shut down.

That's right.

Great.

Thank you everybody.

Your next question comes from the line of Felicia Hendrix with Barclays.

Your line is open.

Hi thank you, good morning, good evening.

Matt, just starting off with a point of clarification, so it seems like there will be an incremental bonus expense of about $15 million per quarter on a go forward basis?

No, no no no.

It's the first, the second quarter we had to catch up for the first quarter.

On a go-forward, it's around, it's between $5 million to $7 million per quarter.

Okay.

Thank you.

And that will be rolling in in 2015.

Right.

Okay.

And then just also, on the peninsula at your properties there now, it looks like the promotional expense run rate is increasing on the premium mass side of your business.

I was just wondering if you could help us quantify for that, or how to think about that?

What I can say on that, Felicia, is that our margins have remained very steady in our mass and slots.

So I wouldn't want to get into how much money we're spending to generate these type of returns, but our margins have held in both the mass and slots business in Macau.

Okay.

That's very helpful.

Thank you.

And Gamal, my final question is on labor, particularly with the dealers, and as you planned for the opening of Wynn Palace, can you talk a little bit about how you're thinking about staffing the gaming tables, and how you're going to manage and potentially mitigate the labor inflation we might see there?

I think we're already what Mr. Wynn has done in February, by having an increased bonus and offering shares, he's made the property and this Company far more popular than any of our competition, and we have seen a drop in the turnover and the number of employees that leave the Company.

I think we will have a much better opportunity finding that labor as we open.

So I think we'll be in pretty good shape when it comes to that.

But all of the competition are on the call, everybody's, everybody knows what everybody's doing.

There's no secrets here.

We're all friends, we're all watching each other.

And everybody's going to try and take their best shot, to make sure they're properly staffed.

Okay.

Let's say that's true.

It's also true today.

Everybody's perfectly staffed.

No one's short of employees, everybody's got dealers and waitresses and cooks and housekeeping.

And we all got them from the same place, right?

So when happened?

We got five stars in all of our hotels.

Our service levels are integrated with our business plan.

What do you think is going to happen 18 months from now?

Exactly the same thing.

That's the reason I went through that whole dissertation when we started the call.

Sure, there are always challenges.

There's challenges for Galaxy, there's challenges for City of Dreams and SJM, and there's certainly challenges for Venetian and The Sands.

But the fact of the matter is, the way we meet those challenges and the results that our business plans produce are clearly visible to you, and have been for the past ten years or more.

So the past and the present are the clearest indication of where it's going.

The economy, the competitive market always moves here and there, up and down, sideways, left and right.

But it's the program and the management philosophies, the business plans at their core that define these companies, and tell you where they're going to go, I think.

Yes.

Okay.

Thanks.

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

Your line is open.

Hi.

Good afternoon.

Two questions.

First, I don't know, maybe I miscalculated something, but it looked like the number of slot machines declined in Macau, and I just was wondering what the strategy was--?

It's a remodel, Steve.

It's the remodel, Steve.

Okay.

Perfect.

So that will move back up once that remodel is done?

I don't know.

I'm not quite sure.

We find that we can win the money with less equipment.

In Las Vegas we're winning more money, and I think we dropped off 10 or 15% of our machines, because we changed the presentation of our floor.

We didn't want to look like everybody else.

It's not about how many machines, Steve.

It's who's playing them.

Right.

Steve, this is Gamal, we basically with the drop in number of units, our slot per unit per day has increased substantially as you see in the numbers.

So it's really about those 20% of the customers giving us 80% of our profit in slots.

That's our focus.

And that's why we've been incredibly successful in the last six or nine months, focusing on those customers.

And that actually goes to the second part of the question, which is just the way you've managed your customer base.

Because, Steve, as you said in the beginning, you are going to have more capacity yet, by every metric that you describe you get more profit, more revenue per unit.

As you open up the Palace, is there, I know you feel confident that you'll be able to maintain some of those numbers.

But why won't there be some dilution?

Do you have some sense to some of those metrics, that there is even more depth behind that, meaning that there are even more affluent high-end customers who want the Wynn experience, who will pay similar numbers to what you're achieving in the existing property?

Perfect question.

Perfect question.

And we can answer that question, not because I say so.

Let's just look at it from an entirely different perspective.

We had revenues per unit and EBITDA per room, and all of that other metric stuff four years ago, three years ago, and we looked cool compared to the competitors.

And we're very grateful for that.

Then what happened?

The Sands, The Galaxy, the Melco guys, SJM, built brand-new hotels.

We didn't.

They built gorgeous new hotels.

They put in beautiful VIP rooms.

They dealt with the same junket operators we did.

They put out the promotional allowances for the slots.

They built magnificent suites.

They did everything it appears that we do.

And what happened to us?

Absolutely nothing.

Now if we can hold our head up against that kind of competition, I'm not saying that demand is perfectly elastic for any company.

But I'm saying that there's an awful lot of evidence on the table to indicate that demand for our product may be a hell of a lot more elastic than you might think.

And I say that not out of bravado, or because I'm trying to make myself believe.

I'm just asking anybody who's on this call, including my dinner pal Sheldon Adelson, what are we looking at?

What determines the future?

The situation today.

Nobody can say the demand is perfectly elastic.

But what I am saying is that if you are wondering what is going to happen to us in 2016, take a look at what's happening right now when we're up against the toughest guys in the world who really know what to do.

The facilities at the Venetian are par excellence.

The facilities at The Galaxy and at Melco, everybody has really come out of the box A number 1 first class.

It's something else that's going on here.

It's about a program, a sense of elan, that starts with the employees, and goes from top to bottom.

We've been doing it a long time.

Probably, that's another advantage we have.

At this point in my life, I guess I'm the oldest operator in terms of time on the job of the gang of bosses, that include Francis Lui, and Lawrence Ho and Sheldon and myself.

I think I've been at it not quite as long as Stanley Ho, but probably as long as the guys who work for Stanley.

So we've had a chance to make virtually every mistake you can make, and we're making new ones now.

But we've got our own game down, and we don't play the same game that the other guys do.

And that's one of the reasons why Macau is such a healthy place today, because there's a choice between the Venetian, The Galaxy, The City of Dreams, and a Wynn kind of place, and that menu, that choice is at the heart of the longest of Las Vegas against Indian casinos in California.

Remember when they said if there's gambling in California you can roll up the streets in Las Vegas.

Not quite, not quite.

We adjust, but our program and our sense of ourselves has not changed.

But so again, I'm not guaranteeing what the results are going to be in Cotai, but I'm telling you why we feel sort of comfortable in this environment, and we're feeling very positive about where it's going to go.

We love Macau.

We love the environment of China.

It's steadfast.

It's steady.

It's predictable.

Unlike some other places that I could mention.

Okay.

Thank you.

Yes.

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

Your line is open

Hi.

Good morning.

Just to follow-up on Macau.

Steve, you mentioned that your business has stabilized.

Your volume in the first quarter was quite a bit higher than the second quarter.

The question is, at what level has it stabilized?

What I'm wondering is, has there been a behavior of VIP customers that may take a longer period of time to come back, particularly if they're defensive about the Chinese government's anti-corruption campaign?

You got a feeling about that.

You like to think about it?

Yes.

Harry, July is up from June, but as you can see, the numbers that the government puts out every week, it is still down in VIP year-over-year in single digits.

So we've seen it stabilize and come up from what we think is the bottom in June, and every time we try to predict how quickly it will recover in the past, it has always recovered much faster than we predict.

So what we can tell you is, it's better than it was in June and it feels stable.

And Harry, Gamal Aziz in anticipation of this call, walked into the office about 30 minutes ago and I'm going to ask him to repeat what he read to me.

Harry, this was the exact question posited to Steve a couple of years ago--

June of 2012.

--of June of 2012 about the demise of the VIP business, and his answer was that there has been an increase in capacity of VIPs, and I am not sure the picture's clear of a marked slowdown.

The market is still growing, and I think it will continue to grow.

I think you've seen the VIP business growing since 2012.

It may take a pause of some sort, but we don't think that it's the end of things.

As we've heard it so many times by now.

We've seen a July stabilization after a June drop.

And whether it comes back in the next 60 or 90 days, or it gets like the first quarter in the next 90 days, we don't know.

But we are sensing a stabilization and a tremendous growth in the other segments in the market, namely the premium mass and the slots.

and as you talk to your direct customers, what is their level of confidence in the future?

Have you had those conversations?

Linda's here.

She just came back from Beijing.

Linda Chen.

So when you say stabilize, I think it's only reasonable for all of the high-end customers to take a pause in their recreational spending, that like they say if you feel the economy or the world is going to go for a slower growth, then you're not going to spend as much money on recreation or entertainment.

But I don't think that's actually probably good stable growth, because they are here for the long term.

They're not here to just play and make a great return.

So they are actually looking at gaming as part of their, if you made normal long term recreational entertainment budgets.

I think we are actually seeing more of new customers that have never been to Macau, which is a positive, that there is actually a difference of profile, demographics, of newer mass customers that are coming in that we've never seen before.

So I think for the long term that just means the market will have a lot more potential to grow.

There's a wonderful SAT word from the college board tests.

I remember inexorable.

I love that word.

Inexorable is a word that I think of in terms of the growth of the Chinese economy.

Inexorable, which is a kind of thing you might see on Bill O'Reilly's Word of the Night.

But it means unstoppable.

Now, growth can go from 10 to 6. But the base is so much bigger.

Steve, I'm going to give you the week's award for the Gary Loveman's prize for vocabulary.

Shifting gears, though.

I'm not sure I like Gary Loveman, if it's all the same to you, I'd like to have the Sheldon Adelson award.

If I have a choice, I'll take the Sheldon Adelson prize.

Okay.

So getting back to Vegas real quick, your ADR in Vegas has now come back to around $25 or so.

It's still $25 below the peak in 2007, which isn't all that much.

Yet in an EBITDA per room from that perspective, you are still quite a bit below the pace of where you were back in 2007.

And I'm just trying to understand what the primary drivers of that is?

Is it a mix of customer?

Is it gaming?

What is it?

First of all, if I knew then what we found out after we opened it, Sheldon wouldn't have built Palazzo, I wouldn't have built Encore, and I'm sure that MGM wouldn't have done City Center.

None of us, we all started these projects three or four years in advance of the recession.

Remember, we opened Encore on December 22nd of 2008.

Can you think of a more perfect negative moment to open 2,000 rooms that cost $2.25 billion.

If we hadn't built those rooms, we might be making pretty close to the same amount of money and we would owe $2 billion less.

But hindsight is perfect.

But at this point, it's all history.

What we're saying now is where are we going?

What is the health of the market?

Are we building on our own base?

Are we headed in the right direction?

Are we comfortable about our investment in China?

Do we feel good about Nevada?

The answer to those questions, speaking for myself and my colleagues on this call, is yes we are comfortable about our investment in Las Vegas, we are happy with Las Vegas, we are feeling very up about it.

We're enjoying the privilege of being part of the Macau scene, and looking forward to the future.

When we start splitting hairs about 2007, look, we made $427 with 2,700 rooms, in a place where everybody said you can't make money at the Desert Inn.

Well, that didn't turn out to be accurate.

We made more money than everybody on the strip, including Bellagio, with 2,700 rooms where the Desert Inn was, supposedly at the wrong end of the Strip, another interesting point.

Look, development makes a location.

The location doesn't make the development, unless you happen to be in Las Vegas or you happen to be in the city of Macau.

So when looking back at 2007, it was delicious, and maybe that's, it was what we saw coming in 2007 that allowed us to start that building in 2005.

It turns out, was a capacity we didn't need.

But we didn't need the Palazzo capacity, we didn't need City Center capacity, if I could speak for my friends in the other companies.

But what the heck?

I mean it takes a long time to get these places up and running.

And Harry, if you look at the history of Nevada gaming revenues, it's clearly the domestic gaming that people overestimated.

So the domestic gaming has not grown from 2007 to today like everyone thought.

But the other segments have done quite well.

Alright.

Very good.

Thanks a lot.

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

Your line is open.

Thank you.

I see your yield manage the Macau floor can you give us a little color on the breakdown of VIP versus mass tables?

Who wants to take that.

Frank?

Frank, the Chief Financial Officer of Wynn Macau.

Our VIP win per unit per day is $32,000, mass win per unit is $17,000.

Frank's Casella's father, Danny Casella, was my Chief Financial Officer, and opened the Mirage with me in 1989 on November 22nd.

Sorry.

Go ahead, Frank.

Nice little bit of history.

I was also looking for just kind of the mix on your floor as you kind of yield manage and you shift tables between VIP and mass, where that was in Q2?

Why do you care about that?

We yield managed it, Robin.

We said, okay, some of the junket operators were a little wobbly from time to time.

We add them, we subtract them, then we put the tables back into the mass, if we think we can make more money.

It's the kind of thing we're yield rate managing these tables on a monthly basis.

We acknowledge that we do it.

So does Sheldon.

So does Lawrence, so does Francis, and so does Ambrose So and Lewis Ing across the street.

We all do it.

What color would you like on that?

I want to respond, we want to be accurate

It's just usually a breakdown that you provide in the release in some form.

You usually talk about the number of tables.

So maybe you're not going to provide that going forward?

Yes.

Robin, that's right.

It was 263 VIP tables, 191 mass tables for 455, and that count is down because of all of the construction that we have going on, and some changeovers in pits from VIP to mass.

Okay.

Great.

Thank you.

And then --

Robin, is that important?

Just for my own benefit.

You keep very careful track of that?

It's something we look at in the market, looking for trends with VIP versus mass.

Yes, we look at market share among the operators in the different segments, I think that's what investors generally look at.

Yes.

I see.

I see.

Okay.

My one other question is on Cotai, you talked about how you're going to keep competing as Cotai opens.

So I understand the overall picture.

I'm just wondering when you look at the actual opening, and there are a number of properties with different opening dates within a quarter or two of your project opening, and it sounds as if everything is on track with your project opening, do you care whether other projects open in the same quarter as you?

I mean does that, do you think that will impact--?

Would it make any difference if I did?

I have no control over them.

I was at Cotai when I landed the other day, and activity at MGM and at the Parisian was either nonexistent or light for whatever reason.

So I don't know what the latest scoop is on my colleagues, my friends' projects.

When is Parisian said it was going to open, when will it open?

I'm sure if you ask Venetian, they'll tell you.

About those dates are what they are.

And Wynn Resorts personnel have no control over it.

We just have to deal with it whenever those dates come due.

And the market matures and these projects come of age, then they'll come online.

And hopefully they'll all just have wonderful beginnings.

But we don't have much, because we have no control over it, we don't give it any thought, Robin.

I guess you used the phrase, you deal with it when it happens.

I guess is there anything different about your opening, or about what you do if there are two projects opening that quarter or not?

No.

No no.

What we do is we finish the building.

Hopefully we have the proper time in which to turn it into a campus for two weeks or more, where we run it just for ourselves, and the employees stay in the rooms, and the employees eat in the restaurants and we break down the computers, and we try all of our backup systems, and we just dry run the place for 14 or 20 days if we get the chance, so that when we open the doors to the public, we're ready for them, and we can deliver a service level that isn't scratchy and erratic, and we're not apologizing because this didn't work or that doesn't work.

We try to build into our budget enough money to run the place with full payroll for at least two weeks or more, so that we take the punishment, not our guests.

And we're going to do that no matter who's opening when or what.

The most important thing, first impressions matter, is to get the place off on the right foot, so that the service levels match the elegance of the carpet and the marble and the onyx, and all of the other stuff that we put into it.

So that program is fixed in our mind, and it doesn't relate at all to what the other guys do.

Okay.

Great.

Thank you.

Sure.

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

Your line is open.

Good evening, Steve.

How you doing?

Just great, Tom.

A little jet lag, having fun.

I'm dealing with patience on this side.

We started this investment years ago at $13, so I'm going to reminisce a little bit.

I think the stock is right now at $211 or so.

I don't know how many dividends we've received.

We've experienced the greatest Recession since 1945, and there are questions about the capacity that's being added at Cotai in relationship to the fastest growing economy in the world, and the largest travel market being Asia in the world.

You have companies that are coming public here in the next several months in China that will have market valuations in excess of over $100 billion.

So the wealth that's being created, I don't think that most investors have seen the wealth creation that's going on in Asia that's being experienced right now.

So given the environment of the greatest recession, there's this continuous concern that the amount of capacity that was built in Las Vegas with the lag times that you have suggested is happening with the new hotels going on Cotai.

And if you look at the growth of the economy in China compared to what we've been experiencing here in the United States for the last several years, I think that's where the biggest concern becomes.

But if you go deeper into the numbers and look at the vibrancy of that Asian economy, I think that's where investors are missing the opportunity of understanding how large Cotai can be.

I think they're also missing the fact, something that you've touched on but maybe not directly is that as more of these hotels are built, people will be attracted to come to the hotels.

But what the main attraction is in town, is when they see as you would refer to it, your joint.

Your joint has always filled up because of the people you hire, the way you execute, and the type of products and services you offer your customers.

So with that comment, I think that the opportunity is execution on The Palace.

You say you are on time opening up in 18 months.

I think you also have a great opportunity as customers become more discrete and move from the VIP segment into the mass segment, a segment that you think will make a lot more money on a margin basis, maybe you could just talk a little bit about how you're trying to improve that premium mass experience versus what the VIPs see in the services, and the type of experience that they have compared to your premium mass customer?

Thank you for the kind comments, Tom.

It's been a pleasure having you as an investor all of this time.

I remember when we started the road show, and I came into your office, and it was October of 2002, and everybody pulled their deals off the street, and we were up against it.

And you looked at me and said never mind the speech.

We'll take 5% of the deal.

It was a wonderful moment, and thanks for the kind words, and I will address your request.

It's not been a shabby investment, Steve, and I think we're in for 10% of the deal.

Oh, okay.

So your issue about the premium mass market.

Every time someone asks an important and complex question that can be taken any number of ways.

My philosophy, I think process is the answer to most problems.

I wish they understood that in Washington.

But process.

Back up to something you're certain of, and then come forward again once you've got yourself grounded in a simple truth, come forward again and deal with the complex question.

Okay.

What's the most important thing in our business?

Guest experience.

Who takes care of guest experience?

The staff of employees.

Those are the two central truths on which every decision we make are based.

We ground ourself with those two truths, that if we have good guest experience, people will come back again, tell their friends and maybe pay us more money in the future.

And we say that guest experience is not about the carpet or the onyx, and all of that stuff.

It's 90% about the people because only people make people happy.

So when we are designing the hotel, and we want to get the premium mass, we're saying what's a premium mass besides a term that Wall Street people use when they talk about the gaming industry.

It's that person with more money who likes to come on vacation, gamble, eat, and shop.

But this person has enough money to stay at the best hotel, or whatever they think is the best hotel.

The branding, the cache matters.

And how do they find bout it?

From personal experience.

But before that, word of mouth.

The truth prevails in creating a brand, not the advertising, not the baloney that CEOs like me lay out, but the truth prevails.

So what we do in order to get the premiums of mass market is we build a better product.

And the way you build a better product is to make every single minute detail that goes into the whole better from scratch.

We're talking about the width of the hallways, the balancing of the lighting, the level of sound, the color coordination of the place, if we're talking about the building.

Every single thing is better.

And we are banking on, and here is the key to it.

Guys like myself and the people that I'm in business with, we've been attracted to each other because we all believe that the public gets it, that people do know the difference between pretty and ugly, clean and dirty, that the public has an innate sense of discretion.

Now, there are exceptions.

There are people without any damn taste in the world, and there are people who are very, very discriminating and see every little detail.

But basically, this Company is built on a foundation that says the public knows the difference.

And if we give them that difference, they will reward us with their patronage.

That is the whole secret of Wynn Resorts.

Nothing else.

It isn't more complicated than that.

And that's why we grind on the details.

That's why we take longer to build our places.

That's why we end up outperforming the competition.

We never made a secret of it.

Hell, the guys that work for MGM all work for me.

What happened to the culture?

Damned if I know.

But our culture is pat and simple, and that's how we'll get more of the mass market, and damn it, we'll get more of the mass market, Tom, as sure as my name is Steve.

Not because I say so, but because we're dedicated to a business plan and a common sense program that has never disappointed us.

We think plain and simple, and then we act on it based upon those simple truths, that if we give a better guest experience through our employees, that we will be rewarded with the patronage of the most affluent, the most discriminating, the people who really know the difference.

And those incidentally, are the ones that want better food, that shop in better stores, that want a fancier bedroom to sleep in, that want a bigger TV to watch, and that want to be treated by employees who make a personal connection with them.

And that's our story, and that's all we ever knew, and that's the basis of every decision we've ever made as a family, as a group.

Gamal, am I talking for you?

That's a lot of talking here today, but

Absolutely.

Steve?

Yes.

Steve, I think that's one of the reasons why, as we got through the recession, and I was comparing the recession, the Great Recession back in the 30s, I used 1945 back in World War II, but it was back in the 1930s you had the greatest recession, depression, but the point I was trying to make was, the type of customer that you attract is the type of customer that is able to ride out difficult economic times and that they do come back, and they come back just as the Four Seasons client come back, because they have a greater amount of propensity to spend, because they don't have to spend the money they make from their jobs just on the essentials.

They have that extra dollar to spends on entertainment and travel.

And the amount of travel this we're seeing in Asia, and the growth of the market is unprecedented for most investors that have been in the market over the last 24 years or so.

We have never seen anything like China.

Issy Sharp, you hit the nail on the head.

Issy Sharp, exactly.

We look at Issy, and I did as a younger guy, and said oh boy, who else had it, Bill Harrah when he was alive.

He didn't have the fanciest places, but he had a sense of elan and esprit de corps, that when I went to Reno and stayed in his hotel, the employees lit me up.

It's not the building so much as it is the people.

And Harrah had it, and Issy Sharp's got it.

Those things have changed over years, unfortunately.

Thanks for all your hard work.

It's a great quarter.

Nice conversation, Tom.

Thanks for giving me the chance.

We'll take another question, huh?

We're not in any hurry.

We've got plenty of time.

Actually, Steve, that's the end of the time.

We're right over an hour.

So that was Tom closed our call.

He was the last question.

It was sure fun.

Anyway, we'll see what happens 90 days from now.

90 days from now, we will also have a decision in Boston.

They say on September 12th they're going to decide, and we're waiting to see how that turns out.

Thanks everybody.

See you next time.

Thanks, Matt.

See you, Moe.

This concludes today's conference call.

You may now disconnect.