永利渡假村 (WYNN) 2015 Q1 法說會逐字稿

Thank you, ladies and gentlemen, for holding and welcome to the first-quarter 2015 earnings call.

I would now like to turn the call over to our host, Steve Cootey, Chief Financial Officer, Wynn Resorts.

Please go ahead.

Thank you and good afternoon.

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

Gamal Aziz, Linda Chen, Ian Coughlan, Frederic Luvisutto, Robert Gansmo, and Frank Cassella are dialing in from Wynn Macau.

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

With that, I'm going to turn the call over to Mr. Steve Wynn.

Well, the numbers in the first quarter are out.

I think the trends in Macau were beginning to be very visible in the fourth quarter.

But our hopes for an improvement in Chinese new year turned out to be incorrect.

And the repositioning of the market and the degradation of the volumes in VIP have continued even into April.

Most of my remarks now are going to include what we've seen in the first four months, not just the first three months, because the trends that were clear in January and February and March have continued into April.

And as we look at the whole year in Las Vegas and Macau, certain simple truths emerge.

It is no secret that there has been a change in mainland China in attitudes towards a number of things that have impacted Macau.

That has not -- nothing has changed since this all began last October.

And the depression of the VIP market continues.

Business is off 44% or 45% or something like that.

It is impossible for us to predict how long that will last.

We are not in a position to answer those kinds of questions intelligently.

We are only in a position to react intelligently to what we see.

We run this Company, and we have at all times, with a few simple guidelines and principles.

Number one, we want to maximize shareholder value for the people that actually on the Company.

We want to always be able to honor our debts and never have to ask for reconsideration.

In order to do that, we pay careful attention to the capital structure of the Company.

At the core of the whole discussion is what is the franchise of a business like Wynn Resorts or any of the others in the hospitality business.

And it's simply guest experience.

Guest experience is what creates a better tomorrow and allows us to continue in business, eventually raise our prices to offset the rising cost of business.

People that have a good experience tell their friends and they come back again and again.

Guest experience is the beginning, the middle, and the end of the story.

If you accept that as the truth, then of course guest experience is determined by our employees, the people that actually touch our guests and create that experience.

So our attention goes from our balance sheet and our financial condition to maintain flexibility.

But also it goes immediately to keeping our workforce stabilized, happy, and proud to be here.

That's the core of our business plan.

That's the core of our understanding.

And every major decision in this Company is determined by those principles alone -- protect the employee attitudes and morale because the impact and they really create the guest experience.

In order to do that, again, our financial condition has to remain flexible, strong, and secure.

In the 40-odd years I've been in business we have never altered a debt or any of that sort of thing and we don't ever intend to do it.

So as we look backwards for the fourth quarter and especially during the last four months and understand what's happening both in Las Vegas, because of the Asian impact on baccarat, and we look back and then we extrapolate and try and predict the future or at least understand what most likely will be the future, it is foolhardy and immature and unsophisticated to issue dividends on borrowed money.

We only distribute money that's free cash flow based upon our earnings trail.

Therefore, today we lowered the dividend.

As we have raised in the past, based upon financial results, we are lowering it today to $0.50 a quarter.

And I might add that my and my Board of Directors would not hesitate to adjust the dividend down or up based upon performance without a second thought and without any apology.

Dividends are nothing -- we don't say that because we have a business that we now have a $0.50 dividend forever.

That's baloney.

Any company that does that is irresponsible.

We distribute the money that we make after we make provisions for capital expenditures and all of our other obligations to creditors and to our employees.

And then we distribute aggressively whatever is free and easy to distribute after that.

Now, I'm speaking on this call as the largest single recipient of such distributions.

There's a few institutions that, if you take T. Rowe Price, own more shares collectively, at least for the moment.

But they are in individual pockets.

When there's a dividend check in this Company the largest one goes to me.

And so, I say again unapologetically, as a shareholder and as a Chairman of the Board, we believe that you distribute the money that's free and clear cash flow after you've met all other obligations, and the Board of Directors should consider that principle every time they meet each quarter, as we did this time.

And I hope that those comments summarize not only our current attitude but will allow anybody to predict our future behavior, Wynn Resorts, with regard to distributions.

We have two projects that are aggressive and ambitious.

One of them is a $4 billion Wynn Palace in Macau, which, even though we've struggled with adjusting our work schedule on construction to the permissions we've been given for workers on construction by the government, we believe we are going to be open at the end of the first quarter next year in March.

And Wynn Palace will quite simply be the most extravagant and beautiful hotel in the world -- 1,700 rooms and I don't think there has ever been anything quite like what we are going to show off next year.

It took us two years to plan it.

It has taken four years to build it -- a big long project conceived by people with experience, and I think will be a powerful addition to the Macau market, whatever size that Macau market may be at the moment.

We do not know how many tables we're going to have.

That's a very difficult uncertainty to adjust to.

But nevertheless, it is the uncertainty of the moment as to what the government will do.

When we started the project, we had an understanding that the table levels -- that we would need approximately the same amount of tables as we had at the Peninsula Hotel, and nobody objected.

But then subsequent to our beginning, the government made an announcement to institute a cap of a certain percentage of table increases a year.

They've said that the allocation of that percentage of extra tables is a decision that they will make based upon a number of factors.

And they will weigh such factors as diversification, non-casino versus casino.

The Wynn Palace is the most extravagant exercise in non-casino attractions in Macau.

We've taken entertainment to every restaurant.

We've taken massive public entertainment to the front and dedicated a huge portion of our real estate to public entertainment for tens of millions of dollars, approximately $100 million when we are done, with just the front lake.

So it's going to be the big photo op for Macau and it will show up next year, hopefully with enough tables to allow it to prosper.

We will begin construction this fall in Boston.

We've made most of the financial arrangements to finance those projects.

Macau is completely financed.

Boston is almost completely financed at very favorable rates with a debt that is nonrecourse to the parent.

And so, the Company at the moment is on strong financial footing.

I don't know whether, with this change in EBITDA, whether S&P and Moody's will continue our bond rating as favorably as they have in the past.

But the fundamental health of the Company is perfect and without question.

And my intention is to keep it that way without any qualification to that statement.

Now, we will take questions.

And all of the executives in China and Las Vegas are here to get into the detail of these stories.

I just wanted to provide the overview.

With that, we will take questions.

(Operator Instructions) Carlo Santarelli of Deutsche Bank.

You have long been a proponent of having a capital structure that matched the operating environment.

So I don't think this necessarily would come as a total surprise.

But as you contemplated the dividend and you thought about some of the CapEx expenditures that were coming over the next few years, what drove you to make this decision today?

And does it say anything about your view on the outlook for Macau over the next 18 to 24 months other than just what we've already seen and that it remains very murky?

Sure.

So when we were reviewing this -- Steve put it perfectly that we don't plan on dividending out borrowed money.

So if you look at our payout ratio based on our adjusted earnings per share, what we are looking at right now is similar to what we did last year.

So that's really the way we are looking at the capital structure.

And there's so much uncertainty right now in Las Vegas, in Macau, and with our project coming on next year that we are just not going to be dividending borrowed money.

Understood.

Thanks, Matt.

And then if I could, just one follow-up on Macau guidance.

Was there any differential or any meaningful differential between your direct and VIP on the hold side?

Or are what we seeing maybe a little bit of the cost creep from some of the fixed expenses in the business?

I would say that there was really no impact from a hold standpoint on margins.

And clearly, there is a little bit of cost creep.

If you look at the fourth quarter 2014 to the first quarter of this year, you can see that.

And operating expenses a day are up around 7%.

Our new junket rooms well, but the other junket operators that weren't quite as powerful as -- I wouldn't say they scavenged the other ones, but the new junket routes are in the hands of very well-financed operators.

So the rooms were very well received, and they have been lively and they have been busy.

Great.

Thank you both.

Thomas Allen of Morgan Stanley.

So two questions on occupancy -- so in Macau your occupancy held in relatively well.

Some of your peers, you saw sizable drops.

Can you just talk about your expectations of occupancy trends in Macau going forward, especially after we all saw March visitation dropping down significantly?

And then just second part of the question is just on the Vegas we saw a decline in occupancy.

Was that a function of just the CON/AGG comp or something else?

Yes, CON/AGG.

Go ahead, Matt.

Ian, do you want to take the Macau call?

And Maurice, you can add some color on Las Vegas.

We have a slightly different eco-climate on the peninsula.

We also have a smaller inventory of rooms in the big operators in Cotai.

So with 1,000 keys we also had a shift of rooms into our premium mass and mass segment.

So we have some new reward programs where we are getting approximately 100 rooms a day more to our premium mass and mass areas, where we have been able to grow a mid-section of our mass business very nicely despite the downturn of business.

So, we've utilized the inventory where the business is.

So we've kept their occupancy virtually the same as last year.

So in Las Vegas, the first quarter we saw a lot of compression with convention business in the month of January, where there was a lot of opportunity, we just didn't have all the room inventory.

So where you have a lot of business that really was interested in being in Las Vegas during that month, as opposed to the previous year where it was spread out throughout February and March as well.

And of course, you had mentioned March as far as CON/AGG and CONEX, and that was a big impact for us from a revenue perspective well as a room night perspective.

While you are at it, Maurice, how do you see -- we might as well get into this.

How do you see May and June and the summer, at this point, for Las Vegas?

Well, for April and May we have a strong base and a stable base of convention as well as leisure mix.

Summer is going to be interesting.

We are starting to see summer trends not pick up the same way they did in previous year.

So we are paying very close attention to the market and what we are getting as indicators as far as the summer business, but it does not seem as strong at this point as it was last year.

And business in April -- compare business in April compared to business in March.

So April's business is much better than March.

A lot more stable, equal; the bases more equalized with respect to the different segments that are filling our rooms here.

And so we had a better convention base and a better mix.

But in terms of the whole operation in Las Vegas, the EBITDA decline that we have been seeing continues.

It does.

If you were to ask me, since we are making forward-looking statements, what will the second quarter look like in Las Vegas -- weak.

Did you hear me?

Weak.

So I'm trying to lower expectations here.

This notion of a big recovery is complete dream.

I don't think Las Vegas is experiencing a great recovery.

I think it's still very patchy and I think that's probably -- our non-casino revenue in the first quarter was flat.

I would be thrilled if it was flat in the second quarter.

Would you, Maurice?

I would be.

Do you hear that?

Now, here's two of us saying we would be thrilled if non-casino revenue was flat in the second quarter as it was in the first.

My guess is that that's going to be a struggle.

So what you think is driving it?

As you think about this summer, is it the strengthening US dollar?

Is it something else?

And then just -- I'm going to sneak in one more question.

When you talked about Cotai Palace opening up or being ready to open up in March of next year, can you just give us an update on just the labor allocation?

I think there was some issue over that last quarter.

Then I'm done.

Thank you.

Well, on our labor allocation we got less than we asked for.

And then we appealed it and they gave us some more.

Then we made another application and they gave us less than we asked for.

And we appealed that.

I'm not sure how exactly the process works in the calculations that are done at the labor department in Macau.

These jobs, after all, are people from mainland China, just on the other side of the fence.

But there's pressure locally -- I guess it's sort of the locals don't want the streets too crowded or something.

And they put pressure on the local government officials, and they respond; they are very sensitive to local pressure.

So it leaves us in a bit of a quandary.

We never know quite what to expect these days.

And uncertainty -- for our employees we are beginning to notice that our -- we have the lowest -- let me start over on this.

In that town, where there is a 25% to 30% turnover rate, our company stands alone with a current rate of 8%.

All of last year it was 11%.

Our employees are very sticky.

They like us.

They stay with us.

That's a big advantage when you are building a new property.

However, every one of our employees in Macau is a shareholder of Wynn Macau.

And they are counting on the accumulated dividends, the value of those shares as their basic savings.

The current situation in Macau is threatening them.

And unfortunately, I'm not in a position to protect them from the exposures attendant to the changes that have been brought about in the marketplace.

We try and deal with that as we build the new place.

But there's no question that uncertainty is the plaguing word of the day in Macau.

And hopefully, our government in Macau will calm that down and put some certainty back into the picture, and that will be very important to the employees, who are basically Macau citizens.

But they are beginning to feel these rumbles.

And I fear that that may erupt into protests against the government if it isn't settled soon.

And sorry, just following up on my first question, what do you think is driving the weakness during the summer in Las Vegas?

Is it the stronger US dollar?

Is it fewer Chinese -- play out of China?

And then again, I'm done after that.

Thank you.

Both of the two things that you just mentioned are in play.

And secondly or thirdly, the recovery in America is a jobless recovery in real terms.

And inflation in America in real terms is an enormous number.

So I think that the general economic recovery in the United States has been grossly overstated.

And we are an echo of that here in Las Vegas as one of America's main destination resort cities.

And all of you get to hear these kinds of comments from other public companies that are engaged in this business.

And I think a picture is beginning to emerge.

Next question.

Joe Greff of JPMorgan.

Maybe this is a difficult question to answer, Steve, and I think you touched on it in a couple of answers here.

But do you think the Macau government cares if the new projects that are opening in Cotai over the next few years, if those new projects cannibalize the existing base of casino hotels, particularly if that generates disruption to social harmony locally in Macau?

How do those topics of conversation -- how do they go when you potentially bring that up as a topic of conversation with the government there?

What a great question!

First of all, it will impact social harmony.

But the government officials are balancing, I think at this point, a lot of issues that have emanated from Beijing and also emanate from their own population.

How they walk that tightrope and what their decisions are, are at the moment unpredictable to us because we can't sit in their -- we can stand in their shoes.

We don't really know how much pressure they feel in different areas.

We hear their public statements and we certain enjoy private conversations with them.

But they tend to be very formal.

They are never critical of anything directly.

When they want something, they make requests.

It's a very civilized process.

But there's no question that the atmosphere there has changed and become cloudier in terms of predictability and consistency.

It has definitely become cloudy.

They had a press conference.

One of the new ministers, as part of this government, made a statement in front of the legislature that the light rail system, which has been under development for five years that I'm aware of or six years, that they don't have any idea exactly when it will be finished and what it's going to cost.

I'm sure that was a painful thing for the man to say.

His exact words: you cannot excuse the un-excusable.

I'm here just to apologize.

Well, if that's going on at the highest levels of the government in Macau, you can imagine what happens as it filters down to those of us who are part of the resort industry.

So I know if I'm being very helpful in passing on my impressions, but I'm doing the best I can.

Great.

And then I have a quick question following up on your rather crystal-clear comments on the Las Vegas strip.

If you were to look at the non-Chinese resort baccarat player, is that segment on the Las Vegas strip relatively healthier or in good shape?

I would say that it's not necessarily healthier.

I would again look at the same trends that we have with respect to Far East market.

I think that they are paying close attention to traveling over here and whether they should or whether they shouldn't.

So if that's a measurable, it's a little different than watching our high-end play.

We are having this call today on the eve of the upcoming Pacquiao fight and Mayweather fight.

And this -- in my 40-odd years in this town, this is a one-off.

I have never seen madness and demand of this sort.

This fight is probably going to break all records for pay-per-view.

It certainly is breaking all records in what they are getting for tickets.

We have never charged more than $1,500 for a ringside seat in a fight, and they are going for $10,000 and then $7,500 for the medium range and then $5,000 for the ones in the upper tier -- an outrageous amount of money.

Mayweather and Pacquiao are going to not only have to have a fight, but they are probably going to have to do a chorus line or something to justify the cost of this.

But our room rates are at $1,300, $1,400, $1,500 for typical rooms, and you can't get a room in this town.

I've never seen anything like it, even when Hagler fought Leonard and Ali, nothing like this.

And there's a lot of baccarat business coming to town this weekend, a ton of it.

So we are going to have one of these New Year's Eve/Chinese New Year puffs.

But I am trying to give an overview here of what's really going on in terms of the tempo of the city here and in Macau.

And I think we ought to keep our eye on the long view as opposed to the short view.

Thank you for your thoughts.

Shaun Kelley of Bank of America Merrill Lynch.

Just to circle back to the dividend philosophy for a quick second, Matt, you mentioned I think in response to another question the idea of basically a payout ratio as it relates to your current earnings per share.

And I was wondering, is that something that we should look to as a guidepost for this?

And how often should we think that the dividend will be reevaluated?

Is it a quarterly thing, or is it going to be this is what you think you need to get through Cotai from here?

Well, I'm going to answer it.

It's Steve.

It is quarterly reviewed.

We said $0.50 a share because we thought that was a relatively stable number, a couple hundred million dollars.

If we do $1 billion in EBITDA or something like that, we would probably have $400 million in free cash flow.

Right, Matt?

Yes.

So we said, well, we can safely say half of that.

We could have said $3 instead of $2 a year.

But I decided that until we get a clearer picture of this I was going to try to avoid another reduction, if I could.

But I want to make it clear, Mr. Kelley.

I wouldn't think twice, if there was another big change, in changing it every quarter, up or down.

Make no mistake about it.

We do not feel it is appropriate, prudent management to make promises about distribution in a business that fluctuates.

Now, that may be bad news to some investors who would prefer to know that it just comes off like clockwork.

But this is not that kind of a company.

And it's never really going to be that kind of a company.

We will get bigger.

I think we will do fine with Cotai as a percentage of return on its investment.

I think we will do great in Boston as a percentage of return on its investment.

And therefore, the Company will grow and the available cash flow will increase, hopefully, and so will our dividend because we are distribution company.

But at the moment -- one of the benefits of the fact that we are distribution company is that we distributed billions of dollars to our shareholders.

That's good news.

But it's not an inherent promise of a fixed amount of money.

It's only an inherent promise of our approach to the problem.

Hear me on this.

There will be no change in that attitude while I'm sitting in my chair.

Got it.

I think that's crystal clear.

And then I guess a second question, and this is certainly changing topics a little bit, was I noticed in the release that when you look at the mix in the mass business and what you saw during the quarter, it looks -- the hold ratio was up.

It's always been hard to read those numbers, particularly in recent times.

But my question is, did you guys see more of a shift to premium mass in the quarter?

Or was it pretty balanced between what you saw in the more grind mass in the higher-end part of mass?

Just curious as to what you guys saw throughout the quarter.

Linda or Frank in Macau?

I know it's late or early.

Do you want to pick up on that?

Sure.

As Ian said earlier, we have been able to take a lot of the rooms away from junkets and reallocate those to the mass, specifically the mid-tier mass.

So we definitely saw some improvement in the mid-tier mass.

Over half of our rooms are now allocated to the mass and we were able to realize benefits from that.

Great.

Thank you, everyone.

Steven Kent of Goldman Sachs.

I noticed that you upgraded us today.

And then -- did you do it in spite of this call?

Actually, just to be clear, it was my counterpart in Hong Kong who did it, not me.

So we'll be sure to wake him up.

So just, I guess, a question.

Given so much uncertainty in Macau and Vegas, why not scale back the project or delay the project in Boston?

Why not do the same thing in Macau?

Maybe you need to slow that down.

Hold on.

You can't slow it down.

It's being finished and there's bank obligations.

You can't slow it down in Macau.

The building is sitting there.

The skin is on.

They are getting ready to fill the lake.

Staff is hired.

I don't suspect that we are going to lose money in Macau, if you are wanting me to draw that inference.

I'm not implying -- I don't want you to infer that.

Boston -- we have made hard and fast commitments to the Gaming Commission in Massachusetts.

These things are really -- you are very much handcuffed in what you say and what you are required to do in these conditions when you go before these regulatory agencies such as Massachusetts.

You don't get much wiggle room.

You can certainly make sure you have complete drawings and hard and fast numbers on the cost of the project, even if it takes an extra few months to get the drawings done.

And we surely will do that.

But then it sounds like, Steve, that you have a much more bullish long-term view on Macau, a much more bullish view on the domestic market.

I do.

So --

I do, I do, absolutely.

So why don't you lay that out for people?

Because I think there's going to be a lot of anxiety tomorrow that a guy like you who has been around for a while and is pretty thoughtful is cutting his dividend and is talking about how terrible things are, yet is also spending quite a bit of money because you truly believe in the long-term market in Macau and in Massachusetts.

So why don't you lay out why that's the case?

Okay.

First of all, my comments on the dividend are irrelevant to the moment.

They just explain how we approach distributions.

And I think that applies in good times and hard times as well.

In terms of my long-term view, what I object to very often is this unrelenting attempt of CEOs and their agencies in these calls to try and support the stock price with rosy predictions that do not come true.

What I'm interested in accomplishing when we have these phone calls is to build up a structure of trustworthiness and predictability about the way we run the Company.

In order to do that I have to be very candid about what we see and the conditions that we find ourselves in.

And I don't know any other way to handle this and still be true to the notion of creating consistency in the way people perceive the management's common sense and my Board of Directors' common sense.

Incidentally, all of us are totally unanimous on this, on this approach.

If I start to talk about, gee, don't worry about all this, the long term is going to be great, although my instincts tell me that that has to be true -- after all, President Xi Jinping -- he instituted this campaign against corruption based upon his explicit explanation that he felt that there was a perception in the 1.3 billion Chinese that government officials were corrupt -- of course, they were members of the Communist Party -- and that this corruption undermine the public's faith in its government, and therefore he was bound and determined to change that, period.

And he set out on his campaign.

And if we are to believe the South China Morning Post, the leading newspaper of South China and Hong Kong, then thousands upon thousands of public officials have been brought up on accusations of misconduct of varying degrees.

And it's starting at the Politburo itself, which is unprecedented, and descending all the way down the chain of command to local governments.

If this observation is accurate, then Xi Jinping is doing the right thing for the right reason.

Now, does that create a new norm?

I don't know.

People like to use phrases like that, the new norm.

Newspaper people love to be able to make far-reaching and categorical statements.

They are irresponsible when they do that.

There are no far-reaching and categorical statements.

But we know this.

The only reason that President Xi Jinping did this was to strengthen public confidence in his government.

His speeches in Macau in December was unequivocal.

He supports the continuing prosperity and the diversification, like our new resort, of the offerings for tourism and other industries in Macau.

He was unequivocal in that statement.

And he has begun to take steps in mainland China to privatize and to make the government-owned companies either more responsive to the public or to change them to private.

If the Communist Party and its leadership are dedicated to a peaceful, growing, and harmonious China, then it's hard to believe that they would do anything to sabotage one of their key possessions, Macau, going forward -- or Hong Kong, for that matter.

And for that reason one can be very positive about the long-term future of China and its special administrative regions of Hong Kong and Macau.

I look at that big picture to draw my confidence in our participation and hopefully our long-term participation there as agents of development and change, as visitors and guests of that country, to bring about positive results.

So there is my long-term view and the reason for it.

But these short-term implications are significant.

We've lost half the province.

You go from making $4 million a day to $2 million a day.

Now, considering the success we've had in Macau, $2 million a day would be terrific anywhere else.

But compared to the unbelievable events of the past few years, it seems morbid.

It's not morbid.

Am I being responsive to you?

Yes.

Am I explaining why I tend to talk about what we see and what we think?

And I'm trying to deal with the next six or eight months.

And it's hard to do.

I've been doing this for 40-odd years.

I have to tell you -- and I talked to Sheldon.

We are very good friends.

It's hard for us.

It's hard for Rob Goldstein and the rest of the people, our neighbors next door, who are up to their eyebrows in development investments in China.

They've noticed it in Singapore as well.

And then we hear that finally it appears the Japanese are going to pass or on the threshold of passing a study bill.

We've always been told that if they weren't going to do it they wouldn't have a study bill in the Diet.

But now it turns out there's going to be a study bill, it appears, this week.

I spent the day yesterday with the deputation from Osaka, the whole day yesterday with Osaka.

And they were here touring all the hotels.

So there's a lot of good news.

And I love our opportunity in Boston.

And we are going to build the first really grand hotel in the city with nonstop service from every major capital in Europe, Latin America, Beijing, Hong Kong, and Shanghai.

So I don't want to stop anything.

But I want to build them carefully with as much insight that we can gain from our 40-odd years of successful experience.

We've never had a failure in this industry.

We never hit a real bump.

We don't do layoffs.

Well, thanks.

Felicia Hendrix of Barclays.

I'm directing this to Linda and Ian.

But it's also for you, Steve.

And Steve, I realized that in your prepared remarks you said that you can't address this intelligently, given the uncertainty.

But I really do want to hear how you are all thinking about the deceleration in VIP GGR and premium mass as you try to run your business and budget for the future.

Certainly, you must have your own forecast and assumptions for when this deceleration slows, even bottoms out.

I get this question all the time from investors.

I know you get this question.

But considering you have your finger on the pulse of this market a lot or than I do, I really do want to hear your thoughts.

Linda, Linda Chen.

Steve, Linda is in the air traveling, drumming up business.

Okay.

Then you and Gamal can take this one.

I think you are talking about China.

Right?

Correct.

Okay, let's hear it from Macau.

Basically, the opportunity that we have in the decline of the VI business has opened a window for us to attract more of the premium and general mass to the property, which you have seen in the first quarter.

And it actually continues in April.

It opened up more room inventory and it allowed us to invite some of our premium and middle tier of the premium market.

And as you saw, the market declined about 27%; Wynn Macau declined only by 6% or 7%.

So, we are making inroads in that category, in that segment of the market.

And I think that's going to continue.

Every time we have an opportunity in the decline of the VIP, we will open it up for the more aspirational premium and general mass.

So I think that's a balance that's going to continue until there is a stabilization on the VIP front.

Whether that lasts until the second or third or fourth quarter, we will have the flexibility to fill in the room with mass and premium mass customers.

So that's what we --

The President of China expressed, as has the Chief Executive, Fernando Chui, this repetition of the desire for diversification of the offerings in the city.

Wynn Palace is primarily a non-casino attraction.

Billions of dollars of the $4 billion are dedicated to non-casino attractions.

It becomes -- in a few months, when we feel the lake and turn on the fountains and the gondolas start to flow, it will be the photo op in China, just as Bellagio was.

It will be the photo op in China.

If that isn't diversification, then I need a new lesson in the use of language.

But we have followed the guidelines of the government religiously in diversifying the offerings that we have.

And in private conversations with the government I have raised the question of further diversification and I am awaiting their response.

The government is tentative at best in responding to us.

I think that's a reflection of little bit of their own uncertainty under the circumstances.

I repeat again, the tentativeness of the government is a reflection of their own uncertainty, I believe, in many respects, as far as predicting where to go tomorrow or in the near future.

There's a new boss in China, Xi Jinping, and his agenda is something that everybody is adjusting to.

He's a very dynamic man.

He enjoys enormous popularity among the people of China.

And in China the people matter.

And so everybody is waiting and watching.

Steve, do you think that there's a risk as the new properties open this year, if they don't grow the market -- we talked about social harmony a few questions ago.

Do you think that there's a risk if the new properties that open don't grow the market the properties that are slated to open in 2016 could get delayed?

I don't know the answer to that question.

I don't know how you delay Wynn Palace without causing major social disruption in the city.

All of these people -- their shares, their jobs, their future -- these are Macau people -- are sitting in anticipation of that event.

There has never been hotel of this scale in Macau.

And as big as Venetian is, Wynn Palace is a $4 billion hotel.

Now, that money was very carefully spent.

And you say it slowly, 1,700 rooms, $4 billion -- this is a fancy piece of business.

It is a destination creating -- it creates more of a destination for Macau from people from far away -- remember, growth in a market is a phrase I've used before.

Tourism is all about bringing people from over there to over here.

And the way you bring people from over there to over here is to make sure that what's here is better than what's over there.

That simplistic three sentences I just said are at the heart of the way we designed and created based upon 43 years of unparalleled construction, every project we've ever done has changed the market.

We decided that we were going to try and do that again in Macau, and we took our time, as you know, with the Palace.

And it represents our very best effort.

The city benefits from that in its appeal to the outside world, bringing folks from outside China and from all over the Pacific Rim to Macau, just as the other buildings that have been built by Galaxy and by Melco and by Venetian have done that.

The growth of that market, its position as a destination in Asia, is the most phenomenal modern development in the last 50 years.

Why anyone would want to tamper with that or undermine it flies in the face of all the logic that we have been discussing for the past several minutes.

But can there be social disruption?

For sure.

The public and the citizens of Macau have been brought to a higher level of income and a higher level of expectation, and they don't hesitate to express themselves publicly on the subject.

The government is now currently awaiting and hoping there won't be any May demonstrations.

It's just like America.

Everybody has high hopes and everybody gets a little spoiled at times.

And they want what they want when they want it.

And all we do is try and service this expectation as best we can, with the help of the government, hopefully.

Hopefully.

Last just very quick housekeeping, Matt or Mark -- what were the number of tables in Macau in the end of the quarter in mass and VIP?

In the release you gave the average number, but if you could give us the end-of-quarter number, that would be helpful.

Who in my family knows the answer to that question?

Felicia, would you repeat the question, please?

Yes.

The number of tables in Macau, the number of mass tables, the number of VIP tables at the end of the quarter?

In the release it was just giving the average; the average was given.

It was 215 mass and 252 VIP.

Thank you.

That's in our hotel.

Yes.

I thought you meant for the city.

Okay.

Well, the 252 in the release is the average number.

I just -- because you opened up the renovated part of the casino at the end of the quarter, that's why I'm just trying to see what the numbers are.

They are constantly being adjusted, as you know.

We reconfigure --

One of the interesting -- I'm sorry.

Go ahead, Ian.

I was going to say we've been -- we haven't just woken up and thought we need to reconfigure the floor.

We have been reconfiguring between mass and VIP now for nine to 12 months.

And we continue to do that, and it's part of our plan going forward.

So we are constantly re-energizing areas of the casino.

The two new VIP rooms are under construction for eight months.

It closed down the big section of the casino with a lot of disturbance for six months.

Now we have fully operating casino again, but we have future plans as well for the mass casino.

We will continue to recalibrate it and balance between VIP and mass.

Steve Wynn

Here's a point of interest.

When we designed the Palace, it was going to have a spectacularly dramatic front area with the fountains and the gondolas and everything else.

And of course, it was going to be serviced by the light rail; it was going to stop right in the middle of our front area.

Well, whether it stops now or later is irrelevant to the fact that we've had to answer the question, what do we put on the lake?

Well, we put major restaurants and then we put VIP rooms.

And each of them had -- and our pool and our recreation area all look over the lake.

We -- and the gondolas pass over it and look at the recreational area of the hotel from about 30 feet up and about 30 feet out over the water.

It's quite dramatic.

And there's music in the gondolas and air-conditioning in the gondolas as people experience this, to use a Disney term, this E-ride.

Now, we decided to put VIP rooms on the lake, and each one of them have balconies.

Well, you know there has in a crackdown on smoking that's very aggressive by the government.

There's no misunderstanding their intention or their rationale for such things, and our job is to accept those decisions, regardless of our own opinions about those decisions.

Frankly, the air inside our hotel is better than the air outside our hotel.

But, notwithstanding that truth, we were able to take the mass area and some of our regular gaming and put it in these areas on the lake, which means that these tables can take three steps and be outside on a smoking balcony.

It was unintended consequences, but it tends to mitigate the impact of the smoking ban because all of these areas around the lake have terraces that are open aired and will allow visitors to smoke if that's their pleasure.

So there's a little silver lining to the smoking cloud.

We have an advantage that our competitors don't enjoy in regard to that fact.

Just a little piece of business that's interesting about as you reallocate space.

Thank you.

Harry Curtis with Nomura.

Steve or Ian, if you could give us an update on the infrastructure that's needed to accommodate the 10 million to 12 million visitors that are required to generate double-digit returns in Macau?

You have touched on the light rail system.

Are you hearing anything about when that might be operational?

And then we are hearing different things about the bridge.

If you could cover the map on that.

Well, you know the light rail system is a question mark, according to the secretary and his testimony before the LegCo.

Having covered that, we can turn now to the bridge.

Ian and Gamal, what is the latest on our bridge construction?

When I was there a little while ago, the construction -- you can look from a helicopter and see it clearly enough.

The latest estimate on the bridge, Steve -- there are some media reports that it's not going to be done until 2020.

We asked someone high in government and they said that's not correct, that it should he down by the end of 2017.

So that's the latest information, but that's a moving target for these people.

There's different responsibilities, Steve, with different governments.

The Macau side may very well be ready, but on the Hong Kong side they have some big reclaimed land infrastructure to take care of.

So, we are depending on three parties -- mainland China, Macau, and Hong Kong, to get the bridge finished.

So the number has come out.

The year, as Gamal said, is around 2020.

That's pretty much the latest that we have heard.

There you have it.

Okay.

Steve, the last question that I had was if you could discuss whatever issues in Everett that still need to be resolved.

Years ago there used to be environmental issues.

Are there environmental drillings that have to happen?

What about the dispute with the city of Boston?

Just any update on those would be terrific.

Sure.

So we are continuing to move forward in our master permitting process, and we are making a lot of progress with MEPA and the Department of Transportation.

We have performed all of the drilling and testing --

Who is MEPA?

Tell them who MEPA is.

It's the Massachusetts Environmental Protection Agency.

What they do is they will issue a sort of a master permit before you can continue to move forward.

That process will likely continue for another six months as we go through all of our permitting.

And as Steve said, hopefully we will be breaking ground sometime by the end of the year in Everett.

So we are making a lot of progress on that front.

Build it in 2016 and 2017 and hopefully get it open at the end of 2017 or close to it.

We had to make some changes in the plan to accommodate, as we've learned this year, the weather.

And so we've revisited our project to make sure we had adequate snowmelt and the proper disposition of snow when it accumulates so as not to interfere with business.

And again, remember you can't just push the snow into the Mystic River.

That's against the law.

You have to store the water.

You have to deal with the snow when it melts.

And we've accommodated all of those things.

It's a new challenge for us.

It was very interesting to do.

I spent several months with my colleague, the DeRuyter Butler, with whom I designed these hotels.

And we've made changes to ensure that even if there's a blizzard you will be able to turn off Alford Street and be on dry pavement as you go to our porte cocheres or our garage.

I'm very high on the Boston project and I see no reason to say anything else.

But timing will depend on Massachusetts' substantial and formidable regulatory hurdles.

Here's a project between $1.5 billion and $2 billion that has 300-odd million dollars -- Matt, why don't you put a fine point to this?

Hear this now.

This is very interesting.

In order to build something that is the largest employer, private employer, in the state of Massachusetts, that will contribute more jobs and more revenue to the state than anything they've seen in decades, how much money have we spent that is not going into the project itself, Matt, just to get into the position to build?

Just to get into the position to build?

So we have spent $200 million to date on the project and we do not plan on breaking ground until the end of the year.

I think we probably have another $100 million to go this year, Steve, with remediation and various fees that we owe to the Massachusetts Gaming Commission.

So I think we will spend $300 million before we break ground.

Fixing streets in the neighboring communities, working on traffic resolution, environmental, and other things.

The hurdle is substantial.

And that's what it takes to build a grand hotel in Massachusetts.

Welcome to the regulated businesses of America.

The [legal] and bureaucratic challenges are endless.

And this doesn't just apply to our industry.

It applies to all businesses.

And at one point investors and citizens can take note of this as they clamor for more jobs, as they clamor for more governmental support.

Think of the jumps that private enterprise has to make in order to get the job done.

It's daunting.

You can quit, retire, or you can keep up the effort in the hopes that these energies are rewarded at the end of the day by patronage.

It requires a bit of (technical difficulty).

But I guess we are true believers around here, so off we go, onward and upward, Excelsior.

How satisfying is that to the group on this call?

(laughter) You got to have a sense of humor about this stuff, ladies and gentlemen.

I imagine Sheldon is listening and is chuckling at this moment.

Okay.

Thanks, everyone, for dialing in.

Do you have another question?

Or does that put a fine point to it?

Is that enough, I think?

We have reached the allotted time.

Yes.

We are over the hour now.

So thanks, everyone, for calling in.

See you later.

Thank you for your participation.

This does conclude today's conference call, and you may now disconnect.