永利渡假村 (WYNN) 2016 Q3 法說會逐字稿

Good afternoon. My name is Karen and I will be your conference operator today. At this time, I would like to welcome everyone to the third-quarter 2016 earnings call. (Operator Instructions). I would now like to turn today's call over to Mr. Steve Cootey, Chief Financial Officer. Please go ahead, sir.

Thank you and good afternoon. Joining the call on behalf of the Company today are Steve Wynn, Matt Maddox, Kim Sinatra, Maurice Wooden, myself here in Las Vegas. Also on the phone are the operational management teams of our Las Vegas, Macau, and Boston properties.

Before we get started, I just wanted to remind everyone that we will be making forward-looking statements under Safe Harbor federal securities law and those statements may or may not come true. And with that, I'm going to turn the call over to Mr. Wynn.

On this call today, we're going to be dealing with a good deal of technical information and I will be referring and having input in the call from Mr. Cootey, Mr. Ian Coughlan in Macau, and Mr. Maddox.

I personally have been focused very heavily on the finishing touches of all of our construction and fitouts that are associated with the Massachusetts property and stuff that we are doing here in Las Vegas, but I think we should start off today by talking about Macau and Wynn Palace and Wynn Macau, because the Palace is now several weeks old and underway.

The first thing I would mention is that, first of all, we are very happy with the way the property turned out. We finished and completely closed the cost of the place with our contractor Leighton at $4.4 billion and that is now behind us.

There is something about our property in Cotai that I want to frame this conversation today. Our 52 or so acres there is surrounded on all four sides by streets. On the east is the staging yard for the light rail system that resembles a monorail that seeks to bring people from the airport and the Cotai ferry terminal to the various hotels in Cotai. That project has been underway for several years, experienced some developmental complexities and problems and delays, and is now scheduled for completion in a few years.

The staging area and the construction area for the light rail system covers our entire east side and is across the street from our property, the entire parcel, on the east side. Next to it is the airport. The light rail system goes from the ferry terminal and the airport along the entire north side of our property and then makes a 90-degree left-hand turn and goes down the west side of our property.

Across the street on the west side of our property is the City of Dreams, the Melco development, on the right, and then as the light rail proceeds, it passes at the midpoint of our front of our property, a street going perpendicularly west to Venetian.

On the other side, representing the other half of our western front, is the construction job of MGM, and then on our Southside we have the construction job of SJM's hotel that is scheduled to open in the future. MGM is scheduled to open this spring, at the end of May or the beginning of June at last check.

So what we have is an anomalous situation where all four sides of our property are currently the -- being enclosed by either barricades or construction blockades of one kind or another. It has tended to isolate our property on all four sides, and it's made access to the Palace temporarily highly encumbered, crossing the street or getting through these barricades that have been erected by MGM and by the folks who are building the light rail system, and it comes to its first stop with escalators and bridges right in the midpoint of our front yard where our gondola station is.

And, of course, in the short term it has turned out to be a disadvantage having all the barricades and the construction on all four sides, but in the long term, of course, it is very advantageous to us. But in that context, it has represented a handicap in the access that the public has, both in buses, in cars, or taxicabs.

And we have worked in the last month or so in conjunction with the government on trying to mitigate these substantial barricades that enclose our property. And the government has been understanding and sympathetic to our situation and has promised to ameliorate the situation in the next several months. But it is at the moment a handicap for us and one we are forced to deal with.

Scheduling for all of this was supposed to be done when we opened at the time that we broke ground on the hotel, but, as I mentioned a moment ago, there have been delays in all of this, both in the construction of our two neighboring hotels and of the light rail itself.

With that in mind, I still think it would be constructive for us to review the performances of these properties and address issues of cannibalization, of startups and ramp-ups and that sort of thing.

I would add to that conversation one other element, from my perspective. For the past 40-odd years that we have been building these hotels, and the Cotai hotel was number 12 for us, we have followed a philosophy of how to open major destination hotels. And I will describe it as follows.

We open a hotel without any real marketing support or pressure because we are very curious to see what its naked, unstimulated kind of revenues are. And then in the months following the opening, we do a low-keyed opening. In the months following the opening, we constructively and with a very targeted approach ramp up and institute marketing programs both in hotel occupancy and casino revenue and that sort of thing in a very layered fashion that allows us to protect our price.

By not throwing the kitchen sink at a place when we open, we risk less than dramatic instant results, but we also protect our price and instead resort to a more progressive and orderly buildup of our promotional and marketing approaches, based upon what we see when we first open.

With that general philosophical framework in mind, I will let Mr. Maddox, Mr. Cootey, and Ian Coughlan talk about what's happened since August 22. Matt, do you want to go first?

Sure. So, I think as Steve said, the ramp-up at Wynn Palace is clearly taking a little longer than we expected, and likely will, due to the circumstances surrounding the property.

But when we look at what's going on at Wynn Palace and Wynn Macau, comparing September at Wynn Palace, which was our first full month, to October, which we just completed, we have seen in our volume metrics that turnover, mass drop, and slot handle, those increased sequentially from September to October by about 20%, which was in line with the market that also increased from September to October by around 19%.

So Wynn Palace each day is continuing to gain traction in the Cotai market.

Wynn Macau also experienced the same increase from September to October in its volume metrics of about 20%. So while the process is taking longer, we are maintaining our share in these markets, and in September, combined, we were on a normalized basis roughly 13.5% market share. In October, we didn't hold as well in the VIP segment, but from a volume standpoint we have maintained that share.

So, we are happy with the progress, but believe it is going to take longer than we anticipated, due to the challenges in our location. Ian?

We have been open in Cotai for just over 10 weeks. We had a very well-executed opening of all facilities. Customer feedback has been overwhelmingly positive. Rooms and food and beverage particularly are a new standard for the market.

Despite all of the challenges that Steve referred to with the light rail and resort buildings around the property, visitation has been good, particularly on the weekends.

We are very focused on ramping up premium mass, which we believe is a real edge giver, given our service and our facility. When we look at VIP turn for the two properties over at Wynn Macau and Wynn Palace, we have actually doubled our VIP turn versus the previous 60 days since we opened, so the junkets have managed to backfill downtown very effectively. We have a new junket opening at Wynn Palace on November 5. We are also introducing some casual junkets, so we're building up that side of the business.

We are actively bringing back customers that are already in Cotai that were previously Wynn customers, and we're just learning and adapting to a very competitive market. Seeing is believing and people experiencing the property is really going to help us.

We have made a number of significant casino floor changes with game mixes. We are watching how people are adapting to the property, what they enjoy. We have got a lot of new promotions to animate the casino that we've been introducing. We are driving occupancy post the holidays; occupancy has grown 10 points in October. We finished at 81%, and we continue to bring the occupancy up.

Our food and beverage offer and the variety of offer we are altering and changing, again to meet the customer need.

We have been tackling the bus program. We have effectively doubled our buses that are on the road, picking up people from different entry points into Macau and within the city itself. We have introduced a taxi incentive program, which has proved to be extremely effective, and we are going to be coming part of the Cotai Connection, which connects all the properties in Cotai from a bus travel perspective.

At the same time, we're looking at post-opening cost base management. When you open, there is always areas that need to be tweaked and cut back on, and looking back downtown at the cannibalization aspect, pretty much what we perceived was going to happen has happened. There has been a fairly significant impact on our direct VIP downtown because we have a lot of Wynn players that wanted to come and experience the new property. The junkets backfill very well, as I discussed already.

On the mass, we are less affected. Our customers downtown seem to be very peninsula downtown centric; while some of them have experienced our new property, they have been very sticky downtown. And overall, downtown is pretty settled and we're just growing business uptown.

Our competitors are smart people. A lot of the ways that we bring business to the new property is personalized selling, seeing is believing, and we will take care of the players that come to the property and bring new people in over the coming months.

Thanks. Steve, do you have anything to add?

No, I think Ian and Matt covered it.

Pardon me?

I think Ian and Matt have covered it.

Okay. Is there anything else that -- I don't know. Having discussed China, I would imagine the questions about China would be appropriate at this moment, but I want to remind everybody that Bob DeSalvio is on the call in Massachusetts and can update us on that. Bob, you want to take a moment before we take questions to tell us where we're at?

Sure, thanks, Steve. We have gotten off to a really good start on construction. As most everyone knows, we began on August 3, and at this point the foundations are done in the areas of the central utility plant, the garage, the hotel, the casino sections of the building, and we have now started the mass excavation of the dirt from the parking garage area. That represents three floors below the main section of the building and that has gone very well.

We are starting to pour the slabs in the back of the house, in central utility plant areas, and we expect on-site steel deliveries in December, and by first quarter of next year, we will be standing steel in those -- the back of the house and the central utility plant area.

So, so far, a very good fall construction season. Weather has been great. Very -- actually, a little bit of rain, and so that has helped us move things along. So, about 325 workers now currently on site and we are running right on schedule. So all good news on the construction front, Steve.

We have been polishing the invitations, and in the food and beverage promenade and all of those things, we have been able to interest some very substantial local personalities with various forms of food and beverage, and we are in the process of making room for them to join in so that the facility is very locally oriented at the top end with the kinds of people that are very popular in Boston, with the Boston public already. And we think that adds to our general appeal as we go forward in a couple years with that project.

So I think generally that's what's going on. I have spent my time in continuing the planning and the refining of the development of our real estate in Las Vegas, and that planning process is continuing. One of the most interesting things in the 49 years I have been doing this is that the golf course and the available real estate in the Company present so many options that making these final decisions and choices has been extremely challenging and an awful lot of fun, too. With our land, our water, and our location, we are seeking to come to a final layout of all of our facilities that put us in a much stronger position to be a very dominant force in all aspects of non-casino revenue.

I think that I want to share something with the people on the call. Ever since 1989 when we opened the Mirage, the facilities that we have built have always broken the record for casino revenue in Las Vegas and in America. Our casinos have won more money than any other gambling floor in the United States and in the world, with the exception of Asia, Hong Kong, Macau market, and Singapore.

I have made this point in previous phone calls that in spite of the fact that we break the annual revenue for casino numbers in Nevada, we have always had more non-casino revenue, starting with the Mirage. When it went through $500 million, we had $600 million in non-casino revenue. When we did $700 million sat -- $600 million, rather, at Bellagio we did $800 million in non-casino revenue. And at Wynn when we went through $700 million, we had $800 million or $900 million in casino revenue, and then, finally, over $1 billion with the Encore Wynn facility when the casino revenue went through $800 million.

So, therefore, there is always been this pattern of 48%, 47% casino, 53%, 54% non-casino.

In September in this hotel in Las Vegas, I saw something that was even surprising for me, but very encouraging in a point that I will make in a moment. In the month of September, our casino revenue was $1.870 million a day, well over $50 million in that 30-day period. That was probably the biggest number in the world, except for Singapore and Macau, $1.870 million a day.

But what was dazzling to me privately and personally was that our non-casino revenue was $3.340 million a day, and if you normalize hold percentage, because we played a little lucky, the ratio of gaming to non-gaming in the number one casino in Las Vegas was 2 to 1.

I take that development as follows. It tells us that these 43 million people a day -- a year that come to Las Vegas, 800,000 odd people a week, are spending more money and have more disposable income for the non-casino aspects, which are really the drivers in our industry. And therefore, I am heartened by the fact that we have almost unlimited possibility of expanding in convention and other related business on our property in Las Vegas. And that has made the design development process even more challenging and exciting as we exploit our undeveloped real estate in various parts of this assembly on the strip in Las Vegas.

Having made that point and hopefully shared that insight with you, I will turn the questioning over to the folks on the call.

(Operator Instructions). Joe Greff, JPMorgan.

Just on the topic of Wynn Palace, and Steve, you talked about how you're dealing with the handicap of having construction impediments on all sides of the property, in your earlier comments you talked about having discussions with the government. Can you share with us how the government can help here?

And then, with respect to work that you can do without perhaps the aid of the government, does that require meaningful additional CapEx or OpEx to work around those issues?

Well, a good question. In our conversations with the government, we have demonstrated with photographs and examples of how critically impaired the whole front approach was from the body -- from the mass body of Cotai development, and they understood that completely.

And we have offered some suggestions on how, especially on the west side, which is where all the other hotels are at the moment, how they could help us out in creating crosswalks and opening these barricades and stuff like that. And I think Ian, you have been -- you have received a favorable response?

So, what has actually happened, Steve, is the construction work that was taking place on the light rail system directly in front of our property had completely stalled, but the government had been assisting us and they fired up the contractor to finish that aspect of the light rail system.

There is a station right across the road from us as well, which requires a lot more work, but the actual light rail viaduct is being finished as we speak, and that causes a lot of havoc on the road beneath. So I believe in the next six to 10 weeks we will see quite a bit of progress. So the government have been listening and they are helping us out with the frontage of the property.

The second part of your question, about significant CapEx, I spent the month of August there and I have been back again since, and my take on this is that one of the facilities that we have downtown that is extremely well received, called Red 8, which is casual dining, we did in Cotai, but we did it on a scale that, based upon the customer reaction, is not adequate.

So what we are doing on one side of the mass gaming area is building a larger Red 8 to handle the demand that we have had, and that is going to take several months to install, but we had the room to do it and we're going to increase that. So as far as a project goes, that restaurant modification represents what I think is an investment we're going to make of several million dollars. It is not earthshaking, but it is very significant.

We have also added -- we had two spaces in our retail area that we held to ourselves so that we could do exactly what we are doing now, and it's a pattern we've followed. We always leave a number of spaces either unassigned or temporarily occupied so that we can react to the surprises or the things we learn after the place opens.

And so, we had some spaces and we filled them with things that we could move easily that were our own, like a luggage store that we operate ourselves. We actually left 15,000 square feet empty, but shelled in in a critical location and hid it with a false wall so that we would have that capacity and that element to resort to if we wanted to, because each one of these hotels takes on a personality of its own that is, in many cases, surprising or unexpected after the public gets possession of it.

So, the casual dining additions that we are adding don't represent serious capital in the scheme of things, but there are alterations we're going to make in terms of casual dining in the months ahead. Matt, did you have anything you want to add to that?

No, I think that's exactly right.

Okay, is that (multiple speakers)

And then -- that answered my question. Thank you. And then as a follow-up not related to Wynn Palace, there has been recent press in Japan about some desire to restart the casino proposal, which I know has gone really nowhere in the past. Can you give us a sense what your sense is where that might be going now with [any]? Thanks.

We are following it carefully, Joe, and there does seem to be more momentum now than there has been in the past. The parties seem to be coalescing behind the idea and there seems to be momentum. I can't really tell you if it's going to happen or not, but it does feel like there is definitely more action in Japan now than there have been in the past six Diet sessions.

Thank you.

Carlo Santarelli, Deutsche Bank.

Just as it pertains to the Palace and you guys think about the ramp from here, when you think about the VIP business in the 3Q, as well as your mass business, is it fair to look at the VIP segment and say this obviously will ramp faster and we should expect similar drop per day metrics going forward, or do you think with some junket tweaks and stuff there is a lot of room to move there?

And a similar question on the mass side, just in terms of how you guys expect to build that business going forward. Obviously with some of the construction and some of the other marketing that you will start to turn on now, how do you anticipate that ramping?

So, Joe, this is Matt. I think clearly the VIP business at all openings ramps the fastest, just given the nature of the junket operators and then bringing their customers in and the liquidity in that business that is immediately injected.

As Ian laid out, we are planning on growing that business going forward by adding a junket operator and some casual junkets in the relative near term.

On the mass side, we are very focused on capturing our fair share, which is -- or exceeding our fair share of the premium mass business, which is what we've always done. And that is that hand-to-hand combat, acquiring the Cotai players one at a time. And so, we are very focused on that. It will take longer to ramp that business up, but as customers come in and experience Palace, we believe they're going to become Wynn Palace customers.

Great, Matt, and then if I could just follow up on that. When you think about the delta between promos on Cotai relative to the Peninsula, I think you guys were about 25% on Cotai of mass revenue in the quarter. Is that how you are thinking about the strategy there from a promo and discount standpoint with respect to Palace?

Carlo, I will let Ian jump in, but with only 40 days in the quarter under our belt, we plan on growing both significantly. VIP ramped faster than mass, and Cotai is little more promotional than the Peninsula, but it's not a lot more promotional.

I don't think there is a huge -- there isn't a huge variability between what we have been doing downtown and what we are doing at Wynn Palace. We are seeing what works and what doesn't work as well as we thought, and tweaking it, but I don't think it involves huge additional expenditure.

Understood (multiple speakers)

Carlo, this is Steve. Year over year, promos are effectively flat between Wynn Macau and the Palace.

Yes, I was referring more to just the level at the Palace in the future and how you think about that run rate going forward, but I think you guys answered.

Robin Farley, UBS.

I was wondering if you could talk about whether the results in Macau will impact the timing and/or budget for your Las Vegas development, the Wynn Park. Just how we should think about that relationship.

Gee, I don't know, Robin. From my point of view, they're completely separate conversations. Design development in Macau took place years ago, and although we tweaked the property as we go forward, it is fairly mundane compared to the conceptual exercise on the kind of thing we're talking about with Wynn Park.

I guess I meant not so much from a design perspective as just that Macau's cash flow would be what is financing Wynn Park, and does that therefore change your budget if the cash flow is not coming in at maybe where you would have thought it was (multiple speakers)

Oh, I see. I see what you mean. Well, since Macau is in its -- the Palace is in its infancy and just beginning to get rolling, I must -- I have got to remind you that the lead time on design development on a thing like Wynn Park is substantial. I mean, we spend as much as a year or two getting to the point where we can budget and start to break ground, and I'm in that six months.

There are parts of the Wynn Park development that are going to kick in very early. There is -- if we go according to plan, and that has to do with the addition of meeting rooms and ballrooms on property that is part of Wynn and Encore now and not on the golf course, as we up our convention profile, our meeting space, convention, and ballroom profile substantially.

And then there is the lagoon, the new rooms that are going to be available on both the north and south side of Wynn Park, and the other features that go around the lake. And then the issue is adjacent properties that will be available for smaller operators on Paradise Road and the potential for exhibit space.

So, balancing all of these things, I don't have a scheduling problem as much as I have a planning problem, but each of these things on our early investigation have overwhelming self-justification financially. So we don't really worry about financing them, if that's the direction of your question.

Okay, great. Thank you.

Jon Oh, CLSA

You were carrying roughly about $100 million of annual excess cost for the Peninsula property before you opened Palace. Could you tell us that, the opening cost for Palace, are you -- have you fully shifted the additional cost load over to Cotai already?

Yes, we have. The Wynn Macau daily run rate is now about $1.1 million and Wynn Palace is in the neighborhood of $1.5 million, and if you look in the past, Wynn Macau was closer to $1.4 million.

Okay, thank you. And if I could follow up with a question on Palace, we have seen some chatter of late that perhaps the VIP play in the Palace picked up a little bit and that partially explains what we saw in October. Could you comment on whether or not you sense that this is a structural pickup in VIP play or is this just a temporary event that is driven by the euphoria of a new opening?

And could you also maybe comment loosely around some of the recent events we saw in China that we saw one of your competitors in Australia, where they have gone through some issues in China as it relates to VIP marketing. How do you stitch all these mosaic together and how do you read the VIP business as it stands right now? Thank you.

Boy, that's a good one, but I think it's two parts. And the first one was, was the step-up in VIP, the junket business, euphoric or was it structural? I think that part was the first part of your question. Who wants to take a crack at that one?

There is -- both of the elements are correct. When you have new openings in the marketplace, you do get more VIP business, and there does appear to have been a lift in VIP generally. We have obviously seen our junket business downtown backfill as we open new junkets with the same operators at Wynn Palace, so it is certainly stronger.

How that maintains over the coming months, we will see. The opening of new property certainly adds to the euphoria, as Jon described.

We are very close historically to the events you have asked about to have a lot of perspective on them. Time is going to straighten out, I think, the answer to your first question.

The second one has to do with the remarkable events where 28 people were detained from Crown in Australia. I know very little about that, and I think I speak for my colleagues, and because we know so little and because these processes are opaque in many cases, I think the only people that can give you intelligent fix on that would be the folks at Crown.

We have known -- I can add this. We have known for many years -- we have been there 15 years now -- that marketing and promotion in mainland China is not permitted, so we don't have our employees doing that. So, other than that, I know what I read in the paper and I think that is the same thing you read the paper, and I don't have anything constructive to add to it.

Okay, thank you.

Harry Curtis, Nomura.

I wanted to go back to your marketing expectations. For the Palace, do you have any plans to begin dialing up your outreach to wholesalers, groups, associations?

Yes.

So, Harry, we are -- if you look at Wynn Palace, about 30% of the hotel business right now for us is cash business, and we are actively engaging travel agents and wholesalers and putting together great packages, not based on price, but based on combining food, spa, et cetera, because the Cotai market is between 30% and 40% retail. So, we're actively moving on that front.

Okay, and then as -- I'm sorry, go ahead.

We didn't do it when we opened; we did it after.

Seeing is believing. We have scheduled 600 [fam] trips on the property since we opened, between opening and the end of the year, and our tour and travel business is growing very nicely. We ran 81% in October and we believe we can lift that even further.

And my second question just has to do with if you might maybe give us some way of developing expectations for sequential margin improvement for the property. It was a little lower than we thought at the outset, but that can be explained by just incremental opening expenses. What expectations do you have for margin lift over the next nearly six to 18 months?

Harry, I think six to 18 months, that's the right time frame to look at this. So, come positive, Wynn Palace's makeup will be lots of premium mass and high-margin cash non-gaming business. So, we would expect our margins to get closer in line with our downtown property, in that high 20s EBITDA margins, but that's going to take us time and Ian is doing a lot of work on rationalizing the expenses inside the property as well.

Okay. Very good, I appreciate it. Thank you.

(Operator Instructions). David Katz, The Telsey Group.

I wanted to ask about the setup for the Palace and, Steve, I appreciate your description of the situation at the beginning. When did it become clear or obvious that the issues that are going on on each side were evident, meaning they sound like things that would have been -- that are long-term projects that have been in place for quite some time. And would we have known about them six months or 12 months ago, and essentially what has changed?

We certainly knew all during construction that the light rail was under construction. The sequential delays that took place and the problems the governments have had in resolving their own problems with the light rail construction have been a moving thing, and so -- and we knew that -- we certainly saw that everybody knew that SJM was under construction on one side and MGM on the other. MGM thought they were going to be done earlier, as did a lot of the people in our neighborhood. I don't know that it's a bad thing that they are going to open when they open, instead of earlier.

But we never had terrific insight as to the status of our competitors' scheduling. We can read what they say on their quarterlies, but they are subject to the same kind of contingent events that we were with regard to construction and completion dates in China.

So to that extent, we looked around us and everything that was happening was fairly obvious. There wasn't anything we could do about it. There was no dynamic action that was available to us, and we were hoping that the situation would improve as we approached the summer months when we were getting ready to open the property.

I myself didn't realize how critical the blockade was until I went there in August. I was there in the month of August for three or four weeks before the place opened, and I didn't realize how critical it was until I tried to go across the street to City of Dreams, and you took your life in your hands trying to get through the barricade and cross the street because of the traffic. There is no crossing. All of that is tied up at the moment at the middle where the construction is taking place for the escalators.

See, there is a big terminal for the -- a big stop right in front of our hotel on the light rail. As I mentioned, it is the first stop from the ferry terminal, and they have built a bridge that goes from the west side of the street, which is MGM and City of Dreams, to the east side of the street, which is us and our gondola station.

I didn't realize how big the holes were and how -- the primitive state of the construction with the walls they built. And I guess there is nothing to say except it is what it is. We weren't in charge of that construction. We didn't have a dialogue going with the builder.

This situation happened -- when we were opening the hotel on the Peninsula, on the east side of our hotel between us and StarWorld and Arc, there was a street that originally was a sewer canal, and they were going to make a street out of it and cover the sewer canal. And five months before our hotel opened, it was still a canal, an open trench.

And then, all of a sudden, in a space of 12 weeks, a street emerged. It was an amazing rapid transformation, which proved that the Chinese people could do -- the Chinese government could do pretty much what it wanted at a speed that was quite remarkable under certain circumstances.

Apparently with this light rail, they haven't been able to get the same kind of acceleration, and I believe they are trying to get that fixed up. But I didn't really know what to expect as I looked at the construction during the -- of the surrounding properties and the light rail while we were building our place. We were heavily focused inside on our own problems. I don't know if my answer is helpful to you, but does that deal with your question?

It does. And if I can just follow that up in a two-part follow-up, I assume -- it sounds as though you are pleased with or there is nothing that's changed on the inside of the property. And as we think about the ramp-up that will have a little different trajectory than we may have thought, if you could just talk about the balance between generating revenue and profit and profitability as this trajectory evolves over the next five, six quarters, just so we can think about our models the right way, that would be helpful. Thank you.

Well, okay, here's the way I would approach that. When we opened the Wynn Peninsula, we got to $1 million a day on the 12th month, and starting at $500,000 a day, $600,000 a day in EBITDA.

And it was slower getting to $1 million a day, but it was much quicker getting to $2 million a day or $3 million a day. And the reason is is that this -- in our kind of property, the acquisition of clientele, of customers, is done sort of one at a time. There is an old phrase -- eagles don't flock. You got to catch them one at a time. So laying the groundwork for building the clientele for a hotel that is exemplary, that is unique, and the Palace turned out to be the most beautiful job we have ever done by far. The rooms are exquisite. The place is absolutely magnificent physically.

Now, you introduce such a property to people and they like it or they don't. You asked yourself, who are the customers? Who do you build the place for? And you do so with a conviction that when people see something wonderful and special that they will like it and they will be loyal to it or they will come back again and again. So, the exposure of the building at first aggregates. It compounds on itself.

And we got to -- the first day we opened the place, we made $1 million and we're operating at $500,000, $600,000, $700,000 level or something like that in October. And I expect that to climb on a steady basis, because I believe that the people will respond to our product, as they have for the past 49 years in Atlantic City, Fremont Street, the strip in Las Vegas, the Peninsula in Macau, and every place else we have ever been. This property is following the same pattern that I have observed in our developments over the years.

I guess you have to use your own arithmetic when you do these things. I don't want to make a lot of promises or puffy statements. I make one statement, that it is the most magnificent hotel we have ever built, and clearly, clearly, the most dramatically elegant and beautiful hotel in China, or maybe anywhere in the world, for that matter.

Now, what will public acceptance of it be? Well, based upon our experiences so far, pretty good. But tackling the mass market and the premium mass market, as Matt mentioned before, is sort of a sequential process. You have to expose the place to people for them to find out what's in it, but in order to do that, they have to be able to get there. And right now, it is a bit challenging. And that's temporary, of course. It will go away.

And these very things that have complicated our launch are the very things that will underwrite its future. Having that light rail and being the first stop is a cool thing. So I'm looking forward to it, but in the meantime we will deal with the shortfall or the inconvenience of the moment as best we can. Am I responding to you properly?

Absolutely.

I have never spoken to you before and I want to make sure. There is a whole bunch of us -- we are sitting around this table. We have got all the information here, and at moments like this when you launch a new project, especially one as ambitious and in a market as complicated in many respects as China, you want to try and give as much clarity as possible to the moment and not exaggerate or feather your nest or make promises.

Personally, I would rather underpromise and overdeliver whenever possible. Ian, I don't know if you want to add anything to it, or Steve? You have your own opinions, fellas. You can say what you think.

Going back to the light rail itself, paradoxically the more progress they make, the more painful it is for us. In order to finish it, they have had to close large sections of that road and make the property difficult to access, so we will tolerate the pain until the end of the year or the turn of the year, and then things will improve.

By early next year?

They are telling us that there are some things they are going to do rather quickly, as far as crosswalks and things like that, but we literally couldn't get across. We had to take a very risky approach and dodge cars for me to get to the City of Dreams. I hadn't expected that it would be at this stage when we opened in August, but there it is.

Perfect. Thank you for your answers.

Shaun Kelley, Bank of America.

I guess during -- right after the opening, or not too far after the opening, there was a pretty significant management change in Cotai, and I was just wondering if you could comment a little further on. Is there any difference in strategy moving forward as you think about balancing what's going on at Peninsula and Wynn Palace or is everything, generally speaking, still as you originally planned it?

Yes, everything is as we originally planned it. The Cotai property was built to appeal to the most discriminating person that would come to China, the premium mass customer and the VIP and the top end of the mass, even just below what we call premium mass. The idea was that this was going to be the place of choice for people that cared about their choice. And, so, that was always the program.

I think if you ask me to be candid about any adjustment that I thought we needed, it was that I wanted to see more -- after the opening, as I looked at our neighbors and I looked more closely at our own trade and the response to various outlets in our hotel, I realized because we were so overrun with the casual dining things that we offered that we needed more of them. I think, if anything, I think I might've underestimated with my colleagues the amount of casual dining that we needed, compared to the other folks. They have dozens and dozens of these casual dining restaurants throughout Cotai. We had two or three, but I found out with the mass of people, it is not enough so we have got to increase that.

And we are doing that in two specific locations adjacent to the casino straightaway. Now we have got to get through the approval of the government to do the work, and we're doing the drawings lickety-split as fast as we can to get that job done. As a matter of fact, we're going to put up construction barricades and get on with it immediately, but that's -- I guess if you asked me what surprised or what did I see after the place gave birth and the public came in, I was -- I immediately, and the rest of us, Ian, we all recognized we needed to up our casual dining capacities beyond what we originally thought.

And it was pretty easy to do, actually, because we had anticipated that there would be something that we wanted to add or change after opening, which is why I left those spaces available for it. And now we're going to take advantage of it, based upon what we learned since August 22.

Other than that, it is pretty much the same thing as we thought before.

Great, I appreciate the candor on that. And then, as a follow-up, and I know it's been addressed in different forms, but maybe to ask it outright, Matt, I think you mentioned the expense run rates where you are at today with Palace at $1.5 million a day and Peninsula down to $1.1 million a day. Is that generally a level that you are comfortable with, moving forward, and is there any change in either staffing or promotion that would be material to those dollar numbers moving forward?

This is Steve. I would add one thing. We are going to add -- we have the tables, but we find that our mass demand at the Peninsula, we need to increase some more dealers because our utilization is too high. So we want to increase the amount of tables that are actually active during more hours. It is not a significant number. But I don't know how much that will affect the run rate.

Yes, I think that the $1.1 million down at Wynn Macau, because it is slightly less than that now, will be in range. And then Wynn Palace, we haven't been open long enough. That is currently where we are running, between $1.5 million and $1.6 million, and I know that we are looking at rationalizing some of those expenses, but I wouldn't expect a very large decline from that level.

In particular, as sales ramp up in the retail outlets and everywhere else, you will start to see the cost -- the variable cost ramp up. So, I think that those numbers will likely be in line. Ian, do you want to comment?

That's exactly right.

Okay.

Great. Thank you very much.

Felicia Hendrix. Ms. Hendrix, please announce the name of your company.

Barclays. Thank you. So, I have a question for Ian and then, Steve, I have a question for you. Ian, so if we take everything that you have said on the call and acknowledged that it's an early read for Wynn Palace, and also the challenges that you face, I am just wondering if we look back to the assumptions that were put forth at the investor day this past spring, how reasonable are those EBITDA assumptions for 2017 for Wynn Macau and Wynn Palace? Can you put those in context with what we know today?

Maybe Matt wants to take that call.

Sure, I think what we have clearly said today is that the ramp-up is happening slower than we anticipated, so while those numbers we still believe in, 2017 is likely not the year for those numbers. That should be, if you look at the competitors out at Cotai, where these properties, once they settle in, are able to -- the profit that they are able to generate.

But I think until we get the construction issues settled and some of our new casual dining outlets finished, at that point we should start to get to those numbers.

Okay, that's helpful and definitely an anticipated answer, given everything that you said so far. Thank you for that.

Ian, you want to add anything to what Matt said?

No, I think that's fair. It is going to take us time to ramp up. Everybody is aware of that. We will have a better read of it by the end of the year.

Okay, thanks. And Steve, just a bigger-picture question. I was just wondering if you could comment on the premier visitor -- the Premier visit to Macau earlier this month. Everything that came out of that visit sounded supportive. And just among the policies announced, do you see anything that could benefit the gaming industry, per se?

Well, the central government always supports the financial health, the employment security, and the welfare of the citizens in the special administrative region, and they repeat that, whether it is the Premier or Xi Jinping himself. My visits to Beijing only reinforce that with the people that I have had the privilege of discussing China with.

I go there on occasion to broaden my perspective on China because, after all, Macau is part of it.

In terms of the implications to local policy and, to a certain extent, visa policies, I think that you have to look at the arc of all aspects of the central government behavior or actions and take that into account with the local government's reaction and their independent actions. Because if you are in Beijing, they will tell you that the SAR is autonomous, that it is self-governing, and that although they pay close attention and want to support it, that they look to the government of Macau to run Macau.

And we have this interaction with them on a regular basis. Usually it is on detailed stuff, like trying to fix the roads and things like that, so we are with different parts of the government. In my conversations with the top level of the Macau government, they definitely want to protect the job security of the people that are engaged, the Macau citizens and everybody else, that are engaged in working at these places. There is a strong preference for protecting the employee base of the industry.

When issues that affect them, meaning the employees and the local employees in particular, come up, the government is particularly responsive and on point. When we get to more subtle things that have to do, for example, with smoking, then the matter -- the speed of decision slows down. This conversation about smoking with Secretary Tam and even with the Chief Executive Officer and Secretary Leong has been more protracted. There is competing interests here, the health and safety of employees, the strong preference of the customers to have the freedom to smoke. It is very popular in China still. And then, there is this whole thing about trying to make people healthier, even if it kills them to do so.

So when you get to areas like this that are certainly relevant to our -- right now, the smoking -- I'm using this example, the smoking policy is mixed. Some places have been grandfathered in. Other places have tried to take advantage of the interim policy allowing smoking lounges, but yet the final approval of those smoking lounges has been delayed and nobody is sure whether there is going to be a complete ban on smoking, regardless of any condition within the buildings, or whether there will be a mitigated or ameliorated compromise position.

So when you talk about the policies of the government since the Premier's visit, you really have to separate the general support that mainland China and Beijing gives the SAR from the intricacies and the more granular aspects of the things that we are interested in that may seem mundane in comparison, but are not. You get my drift on this?

Yes.

It is not a simple answer to your question. God lives in the details on this one.

Okay, well, thanks for the effort to answer.

How did I do? You want to have a follow-up on that? It is a tough question that you asked me.

No, I think it is fair and I think there is still a lot unknown, so I appreciate it.

There are a lot of unknowns. The country has 1.370 billion people, and managing it and its relations with the SAR -- I don't think the SAR is the primary thing in China every day. I think Xi Jinping and the central government have a lot of problems to deal with, a lot of decisions.

The liaison office is closely monitoring everything that happens in Macau. They were at our opening. They are very supportive, friendly and warm in every respect, but, again, there is this sort of unusual relationship between the announced autonomy of the SAR and the sensitivity of the SAR to the general policies of mainland China. And it's very hard for us to understand sometimes what everybody is thinking. It is not a bad thing in any way, but it makes answering your particular question a little tricky.

I got it and I appreciate it.

This does end the question-and-answer portion of this call. I now turn the call back over to the presenters.

Thank you very much, everybody. We will look forward to bringing you up to date in three months. Bye-bye.

This does conclude today's conference call. All participants may now disconnect.