Wynn Resorts - Earnings Call - Q3 2011

Transcript

Speaker 0

Good afternoon and welcome to the Wynn Resorts' third quarter 2011 earnings call. Joining the call on behalf of the company today are Steve Wynn, Marc Schorr, John Strump, Matt Maddox, Marilyn Spiegel, Scott Peterson, and on the phone, Ian Coughlan, President of Wynn Macau, and Robert Gansmo, CFO of Wynn Macau. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. I would now like to turn the call over to Mr. Maddox. Please go ahead, sir.

Speaker 4

Thank you, and thank you for joining us today. Before we get started, I just need to remind everybody we will be making forward-looking statements under the safe harbor of federal securities laws, and those statements may or may not come true. With that, I'm going to go ahead and turn it over to Steve Wynn for some opening comments.

Speaker 8

I think the numbers speak for themselves. The only comment that I would make is that we had a lower hold percentage in Las Vegas. If we normalize it, it would take us up over 100 instead of 85. Things got back to normal in October, which is a sort of a landmark month for us in both markets. Business seems terrific. I know that everybody's studying market shares since Galaxy opened, and my comment is the same as it has been in the past. It isn't so much about market share, which in our case, depending on hold percentage, goes between 13% and 14% if you normalize hold percentage. Our bottom line keeps climbing. About the dividend, we are doing our budgeting on the work that's going to unfold in the next few years in Macau, and we have alternative investments.

You can count on the $0.50 a quarter dividend, but I think special dividends are, in fact, special, and there's no certainty about what the board will decide to do about that going forward. I think we can take questions.

Speaker 0

Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. Your first question comes from Joe Greff of J.P. Morgan.

Speaker 3

Good afternoon, everybody. Obviously, a big topic for investors is whether or not tightening of liquidity in mainland China is going to have an impact on the Macau market's VIP segment. I know it's very early, but maybe I'll leave it sort of open-ended. Maybe with respect to credit, if you can tell us what you're seeing thus far, either on the direct side or the junket operator side, or in terms of repayment lengthening, are you changing anything with respect to reserving? I know you are likely very conservative with respect to reserving, but if you can sort of answer those topics, I'm sure investors would love to hear that. Thank you.

Speaker 8

Okay, Joe. First of all, we don't, at the present time, see any change. That's the first part of the question. The second part of the question is, I acknowledge that, in fact, we are conservative. We've never had to increase our reserves because in the 40-odd years I've been doing this, we've never had a special charge because our reserves were inadequate. If that were to happen, it would be the first time in 43 years. I think that's about all there is to say on that subject. As you and other investment community professionals are keeping an eye on China and the American economy, so are we. You know, you view these things with varying degrees of optimism in China and pessimism in America.

Speaker 3

Okay, great. Maybe these are questions for Matt, quick ones. With respect to potential project financing on Cotai, Matt, how are you thinking about the timing of that? If you can maybe help us understand the breakout of cash on the parent's balance sheet between Las Vegas and Macau.

Speaker 6

Sure. Of the $1.8 billion, it's about $1.1 billion offshore and $700 million onshore at this point in time. In terms of financing, we have excess cash in Macau, more cash than debt. We'll go through a very typical investment-grade style bank financing, probably sometime next year, to finance Cotai. It'll be a combination of cash flow and bank debt.

Speaker 3

Great. Thanks, guys.

Speaker 0

Your next question comes from Carlo Santarelli of Deutsche Bank.

Speaker 1

Hey, thank you, guys. If you guys wouldn't mind commenting maybe on some of the trends you're seeing more recently in October, both in Macau and Las Vegas, I think that would be helpful for everyone.

Speaker 8

October is gangbusters. We always tell you about the month when we're doing it. What are there, 17 days down, Mark?

Speaker 7

Yes.

Speaker 8

We got 17 days.

Speaker 7

I have 18 days in Macau, 18 days in Macau and $73 million.

Speaker 8

Yeah, in 18 days, $73 million. How's that sound?

Speaker 1

That sounds very good.

Speaker 8

In Las Vegas, it's just close to $1.5 million a day or something like that, $1.25 million.

Speaker 6

Exactly.

Speaker 8

In a year, we're operating at about $1.25 million a day. Our best year was $420 million, and we got a shot at $450 million here in Las Vegas, which sounds great. That means that instead of losing $200 million or $300 million, including depreciation, we'll lose less. You know we've got a ways to go before we start reporting real taxable profits in Las Vegas. We have lived through 2009 and 2010 and this much of 2011 with $750 million in operating losses, I mean, in losses including depreciation. I know that we don't use all of our depreciation by any means in any given year, but in this business, we really do ultimately use the number. On the current period, it may be a third of $240 million in Las Vegas, but eventually, it catches up with itself.

We don't have a lot of interest, as you know, because we've got a very fancy balance sheet. Both of our bonds and our debt, although they're non-recourse in the People's Republic of China and Macau and in Las Vegas, as you all know, our debt in both companies is investment grade. We like being in that position to take advantage of future opportunities. We protect that status jealously.

Speaker 1

Thank you very much.

Speaker 0

Your next question comes from Sean Kelley of Bank of America.

Speaker 1

Hi, good afternoon. Just to follow up on October a little bit more, Steve, I think you said that the competitive environment and the market shares were relatively stable. I wanted to dig in a little bit because we have heard a little bit about, you know, particularly a couple of your competitors trying to move around some market share, maybe getting a little bit more aggressive on the junket side. Have you seen that activity? You know, how are you thinking about the promotional environment in Macau right now?

Speaker 8

It always happens when a new place opens up that they get very aggressive to try and dig in. We get a little migration for a few months, and then it comes back. It has, and it is. The things that put us in the position we're in in the first place have not changed. You can't buy business in Macau, nor can you buy business in Las Vegas, Pennsylvania, or anywhere else. Most casino companies that are managed professionally and well are dispensing promotional allowances at a level that is pretty much maximum or as much as they can dispense, consistent with prudent long-term management of the enterprise. That means that it stops anybody who's mature and intelligent from coming in and redefining such things. It can't be done, not intelligently and not without being self-destructive on different levels of service levels and other things.

We give and share our revenue with our customers at a level that is consistent with our service levels and the security of our employees. If every once in a while you get a new executive who's a head up his butt and says, "Aha, we can do this or we can do that," and they get over it or they get replaced, we feel secure in our position at Macau. Take a look at Macau. You can look at anybody's profit after interest and depreciation. Our thousand rooms make more money than anybody, even if they have more hotels.

Speaker 1

That's helpful. I think I just wanted to maybe switch topics real quickly and get your thoughts on, you know, domestically, there are some really interesting opportunities that have started to kind of boil up both in probably, you know, Massachusetts, which seems like it's virtually a done deal, and also in Florida, which is probably a little further out. Your thoughts about domestic expansion, you know, given, you know, kind of the investment environment in the United States today and how you weigh that against kind of the money that you're probably very committed to spending in Cotai when it comes available to you?

Speaker 8

You're right. There are some very pregnant opportunities that are presenting themselves in Massachusetts and Florida. Neither jurisdiction has made a final decision that we can measure quantitatively in order to make a determination for ourselves. Those are very interesting markets. You know, when we sit here in Las Vegas and look at these things, we ask a couple of questions. First of all, what is the deal that that state has put on the table? How strong is the invitation? How serious are they? Are they motivated strictly by tax revenues or by employment or a balance of the two? Do they want capital investment and long-term growth and job security for their employees, or is this a quick down and dirty? How much can we grab? Those jurisdictions usually have a dim future. I'm sensing that Florida, for example, and Massachusetts are acting in a more stable way.

I remember once in Illinois, they had a meeting and changed the tax rate overnight by 15% to 20%. That wouldn't even happen in China. I mean, place it. That is really rough. They had 10 riverboats, and they didn't care. In Massachusetts and Florida, I'm sensing a much more serious and mature political approach and long-term economic growth approach to jobs as well as the construction and all the rest. We're looking at it. The second thing that we look at, besides the invitation that the jurisdiction puts on the table, is does our brand fit? Can we really be value added to Massachusetts or Florida? Can we be value added to our shareholders? Those are not always the same thing. It's the reason why we're not in the riverboat business. It's not consistent with what we do best.

I'm feeling very positive in a very preliminary way about Massachusetts and Florida. I think those jurisdictions have potentially a great deal of promise. We will look at them seriously, as we have been for the last several months. Hopefully, there will be a business opportunity there, in which case, we'll step up and put our credentials on the table and try and satisfy the political leaders and other decision makers there. I hope that answer is helpful.

Speaker 1

It does. Thank you very much.

Speaker 0

Our next question comes from Marc Schorr of Morgan Stanley.

Speaker 1

Hi. One quick question on Las Vegas. Have you guys seen any changes to the pace of leisure and group demand in Las Vegas at all as you look ahead?

Speaker 8

Marilyn Spiegel or something. She runs the show here.

Speaker 2

Oh, Miss Chen, so between leisure and transient demand, you say?

Speaker 1

Just more leisure broadly, leisure as a whole and group as a whole.

Speaker 2

Leisure has been pretty stable for us. We've seen big improvement in ADR for the leisure market. Actually, in the third quarter, we saw a 21% improvement in our leisure ADR. When you think about convention, we had another great quarter in convention. We book strongly and we're strong again in the fourth quarter. ADR is up in convention also.

Speaker 1

Great. You haven't seen any disruption to that booking pace on the group side? We have a little more visibility.

Speaker 2

First quarter is still coming in. We think we'll be similar to last year. January is pretty close. The financial market sometimes, the CNBC analysts, can cause some shaky consumer confidence. That impacts us. We've seen people who are waiting for their 2012 budgets to be approved, so they haven't committed to January. March for us in Las Vegas is a challenge because ConExpo is not going to be here this year. It's on a rotation, and we have a hole. With less compression in the market, we may see the same or a slight decline in ADR and convention rooms for the first quarter. For the year, we project a pretty stable amount as we've seen this year.

Speaker 1

Great, thank you very much.

Speaker 0

Your next question comes from Harry Curtis of Nomura.

Speaker 1

Hi. Steve, back in really up to the late 1990s, if you built something really inspired in Las Vegas, demand in Las Vegas increased more than the supply. I'm wondering if you still think that's the case in Macau and how long this runway is where if you build an inspired property, that demand is going to exceed capacity growth.

Speaker 8

Harry, congratulations on your move. It was a good one.

Speaker 1

Thank you.

Speaker 8

Matt, you want to answer that question?

Speaker 6

Yeah, his question was, will Macau, will continued supply in Macau generate more demand? Harry, our opinion is, I think Macau is probably in the third or fourth inning of development. If you look at what's going on in Cotai, there's continued to be excess demand for the current supply. In fact, if you tried to book a room at Wynn Macau on any weekend between now and the end of the year, it would be almost impossible. If you look at it today, I think that there could easily support a Wynn Cotai property. Five years from now, we think that the market has continued growth underneath it.

Speaker 8

Sheldon's going to come online in 2012.

Speaker 1

Yes, with partnership.

Speaker 8

With those two new hotels, they have some casino space. They're not enormous, but it is an additional capacity of talking about tables and slot machines, as well as room.

Speaker 1

And retail.

Speaker 8

The retail as well. Our retail business in Macau, you guys see $45 million in revenue, right? When you look at our reports, you know that's $30 million worth of profits. We got a $120 million profit of $60,000. Our retail business is high-end. We get these very advantageous leases. It's going to be $120 million that you could dodge. Really quite phenomenal. The desire of good life that the folks of the people of China are demonstrating. They go on vacation. Love to shop.

Speaker 1

Steve, if you parse the depth of the markets between the mass side and the VIP side, you know, how close are you to the early innings in each of those markets?

Speaker 8

Good question, Matt. You and Marc can answer it. I know that's one of your subjects.

Speaker 6

Hey, you know my.

Speaker 1

Is Ian Coughlan on the call?

Speaker 6

Yeah, Ian Coughlan's on the call.

Speaker 1

Hey, Ian.

Speaker 6

Hi.

Speaker 8

That's Steve. What's your take on that question?

Speaker 6

I mean, we can only look at history. Every time a new resort has opened in Macau, it's been fully absorbed. Visitor arrivals continue to grow quarter to quarter. There's plenty of business out there in all aspects of the market. Every single source of business we have is strong. We're not concerned about that at all. One thing is, you know, Macau, while it says 25 million visitors or so, that's really probably four or five million unique visitors coming multiple times a year. If you think about where the growth of the market could go with new unique visitors, that's why we think Macau, with all the infrastructure improvements, could continue to grow pretty quickly.

Speaker 1

Okay, thanks, guys.

Speaker 8

It's probably 1% or less of the upscale citizens in the RC. There are 300 million, a billion to 300 million people that are enjoying what we would call a middle class or better standard of living in China. We're way less than 1%.

Speaker 0

Your next question comes from Robin Farley of UBS.

Speaker 1

Oh, yeah. I'm just curious your comments about the special dividend and maybe you're keeping your powder dry until final Cotai approval or until your project financing is done next year, or is there you're keeping your powder dry for something else?

Speaker 8

I think the comments I made about the dividend stand as I said them, Robin. I don't think there's much point in repeating it. I'm not evading your question, but I think I covered the ground. There are a number of reasons why Cotai, other opportunities that the board considers, you know, special dividends as special. I don't think that we should take it for granted that there aren't going to be any, nor should we take it for granted that there won't be any. It's a changing, fluid situation.

Speaker 1

Okay. If we could return just for a moment to the issue of credit in the VIP market in Macau. It is not a question at all of you not being reserved enough or anything about collectibility. I'm just wondering if you're seeing anything, anecdotally, out there with credit, with collectibility just being out there for more days and maybe some people asking for more days than they normally have in terms of repayment. Anything along those lines?

Speaker 8

Yes, I understand the question completely, Robin. The answer is in a word, no.

Speaker 1

Okay.

Speaker 8

If it were to change, it would be, I think, a relevant and appropriate discussion to have on a call like this. The answer has to be no at this time. You know, we consider the question very seriously. There's not much point in skirting the issue or shilly shallying on something like this, but we don't see it now.

Speaker 1

Okay, great. That's very helpful. Thank you.

Speaker 0

Your next question comes from Janet Brashear of Sanford C. Bernstein.

Speaker 1

Thank you. A quick question about the follow-up to the Miami business opportunity. As Florida looks at new integrated resorts, and they're talking about a $2 billion minimum investment, is your view that the market's deep enough for three new concessions, or is that too many from a return perspective?

Speaker 8

That's a very good question. Florida has always been one of the places in the world that was most perfectly suited, South Florida, Miami, and Miami Beach, to becoming a vastly expanded destination resort, not just for Latin America, but for Europeans, for Eastern Coast Americans, and for people from Texas and all over the United States. Florida, its climate, its ancillary offerings of features and restaurants and shopping, Miami is a fabulous place. If it were done right, in my opinion, Miami would take off and become one of the two or three greatest destination resort cities in the world. I remember as a young man going to college in Philadelphia, and my parents moved to Miami Beach. We lived on Pine Tree Drive, and my folks had a cabana at the Fontainebleau in the 1950s and early 1960s before my dad died.

Everybody came to the Fontainebleau from all over the world. It wasn't just New Yorkers. It was everybody. The hotel redefined destination luxury and fun. The greatest entertainers, the wealthiest people, the greatest shopping all took place between the Fontainebleau and the Eden Rock and the Americana Hotels. The destination was created because of the development, not in spite of it. I had a conversation with my neighbor, Sheldon Adelson, who was a little bit more conservative in his view. I think both of us agree that Miami has the opportunity of becoming something quite extraordinary. It won't happen with racinos. That doesn't even get on the radar. It's a false start, and it's been a false start everywhere that they've tried it. It's regressive. It's homely. It may make a buck or two for the operators, but it does nothing really for the local economy.

If they soak the tax rate, it generates a few bucks for the government. The fiction that it helps the horsemen is exactly that, a complete fiction, and that's been proven over and over again. The existence of large employment-based destination resorts has the capacity to change the economies of the communities in which they exist on several levels, primarily by the huge payrolls of such places. They hit the economies like a freight train. Secondly, by the people that it brings from outside the region into the region. I am on a macroeconomic level highly positive about the implementation of large destination resorts in Miami and Miami Beach, however that comes down politically. It's very, very important that the government decide to do it intelligently, and they have numerous case studies to examine.

Mississippi, where the tax rate was low to encourage big capital investment, Las Vegas, and Florida has everything going for it. Massachusetts has the population base. Both places would be great. On the other hand, in New York City, it was a racino and aqueduct. Altogether, different story. In my view, it produces an entirely different result. That's the basis of, you know, but the core question is, can they support three of them? If they're done well, if they're positioned properly, if they're managed intelligently, absolutely. It could become a $2 billion or $3 billion market, Matt.

Speaker 6

I think, yeah, that's probably about right.

Speaker 8

Maybe more over time.

Speaker 2

Thanks for that. Could I follow up on a question with Ian from Macau as well? As demand continues to grow, is the capacity of your resort becoming a constraint now? How much can you continue to improve your yields from here?

Speaker 8

That's a Marc Schorr question.

Speaker 1

It's pretty constrained right now. I mean, we're at our maximum table limits right at this moment. It's just getting the best customer into the facility.

Speaker 8

Is Linda on the call? Not, but Ian is. Ian, what's your take on that question?

Speaker 6

I think we're fully farmed after ramping up Encore. There's still opportunity to increase business. As Marc said, optimizing our products and game mix, looking at our table and slot yields, we continue to be very active in making sure every table is yielding as much as it can. We manage table limits very effectively. There's still opportunity for growth during the week and at certain times on the weekend. We're building a bigger customer base. Our players are coming and playing longer. There's still room for growth. We're also looking at jumping operations. We continue to tweak where we can.

Speaker 8

Can I give you the date we're up 47%? Look, let me put it to you this way. I have my glasses. I'm going to read you a number. Hold on for a second. I'm going to put on my glasses. Here's an up to the minute, year to date in Macau. $956 million. Last year, $651 million. An increase of $304 million or 46.7% in EBITDA. What does that sound like to you? I mean, there you are. You're looking at the same thing I'm looking at right through yesterday. I don't know what the rest of the month will look like. We'll discuss that in great detail when we review the fourth quarter. You know, I look at these numbers every morning when I wake up. I get them before 7:30 A.M. That's what I'm looking at. That's in spite of the competition.

If I look at the month.

Speaker 1

30%.

Speaker 8

The competition here is 30%. Yeah, and even for the month, we're up 30%, another $17 million. That's with a $73 million for this month. You know, we're headed for another one of those $100 million plus months. That's all I have to say.

Speaker 2

That's great. Thanks.

Speaker 0

Your next question comes from David Katz of Jefferies and Company.

Speaker 1

Hi, afternoon all. I wanted to just ask about the Cotai development project. We've certainly read the announcements that you've put out, and I think Steve commented earlier about expecting to start to spend a little bit. There certainly has been some commentary gathered in the press, which can add to some confusion about what the next steps are in the process for moving this project forward. Can you talk about, A, the amount of spending that we should reasonably expect the next year or two, and to the degree that you can arm us for what next steps along the way in this project we should look out for? I hope that would be helpful.

Speaker 8

The government issues the draft contract, you approve it, discuss it, and then you sign it. We've done that. That's usually associated with the final stages of the choreography in Macau. They set a premium. They did that. You then wait for its publication in the Gazette. At that point, the land process, the land concession grant is completed. During this process, you're free to, you're encouraged, as we have already done, to submit your plans. We've done that. You get very far down the line, but you have to always be mindful that the government of Macau follows a very set procedure. They do not vary. You don't get to rush it or change it. You live with it and respect that process. It moves along at the speed that they think is appropriate. You respond. We are encouraged, but we're part of that choreography.

We're part of that schedule and the march to completion. All that's taken into account. Really, there's little more to say to that except that you know when the Gazette publication takes place and you're ready to hit the ground with actual foundation work. Hopefully, you will have been approved for your foundation drawings. There's a great deal of work that takes place on a subterranean basis in a landfill. I remember studying a chart two months ago with my colleagues that showed, for example, if you're interested in this, the high rise has columns on 36-foot centers. There are 40 of them. There are 40 structural bays that are used for suites and rooms. A regular bay is two rooms, and sometimes two structural bays are used for super deluxe suites. The building is 98 feet wide.

It is extremely deep because the rooms are 45 feet deep with an eight-foot hallway, which is you only see eight-foot hallways in villas. In Cotai, our typical hallway is eight-foot wide and 11-foot tall. What happens is that we have 40 columns, 40 structural bays, and we have four of them across the building. There's one on each outside window and two on the interior. That's 160 major columns that support a high rise. Those things are caissons. Those are 10, 8 to 12-foot holes that go down until they get six feet into rock, on the top of which, there are caps that we rest the columns of the heavy hotel. Those 160 caissons alone, I looked at a chart that shows how deep they go to get through the fill of the land and into the six feet into rock.

In some cases, we're as deep as 92 meters and as little as 78 meters. You can imagine the work. You had the rest of the public area that involves 15, 20, 25 acres. The rest of that podium building, which is three or four stories tall, houses the casino, restaurants, VIP rooms, showrooms, spa, swimming pools, villas, and all the rest, garage. Those things rest on pile caps. Pilings are nails or spikes that go down as far as I just described in clusters of six to eight, like if you put your fingers on the table and the top of your hand was the cap, and you rest the columns that support the steel columns that support the public area on those pile caps. Between caissons and pile caps, you've got 10 months or a year of work.

That's exactly the way Wynn and Encore were built and all the other hotels that you're familiar with that belong to our associates and other companies. Subterranean work in Macau is quite a bit different than, for example, building in New York City where the entire island of Manhattan rests on solid granite. You can erect huge size skyscrapers with a matte foundation. Not so on landfills. When you take that into account, you spend a lot of money on foundations. Once you get out of the ground and you're up at grade level, the buildings are pretty much traditional and they go very fast. Floor a week, stuff like that. Is that helpful? Is that too much information for you?

Speaker 1

I'm all interesting. If I may follow it up by asking, if you can recall last time from the time you signed your agreement with the government as you have now until the time it appeared in the Gazette, how long was that period of time? I did want to get a sense for how much spending CapEx on this project there might be this year and next as well.

Speaker 8

It's a very interesting question, and it changes from time to time. When we first started, Macau was the profile of Macau as a community, both public works and private works was in one shape. Today, as that city, as that special administrative region has matured and grown and the needs of its citizens and its businesses have increased, the load on the public works department to process properly such applications, building permits, and the like has become geometrically greater, exponentially greater. The lead times have quite understandably extended. Comparing it to the past, I don't think is relevant anymore. I meet with Secretary Lau, under whose authority such matters are prosecuted, and he shares with me the amount of public works. There's a light rail, a monorail system going in. Incidentally, we're the first stop from the ferry terminal.

That monorail circles two sides of our property, which is very nice for us. It circles two sides of our hotel on the peninsula, the Encore and Wynn, and has a stop right at our door. These kinds of projects now are new and have placed a terrific load on the government's staff. They rise and grow to meet that demand as best they can. It's definitely created more traffic in public works and the building department. They don't share with me the detail of such loads, only a general description. I know it to be true. I can't answer your question definitively. I will tell you this with regard to the last part of your question. It's possible on foundations to spend hundreds of millions of dollars.

Speaker 1

Okay, thank you very much.

Speaker 0

Your next question comes from Dennis Forst of KeyBank.

Speaker 1

Yes, good afternoon. First, I wanted to ask Matt about corporate expense. It was about $10 million above the recent trend line. What was in there, Matt, this quarter that moved the needle?

Speaker 6

You know, what happens is if you look at our corporate expense every year, it's very choppy. One quarter will be up more than another. It's usually just various development projects we're working on and other initiatives. Where we're pacing to for the year is similar to last year. I think that's the way you should think about it.

Speaker 1

Okay. The next question had to do with promotional allowances. I've seen promotional allowances be very steady as a % of casino win, although the second quarter, not the third quarter we just reported, but the second quarter was well below trend. I was expecting maybe that trend to continue, but it looks like we're back to normal. Was there something unique about the second quarters?

Speaker 6

You know, I have to be honest with you, Dennis, I'm going to have to go back and look. That feels like a long time ago.

Speaker 8

You know what, Matt, Marc and I are sitting here. I don't know the reason.

Speaker 1

Ian, do you know, can you answer that question?

Speaker 8

Oh, Marilyn?

Speaker 1

Are you talking about Las Vegas?

Speaker 8

I don't have a definitive answer. I'd have to look at it.

Speaker 1

I think both, Steve. I'm just looking at corporate win was down $60 million sequentially, and promotional allowances were up $6 million.

Speaker 8

First of all, I can answer part of the question. I just realized we've been holding very well. We've had a huge influx of Chinese business in Las Vegas. That would account for it.

Speaker 6

In the second quarter, right?

Speaker 8

We're winning more money, sorry, and so we're giving away more. You know, we've got this rather dramatic increase in business in Las Vegas, right?

Speaker 1

Right.

Speaker 8

You saw that in both quarters.

Speaker 1

Okay, talking about Vegas, I was going to ask a question.

Speaker 8

The percentage can go up depending on how that increase in casino revenue is structured. When it's high rollers, then, you know, discounts to losers and stuff like that.

Speaker 1

Okay. I don't know whether Marilyn's the right person to ask or you the right person to ask.

Speaker 8

I am in this case because I do know the answer.

Speaker 1

Okay. The low hold in the quarter, was that associated with maybe one group or one month or one event, or was that pretty much across the board?

Speaker 8

No, it was Baccarat.

Speaker 1

Obviously, Baccarat, but was it one specific time period or kind of throughout the whole quarter?

Speaker 8

They come in groups of five and six and three and four. We had guys win $7 million and $6 million. A casino that can win $200 million or $300 million in Baccarat can do that. Our Baccarat percentage overall is wonderful. It holds up the casino. You do get these kinds of fluctuations. This month, it was off by 3% or 4% if you take it the way we usually look at it. That would have been about $15 million to $20 million.

Speaker 1

Yeah, I guess that's in the question. Was it all at one time?

Speaker 8

Everything was normal outside of Baccarat.

Speaker 1

Right. Was the Baccarat low hold over a short period of time or spread?

Speaker 6

Dennis, you've seen the August numbers for the entire city. You clearly saw that that was down in August and also in July. It was each month, but it wasn't one event that caused this quarter. We have too much volume for one group to come in and cause five points of swing. It was really throughout the quarter.

Speaker 1

Good. That's what I wanted to hear. Thanks.

Speaker 6

Thanks.

Speaker 1

Thank you. Appreciate the answers.

Speaker 6

Sure.

Speaker 0

Your next question comes from Janet Liu of Goldman Sachs.

Speaker 5

Good afternoon. I've got several questions on the Macau business. First of all, you've said that the October trend looks still quite good. I just want to understand a little bit on the second week of October, which is after the Golden Week holiday. What is the trend of your market share and revenue? Also, yeah.

Speaker 8

Oh, okay.

Speaker 5

Go ahead. Sorry.

Speaker 8

Oh, I just answered you. The second week after Golden Week.

Speaker 5

Oh, okay.

Speaker 8

Okay, what's the next question? What were your other questions?

Speaker 5

Actually, in the first week, we noticed that there's some pickup in the market share in Macau. Is that because of like win rate, or is there any, or did you do any more aggressive in marketing, or?

Speaker 8

You're paying too close attention. You're too close to the sheet of paper. In a week, to look at a casino like Wynn Macau is a mistake. We have a lower hold percentage one week, a higher percentage the next week. I answered you about the turn, about the level of activity. It's up. Looking at the place week by week is a waste of your time, really. Don't do that. Even though they published the numbers, you're seeing gross market shares. Gross market share means nothing month to date. Absolutely nothing.

Speaker 6

Last year.

Speaker 8

What good is gross market share when you have four hotels or three hotels or two hotels? You have three sets of payroll, three sets of depreciation, extra interest expense. It's a totally worthless number. Wasting time on this call is probably not productive.

Speaker 5

Oh, sure, sure. Okay. My second question is regarding your Cotai project. Because the government has reiterated its intention not to increase its table cap at 57.13 and keep the growth at 3%. On your Cotai project, how are you going to allocate the tables of around 500 tables for the project?

Speaker 8

Your interpretation of the table cap is that the current table cap is going to apply to future hotels, that you misunderstood the government's position. The current table cap has to do with the current tables.

Speaker 0

Your next question is a follow-up from Harry Curtis of Nomura.

Speaker 1

Hey, Steve. You know, the topic, at least here in New York, is Occupy Wall Street. I was going to ask a wise-ass question about whether or not you were going to contribute to that cause. I do think that it raises an interesting political question, which is, how do you see the landscape politically now? Is there any reason for optimism given the current slate of candidates who give you hope for the regulatory environment improving for your business?

Speaker 8

We had the debate here last night, and we had a focus group that actually took place in Tryst last night with Frank Luntz that will be on television. It's very interesting about the folks who are occupying Wall Street. That group is quite diverse. There are people in there that think the government should give them more just because they are alive, regardless. There are people there who are opposing government spending. There are people there that are opposing bailouts. That group is not homogeneous by any means.

What you do have on Wall Street is a reflection, a real reflection, in my opinion, of the anxiety, the insecurity, and the fear that is endemic in the United States of America about the way the government has gotten into the business of managing its life and the ability of the government to manage the economy intelligently by increasing these deficits and government spending passionately to the point of threatening everybody's financial security. I am watching my employees' standard of living drop because of deficits. I think that the American public is beginning to make a connection between deficits and their own loss of living standard. People that work for me are being paid in $0.80 dollars on their way to $0.70 dollars.

Even though I've given two cost of living increases to my employees in spite of operating losses in America, because I've been able to use money from CapEx, I have not been able to keep up with the effect of deficits on the living standard of my employees. The net result of all this is frustration, anxiety, and anger. You're seeing that on Occupy Wall Street. You can see it taken to the next level in Greece, where people are trying to break into a parliament primarily controlled by the unions and the very kind of government that the people who are trying to break down the fences elected. There comes a moment when the population realizes that it has to stop. Sometimes it takes a form of tax the rich people, which is a reflection more of a lack of understanding of how the economy works.

Rich people are now being defined by the administration as people who make $1 million. Most of the businesses in America, other than giant corporations, are paying taxes under Chapter S, partnerships, or individual proprietorships. Somebody shows that they've made $3 million or $2 million this year, and they pay personal taxes on that money. They subtract the cost of living, and then what's left? That does not show that probably 25% or 30% of their profits are tied up in accounts receivable or inventory, stuff that they can't spend or get their hands on, but to support their business and their employment. They take whatever is left, these so-called millionaires, and they open up another shop or another office. That is the only known engine of growth in the United States of America.

We have an administration that is fanning the fires that this is somehow undeserved, profligate millionaires, and it is worse than hypocrisy. It is totally dishonest. It represents, by young people who don't know the difference, a simple misunderstanding and lack of understanding of how the economy works or what's going on in America. If it's a politician that does it or a union leader, it represents something much more pernicious. It represents a deliberate misleading of the public. I think that Americans are waking up to this. It's taking the form of anger and dissatisfaction with the government. I think that's probably just right. Because until there is a change, until this all stops, it's only going to get worse. No matter what anybody says in some fancy speech, even if it's a president, it is going to get worse.

People say we're angry at the government for not compromising both sides. We don't really have a situation that lends itself to what reasonable people would call compromise. We've got a situation that requires a change. That is to say, one side is right here and the other side is wrong. You cannot sustain these deficits. You cannot undercut the people that form the jobs and create the employment in this country. I'll give you an example of Las Vegas and my own industry. Across the street from me is an empty piece of property that's 34 acres. It's owned by two Israeli gents that are friends of mine that bought it at a very high price and are sort of in a difficult position now. They even owe money against that property. They have come to me on a monthly basis to say, "Go ahead, Steve. You take it.

Build something. Connect it to Wynn and Encore, your golf courses and convention facilities. Help us get out of this. We're willing to take a very long-term approach. We'll turn the property over to you even if we have to pay off the loan." That is a very attractive offer, especially since they're willing to pay us for management, design, and supervision, as well as inviting us to invest. I have to tell both of these men who are friends of mine, "Look, I can't give you a reasonable projection of what this return on investment will be even if we spend $2 billion and create 10,000 direct jobs and another 30,000 indirect jobs for a total of 40,000 jobs.

That's how many jobs I could create if I broke ground on the frontier property in the next six months or a year, and we would know how to do that. I can't tell the men who are willing to sacrifice any short-term benefit in exchange for a long-term opportunity because I cannot predict what healthcare costs are going to be, what regulatory load they're going to heap on us, what new taxes or other burdens this insatiable governmental appetite for money from the citizens will take us to. That is simply a statement of fact. It isn't a partisan political pitch. It's simply a statement of fact from a businessman who has supported probably more Democrats than Republicans. I say right now that the Democratic agenda of spend and bribe the public has bankrupted this country.

Until it stops, the citizens of this country are in for more hard times. Fancy speeches aren't going to change that. Only a fundamental realization that citizens are going to have to take real sophisticated responsibility for how we allocate the resources of this country.

Speaker 1

Steve, we got to get you on the slate.

Speaker 8

Only if I could take my pillow to Washington.

Speaker 1

All right. Very good.

Speaker 8

I'm not qualified, but I am qualified to say what I just said. I stand by it.

Speaker 1

That's great. Thank you.

Speaker 0

At this time, there are no further questions. I'll turn the conference back to management for closing remarks.

Speaker 8

It's nice talking to you. See you in 90 days.

Speaker 6

Thanks, everybody.

Speaker 0

Thank you for participating in today's conference call. You may now disconnect.