Wynn Resorts, Limited (WYNN) Q3 2010 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Wynn Resorts Third Quarter 2010 Earnings Call. Joining the call on behalf of the company today are Steve Wynn; Marc Schorr; John Strzemp; Matt Maddox; Andrew Pascal; Scott Peterson, and on the phone, Ian Coughlan, President of Wynn Macau; and Robert Gansmo, CFO of Wynn Macau. [Operator Instructions] Now I would like to turn the call over to Mr. Maddox. Please go ahead, sir.

Thank you, and good afternoon, everyone. I just like to remind everybody that we will be making forward-looking statements under the Safe Harbor Federal Securities laws, and with that, I'm going to turn it over to Steve Wynn for opening comments.

Okay, so we had a nice quarter. Made a couple of $100 million [ph] in Macau and not bad in Las Vegas either. This is the first time on the conference call that I'm going to say I believe that we've seen the bottom in Las Vegas and I don't know how fast it's going to get better, but I don't think it's going to get any worse and we had a really nice October too, and we had a record-breaking October in China. So business is pretty good actually all the way around. I think with two months to go, we're over $900 million of EBITDA, so speaking after my 40-odd years, first year we're going to go well over $1 billion in profit, in EBITDA at least. Although I stress again that this EBITDA number, which is what everybody likes to flash around is sort of a fake number because you have to pay your interest so lots got to do with what you make as how much money you owe. And depreciation isn't something that can be discarded. The more hotels you have, the more depreciation you've got. And the more money you have to spend taking care of these places, which reminds me that our remodeling and upgrading of the whole Las Vegas facility, the Wynn Las Vegas facility is proceeding greatly and the public is receiving it well. It's caused our room rates to go up in the newly remodeled and refurbished rooms. Our baccarat is closed until Christmas, it's being re-configured and we opened a restaurant a few days ago in Las Vegas called the Lakeside Grill, which is jumping and doing big business for us. And our night clubs continue to be as a group, probably the most successful on the planet. We're going to do $150 million or $160 million in Nightclub business in Las Vegas and make 45% profit or something. So generally speaking, we like the way we're configured and we're happy that things aren't going to get worse. I think the election today is a great moment in stabilizing what has been overwhelming uncertainty and fear of this administration by businessmen around the country. And I think that the message that the American people are sending to Washington tonight is clear, decisive rejection of the policies that have put us in this position lately. And so I think that we're going to see a more positive, a more consumer confidence after tonight, as the administration sort of gets put in its place about overwhelming government control and ridiculous spending and stuff like that. We were damaged as a company by the healthcare bill. We have been the victim of 8% escalation of healthcare costs and our insurance program and we self-insure. We are healthcare provider. And we have never touched the benefits to our employees or raised their costs of their contributions in co-pay and such. Since we opened this hotel five years ago, we've just taken the hit on 8% a year. As a result of this ridiculous 2700-page fiasco that this Congress passed, our escalation of healthcare cost is going to close to 11% or 12%. Thank you very much, Congress, for all the help. They made it tougher on large businesses, small businesses, they've made it tougher on unions. In many cases, the culinary union contract with us, for example, and calls for a fixed contribution or cost of living escalation every year to be put into healthcare or wages whichever the union wants. And when it all goes to healthcare, their wages can't be increased. Or put in even a worse situation that the amount of money that we can give the union to cover their healthcare escalation doesn't equal what the union has to pay out in its policy to our employees. So the healthcare bill was a fiasco across the Board. We can only hope that maybe when the new legislation reconvenes, they will somehow undo the damage that has been done by this ill-conceived piece of legislation, which is very important to companies like ourselves, which employ and ensure tens of thousands of people. So I think that the elections have very positive moment and maybe we'll get some relief from the government in the months ahead. The President, as you know, told everybody not to go to Las Vegas in more or less terms and that didn't help us. So all of this is going to get cleared up I think now, and we're filling terrific about China now. I think I'll finish my part of this meeting before it get into questions about Cotai. My designed partners and I have been working on an average of 6 hours a day as many as 12 this summer, but six hours a day every week for months now. And maybe it was because of experience and maybe it was because of opportunity, but it's gone much faster than it usually has. And we have a plan and we have our building drawn. We haven't finished construction documents for bidding, but we're ready to begin and we will. We're doing soil testing on the location of the tower as we speak in China. It has begun. And site clearance begins in a few weeks. And we're off to the races with the Cotai project, which is a stunning, remarkable piece of business. And it's been the most fun, the most challenging and the most rewarding experience of my 42-year career in this job. And I believe that it's a breakaway property physically and conceptually and operationally compared to any other facility of its kind in the world. I'm very, very proud of it. And we're going to be showing pictures and models in a few weeks as we complete renderings and other visual studies that would allow us to explain this hotel to the public. But it is a dilly. And it's going to be the photo-op of China's gaming scene in much a way that our other properties in the past to become the photo-op of each community. It will introduce concepts and ideas into the casino architecture and casino organization of parts as they relate to the whole that have not been seen before. So I'm very happy. And it will also introduce concepts in terms of a room product that have not been seen before. Now I know I'm craving a lot of expectation with that kind of talk, and I wouldn't be doing it if I haven't seen the building and know that we could keep that promise. On the phone call like this, it's not possible to create, to show you pictures, but they will be available soon enough. And I think that since everybody is sort of done, what they're going to do, it will be tough for everybody to copy it. Now we'll take questions.

[Operator Instructions] Your first question comes from Joe Greff of JPMorgan. Joseph Greff - JP Morgan Chase & Co: Steve, on the Cotai project that you just discussed with us, what's your expectation for timeline? When do you break ground? When do you think you'll open and what sort of CapEx are you talking about? And then another question on Macau, we obviously have been hearing and reading a lot about, I guess, heightened competition for the junk of business and I guess some others in the Macau market, I guess, upping the revenue share arrangements. Can you talk about that and if there is a reaction from you all, or what you are seeing in the marketplace that would be helpful understanding that.

Okay, we make forward-leaning statements or whatever they're called, so I'll tell you. Some of the other fellas are a little desperate about their performance. And they've been trying to buy business. I guess in order to make an impression for an IPO or something, it's a scheme that doesn't work very well. They increased the top line but they don't increase the bottom line. October was the best month we ever had. We made over $90 million last month in Macau. And so they don't really lay a glove on us. We've got our own customers. And you've all written about the fact that we tend to be resistant to such change. Our fair share increases, that comparison of the percentage of tables to the percentage of money compared to the percentage of equipment. Our fair share improves, our competitive posture improves with competition. It doesn't deteriorate. So we like the fact that the market is strong and growing and vital. We would prefer that the competition adhere to the rules, but we'll leave that to the government. But we run our business based upon creating a good experience for our customers and that's what pays off. So with regard to Cotai's costs, we know what the building looks like now, and how where all the parts are and how they relate to one another. We don't want to publish our estimated budget for the building until we've had a chance to finish certain parts of the back of the house that we have to place. And then we're going to do a final take-off and we're going to budget the footage. And I'll do that and have a budget by the next time we have a conference call in three months. But it's a little early for me to say it, but I could say it's between $2 billion and $3 billion, probably closer to $2.5 billion, but I'm not sure. I'd like to finish doing the whole take-off. We'll break ground and we'll actually get started -- because remember it's a landfill. We'll be working on the site and what is the beginning of the construction of the project within a few weeks. We'll do site clearance immediately. We're doing the test borings this week because we know the exact location of the high rise. We'll be cleaning up the site and starting the remediation. Remember, it's a dump in effect, it's a landfill. They dump all kinds of junk on the ground and they put dirt over it. And when the ground settles unevenly because of the unstable base, and in order to put our foundation and we have to clean that stuff out and go through it with pilings and other forms of foundational structure. And all that will be done during the year of '11. We're underway and we'll finish and be open for business in '15, so four years from now. That's what the whole thing takes. And we'll show you the building in great detail probably next time, the end of the next quarter. We'll start using showing all the pretty pictures and stuff that might Board saw today. We had a board meeting a few minutes ago and I showed the building to the directors, enjoying it as we have been. Did I answer your question, Joe? Joseph Greff - JP Morgan Chase & Co: It does.

Your next question comes from Carlo Santarelli of Wells Fargo.

Steve, I was wondering if you can comment a little bit about your strategy for Japan and how you see that process playing out?

I just came from one room talking about Japan after the board meeting. The situation in Japan has come to the point where a committee of inter-party committee, cross-party committee has been formed to study the matter and to advise a report to the diet. And our people have just spent a couple of weeks in Japan and we are following the situation carefully. Exploratory committees or individuals are visiting Las Vegas in the near future and they're visiting Macau and Singapore. You can imagine that all the companies that have an interest in international gaming are queued up, making their best moves and creating their best relationships in doing all of the others enabling [ph] and maneuvering that they could possibly do and we're included in such group. Where it all ends up is murky at best at this moment. They've got to accept the budget. And in a parliamentary form of government in Japan, it could fail or be accepted. It could cause a crisis that would require an election. And there could be a change of power or continuation of power, there could be consolidation of power by the Democrats or the LDP [Liberal Democratic Party] and the players could change and the attitudes could change. Matt, what did you tell me that the average lifespan of a Prime Minister in Japan is how long?

I think in the last five years, it's about one year. They've had five in the last six years.

Yes. So the situation in Japan is provocative as inviting as potentially wonderful as it might be for the citizens of Japan and for a company that could be of service in the construction of such an industry like ourselves or any of the other fellas. We're not quite clear on a schedule or the exact description of the chain of events that would lead to the development of an industry like this in Japan. There are some very influential and intelligent men in government in Japan that feel that it maybe appropriate to do this. And that's encouraging. And then of course everybody knows who they are, and is trying to put the best foot forward. That's it.

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

Just a quick question again to go back to the Cotai. I'm wondering if you could talk a little bit more, maybe, about just kind of the land concessionaires, that's something you need before you're going to feel comfortable putting a lot of different capital into the ground there and maybe timing around that? And then also just your thoughts on financing the project maybe for Matt.

Well, I'll talk about one part of it because Kim Sinatra is here. It's a strange thing for Westerners to understand how it works in Macau sometimes. You lease the land with ground rent from the government for a specific purpose and you must comply with that purpose when you ask for the concession. And the amount of money you pay for the concession is directly related to the purpose and the amount of footage and the description of the footage on the property. They commit to the property for you in advance and allow you, in our case, to put a fence around it, to build a warehouse. The final lease payment is determined by the publication of the plan in the gazette. Prior to that time, you're encouraged to go ahead and begin. And we do. And hotels are built that way. Sometimes the gazette process trails, but in all cases, you are given instructions by the government in advance on what to do and what you're allowed to do as we have been given in the past two years. So that's why there's a warehouse and plans and our procedure has gone all the way to the end of the regulatory process to execute the final lease and that will happen in the next several weeks. But as far as the commitment that you have to use the property and do your project, you get that way in advance, and we've got that. And it comes in writing as a matter of fact. That came quite a while ago. So there's stability, there's predictability there. Again, I stress, it's not like here we nobody knows what to expect tomorrow because of our particular political problems we've had in the past two years with this administration. But in Macau, it's not that way at all. I mean there's rules and there's procedures and you follow them. And then you go about your business.

On the financing, as you've seen in the press release, Sean, we are talking about Wynn Macau Limited being a regular recurring dividend-paying company with a target yield of 1% to 3%. So if you run through the math, you'll see that that's anywhere in the neighborhood of less than 50% of the cash flow. So when I think about financing it, we'll probably put an extra add-on to our bank facility down there. Once we really know what the final budget is, and then use the substantial free cash flow. But what you give with Wynn Macau is, you get both the dividend-paying company and the growth of Cotai. So we want to be able to execute and we will execute both.

Well, we're at it, the Board of Directors today voted a special dividend of $8 a share payable on December 7. Another promo, another piece of good news associated by our extraordinary capital structure and our cash flows still leaves us with a huge amount of excess capital and the freedom that many of our competitors don't enjoy financially. But it's good news for our shareholders who we believe should be the principal beneficiaries of this company's activities. And that has been our pattern over the past, ever since the inception of Wynn resorts to take the interest of the shareholders first and considering the whole picture in this country. It was good time for a special dividend.

Your next question comes from Mark Strawn of Morgan Stanley.

One question on Las Vegas. Sounds like you're calling something of a bottom with maybe a slow recovery. If you look at the core segments to your business, are there any segments that you see outperforming at this stage and any segments that are still consistently weak perhaps?

I think we've talked about in the past couple of calls about one segment, where I think we're starting to see more stability and that was hardest hit coming into the recession mostly Convention and Group business. And so we've seen that improved. I feel pretty good coming into next year. The amount of business that we currently have on the books committed, I mean, to give you a comparison last year coming into this year, we had about 35% of our convention room nights on the books. And going into next year, we're looking at 65% of our convention room nights on the books. So we're happy to see that segment is going to return to somewhere between 18%, 19% of our overall occupancy. And also we're seeing some rate improvement. The hardest hit in terms of the segments, in terms of the overall rate decline and we saw that bottomed out. We're starting to see some rate improvement there as well. So if I think about the different segments, I would say the Convention segment is the one that is showing stability and signs of growth.

I was just, for a second, while Andy was answering that question. And I mentioned the dividend a moment ago. After the dividend, this company throws out the cash flow. It's almost half as much as our total debt, net debt. It's a very comfortable position to be in. I just thought I'd mentioned that. I love that ratio and try to keep it conservative like that. We don't worry about coverage of our interest payment, we worry about coverage of our earnings compared to the total debt. And we'd like it when our earnings as half of our total debt. That keeps us in a very strong position and that's after we pay $1 billion or more dividend. So what's the next question ?

Your next question comes from David Katz of Jefferies. David Katz - Jefferies & Company, Inc.: So many things have seemed to be going right in Macau. And clearly, this is a happy release and a happy conference call, and not to spoil that in any way, but what should we consider that could potentially go wrong. What are the biggest concerns or issues we should think about going forward as we model out the next couple of years particularly in Macau? What concerns you?

You want me to hypothetically think of everything could go wrong on a conference call? Who do you think you're talking to, anyway? You've got no chance of me doing that. You do that. That will give you something to do. I'm not going to do it. You understand the market clearly enough. Why would I hypothecate about stuff like that? David Katz - Jefferies & Company, Inc.: If I may turn it around as it relates to Las Vegas and talk about some of the issues that could drive the market higher, you made a comment earlier which, I think, we took note of that. It shouldn't get any worse. What are the issues as it relates to air traffic as it relates to the overall business climate that you would recommend we keep an eye on and plotting the trajectory of Las Vegas getting better?

We are a top-end operator. We cater the better people with the five stars and the five diamond service in the [ph]. We are a niche operator. We try and have the best hotel in every market that we're in. That means our customers are discriminating, well-to-do, very intelligent people. And they have money. And in the United States of America, people with money have been in the defensive crouch if they run a business because of the administration in Washington. It's an anti-business, socialistic and aggressively anti-business. We've never seen like this in our life. Where there's a cross here, printed on the back of anybody that creates jobs or makes money. My customers, my guests are frightened of these people. And so they are clutching their bankrolls and hiding out. Now what's going to affect the Las Vegas and companies like MGM and The Venetian and myself, our gang will be, the phrase they use is consumer confidence. But its absence of fear. Once the businessmen and -- all this cash in America is being held on the side, it maybe a couple of trillion. It's locked up. Unfortunately, most of it is being lent to the government at no interest and treasuries. Between the family and the company, we have probably couple of billion dollars in treasury bills with no interest. Nobody wants to take their bankroll out of their pocket because they don't know what's going to happen to them. The minute that this election is straightened out and this administration is properly put in its place, I believe there's going to be a change in consumer confidence in America. And if they're smart enough in Washington to not touch with the tax rate that we enjoy now, you will see businesses heave a sigh of relief and there'll be a lot of unexpected good things happen. If this money that's on the side comes out, it's not only good for Las Vegas, it's good for America. And if we get some people in there that stops squandering money, and the government will even be in better shape. And we get some intelligent leadership on entitlements, there's going to wave of confidence and optimism in America that will radically and rapidly change the doldrums that we're in. One of the problems we got is that the people who are in elected positions in Washington do not have the intellectual firepower to deal with the problems or understand them in America today. The damned farm system for the Washington is the state legislature. For example, that really affects our business, we've been told over and over again by the President that everybody who's got $250,000 a year income or more is a rich person that should pay their fair share, presumably because we're not now. Well, the fact of the matter is that the personal tax rate is the business tax of small and medium businesses in America. And the people that are making $2 million and $3 million and $4 million in subchapter S corporations are proprietorships or partnerships. They're paying their taxes as individuals. They're subtracting their income expenses and then paying a tax as ordinary tax rates and then opening up shops and new offices with what the balance of the $2 million or $3 million or $4 million or $5 million they're making. And incidentally, they're not really making the $2 million or $3 million or $4 million or $5 million. Usually, 25% or 30% of that is tied up in inventory or accounts receivable. And yet, in spite of this overwhelming truth, the President of the United States and leaders of the parties that support him keep calling everybody who files a tax return with $250,000 or more a rich person. It is a total and deliberate misstatement of the structure of the American economy. It's a form of hypocrisy that defies understanding. It's also an insult to the intelligence of the American people. An insult, which I think is going to be answered as this day proceeds very clearly by the voters. But this kind of foolishness and hypocrisy has to stop. And that's when people come to Las Vegas, to spend money, go shopping and do all the other things they do, it will loosen things up. And we call all of these consumer confidence. Right now, it's consumer disgust and fear of -- when our leaders in Washington are guilty of blatant hypocrisy, anybody with a brain in their head is frightened by it. And I think that when that disappears, if it does tonight, we're going to see a much a more optimistic frame of mind in the United States that will directly benefit Las Vegas. And if Harry Reid survives his challenge in this election, I think Harry will go back to a Senate with a different flavor. And I think that maybe Harry will be in a position to help Nevada more than he has in the past with the different constituency in the Senate and it will be good for Las Vegas. Those are the things to look at for this town. We are very much a sounding board for America. David Katz - Jefferies & Company, Inc.: With your financial strength and the Cotai project which you discussed earlier, are there any other areas or markets or projects that you would consider between now and Cotai openings since it's a few years away and you do have the strength to pursue things?

The answer is yes, but I think it's probably a pretty good idea to keep our cards closed to the vest and talk about deals we've made instead of ones that we want to make.

Your next question comes from Tom Marsico of Marsico Capital Management.

First of all, as a longtime shareholder, I would just like to express our gratitude of the execution and transparency that you provided for our shareholders in the money that we manage for our clients. I think that the $8 dividend, we bought stock back again at $19 [ph] on the -- during the terrible period of time that we went through a couple of years ago. And I think in total now, this is about $24 of dividends that we've received. I commend you for making, taking a public stand as far as what was happening in Washington. I think that you definitely, as you always have understood the feelings of your guests, who are the citizens of the United States and of the world, and you definitely tapped into a feeling that people were frightened and scared. And I hope that you're right if we see some difference as a result of the election tonight. But I would just like to say on behalf of our clients, your leadership execution and transparency of the company has been terrific and we applaud you.

We went public so that we could have shareholders like you and our other strong institutional shareholders, and Ron Baron and others. And It's been a source of strength because the institutional shareholdings that company like ours hold when we're lucky enough to enjoy that kind of institutional ownership. It gives us stability to the base of the company that would otherwise be impossible. And incidentally, Tom, I don't know how, since you and I are talking to each other in front of everybody else, I don't know after tonight how this administration could possibly interpret the mood of America any differently than what the results are clearly going to show, which is a rebuke and repudiation of this move towards massive government expansion overcontrol and ridiculous, ridiculous is the only word for it, spending. And I don't know how this President or any member of that administration or politician, regardless of party, could stand up and not get the message from the citizens of this country that, that stuff doesn't go. It's got to change, Democrat or Republican. And I vote both ways. It's got to stop or America is headed for problems that -- I mean, one of the reasons I'm so angry about this, and there's no question I am, is that I have always had a sort of a protective attitude towards my employees. I consider us a family. And I've always thought that we, as a company, if we stayed healthy, that we could protect our employees in every way possible. And now I see the government destroying the value of the dollar, lowering the quality of life and the standard of living for the working class of America, the very people that they're supposed to represent. And sure, we're going to give paychecks out, but they're going to be $0.60 on a dollar paychecks. And all these people are coming up for Social Security and Medicare. They're going to get paid with $0.60 and $0.70 on a dollar, dollars. I remember hearing the President say that the middle class has gone down and the rich get richer. The reason the middle-class relative position deteriorates, if it does at all, is because of the government. Not because of people that creates jobs and build companies. It's because of the government. And what happened now is the American public has awakened to this miserable truth. And they see right through with phony rhetoric. And if that's true, we're going to get a different kind of leadership in Congress that recognizes what it takes to run this country properly using common sense. And that's the reason that I think that this stinging rebuke that the President is going to get tonight has to have a proper effect on him and other like-thinking hypocrites.

Your next question comes from Cameron McKnight of Buckingham.

Steve, would you mind commenting on some of the general macro trends you're seeing in China as it relates to your business. Are you seeing more customers? Or are you seeing more spend from a similar number of customers?

More customers, longer stays, everything that the government of Macau intended to happen in Macau is happening. Here's a government with a plan, with a common sense plan, and they employed experts to execute the plan. A bunch of us that do this sort of thing. Instead of it being a day-trip market, the length of stay has elongated. The amount of spending on non-casino has increased. The total amount of visitation has grown at a steady, wonderful pace under the control of the government. Employment is stable. Earnings are stable or growing. It's another example of solid political leadership in the local Macau government level and in the policy direction and support that the central government in Beijing gives Macau. I've been there nine years and the contrast to last two years between this and China is something I've commented on publicly before. But it's even more clear at the very moment that we're speaking today than ever before. I mean everything that they wanted, by opening the monopoly situation in 2002 has happened right on mark. Very Chinese. Have a program, outline the program and stick to it. That's what they do over there. And if you're part of it, you're fortunate. And we are very fortunate to have been allowed to participate.

And switching gears over to Las Vegas. A few quarters ago in '09, you commented about the win rate on table games was impaired because of shorter time on device. And over the last couple of quarters, we've seen the hopeless and it's started to come back. Are customers feeling more confident? Or is it something else going on with the mix of business?

Well, as we've raised our rates and our hotel rates have started to slowly climb again, we're getting that visitor that is more well-rounded and got a deeper pocket too, so they play longer. Andrew can comment and Marc Schorr is here. Either one of those guys -- really this is the ballpark they live in every day.

Better customers are better players. As simple as that. That's what we're seeing, just better player in the casino. Playing for players [ph] is what's happening. It's improved over the last year.

And Andrew, it's sort of directly related. The room rate we get is...

We've seen more stability in our domestic segment of our market on the gaming side. So that's helped a lot.

Especially with the last two quarters.

Domestic business in the last two quarters has been better. I think it's all anticipation of this election to be honest with you. It's been pretty clear what's going to happen in Washington for about four or five months. And I think that has taken hold. The effect of the government on this economy, the perception of the government in this economy can not be overstated. The psychological impact that has been -- that the government's policies have had has been a major factor in prolonging the recession.

Your next question comes from Grant Chum of UBS.

Steve, just a question on the casino side in Macau. As you look at the configuration of the VIP and mass-market compacity in Macau, do you have any sense as whether we should expect you to add more junket partners over the next six months or so. And related to that, what's your feeling now on credit extension environment in Macau? I mean, you've been so cautious since mid of 2008. What should we expect in that going forward?

The boss lady is here, Linda Chen. And I'm going to let her deal with this because it is her -- since she graduated Cornell, I won't say when, it's been her issue with us.

The first question on the junket, yes, we do have plans to add more. We are capacity-constraint, as you always know, Grant, you know our property very well, but we're looking to add two or three more junket within the next year. We have one actually coming out before the end of the year. As far as credit, you and I have had this conversation. I think the worst mistake someone could make is use the credit as a marketing tool and to buy the business. And its stability. You can't do whether it's credit or incentive for short-term purpose. And there are operators, whether they're trying to boost up their revenue for whatever purpose that they go in and out of increased commission or credit.

Linda, could you speak a little louder, a little slower. I want them to understand the point you're making. Start that explanation over again.

What I think a lot of operator do, whether it's with credit or incentive, which is commission, is they use it for short-term purpose to increase revenue, to increase market share. So obviously, they go hand-in-hand. One is giving more incentive, which is commissioned back to the customer to bring the business. The second is you need credit. You need to give them facility to get the business. So they use both of them hand-in-hand to gain short-term market share, whether it's for IPO or they're trying to do different purpose to gain that short-term market share. However, the danger with that is first, we believe in stability. Obviously, if you give something more weight on the commission, then you have to cut something back, whether it's salary or renovation dollars. So you're taking -- there's only so much dollars in the 100% that you can give away. So if you're giving it too much away on the commission, then you got to cut back to other places. That creates unstable business model for the whole operation. But second, it's not good for the customers where you go in and out. Today I'm giving you more and then tomorrow, as it's found out that it's not a profitable business, now I'm going to take it back. It doesn't buy long-term loyalty with the customer or the junket. And that's what we do well. If you look at people always talking about market share, they said, "Have we lost market share?" Actually, what's the growth of the whole Macau market, we maintained our market share quite well. And that speaks a lot with even additional tables from Encore. So our penetration level had actually increased with the additional table. People don't look at that, they just keep saying as a whole market share has decreased. But in a growing market that's grown 60%, maintaining market share is already a lot of dollars and we maintain very healthy business model, where we take all those additional business to the same profitability down to the bottom line.

We don't owe anymore money.

Yes. And we haven't over extend the credit. We do credit by junk or by customer 101. You can't say credit as the overall picture says. I'm just going to increase 20% credit to get more business. It doesn't work that way. You have to know your customers. It's based on could that person, can that junket pay or can they sustain their long-term collection efforts. So it's hard for an operation coming to say, "I'm just going to go buy the business." It doesn't work on a long term. They can do that for months to buy the business. Once they can't collect, they can't turn the money around, then the business goes away. And the thing that happened in Macau [ph] .

For example, if she has used the phrase short-term advantage. The reason it's short-term is because you don't make any money. You get bad debts and what happens is, the company has fired the dimwitted executive that did it. I been watching this for 42 years and you see one President after another get dumped one marketing tie after another gets switched. And then a new guy comes in or a new lady comes in and sanity returns and the bottom line returns and they realize finally, and irrevocably, there is only one way known to mankind to increase business, and that is by increasing the quality of customer experience. This market in China is a repeat market, they come once a week. And the quality of their experience is the only thing that matters. Consistency is what they depend upon. Predictability is what they want, just like everything else alike. Predictability, consistency, when you get the short-term thinking nitwits jumping around, it just means that pretty soon there'll be a new name on the business card. I've been watching it for 42 years, I mean, it's very difficult. It's almost unimaginable that you would need to explain at this day and age that all the casinos in Macau were paying the right amount of commission. That is to say the most amount they could give and maintain a stable business. And then some Yahoo shows up and says, "What go up by 20%?" We just discovered juicy fruit. It is the dumbest thing I've ever seen. We watched this happen because there's always a new dumbbell. And then there's an ex-dumbbell and until finally they end up with someone who knows how to run the business properly and they pay attention to what really does increase market share or market penetration and that is the quality of the customer experience. And that is all there is to say about this subject. And if you see somebody given more money away than the rest of us can give to attract the customers more promotional allowances, then you are looking at the walking dead. Call that person a zombie because their days are numbered.

Your next question comes from Jon Oh of CLSA.

Steve, this question goes back to Cotai and I know that it's a bit impatient, but to the extent that you can share with us on Cotai, assuming that you will continue to leverage on the Wynn branding, what are some of the key elements of this new property that you will inject? And also how should we go about thinking about cannibalization of the existing Wynn Macau?

Well, the second part of your question is an interesting one for the moment, cannibalization. When I sit down with my colleagues and although my name maybe on the sign, the projects belong to all of us and a reflection of all of us, not me. And when I sit with them and say who are we going to be in Cotai and can we afford to have the two places, are we just going to cannibalize the one we've got. The answer comes back from Linda and company and Ian and company and JD and Doreen and Frankie Zhao [ph] and all my colleagues, no, Steve, we're not going to cannibalize it. This market growth, we are right on schedule. We didn't build each one of the things we built. We built in due course. We let sands go first with the one that they built with the down and dirty quick one, the sands. We took our time and we opened Wynn, and then we took our time and we added tower at Encore and our penetration got better. We didn't cannibalize anything. We increased our fair share. We planned and took our time and we're ready now to build and we're starting to build Cotai because we knew, understanding market rates of growth and seeing that the operation of our competitors have been learning from that, that we would arrive at the date of opening that would allow us to achieve parity with our operation on the peninsula. And grow intelligently with our feet underneath us, gathered up and collected, like a good show horse that goes over a jump, collected. So I think that we're going to make a lot of money on Cotai. I think we're going to have 10,000 or so, 1,200, 15,000 employees and it's going to be a very stable happy experience because we did it in due course. We didn't try and do it all at once. We didn't think it being master of the universe. We thought only of one thing. How do you build with a solid foundation, a steady, predictable, long-term business and be a useful part of the community to be welcomed as a good addition to the community. To sort of be part of keeping the promise of the plan, in this case, of the government of Macau. And that's a slower, more carefully studied and considered process. And that's why our third hotel is going to open up in four years. The first one was in '06, the second one was in '09 or '10 and the third is going to be in '14 or '15. That's the arc of our development in China, but those hotels will be there forever, long after I'm gone. When my time is up in this world, those hotels are still be viable wonderful businesses providing security for their employees and the people that run them and the shareholders. And as far as giving you more information about Macau, it looks like I want to do when I got the pictures. I've shown it to all of us here know what the hotel looks like and what it got in it. But to dribble it out conversationally in this format, I think there's better ways of us doing it. I think we probably will call for an investment conference, one in China and one in Las Vegas, that Matt and I will put on with Linda and Ian and the guys and all of us. And we'll show what we're going to do. We'll have a model and we'll unveil its beauty to our joy and to the chagrin of our competitors.

I have one word to explain what I've seen in Cotai. I think it's irresistible. That's the way I would describe it if I was the customer.

Yes. It's the best work we've done in 42 years. What's funny is that previously the best work we have done was the Encore in Macau. But you see, we get the chance to do this. Think of the wonderful serendipitous coincidence of opportunity and timing. We're in the right place at the right time and we're the right company with the right experience to build the nicest hotel in the world. Just think how lucky we are to be in that position and to know that we can afford to do it right. I am so grateful for this position we're in Macau, but I can't say it enough times. How many developers have been given the opportunity to build really remarkable places for people to visit the way most of us in this industry in China have been blessed. And for that matter, in Singapore, K.T. Lim and Sheldon Adelson's operations are enjoying a wonderful opportunity to create wonderful places because Asia has offered up this moment historically to our industry. It's wonderfully exciting and I think that all of us, whether I'm speaking for Sheldon and K.T., my friend K.T. at Genting Resorts World, is the name of his company or whether I'm speaking for my gang here, my family. We're all feeling very grateful and excited about being alive participating at this moment. Great fun. I don't want to screw up the opportunity. Sorry, but no more information about Cotai. I'd rather do it when I can show it.

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

Two questions. The first is relative to Cotai and the pictures. It's a little unusual to hear you showing rendering ahead of time versus secrecy that's been around some of your other designs. I'm just curious as to what caused the change in modus operandi there? And second, a question for Linda perhaps, as you think about the VIP market in Macau, it's obviously grown over the years as a percent of total to over 70%. Looking forward to the next year or two, do you see it stable at that level growing more or receding as a percentage of the total?

First answer. We have never been secret about our projects. We had the Cotai model, the Wynn Macau model on display the day that we had the groundbreaking. We had a three-dimensional model, I showed it publicly. Had pictures out. We had a model of Mirage on display at the Golden Nugget before it was even started construction. We had the model of Bellagio on display. I'm sorry if you misunderstood, but we've never kept it secret. What we do is we don't discuss it until we're finished designing it, but once we're finished designing it, we shouted out. Yes, we displayed it, but nobody came to see it. It was in the lobby and people used to go in the desert inn and never be heard from again and for five years that applied to us. But we never kept the project secret. We've avoided discussing them until we have them finished. I think that's what you maybe...

I think I was thinking more of Encore Macau, where there weren't tourists or whatever until it was open and then we saw...

But we couldn't get in there. It was such a small site, we couldn't get in. That's what happened. But we have a model of Encore Macau on the Wynn Macau model. We attached it and we had it on display upstairs in the Executive offices and showed it to everybody. Anybody could've seen it. So we don't intend to keep it. Once we design the hotel, we show it and if somebody wants to go, I remember going to Atlantic City this past year, I was making a tour of various jurisdictions to learn about what was going on in America because I haven't done it in so long. And I was walking out of the Borganta, which I want to look at and there next-door was Harra's, with a curved tower and asymmetrical roof, a very poor, homely copy of the Wynn Las Vegas. And I called up Gary Loveman, and I said, "Hey man, have you no shame?" I mean, and in the building was in the wrong proportion. In order to do what we do with our building, it has to be horizontal in its proportion or doesn't look right. And this one was verticals, which just looked like sort of a tall rectangle with point on one end. And he said he gave me an answer, he said "Well, duplication is a serious form of flattery." I found that relatively unsatisfactory answer. I think maybe someone should try to do their own thing instead of doing bad copies of other people's things. But we do give the boys a chance to louse up what they think we're doing. But there always one hotel behind and that reminds me of the story when Waylon Jennings met a kid that imitated the western singer. He told the kid, "Listen, I know you're a nice kid and you sing good and you're good-looking, but if you do well in Jennings, I'm already doing well in Jennings and you got to be yourself if you want to be successful in life, because I'll tell you something, son, and the boy's name was Wendell Atkins. Is it Wendell? Is it Waylon Jennings? If you do me, you're always going to be one record behind. And I thought that was a great funny remark. I was standing there when he said it. So if people copy our hotels, they're always one hotel behind. It's okay with me. Linda?

On the mass market, VIP, I think so far we're seeing a tremendous growth in mass markets, because until all the new casinos opened, there weren't good mass market products. So that is the obvious market where it can grow with a [ph]. But the good news is, I think right now, it also added a good mix. But the good news is both markets are growing tremendously. So in future years to come, we hope that both markets maintain about the same percentage, but keep growing as the new product comes into the market and then new visitors a staying longer. So they're bringing new more visitors in town and they're staying longer, which benefits both segments.

Until this recession, the history of Las Vegas has answered your question for you. Las Vegas always grew, not in spite of the addition of capacity, but because of the addition of capacity. It was the developments themselves that allowed the market to grow, and I think that China, Macau is showing the exact same profile, and as usual, in a more magnified sense because of the amount of people that are available. But that's what Linda thinks. The market grows because of the development, not in spite of it. That was the last question. Thank you everybody. We'll have more stuff for you next time we get together and hope you all have a nice Christmas holiday and a nice Thanksgiving holiday on behalf of all of us.

Thank you. This concludes today's conference. You may now disconnect.