Wynn Resorts, Limited (WYNN) Q4 2016 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. Welcome to the Fourth Quarter 2016 Earnings Call. My name is Ronnie, and I'll be your conference operator today. [Operator Instructions] I would now like to turn the conference over to Steve Cootey, Chief Financial Officer. Please go ahead.

Thank you, and good afternoon. Joining the call on behalf of the company today are Steve Wynn, Matt Maddox, Maurice Wooden and myself here in Las Vegas. Also on the phone are the operational management teams from our Las Vegas, Macau and Boston properties. Before we get started, I just want to remind everyone that we will be making forward-looking statements under the safe harbor federal securities laws, and those statements may or may not come true. And with that, I'm going to turn the call over to Mr. Wynn.

Very nice to have this call. You've seen our numbers, up. I have a couple of comments. We opened the Palace in Macau on August 22nd. We opened the Wynn Macau on Labor Day of 2006. It took us about a year to get that property to produce operating profits of $1 million a day. We were able in the -- in September, October, November, December to get to over $800,000 a day. And the way we operate, we tend to ramp up and put very little marketing pressure on a property to find out what its baseline strength is. I've said this before, but it's worth repeating because I'm happy to say that since the 1st of the year -- and during that period, the Macau and Encore properties maintained their levels of revenue without being negatively or adversely affected by the new hotel in Cotai and so that revenue was additive. However, in -- since the 1st of the year, without Chinese New Year, which is going to begin today, we were able to have the Wynn Palace come up to a $1.6 million a day, and Wynn in Macau in $1.4 million a day. So the 2 hotels have been throwing off about $3 million a day, and I'm very glad. It means that our situation is right on target, right on schedule. As a matter of fact, we're a little ahead now, with our hotel occupancy at the Palace, ahead of our predictions. We're running in the 90s at rate, and we're pushing rates upwards in our occupancy, which has caused us to have very good mass market success in Cotai. We're still barricaded on 4 sides by construction by both by the city's light rail system and by construction on 2 sides, by SJM and MGM. And at this point, we're not really clear on when those properties will open. But we are pretty clear that the light rail and our barricades, that have interfered with foot traffic, will be relieved by the spring. So I think if you're planning and looking at our operation in Cotai, you can pretty much figure that we're going to be barricade-free by the second half of this year, sometime during the second quarter. So the fact that we're experiencing this good mass market activity is a function of our high occupancy at Cotai, which produces a higher end customer consistent with our position in the market, both in the Macau original downtown area and the Cotai area. Our fourth quarter was satisfactory in Las Vegas, and January is operating ahead of last year as we head into Chinese New Year, which kicks in pretty much tonight, tomorrow and this weekend. So we expect a happy ending or at least a vigorous ending in terms of casino activity at the end of January going into Super Bowl in February and the holidays in the first quarter. That's pretty much my take as an overlook on our operations. We've been in construction since July in Boston. Bob DeSalvio is on the telephone. One of the most unusual parts about our business is that our 2 Chinese op -- our Chinese operations are run by 2 Irishmen. And Ciarán and Ian are both on the call. And Matt and I are here with Maurice Wooden, who runs America, to answer any of your questions. And we'd be happy to take them now. Questions? Ma'am, you can begin to take questions on this call if I'm still on it. Does nobody have any questions today?

[Operator Instructions] And we have a question from the line of Felicia Hendrix.

So the color you just gave us in the opening remarks were very helpful, where Wynn Palace has ramped to on EBITDA per day. And I was just wondering if you could just talk to us about what has happened to that property since the last quarter to get there? Has it been more tweaking the product, more proactive marketing? Has it benefited from the growth in the market? All of the above? I just think it would be helpful to get some details around what has been driving that. And then in line with that, regarding the margins that you're generating at the property, the EBITDA margins, like, have you gotten to above 20%? How long does it take to get to normalized margins at the property?

You know what? I think that Ian is perfect. He is -- he got up at 5:30 in the morning to talk to you, and I think we ought to let him do so.

Felicia, we've done a significant amount of work at Wynn Palace after the property opened. We completely reconfigured our main casino floor, and that's driven much greater animation and excitement. We've added 2 themes, slot sections, a high promotion -- high-energy promotions area, a new poker area. We've also increased accessibility to our high-limits area. We're constructing a new noodle restaurant on the floor, which has made the casino smaller and also helps with the energy. We have increased our marketing activity both from an awareness perspective and also with general players that are visiting. And we have increased headcount. We've become a member of the much- fabled Cotai Connection, which is bringing in just over 1,000 extra people a day. And the ramp-up in occupancy from the low 70s to mid-90s has been a big help in animating the property. And just generally, we're finding after you get through the chaos of the first 6 to 8 weeks, a property settles and the true players in Cotai are finding our property and discovering it and visiting us. We were very much helped by exposure over the October Golden Week. And particularly, Christmas and New Year was a very busy period for us. So people are experiencing the property, the right type of players are coming and they're finding it to be their home. There has also been a very, very active program of reenergizing inactive players, players that had either split their play from Wynn Macau into the new properties in Cotai or had moved over to Cotai completely. And we've reenergized a lot of those players and they're coming to our property. So we've been helped by a lift in the market also, but it's pretty much everything that Steve covered earlier.

One of the things that is being demonstrated, once again, it's not the amount of tables, it's whose active, and we're probably a perfect example of that. Wouldn't you say so, Ian?

Yes.

Yes, I don't know what our market share is going to show, but I suspect that it will climb from the last quarter.

Chinese New Year is a great exposure opportunity for us as well. It's the first prolonged holiday period. So we expect very, very high visitation from people that would normally attend other properties.

And if we did our quick math correctly, it looks like VIP versus mass mix is roughly 60/40. Where do you want that property to end up?

What about that Ian?

I mean, we're growing all segments of the business. We've seen -- the interesting thing in the split between Wynn Macau downtown and Wynn Palace is the strength of our junkets and also the fact that our mass play downtown hasn't been affected a drop. So we're continuing to grow all segments at Wynn Palace. But where the split works out, we'll see. But I think it will be healthy and pretty similar to our operation downtown.

Right. And it could -- I should add this. Because we get such big play, volatility plays a role month-to-month in that sort of thing, probably more so with us than with some of our neighbors, and that's also true in Las Vegas. But having mentioned that, volatility is a factor when you look at our company compared to our colleagues up and down the street here and abroad. But remember, that volatility factor does have a concomitant benefit. We always, year-in and year-out, run a higher hold percentage than our neighbors. And that's a historical fact, and it has to do with the kind of people that come to a place that is geared toward the top end of the market. Even though we have more volatility, we still settle at a higher level than everybody else.

And just on the EBITDA -- the margin question?

30% in Las Vegas. And Matt, what is it China? Very close?

Yes. I mean, it's -- Wynn Macau has always been in that 30% range. And your question was when can we get Wynn Palace ramped up over 20%? I think that is certainly going in that direction right now. So we're seeing [indiscernible] on everything.

Yes, that's what I was asking. Like so -- are you over 20% now? Not in the quarter, but through this?

Yes, yes, yes.

Yes, we're on our way there. So...

Your next question comes from the line of Carlo Santarelli with Deutsche Bank.

Matt, just quickly in terms of Peninsula low mass hold, high VIP hold, looked a little lower on VIP at Palace. The net effect of all of that stuff with respect to EBITDA, any kind of guidance on that?

It's about -- this is Steve. About $6 million light.

6 -- we're $6 million light. We just had another $6 million.

Would have been another $6 million. Okay, great. And then, Steve, on your comments regarding kind of October, November, December, I think $840 million a day was the EBITDA at Palace. You said over $800,000 a day for -- was that for each of the 3 months?

I -- Ian, is that -- is it? I didn't look at that, that way, or at least I had forgotten. Matt, [indiscernible]

It's around...

In consecutive months.

Great. Okay. That's helpful. And then, Ian or Ciarán, and just whoever wants to opine. But in terms of what you guys are seeing in the market right now, and I'm speaking more so towards the VIP side. Clearly from the DICJ results for the fourth quarter, VIP has meaningfully changed. What is your opinion on that as we look out to 2017? And do you think we're at the beginning of a sustained rally in that market?

It's been fits and starts throughout 2016. People talked about a VIP recovery, but we really have seen a recovery over the last 2.5, 3 months. There's a lot more confidence. There appears to be more liquidity in the market, particularly with the junkets, and it's being sustained. So the outlook is pretty promising.

I have said this before and I want to repeat it again. It is very important to keep a long view of China. The leadership of that country, and this is also true of Macau, it is a meritocracy and there are smart people running the government. They don't move as fast as we do in the United States, especially these days with our new administration, but there is a steady program afoot. Xi Jinping decided that it was a priority of his administration to eliminate the perception of corruption that was held by the people with regard to government. And that effort was vigorous and protracted and it did have an effect. But it seemed to be the right thing to do for the right reasons, and it had an effect on luxury brands and -- such as gaming and Louis Vuitton and Chanel and Mercedes-Benz and that sort of thing. But the long-term thrust of China is inexorable and undeniable. And that's why we build what we built, and we're going to build more in the future because we have real estate to do it. We have a very, very bullish, bullish attitude about China long term for our company. And as we manage our properties, we -- in anticipation of that kind of movement in the general economy, we're being rewarded. And I think it's probably a sound way of looking at China and our business long term.

Great. And then, if I could, just one follow-up. I know you mentioned Bob's on the phone. It looks as if costs for Boston are up maybe $300 million at the midpoint. Could you talk a little bit about maybe what that relates to?

Yes, the -- this is Matt Maddox. So we're working through our GMP right now. The previous budget had been in there for a number of years. We put a fairly conservative estimate out of -- in our current earnings release. And I think over the next 90 days, we'll have much more clarity as we nail our -- as we finalize our guaranteed maximum price contract.

But it's moving along. I mean, they're proceeding at pace. We've been in construction since July, and we're satisfied with the progress.

It's -- we've spent about $467 million to date.

Your next question comes from the line of Joe Greff with JPMorgan.

Just a question on Wynn Palace. I think it was Ian who mentioned about some of the physical changes that you guys are making to the property. Amongst some other things that you're doing is maybe marketing differently or to different customers. Can you talk about marketing expenses? Are they elevated relative to what you think might be a normalized level? And to what extent do you think they might normalize over time over what time frame?

That's an interesting question. Ian, do you want to take a crack at that? You or Ciarán? Or [indiscernible]

Sure. Linked with the opening and marketing expenses were in the range that we anticipated, but they were slightly higher than what we'll have as a run rate for the remainder of the year. We've already seen the marketing expenses start to come down. So they're within the Cotai range. It's a different market place than downtown. Marketing reinvestment is generally higher than Cotai, but it's where we anticipated it to be.

Great. And, Ciarán, welcome to the fun conference calls here. Maybe you can talk about, since you're new, where you see the opportunities for Wynn Palace to improve? And Steve Wynn, maybe, Steve, you can talk a little bit about maybe some of the opportunities that are more obvious now that were less obvious upon the opening in terms of ways to improve revenue and profitability there from here. Ciarán Carruthers: Go ahead.

Go ahead, Ciarán. Ciarán Carruthers: Thank you for the welcome. I'll let Ian talk to the opportunities there for Wynn Palace as my fault as now is going to be to continue to maintain the position and the performance of the downtown Wynn Macau property. Obviously, the Peninsula remains a very solid proposition for the very core market of high-level game as they're coming into Macau. And I think the performance in Q4 is solid as that has been despite the opening of Wynn Palace, despite the opening of some of the other new properties on Cotai. All is very well moving forward into future. Obviously, work to be done to continue to maintain that position and maintain the service planners and so on. It's been incredibly welcome and enjoying the property and seeing just how much commitment there has been, both from Las Vegas in terms of the spend to maintain the physical property and also the commitment and the hard work of the team of professionals that are there and -- that provide just excellent service. We've just got to continue to build on that.

Look, the way to look at us and that'll give you the insight to project us, we have a very definite approach to this whole notion of the gaming business and integrated resorts. And our approach is based upon 2 solid truths. Number one, better customers. People who have the money to choose, who engage in visiting hotels and facilities of this type have a common thread that is undeniable. And that is they go where they're treated the best and where the facilities are superior. If you are a player who attends these places, you have a choice and you always go -- in the long run, always go with the rooms are better, where the facility is immaculately maintained and where the staff has had invested in it tremendous amount of energy for training and personal attention to the guest. That is to say, we're very customized in the way we treat our people and the way we present our facilities. In the long run, that garners the strongest possible clientele. And again, I point out, it's who's in the building, who's sleeping in the rooms that determines the results, both in gaming and non-gaming results. It is true that there is a second approach to this business, which is more akin to Walmart and the mass approach. And the Sands and the Galaxy and the Melco people do that beautifully. We come to these people with a different message, that if you have the money and the inclination to visit such places, ours offers the most luxurious environment and the best service and the best food. And in the end -- and our shops are catered to the kind of people we expect to be staying in the rooms. That's to say that our facility is, at the end of the day, truly integrated, but it's integrated with a philosophy that's integrated. And that tells you our story. That's the Wynn story plain and simple. It's never been any different, whether it was the Golden Nugget downtown, the Golden Nugget of Atlantic City, Beau Rivage in Mississippi, the Wynn and the Encore in the central part of Macau or the new Palace at Cotai. And that will be exactly what happens in Boston. And that's going to be our story, and it won't change. And you've got a long history of our operations from Rivage and Bellagio and the Golden Nugget to the buildings that we're operating today. There is nothing mysterious or secretive or in a certain sense, particularly cunning, about what we do. It's very straightforward, right out in the open where everybody can see it. Our competitors choose to approach their challenge in a slightly different way, and it's certainly valid based upon the earnings and the results of those places, but we slot in somewhere else. And in the long run, it gives us tremendous stability and performance that a room for room, foot by foot in any building that we built, they tend to over-perform. And we're comfortable doing this. I would say that we probably -- our management team is a collection of men and women who are attracted to the pursuit of excellence. We share a common understanding of who we are and what we present to our guests. So we're at least consistent, but we're definitely different in our approach than some of the other places. And that's not to say that their approach is less valid than ours. But ours is well- defined and historically consistent.

Steve, can you give us the latest update on Paradise Park and the developments on the golf course?

Well, that takes up most of my time. And we're very close to having our choices settled in. And we are adding significantly to our non-casino revenue, both in the building of the lagoon and everything that surround that lake. It's a 1,000-feet x 1,000- feet in general terms, close to 20 acres of -- 20 or 23 acres of space, surrounded by a 4,400-foot long boardwalk, that's 18-feet wide and which is ringed with retail food and beverage and an additional hotel rooms, convention and meeting space and various attractions for the 800,000 people a week that come here. And it includes a new big theater, a new tower of rooms, substantial expansion of our convention and meeting space and related entertainment attractions and customer activities that we think will appeal to a broad range of folks. And having the ability to have a perimeter that's white sand beaches and a boardwalk seems to us to be pretty fetching in the middle of the Southern Nevada desert. We have a unique...

What are you thinking in terms of the timetable?

I hope to take -- Matt and I hope to take the business plan to our Board of Directors in the second quarter and therefore, be in a position to begin work in the fourth quarter of this year. I say that, but we have to have our prices and our business plan all locked down before I go to my board to get their permission to proceed. We keep the board apprised in every meeting and on every telephone call of our latest nuance in that development. But the incredible amount of options that were available on this 130 acres with a 1,000-acre feet of private water, the choices were numerous. And my challenge and my design team that had been with me for over 35 years has been to make sure that we make the right choices. And there have been so many of them, it's been dizzying. But I think that we've nailed it down. We've wrestled it to the ground. And Maurice, Matt, all of us have a tremendous amount of confidence that it's the only way forward. I mentioned that last September -- for example, very interesting. Last September, there were 30 days in Las Vegas, for example. We won a $1,870,000 a day in the -- in gaming, and that had to be the biggest number in America or anywhere but Singapore and Macau in the world. And as good as that was, $1,870,000 a day, and that was net of any discounts or promotion allowances, our non-casino revenue was $3,340,000 a day net of comps. That tells you about this causal relationship between non-casino revenue and an integrated resort and casino revenue. It's the non-casino things that bring the folks and determine their choices of where to play the games. And so, when we approach the design of the golf course property, which sits on our books at a cost of 0, that whole parcel, it's -- has been written off in prior development. We think that we want to take our non-casino revenue to enormously high levels because we think that the probability of this 800,000 people a week in this city remaining the same and growing is almost a certainty. And that's the fundamental assumption about Las Vegas that leads us to wade in to the convention and non- casino end of the business with a high degree of confidence and entertainment as well.

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

Two quick questions, and welcome, Ciarán. I am -- I wanted to focus on the growth in VIP in the fourth quarter versus sequentially from the third quarter just in the market as a whole. Yet at the same time, the overall trend in mass was flat. And the -- and I'm -- I would have thought that there would be an inverse relationship 3 or 4 months ago. So I wanted you guys why you thought, particularly mass was -- has yet or is slow to take off given the openings.

Do you understand that question, Matt?

Yes, I do. I think that if you look back over our history, Harry, when new properties open, the junkets ramp up much faster than mass. They get quick injections of liquidity and hit the ground running. The mass market customers with new openings tend to not come right away and then find their way to the market more in -- a little more slowly. But junkets pretty much come out of the gate at 100%. So that's what -- I think what you saw in the fourth quarter was VIP revenue at $4.1 billion compared to $3.5 billion for the market. In the third quarter, you saw the new properties really powering the VIP market.

And then again, with mass, we're still hamstrung, Matt, don't you think by the barriers that surround our property?

We are, we are, and in areas from out the market overall. Mass was -- it was pretty much flat from the third quarter, but that has always, when I look at the data, ramped up more slowly than VIPs with new properties opening for the -- due to what the junket operators, how they inject the liquidity straight into the market.

Does that get you, Harry? Is that your -- does that answer?

It does. And, Steve, a question for you. You commented about how bullish you were about making incremental investments in Macau and China. If you could put that comment into context versus the -- kind of the rhetoric that's been going on between our new administration and Xi Jinping's Beijing administration, it's been strained. What do you think the implications are for Wynn development in China, given this, at least, initial saber rattling?

I think that's probably a good word for it. I'm of the mind and I have a reason to believe that this position is shared in Washington. As you know, I am acquainted with the administration. Several of us in my -- in our business, were sitting within 30- feet of President Trump when he took his oath of office on the platform last Friday. We all believe and I mean, all of us, that the most overwhelmingly important event geopolitically for the next 50 years is liaison, a constructive liaison between the People's Republic of China and the United States of America. That truth is undeniable. That dynamic is unquestioned. Now, there are issues that are real between 2 dynamic economies like China and the United States, undeniably. And there's a difference between free trade and predatory trade. The government in China understands that it has to do a better job with intellectual property rights. They do the best they can in China to create jobs and take people out of poverty, and that makes them very dynamic in the management of their economy with that single goal in mind. It affects everything from the way they treat energy, to create plants and factories, to how they manage the currency and the movement of currency and their trade policy. The United States has its own point of view on that subject, and the President has been really clear during the campaign that he wants to protect American jobs. Well, that's what they want to do in China as well. So there's going to have to be a reproach -- there's going to have to be an adjustment. But we basically do have intelligent people on both sides dealing with this. My own feeling is that it will resolve itself intelligently. You can make all kinds of examples. I mean, China controls its currency, but during QE1, 2 and 3, we devalued the U.S. dollar by close to 20%. So when the Fed in financing a deficit of close to $2 billion a day increases the money supply, well, that's the same sort of thing, we just do it differently than they do in a centrally-controlled government like Beijing. But a lot of the same things are happening on both sides of the ocean, and they're being done to protect the citizens of those 2 countries. Yet, there isn't a leader in America or a leader in China that doesn't understand that when the United States and the People's Republic of China come together on an intelligent basis, the world is a better place. I'm in a position to know that, that opinion is held in Washington and Beijing. And it gives me long-term confidence in spite of what happens short-term verbally. We mustn't confuse long-term United States policy with the short- term conversations that lead to its development. Do I sound like a politician? That's what happens. That's what happens. We just spent 4 days in Washington and you get brainwashed. It's a sickness but it's fascinating and the fact that America is going through a change is probably the greatest thing that's happened in my lifetime because we were so on the wrong track for the past 8 years. And I've made no secret about that, and I think we're in for better times for sure.

To rein this back in towards -- or back towards Wynn in China, with -- despite these -- the somewhat strained verbal sparring, you feel confident that additional investment in Macau is coming?

Absolutely.

Your next question comes from the line of Thomas Allen with Morgan Stanley.

So focusing on Macau in the fourth quarter, I'm comparing the Wynn Macau property to Wynn Palace. Your VIP turnover was comparable but your mass drop at Wynn Palace was about 35% lower than Wynn Macau. As you continue to ramp up Palace, how do you think that should change?

Directly related to the physical barriers that surround our properties, and that only gets better with each passing week and month this spring. That's my answer about that. There's an awful lot of people a few hundred yards from our property, but they can't quite get there, and they will, they positively will, just like they did in the past. Watch it change. I tell you that it will change. You can believe me or not believe me, but it's as simple as that.

It's also due to Wynn Macau having had 10 years to build up an incredibly high stable of high-limit players, particularly in Encore and it will take time to build that at Wynn Palace. Seeing is believing. It gets better every week. We're seeing a buildup in our high-limit players and that will continue to grow over the coming months.

All right. And then just, Stephen, December you sold some of your Vegas retail to Crown Acquisitions, can you just talk about the rationale there?

Matt did that deal which was absolutely perfectly timed for us and I'll let him describe it.

So we looked at it for multiple reasons. #1, the people that we partnered with are long-time retailers and in the business. And so we wanted to continue to control our retail. We sold a minority stake. We thought it was a good capital raise at a multiple that double where we trade on the market. And so not only was it the ability to raise capital to fund future projects at a really high multiple, but we brought in partners with a lot of experience in the luxury retail space to complement what we already do. So for us, it was really a win-win, and we still control it and consolidate the profits of the retail space because we have over 50% of the ownership.

And Haim Chera and his father, Stanley and his -- that whole Chera family that makes up the Crown organization, they taught us a few things right off the bat. They gave us a few pointers in the nuance of how we do our leases that immediately increased our profitability.

Yes.

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

I wanted to ask about -- you talked about how Palace is going to ramp up. At your Analyst Day last year, I think you talked about a range of kind 6.30% to 8.50% which is a wide range. Is that still where you're thinking it will ramp? And then similarly, I think you had talked about Wynn Macau, that you were maybe factoring in, that it would be sort of 20% or 25% cannibalization. Is that still -- also, do you think that you will maybe sort of ramp to that on the downside at Wynn Macau? I know this quarter was obviously -- it was only down 7% in EBITDA, but just thinking about what your expectations were originally.

We don't think there's much cannibalization. That 25%, where did that come from?

That was our analyst presentation showing the Wynn Palace, Wynn Macau market study of over a year ago, back about in April.

Do you still believe it?

No. What we've seen is Wynn Macau has held up better than we anticipated due to all the reasons we just talked about, the stickiness of the clientele and the 10 years of history. And the ramp-up of Wynn Palace, as we talked about in our last call, is taking longer. We actually didn't anticipate all of the artificial barriers, the construction, not being on the Cotai Connection, et cetera. So getting to the $600-plus million in 2017, it's going to take longer to ramp just -- than that just like we said on our last call, but Wynn Macau is actually performing better than we expected.

Oh yes. No, and I wasn't suggesting that, that would be the '17. I understand that the property opened later and the ramp-up issues. I'm just wondering if that is still the range where you think it will ultimately ramp. And then similarly, do you think that as that ramps, the Wynn Macau will maybe get a little bit more cannibalization along the lines of what you had originally thought as well?

Well, Robin, with regard to the cannibalization, as Macau -- as the Palace has ramped up, we haven't experienced a cannibalization downtown. So what we thought before but what we're seeing now are slightly different in a better way. So the only way that we can really know, Robin, is to watch the ramp-up of the Palace and to continually monitor the performance of the Encore Wynn facility in Macau. You're asking an interesting question. We are pretty much as you are, an observer of this. So far, it's been good news. But the biggest thing we're looking forward to, as these barriers and these obstructions come away, is the ramp up of our mass business. I would have thought, Robin, that the cannibalization would have occurred with the junket operators and that's -- because that's where we thought it would show up, and it didn't as yet. So if the mass market ramps up in Cotai, I don't think it's going to affect the mass market of downtown. That would be -- that would have been our -- that would have been where we looked for at the least. We would have looked for at the most in the junkets. And as you see, that's not what's happening. I think that there's more good news in the mass market in Cotai for sure because of all these other things we've talked about, and I'm encouraged by what we're seeing with the junkets. But I think that the Wynn Palace will get where it's supposed to get. I think Wynn Macau may stay better than we thought.

Great. That's helpful. And then…

Is that response...

Yes, that's just -- so I think what you're saying is that you do still expect that -- that range that you talked about 9 months ago, it's still the range ultimately that you'll get to...

With one exception. With the exemption that we may not experience the cannibalization levels we mentioned earlier.

Right. Right. No, that's great. And then last thing, just quickly, what percent of rooms are sold for cash at the Cotai property?

What about that, Ian?

So what we've experienced is very similar to the Cotai model. We're doing around 60% of our rooms are casino -- directly casino related, more comp-related and 40% are tour and travel, FIT and wholesale.

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

I just wanted to go back to some of the sequential ramp-up you guys are starting to see into Q1. From our seat, it's always getting a little harder to get a sense of what's going on with the market, kind of on a monthly basis. So I guess my question is in terms of that big ramp-up that you're continuing to see so far this year, how much of that would you characterize as the market versus Palace and your properties continuing to take share?

Ian, do you have a feel for that question?

Well, we've -- there was a very pleasant surprise at the end of the last year and earlier into this year. We had a very strong Christmas and New Year as a market, a lot of holiday travel, a lot of holiday travel out of China, and revenues were excellent. And the sentiment about Chinese New Year is particularly strong. Last year, Chinese New Year, people were pretty duller entering it, not expecting much, but this year, at all levels of the business, people are anticipating a very, very strong Chinese New Year.

We are as well in Las Vegas. Maurice is here, and he can address the -- this next few weeks.

So we've actually continued to see a great trend that we saw at the end of last quarter or the last month of last year, into the earlier part of this year. And our parties and our events are full. And as far as the amount of credit coming in, it's been pretty robust. So we're pretty confident that we've seen the kind of activity that makes us feel comfortable that we've got the kind of business flow that we've been looking and anticipating for this year.

Great, and maybe just to switch gears for a follow-up. Now that Palace seems to have stabilized a little bit and the ramp-up's looking pretty secure, could you maybe talk to us how you're thinking about leverage targets kind of into 2017 and how that might filter through to possibly looking at the dividend policy again, how that's sort of fits in your pecking order versus kind of growth capital?

Well, Shaun, it's Matt. If you look at our balance sheet, we have significant cash on the balance sheet. We have projects underway. So I would expect debt to remain fairly constant over the next couple of years, but EBITDA is growing. So we're not really interested in paying down a lot of debt right now. At the rate our EBITDA is growing, leverage is very comfortable, and we have lots of cash on the balance sheet for future projects.

So Matt, does that mean that, I guess, to the extent you're generating positive operating cash flow, there is room to bump the dividend? Or would it be more fair to kind of think about being conservative right now, given just all -- just capital budgets and things that can tend to shift around?

Well, we have only 100 million shares outstanding, so bumping the dividend conservatively is not a -- doesn't really change our financial posture. We're doing $0.50 a quarter and I suppose it's possible we could go to $0.75 or something, but we haven't discussed that. We've been more focused on: a, working on our Macau operation and getting it stabilized; b, finishing what we're doing here in planning in Las Vegas; and c, putting final touches on everything that Bob DeSalvio is running in Boston. The gaming market in America is subject to change. Things happen and opportunities present themselves. I think that we probably want to take a look in the next few months and see how all that plays out before we tinker with any of the kinds of things you're talking about, like a dividend or anything like that. The market's moving, opportunities may present themselves and then that would have to be folded into our planning financially. I don't think there's just a hell of a lot more to say than that.

I think that's right.

Your next question comes from the line of Adam Trivison with Gabelli.

Given that you have meaningful operations on both the Peninsula and in Cotai, I'm interested in your thoughts on how the opening of the PacOn ferry terminal may affect visitation trends in Macau?

What do you thing about that, Ian?

I think any infrastructure that comes online is going to be good for Macau. It allows more visitation. It'll certainly the Peninsula, the current ferry terminal and -- excuse me, it will help Cotai. The current ferry terminal in Cotai is very temporary in nature and not a good arrival experience. So we're looking forward to the opening of it.

Great, that's helpful. And as a follow-up, based on some recent filings, it looks like there were some small changes made to the Wynn Boston Harbor floor plans. Can you comment on those changes and maybe the thinking there?

DeSalvio, you haven't said anything today. Why don't you chime in?

Sure. Yes, we actually got some -- I think we got some very good learning off of the opening of Palace, and we've been making shifts in terms of lightening up a little bit on the retail, increasing some food and beverage and meeting space opportunities because we thought that would be the right mix for the property. So we made those adjustments and they're going through final drawings, and we think it was the right move.

And your next question comes from the line of David Katz with Telsey Advisory Group.

I wanted to just -- I know it's been asked from a couple of different angles, but I wanted to ask about the VIP business and the degree to which there is market lift. And specifically, how sustainable you believe the -- I think Ian used the word excellent in describing the trends. How sustainable you expect those to be versus how much is the trajectory of ramp-up in that business because you are now open?

Good question. And I understand why you ask it again. So there's market trajectory and then there's our trajectory. We have an advantage. You remember a few moments ago, Ian used the word sticky, meaning the customer base was sticky at Wynn Macau. They like it there and it's hard to pull them out of that place because it appeals to them on many levels. And what happens is our trajectory is very much linked to the discovery that customers make of the superiority of our rooms, of the whole place and how much fun it is to stay there. So we tend to get stickier with better players with each passing month. And so, I have to say that we only make money by paying attention to our own business. What the market does is very important, of course, because we're part of it, but we're working on our own trajectory and we have a definite way of thinking about that and addressing it. If I understand your question correctly, there's my view.

In other words, you're comfortable with where your trajectory is headed and the market helps to some degree, but it's like...

Well, sure because we spent $4.4 billion making sure that we could feel comfortable. We didn't really leave this to salesmanship or verbalization by a CEO or any of the other senior people in the company. We did this by putting our money where our mouth is, and letting the property speak for itself. And as people discover it, the property speaks with a very loud, affirmative voice and says -- and beckons to people. When they discover our rooms, when they see the facility, they say, "Wow, I could stay here." Now, it takes a while for them to do that but they do it. They always have done it, in Nevada, in Mississippi, in New Jersey. They'll do it in Boston. It's always been the same. The history of our operations is a straight-line story, very much like the one that I keep repeating on these calls. And it's the only thing we understand.

Understood. If I can just ask one more about the construction disruption that you discussed at the beginning. MGM is on one side and the degree to which they may be having an impact with construction disruption today versus when they open which is now later than what was anticipated. If you can just share some thoughts about sort of how you see that impact or lack thereof evolving over the remainder of the year, that would be helpful.

Okay. You bet I'd like to comment on that. In 1986, I bought the property that is now known as the Mirage, and I built -- and it was big enough to hold Treasure Island and the Mirage over a period of time. But we built the hotel right up against the Caesars Palace borderline, on the south end of that assembly because we wanted to be near our neighbors. We thrive in a competitive environment. We do much better when there is more people around us, not less because there's a certain percentage of the people that go to these other hotels to which -- to whom we appeal in particular. It doesn't do us any good to be alone or isolated. We want to be snug up against our neighbors because the more rooms that surround us, the more people, the better chance we have of attracting them. So we anxiously await the arrival of SJM and MGM. The reason that the Wynn Macau was such an overwhelming whopping success was because of its proximity to SJM to the Arc, to -- what's the other place, Matt, something world?

StarWorld.

StarWorld. We're surrounded downtown by these people and it allows us to have an extraordinary, outrageous return on capital. I think we spent $750 million on the Wynn Macau, and we made like $100 million dollars a month at one point there. It's because of our proximity to our neighbors, it's because we're in the midst of so many visitors that we have the opportunity to exploit our competitive advantages of facility and service. So we're dying for MGM to open and SJM to get up and running. We welcome our neighbors. We're willing to build bridges between the properties, easy access. And that's one of the reasons why the Sands experiences such terrific results. It's because of their connectivity and their proximity to one another. And right now, we're not enjoying that but we will, I hope, in 2017 at some point, have the benefit of active, dynamic, well-constructed neighbors who each brings something to the world of visitors that makes Macau more powerful. That's the beauty of this development. Las Vegas and Macau prosper because of the development, not in spite of it. And we ride that wave like a surfer. So we're hopeful that they get open in the fourth quarter or the third, whenever. We haven't anything lately, maybe you have. I haven't heard when SJM is supposed to open. Does anybody in my team know what SJM's announcements are? It's a mystery. Hopefully, maybe when they issue their earnings, they'll talk about it or the investment community will ask them. Does anybody on this call know when SJM is supposed to be finished? Do you sir?

I do not.

Yes. Ian, do you know what the latest completion dates are on our neighbors?

Sometime in 2018 for the Lisboa Palace and all therein. And for MGM, they announce the second half of this year.

But it's '18 for SJM?

Yes.

Well, they're on our south border. That's the least...

What's going to be interesting is we're going to have a quartet of quality on the west side of Cotai, Steve. You'll have ourselves, MGM and SJM, and then with City of Dreams across the road with their new Morpheus Tower, you have 4 high-quality projects all within walking distance of each other. So that would become its own hub in Cotai; the first stop on the light rail after the new PacOn ferry terminal in the airport. So the future's very bright for West Cotai.

I wish it was true in Las Vegas, across the street from us, where Packard [ph] was going to build and what I think the Malaysian folks are going to do it. We love having neighbors. The SJM facility is on the south side of our property and that's not where the light rail is. The biggest interference we've got is on the west side which is where Melco and MGM and our front door is, our lake and our gondola and all of our other access points. So we get our biggest slug of reliefs when MGM opens and when they take down the barricades on the west side in front of our gondola and our -- in front of our presentation. SJM opening in 2018 probably is -- their construction is the least impactful of the problem that we've dealt with this year in terms of the barricades. It's the west side of the property that really is important to us and that's where we're looking for good news in the second half or sooner.

And there are no more questions at this time.

Thank you, everybody. Look forward to talking to you in 3 months, and we'll have maybe more interesting stuff to talk about then. Meantime, have a nice time.

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