Good afternoon. My name is Jennifer, and I will be the conference operator today. At this time, I would like to welcome everyone to the Wynn Resorts Q2 2017 earnings conference call. Our lines have been placed on mute to eliminate background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during that time, you may simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would like to turn the call over to Mr. Craig Billings, Chief Financial Officer. Sir, you may begin.
Thank you, operator. Good afternoon, everyone. On the call today with me in Las Vegas are Steve Wynn, Matt Maddox, Stephen Crosby, and Maurice Wooden. Also on the line are other members of management from Macau, Las Vegas, and Boston. I want to remind everyone on the call that we will be making forward-looking statements under the safe harbor of federal securities laws. Those statements may or may not come true. With that, I turn the call over to Mr. Wynn.
Well, everybody has seen our numbers. I'll confine my remarks to the most relevant points that I can think of at the moment. Construction in Boston. Our job has been bought out. The budget is fixed. The work is now approximately 11 and a half months old. We're a little ahead of schedule. We're on budget. We're very happy with our builder. That project is moving quickly towards completion in April and May of 2019. We're very optimistic about that situation and delighted with progress to date. The results in Macau need a little interpretation. Occupancy was high in one hotel but low in the other. What is clear is that things are moving along. Our VIP business has picked up in both hotels. The premium mass is growing. We still suffer the dislocation of our walk-in potential because of the extreme construction that surrounds us.
There are two things about the construction that are worth noting. We concluded our financial agreement with Leighton Asia when we opened the hotel last August 22nd. However, we retained $100 million or more to finish work yet to be completed and any defects. Leighton has accepted complete responsibility for that. They struggled a little bit with their own control of the job. As a result, as they've fixed things that had to be fixed and finished, we've taken 180 or more rooms out during the week, each of the past several weeks. We get them back up on weekends, but we've had them down.
We think this cleanup operation, this completion that Leighton was obliged to perform, that that phase is coming to an end by the end of August, which interestingly enough, is a year after the place was opened, which gives you some notion of the complexity of these massive integrated resorts and what it takes to really polish them off. It had no financial impact on us in terms of our relationship to Leighton. That had been concluded, and there were more than adequate funds in the retention to cover it. It did impact our performance by taking rooms out during the week and certain other discomforts that are associated with the fact that you still have a builder on the property. We're hoping that will come to an end at the end of August and September.
The second part of the construction aspect of the conversation has to do with our neighbors. We've discussed this in the past, but MGM, in these final stages, has enormous neighborhood implications. Streets have been blocked, barricades are up, Our conversations with our neighbors at MGM indicate that maybe this November, part of the building, at least I don't want to speak for MGM, but in terms of our interest in talking to them, we've been given the impression that there will be a partial, if not That these obstacles will be removed when they commence operations this fall, That will open up one side of our property, the west side of our property, which is the fronting side on the lake and the gondola and our entrances.
On the south side of our property, the SJM company, they had a fatal accident with a worker three weeks ago, and as part of the post-accident procedure, the government of Macau stopped work on that job. As of yesterday, three weeks later, they still have not recommenced the construction of that hotel. Its opening date, and therefore when the neighborhood clears on the south, is still undetermined. We also have construction on the north side of our property with the light rail or the monorail transportation link, which is one of the most powerful aspects of our company because it travels around two sides of our property, looking at our lake and our hotel, our fountains, and then the first stop with escalators down to the sidewalk is directly at our gondola station in the middle of our fountain feature.
That the completion of the monorail is not just a removal of a negative, but it provides an enormous positive for our traffic and the mass market. We look forward to that. It is being completed in a much more efficient and expeditious way than it has in the previous two years, even three years. We even have the potential for a walkway to be completed in a matter of days that will allow us to use the bridge as part of that station to get to the other side of the street, even before the monorail is in operation. That could happen. You're on the call. When do you think we'll be able to use the crosswalk, the elevated crosswalk, and the escalators?
From an infrastructure point of view, it's due for completion in the next four weeks, including the escalator. We need government approval to be able to use it because it is connected in part to the station. We believe that there's support to get it up and running as soon as possible. It's a safety issue when crossing the road, I think we'll get support for this.
Without it's virtually life-threatening to cross the street to our gondolas and our entrances. We've been able to make money and have satisfactory progress in spite of these rather unique and unprecedented obstacles that we've faced. Nevertheless, our business grows, and we've settled one question beyond a shadow of a doubt in the last 10 months. That is the cannibalization that was expected, the cannibalization that seemed to have occurred with other companies, including the Sands, when they opened on the Cotai, Downtown Place took a hit. In fact, we've continued to grow in our original Wynn Macau and Encore complex, and I'm very happy to see that. Ciarán has done a great job in running that place. He's on the call if anybody wants to ask Ciarán about Macau, the original Macau facility.
Ian is on the call to answer questions that are more broad-ranging than those concerning the Palace. Finally, as we have the opportunity to do these on these calls every 90 days, we are proceeding with finishing our drawings and getting our planning and building permits to begin the development of the golf course with our phase 1 lagoon, our lake of 27, 28 acres, and our 450,000 sq ft addition to our meeting and convention space, fully integrated into this facility, this 10 million sq ft that we have already in this building. We are proceeding with our planning and our development of the 140 acres behind us. The real estate behind Encore, 10 million feet, is unquestionably the most powerful latent asset that this company owns.
It's adjacent to the Las Vegas Convention Center and the Sands Expo and Convention Center . Most importantly, its integration with the 10 million feet of the Wynn and Encore makes that piece of real estate, without any possibility of debate, the most precious piece of real estate in the resort industry in Las Vegas. We have a lot of confidence in our ability to take that forward in the near future. We've had expressions of interest from a number of companies who want to come on this property and participate, either in the form of joint ventures or ground leases and other financial arrangements. Those conversations have been very exciting and give me a lot of optimism about how we're going to take advantage of this asset in the next four or five years. I think that pretty much is my take on the situation on this day.
We'll take questions now.
As a reminder, if you would like to ask a question, please press star and the number one on your telephone keypad. Our first question comes from the line of Felicia Hendrix with Barclays.
Thanks. Good afternoon. Thanks for taking my questions. This is for the whole team in general. I'm just wondering, after digesting these results, what your postmortem per property is, because as we're analyzing it, certainly Wynn Macau did beyond fantastic on the VIP side. Wynn Palace was close to our expectations, and in both properties mass was lower than what we would have expected. As you guys digest this and look at it, what's your thought per property?
It's very important. I'm going to take that first. It's very important when you're looking at this industry, whether it's ourselves or our neighbors like MGM and Venetian. It's very important that you don't get caught up in the very short-term myopia that your professions demand in many respects, because it's the big thing Determine the long-range viability of these places. The history of our company, it gives undeniable proof of that. When you build better facilities, when you invest in human resources, this is a business that remains viable and growing over a long period of time. It's decisions that are not so much in the immediate analysis or frame that matter. When we look at the numbers that you're looking at, to answer you directly, we say the train is on schedule.
The future of the company is being built intelligently with a strong foundation, we take that as our principal responsibility. When you deal to the kind of customers that we deal to, when you deal at the level we do, in the gambling room, which is only less than half of our business, there's volatility. For example, in the last four days, the Friday, Saturday, and Sunday in this casino, just 10 or 15 international players contributed $12 million in a slow month. That's besides the full occupancy in the hotel and all the non-casino revenue, the slot machines, and the race book, and the poker. The power of these enterprises are defined by their ability to answer the real issue with Las Vegas. Can you come to a destination resort and fulfill your expectations of living big and exciting experiential moments?
Those kinds of moments take time to create, once they are created, they endure. You're talking to a group of men and women in this company. Incidentally, we did a count out of all the most high-paid people in the company, 65% of them are women. When you talk to a group of ladies and gentlemen of Wynn Resorts, you will find a high level of consciousness of what we're about and what really defines our short-term and our long-term success. These are sort of chewy, laden with detail conversations that define these big moment experiences. Wynn has emerged, the Wynn Encore facility has emerged as the most celebrated hospitality installation in the world in terms of the awards and recognitions it receives through product and service. I don't say that in a braggadocios way.
I mean, look at Harvard Business Review, Fortune, Forbes Travel Guide, Parents Magazine, [Condé Nast Traveler] magazine , every conceivable measurement of quality of product and service. We've managed to attain a high level of success. As we build these additional non-casino attractions, we have to do the same thing again and again. That's pretty much our whole story. If you've been listening to me for a long time, most of you, it never changes. The way we define that challenge, the details of modernity, using technology, using social media, and all the other-- This hotel is the first one that is all verbal. You can walk into our rooms and tell Alexa to turn on the lights, open and close the curtains, play Seal or Beyoncé or Frank Sinatra. You can do all that, change the temperature in the room through verbally. We take advantage of technology.
We try and stay ahead of the curve. We're told by the people at Facebook that we're the most advanced of all casino properties in our use of social media. Our nightlife people, headed by Sean Christie and Alex Cordova, are up to their ears in the use of those techniques. The tactics change. The overall strategy does not. Any of you folks want to add to that? I'm sure.
Sure. I'm going to be brief here. In terms of market share in Macau, because I think that's the question you're asking, what you see from first quarter to second quarter is we actually, in Macau as a total, increased our market share in VIP, mass, and slots sequentially. Not going as fast as we had hoped 12 months ago, the programs are in place, and we feel good about the direction that we're going.
Okay. That's all helpful. Thank you for that. If we could just kind of drill down to Wynn Palace and perhaps talk a little bit on the mass side and some of the programs that you've implemented there. Given conversations throughout the quarter and talk with things that you've commented on last quarter. I know the market on the mass side was down sequentially. I just thought that you guys would have done better given some of the changes there. Perhaps you can just talk about that. Second in power.
The mass is really affected by the physicality of the neighborhood. I've said it so many times, I'm thinking I'm boring you, but mass has an awful lot to do with access. I've laid out the obstacles we face. I tell you, I mentioned the west, the south, and the north side of our property. I didn't mention the east. Well, that's under construction, too, because that's the service yard and the whole headquarters for the light rail system. We're literally surrounded on 4 sides by things that are under construction that will all add to our mass. One of the reasons our mass numbers is so impressive downtown is because we're in the middle of everybody. Right now, we're on the edge and surrounded by fences. We're on the edge of everybody.
When we get surrounded again by SJM, by the monorail, by MGM, and we have our connectivity, the picture's going to change dramatically. If you go to Macau and you look at this firsthand, you'll grin and shake your head, and you'll say, "It's amazing this place does as well as it does." We've dealt with a severe handicap here. Now, when I say we've dealt with a short-term severe handicap, we have an overwhelming advantage, and that is that we're in Macau to begin with, and Cotai as well. That's a privilege that long-term is sensational. Ian, can I make 1 point?
Sorry.
Please.
One other severe handicap that we've had, particularly at premium mass level, is the smoking issue, where there are spaces in town that have been grandfathered in. They were formerly VIP, and now they're being used for mass high limits, and people are allowed to smoke in them that are competitors. That all goes away at the beginning of 2019. On January 1, everybody has a level playing field. We will be the biggest beneficiary of that because we're operating handicapped right now.
Okay. Thank you. Just quickly, looking at the rolling chip turnover at Wynn Macau, is there anything extraordinary or out of the ordinary, rather, in that?
During the quarter? Yeah. At Wynn Macau, we had probably the most unique statistical anomaly in my 50 years of doing this, and this is my 50th year. That is that with enormous volume, one of our leading outlets lost money for the entire month. Not only did they not hold correctly, they went minus. That's an outlet that in both downtown and at Cotai performs beautifully all the time. April, the bottom fell out and all the players won millions of dollars, and I think we ended up the month -10 or something. What was it, Jim?
It was, yes.
Minus 10 or 15.
Out at Wynn Macau.
Yeah, forget about plus 50. It was minus 10. Look, on a whole, percentages are right. During that quarter, in April, we had a statistical anomaly. We also had counterpoints to that in our history, but we did have one during the quarter of April. Other than that, we have nothing to say. Normal probability, even if it's exaggerated.
Our next question comes from the line of Joseph Greff with J.P. Morgan.
Good afternoon, everybody. Craig, maybe this information was given. I just didn't hear it there at the end. Could you break out what profit level you got was on a hold-adjusted basis at Wynn Macau and Wynn Palace? If you didn't, could you provide that now?
It was about $20 million low at Wynn Palace and about $20 million high at Wynn Macau. They offset each other.
Okay, great. Thank you for that. I was hoping, sticking to Macau, can you talk about your premium mass business? I don't know if you break it out this way, but what % of your total mass revenues or profitability relates to premium mass? Can you talk about the relative growth rate between premium mass and, Steve, I know you referred to a little bit of what you characterize as mid-market, between mid-market mass. Could you talk about those relative growth rates in both Macau properties? That would be, I think, helpful to understand.
Joe, it's just math. Everybody, all the competitors want to know what your breakout is of premium mass relative to mass. We really don't want to get into % of where we're driving our business here. We don't want to tell Joe.
Okay. Fair enough. Maybe a way to ask this question in kind of a generic way for you, Steve, so then I give a high level view, would appreciate your views, is when you look at the Macau market now, Steve, where it was earlier in calendar 2017, and you look at where it is now, are you seeing the market being driven more by VIP here in Q3 and Q2? Versus 1Q. I know 1Q, if you adjust for that revenue classification from the government, it had been more mass-driven. Has that reversed here in 2Q or has it reversed here more recently? If that's the case, what do you think is driving that change?
Actually, Joe, I'm not the right guy to ask the question. I've had my nose down on work in the backyard here. Really. Ian or Craig, either of you guys want to take that? I'm not trying to flip the question, Joe. I'm just not up on the detail.
We opened Wynn Palace with very strong VIP business particularly in the junkets, that strength has continued. The remarkable aspect of everything is we didn't cannibalize our business downtown at a VIP level in the junkets particularly. That's been an area of strength. It continues to grow. Sequential growth in junket business downtown has been significant 3 quarters in a row. We're built to take care of VIP customers at all levels, and our properties serve the VIP customers very well. We're known for that. When that area of the business is growing, we do well.
The cannibalization, I want to point out hastily, is again a reflection of when you build these places with a solid foundation, physically, programmatically, and in terms of human resources, the notion of cannibalization doesn't really apply.
Joe, I think that the question you're trying to get to is what happened to mass in the second quarter for the market. I think that you know that in the second quarter, it is seasonally slow for the market in June, we're not going to sit here and predict which direction mass is going after 90 days. The business still feels good across our properties in both the premium segment and in the regular mass segment.
Thank you, guys.
Our next question comes from the line of Carlo Santarelli with Bank.
Hey, everybody. Good afternoon. To follow up on Joe's question, Matt, you guys have referenced you've been growing share sequentially from the 1Q to the 2Q at both properties kind of across all segments. I was just wondering if in terms of when you reference that, are you referring to kind of mass and VIP in the way that they've historically been categorized by the operators or more kind of looking at the DICJ quarterly metrics?
DICJ quarterly metrics.
Okay. Understood. Ian, if I could, you guys seem to have had a streak of very good luck, obviously some bad luck at Wynn Palace this quarter. Over on the financial, if you look over kind of the last five quarters, the property's been holding over 3.3% on close to $55 billion of rolling chip volume. Has anything changed there that's kind of creating this run?
Ian, I want to join in and answer. It's important for the investment community to understand that one of the consequences of the type of buildings we build and the money we spend on human resources, our properties have a stickiness, an attraction to a caliber of gambler that, to a certain extent, we enjoy to a greater extent than our competitors. When you talk about hold percentage, observe Wynn Las Vegas. We always hold in the mid-twenties enormously more year in, quarter in and quarter out than our neighbors. That's not an accident. It isn't about luck. It has to be. It's part of this program. It is highly self-conscious and highly articulated. We have more profitable casinos, pound for pound, foot for foot. If someone has nine casinos, we obviously with three don't compare.
When you compare any single operation of gaming in Macau, casino floor for casino floor, you'll see that we always hold higher. It's because people play longer, and they're wealthier, and they have more discretionary income than others. That results in a different business plan. Can't stress that enough. When you look at us, you have to understand it, and you've got to be conscious of the history. Take a look at casino performance in terms of hold percentages and stuff like that at the Wynn. It's easy to look at that because the numbers are easier to compare because we don't have the chip roll and the repurchase, which is a complexity. People buying chips at the cage in China in the mass casino sort of distorts.
When you use a traditional form of measurement, Wynn Las Vegas answers the question you're asking about Wynn Macau. We always hold higher. It's one of the goodies that has to do with our program. Ian, you can take a pitch.
What we've seen with particularly holds on the junkets is when we have extremely high volumes, then we do seem to hold better. When you have less volume, we have higher volatility, which has been an issue with Palace on occasions. Usually these things over time sort themselves out.
That's right.
Great. Ian, thank you very much.
Sure.
Your next question comes from the line of Thomas Allen with Morgan Stanley.
Last week there were some stories about junkets asking their customers to remove deposits. How are you thinking about the strength or longevity of the junket system at this point? Thank you.
We don't pay attention to the minutia. What we're saying is people who go on vacation in America and China and decide to go to a destination resort that includes a gaming room, those people tend to have the money, and that provides them choices in life, and they don't usually allow their preferences to be altered. They overcome changes, but they do what they like to do. Golfers find golf courses. People who like to gamble and want to go to a fancy resort find a place that gives them what they want, and they've got the money to deal with change, and they do. The nuance of moment to moment developments doesn't change human nature, and therefore it doesn't, in the long term, ever change us. We heard what you heard. We said, "Okay, that's interesting. Next case." We didn't pay much attention.
Okay. Thank you. Then just your occupancy continues to rise. How are you allocating the rooms between cash and comp rooms at this point, and how are you thinking about it going forward? Thanks.
Which property?
I think at Wynn Macau is up 600 basis points, and I think it continued to be pretty well too high at Wynn Palace too. Both properties would be helpful.
Occupancy is in the mid-90s at both properties. We allocate rooms to the most valuable customers, downtown Macau has been pretty consistent in allocating over 80% to our casino customers and the rest is cash. Cotai, that's a different market. We are up to close to 60% in comp rooms at the moment for casino, and we plan to give even more rooms over to comp. We would like very much in phase 2 in Cotai to add a whole bunch of rooms so that we can improve the mix for everybody. As soon as the government lets us, we'll build some more beautiful hotel towers with or without gaming. That's not the most important thing. We just want the people to stay in the hotel, to have their meetings there, shop, eat in our restaurants. If they want to gamble, that's their business.
We'd like to have more rooms. We were constrained by a height restriction because of our proximity to the airport. That location had good news and bad news attached to it. We're the first stop from the ferry terminal. We're right next door to the airport and all that stuff. We couldn't go as high as we wanted to, 1,700 rooms was all we could get in that first structure. We have property on both sides of our land concession, already we've built the connections to those sites, to the additional real estate, so that we can add more rooms. Depending on the permissions that are in the latitude given to us by the government, we would erect beautiful hotel towers with convention and meeting space the minute we were allowed to do it, which would change the mix.
That's the end of my answer.
Your next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch.
Hi, good afternoon. I think a couple of the questions here have been sort of trying to get on the same topic, which is some of the sequential figures we're seeing at Palace. I guess my question is this, if we look at the kind of growth you saw this quarter at City of Dreams, do you really care or are you concerned at all with the fact that City of Dreams at the moment is [gaining cash with the Palace]? Do you kind of even plan and run the business that way? Are you happy to sort of service the customers where they want to go right now?
You're correct. What you just said at the end. We don't care. It's all one big thing. There's one integrated resort in two locations. To us, it's fixed in one half. It does the other. You already know why the Palace is a little retarded because of the neighborhood. To us, it's all one thing, same ownership. It's all just two locations. We could care less where the money comes from.
Steve, when we look back on this three to five years from now, do you think we are going to be looking at a Palace property that we see the much bigger ramp comp year in the mass market given some of the factors you mentioned? Or do you still think that there's room for the VIP and the higher-end players through comping appropriately and just getting to discover the property? Is there still more growth potential there?
Maybe we'll look back and see Macau grow and prosper. With that growth will come concomitant growth in the mid and premium market levels as well as VIP. As the market gains traction and receives broader visitation in the Pacific Rim and from mainland China, from everywhere else, from Taiwan, Japan. As the market grows, all those segments will beef up. It always happens sort of proportionally. Unless someone restricts a certain part, like we had the restriction of the VIP, then, of course, you see the relationships change. Under normal conditions, it proceeds pretty much pari passu. That's at least my take on it. I don't know. Matt views it a little different way.
No, I think you're right. One thing about Wynn Macau that we also haven't talked about is we are building some new amenities that are going to be great attractions for the mass market that we'll be opening next year. More restaurants are coming in the next nine months that are going to continue to add to that-
For Chinese New Year.
Yeah.
Incidentally, what Matt just said is true of each of our hotels all the time.
That's true.
We never leave any of them open. For example, in a week or so, on the 4th of August, we redid the whole north end of Wynn Las Vegas, where the race sports book are located, and where a big scale bar and delicatessen are located. We closed the whole north end of Wynn, decided that we wanted to make it more exciting. We put new gorgeous screens, a brand-new bar, new VIP seating sections for race and sports people. We've updated the restaurant, and this Friday morning, we're going to take the wall down, and everybody's going to be dazzled because the entire north side of Wynn is going to look different than it did when we put the wall up the day after the Final Four. None of these hotels stay the same. We think of ourselves, if we're not growing, we're going backwards.
If we're not adding new and exciting nuance to each of our properties for our repeat visitors, then we're not keeping the promise that is the backbone of this corporation. What Matt just said about things we're going to open between now and Chinese New Year, well, that's going to be true in Las Vegas, and you'd be damn well sure that when Boston opens up, we'll be tinkering with that. We buy more real estate so that we can grow Boston. We're buying up the neighborhood to make Everett the destination convention and entertainment element of the metropolitan area in Boston and Central Massachusetts. We never leave these things alone. That's one of the reasons why we hold a higher percentage of the table and why our room rates stay high. These places never do static. We don't like it.
Thank you. Thank you very much.
Your next question comes from the line with Robin Farley with UBS.
Great. Thanks. Just circling back to Wynn Palace. You outlined a couple of the challenges for the property and kind of different timelines for when some of the work inside the property will be done in a month, MGM opening by year-end, maybe the light rail, and SJM sort of further out. When we think about the ramp-up of the property, how much is the difference between what the property's doing now and what you think it can be doing when all is said and done? How significant are the changes that happen by the end of this year versus maybe light rail and other things that may take longer to sort of manage our expectations about the ramp-up?
Interesting question, Robin. I ought to think about that one. Wow. That's the kind of question I ask myself. Any of my colleagues want to help me out with this one? That's a very provocative question.
Robin, my take is on, like we said last quarter, actually, the ramp is going to take us longer than what we told you guys in our analyst day last April. Those forecasts are still what we project, but we need the infrastructure in place. We're big believers in that property and in Wynn Macau, but we have to get through really the next, as we said, early 2017, to see a lot of these things start to happen. That's what we said last quarter, and that's still how we feel.
An example is they turn on those escalators. That's an item. You can't get across the street now. It's very tricky to understand that. We can look at the numbers from our neighbors. Can't compare ours to them per table, I guess, Matt, and say, well, suppose that if we're less per table, are we than one of them? Will the number per table change?
We're right at fair share right now, our properties have always been 1.2-1.3 fair share. I believe that's where Macau is going to go.
Let me think about that.
It has all of the elements in place.
Yeah. If we're one-to-one on revenue versus a percentage of the revenue versus our percentage of the equipment in the market, if we're one-to-one, that's the only time it's ever happened in my career in 50 years. In New Jersey, we were 1.68, 1.58, and the more hotels that open, we increase. The margin of excess margin over one-to-one. If we're one-to-one, Matt, right now, and the neighbors are one-to-two, we've always been one to 1.2, 1.3. Look at Wynn Macau. That would be a bare minimum. That building, the Wynn Palace, is the fanciest thing in China so far.
I love the idea that you would grow to a premium to your fair share. I was just thinking about timeframe. It sounds like maybe from Matt's comments that a lot of the biggest hurdles for you will by the end of 2017. Is that fair?
I don't know, Robin. It depends. What are they going to do with the light rail? What happens when MGM? Because MGM's going to open in November. When they open, will it be a complete opening, a partial opening? Will there be blockades left? What really is going on with SJM? They asked us if we would link SJM to us. Well, on the empty land on the south side of our property, the corner of it is directly opposite the corner of SJM. They want to have a connection. Well, I say, "Great, let's do it," because it goes right into our retail. Boom. Build a hallway, the air condition, and we're in business, and we're connected to their 2,000 or 3,000 rooms. Same thing with MGM.
I'm a little confused about the timing on those properties, and I'm a little confused about the improvements in the neighborhood and how they affect us. I've got complete confidence that the Palace will be the show pony, both financially and physically, when these questions are resolved. I'm just frustrated we can't hear the kind of answers. Your question really meant that I had to know how it was going to come in chronologically. I don't, Robin.
Okay. That's fair enough. Thank you.
Your next question comes from the line of Steve Cordas with Nomura Instinet.
Hi, guys. I had a general question, then a housekeeping item. The general question is, the VIP growth of 35%, according to the DICJ, in the quarter was pretty exceptional. Years ago, maybe six to eight years ago, I recall a rule of thumb that the government was fine with a growth rate around 15%. I'm specifically referring to the VIP segment. To the best of your experience or knowledge, is there a growth rate that the government is comfortable with, or can the junket business grow at an over 20% growth rate without the government's objection as long as its customers and liquidity sources are legitimate?
The regulatory agency has tightened its controls and supervision of the junket operators. I think that is the form of expression that has been adopted. We don't know of any arbitrary number that is in government thinking on this subject. Only thing we do know is that they wanted to improve the standards of probity and investigative activity, and they've done that. The main operators sailed right through, as they always have. I remember when we were getting licensed in Massachusetts, the question was, well, Macau has a reputation that may be questionable in some quarters, especially in Massachusetts. I remember that we said, "Well, wait a minute.
Let's put this matter to rest." We told each of our operators that they had to go, in addition to being licensed in Macau, they had to go to the organized crime criminal division of the Hong Kong Police Force and get certificates of clean bill of health certificates. They actually would investigate someone and then come to a conclusion and make a statement in writing that the person was free of any criminal association. Every one of our operators went instantly and did it without hesitation. That impressed the folks in Boston. We were happy to do it because we wouldn't want to do business with anybody that couldn't pass such an examination. The regulatory issue is the one that I think is at stake here. I don't know that anybody has an arbitrary number about growth rates.
Maybe a different way of asking the question is, junket liquidity, do you think that that is maybe more of a relevant question versus government policy? Where I'm going with this is junket liquidity seems to run in cycles, and in your view, now that we're in an upswing again, what could slow it in the next year or so?
Let me say that.
Gary, as you know, we've been through all of these cycles I guess so. There are the macro issues we all understand. Then there are the changes in regulation that could slow down liquidity. To try to guess what might happen in the future, I think is not the right thing. What I would tell you is that we are seeing the same faces and new people in our VIP rooms and in our premium area. That is a good sign about the health of the market. I really don't want to guess on what could slow down liquidity in the future.
Ladies and gentlemen, we have reached our allotted time for questions. I would like to turn the call back over to you with conclusions or any closing remarks.
A lot of today's questions were well thought out and insightful. Especially as all of the investment and analysts wrote for and reached out for the kinds of information that will predict the future. I know that's the job of analysts in advising the public on their investment decisions. We do the same thing in protecting our shareholders. Read the tea leaves, so to speak, try and anticipate the future and the most certain part of the future, which is change, and how to build these enterprises so that they're equipped to handle change, they have the agility, the flexibility that's necessary on any commercial activity in today's world.
I want to go back and say that in answer to all of the detailed inquiries that were brought up in today's Q&A, what will determine the future, believe me, will be the same fundamentals that have done it decade in and decade out. How carefully are your buildings and your facilities designed and executed with care and professional input? Most importantly, what is your human resource profile? Because only people make people happy. These places, their agility is measured in terms of the morale and the attitude of the people who engage the public every day in these buildings.
If you want to have an insight beyond the questions and answers you get from us on a quarterly basis, go to these hotels, interview employees, feel the vibe, eat the food, stay in a room, talk to the employees, see if they're proud, see if this job they have is a measure of their own self-esteem. Do that survey, do that inquiry, and you can predict the future. When you get that information, you will know who will control every market and outperform the competition. That is all we got to say today is to love to have these conversations. Talk to you the next time, and thanks.
Thank you for your participation. That concludes today's conference call, and you may now disconnect.