Afternoon. My name is Nicole, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Thank you. I would now like to turn the call over to Steven Cooney, Chief Financial Officer.
Thank you very much and good afternoon. Joining the call on behalf of the company today are Steve Wynn, Matt Maddox, Kim Sinatra and myself here in Las Vegas. Also on the phone are the operational management teams from both our Boston, Las Vegas and Macau properties. Before we get started, I just wanted to remind everyone that we will be making forward looking statements under Safe Harbor Federal Securities Law and those statements may or may not come true. And with that, I'm going to turn the call over to Mr.
Winn.
Hello, everybody, and it's very nice to have this call. I think you've seen our earnings that we're happy with Macau. We held high, but we made $20,000,000 more than we did last year and it's another increase in our quarter. And even though we held high, we were also carrying an equal amount of extra payroll for the Palace, which opens next month. So the increase is real.
We'll be transferring all those employees in the next few days actually. And so we'll have a different expense pattern for the Peninsula operation of Wynn and Encore in the months ahead as we equalize the payroll. I think we mentioned table allocations in our press release and I'd like to take a moment or 2 to comment upon those and give some insight to those 160 odd people that are on this call according to the operator. We haven't analyzed in the past as we headed towards the opening. We were unable because of the table cap to predict how many tables we would get.
So we established a long time ago various scenarios where we could operate from 100 tables to 280 tables in new tables on how to operate both hotels, all three of them actually, efficiently and profitably. Some of the things that you may find interesting, for example, in a recent month, and this is pretty typical, we had 180 tables allocated at Wynn and Encore to VIP to junkets. And then we analyzed as we do now for the past year, we've had a completely different focus in this company about the gambling activity of our clientele. And instead of analyzing the casino on win or turnover, we've analyzed both in the United States and in the People's Republic of China Macau. We've analyzed and we run our business on a completely different model and that model is contribution to EBITDA, to profitability of each unit in the casino, regardless of win or turnover or activity of a gambling customer.
What instead we look at is how much money do we make with such pieces of equipment, whether it be a table, a baccarat table or a slot machine. And the results of our inquiry, both in the United States and China, have been very, very enlightening, and I'll share them with you. As an example, of 180 junket tables in a month, 60 of them were responsible for all of the EBITDA. The other 120 were either breakeven or in some cases, losses, taking all costs into account. That is to say that our profitability was limited to a much smaller group than one would at first imagine.
Now with 3 and we made a number of very startling changes in the way we laid out our casino, the policies that we employed with regard to the rules of the game, craps, blackjack and baccarat, roulette included, that embraced limits, the moments with the client when we would give free promotional allowance allocations of rooms, food, beverage or airfare. We took a different look at all of that. And since last July 10, a year ago, a little over a year ago, we changed Wynn Las Vegas and Wynn Macau because we were the largest recipient of Asian business in our hotel in Las Vegas. And when that business tailed off as it has in the industry, we decided that and we lost $150,000,000 in wind at one point. That's how big our baccarat business was, that we could lose 150, and we were left with a smaller number.
We used to give discounts to blackjack players and crapshooters. We dealt blackjack at 3 to 2 if you got 21. We started putting in tables where we paid 6 to 5 and dealt single decks or double decks. We changed the layout of the floor. We put our high yield games in more prominent locations.
We put destination type games like craps in secondary locations. What was what was commonly referred to as the 3, 4, 5 game. And that had to do with the amount of free odds you'd get if you made a line bet to double odds. Now I'll give you an example. When someone has a 3, 4, 5 craft game, the house advantage is 37 basis points, 38 basis points.
When you go to double odds, the house advantage is 58 or 57 basis points. Now that doesn't sound like a lot. That's a very narrow margin of a house advantage mathematically. However, 20 basis points is a 60% or 70% increase in the margin of advice game. So that the outcome in terms of profitability was based upon a rather granular analysis of each game.
We made a bunch of changes. And in so doing, we were able to overcome in terms of profitability, what would ordinarily have been a massive loss of top line revenue. So the gaming industry is a little deceptive in many respects. It takes a very sharp analysis and very, very high degree of self awareness because when you take rooms away from the casino block and you can sell them for cash, our margins in the hotel rooms are very high as they are in slot machines. Casino table games in Las Vegas, if you were to do an analysis, would have a profit margin in the teens.
At best, we were able to take our profit margins in table games up into the 40s, which I think is unique in our industry. Well, this kind of analysis applied to China is also very enlightening and instructive. Having allocations, having table caps as we are experiencing in places like Pennsylvania, I was this week, I stopped at Bethlehem at the Sands facility and I was watching what an alert management team did to offset limitations imposed politically on the amount of tables. And they used a concept known as stadium games, where you use 3 or 4 dealers for roulette and blackjack and have 150 automated digital stations for players that allow people. It's a much more efficient use of an allocation of tables because you get 150 players with 4 dealers.
And in the case of Bethlehem, when I watched the other day on Tuesday. And they were able to take advantage of that and introduce people at lower minimum table limits to roulette and baccarat who might not have played those games were it not for the low entry level afforded by this stadium concept. Now we use those at the Wynn Macau and they're being used in Singapore and around the country. And I suspect that because of the payroll efficiency inherent in such concepts that we're going to see more of it. And that allows us to make better use of our staffing levels and offer the opportunity for efficient.
Having said all that, we anticipate the following aspects of our business, which will not impact our profitability. That by having fewer games, you get to have higher utilization. Remember in most casinos around the world, utilization is less than 50%. You're sort of keeping the payroll in the games for peak periods, weekends, a few shifts a week. By having fewer tables, you increase utilization dramatically and you're able to control limits.
So let's get to the second part of my presentation, which is this. A close analysis of the market in Macau will demonstrate that the bulk of the profitability in business is in what is now referred to as premium mass business. We distinguish between mass and VIP because in the mass, very much like America, people buy in for cash. They play with regular chips that are negotiable as opposed to the VIP or junket end where we use non redeemable chips that are purchased by junket operators as supplied to us and then the customer is forced to bet that non redeemable chip and they keep betting the non redeemable chips and they save the redeemable ones and then either cash out or buy more non redeemable chips, in which case they get a little discount. My point is this, the money we make and the margin that we enjoy is based upon the mass premium end.
And that premium mass end is not a hard line of division. It isn't a question of, well, one guy bets $25 using U. S. Currency for a moment, that's $25 and a premium guy bets $500 No, there's a whole range in between where people bet $2,000 $3,000 a decision, but they're playing in the mass area of a casino. We refer to those as a more premium customer.
Now the Wynn Palace in Cotai was designed from day 1, 6 years ago, specifically for premium mass business. Some of our competitors who are very intelligent operators, they've designed buildings that are specifically designed for the lower end of the mass market. The Wynn Palace is not such a structure. The rooms, the restaurants, the retail, all of the amenities, the layout of the place, its entire conceptual framework was based upon getting the higher type of mass player. So we were always in a position to operate our casino with less equipment than our competitors.
Incidentally, to give you an example of that, when we opened Wynn Las Vegas, we had close to 2,900 slot machines and we won $180,000,000 a year. Today, even with Encore, we win well over $200,000,000 with less than 1800 machines. Technology has played a role in this and it is playing a role in table games as well. So to close this little presentation of mine, we feel positive and comfortable about the hotel and we're looking forward to the opening on the 22nd August. And I'm hoping that some of the things that I've just highlighted in my comments are instructive to all of you.
One other note away from China and the United States and Las Vegas for a moment is on Tuesday at 5 o'clock we expect to get our final environmental permit in Boston and begin full scale construction on Wednesday. Although we've had hundreds of people that work already on areas that were not impacted by the environmental permit, work that was necessary to build our building on things like a slurry wall and other preparatory constructions aspects of the foundation. But hard construction begins on the tower itself Wednesday morning, and we don't anticipate any other interference with that process. I think that about covers it. Matt, Steve, Bob DeSalvio is on the call from Massachusetts and is happy to elaborate on any of the comments that I've made or any of the questions you may have, which you can begin asking right now.
Thanks for your attention.
Our first question is from Joe Greff from JPMorgan.
Hello, everybody. Steve, thanks for your comments. There were perspective putting on the topic of table game allocation. Along the same lines, along the same topic, does the fewer initial amount of table games than, say, $150,000,000 to $250,000,000 that maybe some people were thinking, does that alter the amount of labor related OpEx shift from Peninsula to Cotai?
Ultimately, depending on utilization, it will, as it always does. You adjust your workforce based upon the demand that you have from your customers. So, but that's something that you see as time goes by, Joe.
Got it. And then just to make sure we all understand this, is there a chance that you could open with more than 100? And I ask it knowing that Galaxy, I guess, went through a process, maybe got a little bit more to open and then got 50 more and then 50 more after that. Do you have a timetable for when more tables would be released? I guess would be a second go around of additional table games being allocated.
Would that be more of a 2017 event or could that be a late 2016 event?
Joe, we haven't been formally notified nor in the manner that the government does such things yet. And I suppose it's possible. What we do in the absence of official notification is we make plans to run at a minimum efficiently. And then if demand calls for it and the government decides that it's a good idea, then we respond when they give us the tables, but they don't tell us in advance about such things. And so the best thing for us to do is not to plan for it.
Got it. And then a final question for Steve Coote. Can you allocate the EBITDA impact, the positive favorable EBITDA impact in Macau from the high hold?
About $20,000,000 It was about the same as the extra payroll we're carrying, Joe.
Yes, yes, I heard you said. I just want
to clarify that. Great. Thanks all.
And our next question is from Shaun Kelley from Bank of America.
Hi, good afternoon. Maybe just a follow-up on that payroll comment. So the $20,000,000 of extra headcount that was being carried, that's still those are employees that are currently at Wynn Macau will be over to the Palace. And then in addition, was there additional staffing that's going that's feeding the pre opening line, which is why we saw that expand?
Let me clarify that. We were carrying $20,000,000 to $25,000,000 a quarter of extra payroll in the Peninsula operation for Macau. All of those people are being transferred as we speak and they are employed at the current table limit level. The extra tables where we did get them would have been reflected in new hires, which have not taken place. So we're the people that we said we're transferring, we are transferring and they are employed.
That answer your question? I want to make sure I'm responding properly.
And I think from an accounting standpoint, what you're talking about, Sean, is to be clear, Wynn Palace will have 7,000 employees, roughly 2,000 will come from Wynn Macau. So when you see pre opening ramping up, that's the other 5,000 people that are coming on board right now and came on board in the Q2. That's that $40,000,000 in pre op 1,000,000 was related to in Palace Hires outside of the transfers.
Perfect. Now I understand. That makes perfect sense. And my second question would just be, when we look a little closer at the VIP line, it looked like perhaps the rebate percentage was a little higher than normal. Usually that may have to do with what's going on in the direct VIP business, but any color you could provide on that?
There was no change in commission structures in the Q2.
Yes, you got me on that one. I'm not sure what line you're looking at. Linda is on the call or Ian is. Ian, did you have a comment on that?
We haven't altered our commission structure. It remains the same. We're very parsimonious. I'm not sure what's being referred to.
No. Sorry, maybe to be more clear, just asking about, was there any kind of hold outside of the norm on the direct VIP business?
Was there any hold? You mean did we play Lucky?
Yes.
We did. I did to the extent I think we played lucky almost exactly to the extent of the extra payroll we were carrying. So what I'm saying is the $20,000,000 increase is real.
We stayed lucky in both direct and junket, both sides that make up that combined number of 3.98% full percentage.
Okay, got it. Thank you very much.
And our next question is from Carlo Santarelli from Deutsche Bank.
Thanks guys. Matt for starters, you just mentioned playing lucky in both direct and VIP sorry and junk. Could you maybe clarify a little bit what the mix in terms of drop or something is of the 2 segments at this point?
Carlo, we normally don't do that, getting into the mix of direct versus VIP. We always I can tell you both held high and the 3.98 percent on the $11,000,000,000 in turnover.
But generally, what is relevant to this conversation is that we have 3 or 4 very prized junket operators who consistently produce for us and produce profitable business for us compared to any other equipment in the building. And they're going to be both they're all established with proper tables in both Cotai and on the Peninsula in August at the opening regardless of anything that we've discussed so far. But we also run our own program very much like we do in Las Vegas, where we give credit to people in Hong Kong, where we're permitted to do so. And those numbers jump up and down depending on who shows up. I mean, to give you an example, in the last week in Las Vegas, in 5 days, we won $20,000,000 to $1,000,000 in our own program in Baccarat from a handful of customers.
So we get this we benefit from having an extremely loyal high end group of customers that come to us in a number of ways, some through junkets in China and some in our own programs here. And they vary, the volatility or the attendance of such clientele varies unpredictably from month to month and week to week. So the reason we don't discuss it is because it would be irrelevant. It's not instructive and it's unpredictable, which is why we don't give guidance on it because we really don't know what to say other than what I've just told you.
Great. That's helpful. And then if I could just understand a little bit more how you're thinking about the positioning. You obviously open Wynn Palace with 350. If I'm not mistaken, your allocation or your table allotment coming was like 509 or somewhere around there plus the 100 is 609.
It's 520. It's 520 plus 100. It's 620.
620. Okay. Sorry about that. So you'll have 270 at the existing plus your 350. How are you thinking about the splits between mass and VIP at each of the properties?
Now will you try and lean more heavily?
60 or so in both hotels in the junkets VIP and the rest are in mass. So the mass floor is unaffected.
Great. Thank you very much.
The adjustment takes place in the VIP section.
And our next question is from John Ho from CLSA.
My question pertains to the 250 tables that you're shifting from Wynn Macau. I think this number is a little higher than what we are modeling, generally speaking. So as I'm thinking about the cost shift and the expense shift that will be moving from Wynn Macau to Wynn Palace, that's a positive thing. How should we also be thinking about the potential that you're actually peeling off more of Wynn Macau's tables and what it would do to your revenue of your existing Wynn Macau? Basically, I'm trying to understand this risk of self cannibalization, which I think, Steve, you brought the point that maybe only 60 tables out of the 183 in VIP are contributing to the profits.
So you have some slack to pick up there. But what about some of the mass market tables and premium mass market tables in existing Wynn Macau today that you may have to shift to get Wynn Palace to the right size? How do you feel about this risk of self cannibalization in the coming weeks as you open Wynn Palace?
Well, that's the good news. The shift is irrelevant because the tables that are left at Wynn Las Vegas are the ones that and Encore are the ones that were making the money. We're not touching the mass floor. That's the point. We had an enormous amount of tables that were idle with payroll in anticipation of the shift to the other place.
So in one way, it's fortuitous that we're not affecting our premium mass capacity or potential in terms of tables at Wynn Macau and Encore Macau. The adjustment was made in the junkets and sending out the junket operators and the tables allocated to them. Our mass floor doesn't change. Our premium mass floor doesn't change in either place.
What you'd see, John, is if you look at the numbers, we have some poker games that are more of an amenity that would likely go, that's about 14. And then of the 20 or so mass games that would need to be transferred to get to those numbers, those are underperforming games in certain areas that we rarely open. So
This may be a fascinating you may those of you who watch this industry so closely and our competitors as well may find this to be a fascinating observation. When we concentrate this business on the tables that we have predetermined to be the ones that are most profitable and increase their utilization. Speculation has to remain as speculation, but I think we're going to see the results quick enough in August, the last week in August and in September leading up to Golden Week. And I think that we might find this very instructive before it's over. We don't do much spinning here.
We let the numbers speak for themselves. But I want to point out that the trend in our industry has constantly been to less equipment and more efficient utilization of that equipment. I also want to remind everybody that you cannot get dynamic in a casino, you can only get dynamic in the non casino area where you create attractions that produce people of a certain income level that make the place profitable. And it's I can't overstate that simple observation more strongly enough. In a hotel casino, in these integrated resorts, The hotel itself is the show.
A lot of conversation has been promulgated about the diversification of gaming away from just gambling to non gambling things. And that conversation has largely been misunderstood. So let me make a point about that now. When you say diversify to non casino things, you have to understand that isn't a simplistic thing. Well, we'll have more restaurants, we'll have more shows, we'll have more this or that other than a slot machine or a baccarat table.
Diversification means how well do you make the entire place an attraction from a hospitality and touristic point of view, so that you don't just rely on a baccarat player or a slot machine player. Now that diversification involves the entire building we spent without exception and without any possibility of contradiction, more money on non casino attractions in Wynn Palace than has ever been spent on any facility of that sort on the planet Earth. And it has been done in the things that really matter to people, the width of the hallways, the height of the ceilings, the attractiveness, the decor, the size of the rooms, the elegance and luxury of the retail offerings, and most importantly, the entertainment quotient of each and every food and beverage outlet. The customers of Macau in the past since 2002 and even before with Stanley Ho's operation, The customers have a very distinctive personality. They shop, they eat and they gamble.
Their attendance to traditional entertainment attractions has been unpredictable and in most cases unsatisfactory. We saw Cirque du Soleil show remarkable company that we pioneered ourselves in Las Vegas. We saw that show open and close at The Venetian. The entertainment attraction at the City of Dreams is primarily being supported by freebies and people that go in and are offered the experience complimentary. What we have seen at Wynn Macau and Wynn Las Vegas, the only 5 star facility in Macau and the most complete in terms of 5 stars in spa, 5 stars in food, 5 stars in rooms.
That's very unique in the gaming industry. We're the only ones that had that kind of across the board 5 star rating. That is diversification. When Wynn Palace begins at 8 o'clock in the evening, on the night of August 22. Everybody will experience visually for the first time, the press will see it the week before with me.
The most diverse, the most elegant, the most completely diversified attraction in the hospitality industry that exists anywhere in the world. I say that unequivocally because it took us 6 years to be able to make that statement. And all of you who have enough interest in the matter in the press will get to see it for themselves. You'll eat the food with the incredible array of chefs from pastry to we have a Alain Ducasse chef in our coffee shop in this hotel that's on the water, experiencing $70,000,000 or $80,000,000 worth of entertainment on the fountains. That filters through to the entertainment quality in each of the restaurants, even in the gaming areas.
So in the lobbies, tens of 1,000,000 of dollars have been spent on floors that open. The theme of the hotel is flowers. We're talking about Ferris wheels, carousels, 25 foot tall, faberche eggs that open, all made of flowers. Everywhere in the hotel, there is entertainment, public entertainment. And in every aspect of the hotel, the hospitality diversification has been intensified and redoubled.
And those are the things, if you want to take a hotel to another level, not a casino, a hotel, then you have to revisit each and every component down to the most minute detail and revisit them, ask all of the questions, question your history, question fundamental assumptions. The ones that survive have survived cross examination and recross, and new stuff emerges as you apply a great deal of self critical judgment in the design development phase, all of this will be self explanatory and self evident at 8 o'clock on 22nd August to the rest of the world when this hotel takes its first breath publicly. The press will get to see it and the financial community
in the
days preceding August 22. Incidentally, we adopted a technique. I was asked, how do you want to handle the opening, Steve? As I tell you how I want to handle the opening, I want to show the world, I want to show the political leaders who don't attend these hotels. I want them to see the villas, the penthouses, the entertainment attractions, alone in small groups of tours in each of these remarkable moments in this building before it opens.
And then during the month, that's what I'm going to do on the 22nd to our invited guests. But in the weeks preceding August 22nd, all 12,000 or 13,000 of our employees will be in small groups of 8 to 10 and experience the identical tour and visualization of this hotel in tours with music and with full tilt presentations, so that by the time we get to August 22, there will be an awareness in the community of what we have built. That is the policy we're following and it begins in 2 days. And that is the indoctrination and the display. When you talk about the villas and the penthouses and the other attractions in this hotel, normal people will never get to see them.
They'll be reserved for special guests that are being entertained, that are being fed in these restaurants, the politicians and political leaders, union leaders, line employees will never see every part of this place because they're specialized in certain parts of it. But our job from August 1 to August 22 will be to make sure that anybody who works for the Wynn Macau Company and either the Peninsula operations or the one on Cotai are completely exposed to what we have built for them as a place to work because at the end of the day, this is all about our employees because if our employees have a sense of the place and its luxury and its special nature, then they'll pass that on to the public. Those are our strategies. Those are our philosophy. That's our thinking.
And we're going to bring it all to bear along with 40 odd years of experience to see if we can get this place off and running in a nice way. It was built to take market share. No question about it. No need to pussyfoot about it. And we'll see if we can keep the promise.
Personally, I saw it 3 weeks ago. I thought it was the most joyful place we've ever built. My wife, Andrea and I walked through the building and we were quite dazzled by it. I'm hoping that all of you
Okay. Thank you for the color. If I may follow-up with another question. I think you made a statement earlier about premium mass, and it seems like that's going to be the front and center of the Wynn Palace strategy. Could you size up the state of the premium mass market today?
Specifically, if you could maybe give us some sense as to some visitation trends you're seeing and also customer spend. Are you seeing any encouraging signs right now? And how do you feel about the state of this market? And how and we know that you're positioned very well for it given the product that you're building, but any color on premium mass as a segment will be very helpful to us. Thank you.
Ian? Ian? Ian? Ian? Ian?
Yes. My Irish boss. You want to talk about that? Sure.
What we've seen in premium mass at Wynn Macau specifically is very sticky customers and we've been allowed over the last 18 months to grow the mid tier of premium mass. We've cultivated a lot of new players. It's been very strong for us. We've allocated more tables to premium mass and it suits the property. So there are type of customers.
It's been running very well and we're very confident about premium mass at Wynn Palace. We have the product to support it and we've built the place for premium mass and Wynn Macau is no different. So we are seeing finally a return of some of the higher end premium mass players. We've seen that particularly over the last 8 weeks. So it's strong, it's steady, it's stable and we're looking forward to Wynn Palace and Coleside being a different market with lots of premium mass there to harvest.
And John on that, all three months, April, May June, we were up in the mass segment year over year.
Our next question is from Felicia Hendrix from Barclays.
I just want to switch gears for a second, if I may. My question is on capital allocation. So Steve, so you're opening up Wynn Palace in about a month, little less than a month, right? And then we moved to Boston and by the way, congratulations on getting closer to connecting construction there. So in a few years, Boston will be open.
And then following those two projects, you should be back to generating strong free cash flow. The next project in line is obviously Paradise Park, if that gets approved. So I'm just wondering, how do we think about your free cash flow as you're building out that project in Vegas? Is there a scenario where you're returning cash to shareholders while you're also embarking on construction in Vegas once Boston is open?
Felicia, I think we always return cash to shareholders and we'll continue as long as our business remains robust to pay dividends. That's been our policy from the beginning of this company. And once as you look at our balance sheet, it becomes quite strong, we expect over the next 12 months and our capital allocation will be exactly what it's been. We're in construction, Felicia, and we have been for several weeks on our Wynn Plaza Shopping Center on the Strip, on the sidewalk on the Strip between Wynn and Encore. So we're very happy with that.
Leasing is proceeding and that project is underway and will finish next year.
Okay. I'm sorry.
I'm sorry. That's all. I just wanted to throw that in. We did start that job and it's going well.
Okay, great. And then and then Steve, so when we think about Macau, right, and a lot of the questions I think that were being asked today are kind of coming from the base of people trying to figure out what's going to happen in the very near term, right? Like is the new supply going to grow or cannibalize the market? And that's an interesting debate. But when we look out further, a year, 2 years out and given the stabilization the market is seeing now, especially given the market the stabilization that the market is seeing now, do you feel more comfortable about your growth projections for the market as you look out a few years?
And just as a follow-up to that, how much of your vision in Macao relies on proper infrastructure being in place, like the bridge and the light rail, that sort of thing?
Well, we're seeing numbers today that have no bridge, no monorail, none of those remarkable infrastructure additions that the government has instigated. They've not yet matured and come into season. So what we're seeing is the picture that you're sharing with us at the moment based upon the numbers from ourselves and the other gents and the other companies in Macau. The things that are in the pipeline, the bridges, it's mightily being constructed. Monorail with its growing pains seems to be settling in and work is proceeding on that.
Those things all add to the viability of all of the operators in the special administrative region. And they can do nothing but help as far as I understand them. All they can do is make it easier for more people to get to Macau. The penetration of Macau in terms of the general population is still small. The room for growth is astronomical when you consider who's coming to play and how many folks there are.
The visitation of Macau is being augmented and enhanced not only by these infrastructure projects that are breathtaking, that bridge and the monorail, the light rail, but by the very facilities that the concessionaires have invested in and that have opened, I mean, Galaxy and Venetian and the City of Dreams and the Studio City are very aggressive, massive projects. And then Parisian comes on shortly. And then eventually, we'll have the SJM property, which I think they've in a stroke of real originality called the Palace. That comes on at sometime next year, I guess. When does that do, Matt?
I'm not sure. I think it's further out. Further out? Yes. But the Parisian is around the corner.
It's a couple of weeks after us. Yes. So those things match and enhance the future of the market coupled with those infrastructure things that you mentioned. I don't know the final date of the bridge. Have they announced one lately?
When they expect to function to have functionality on the bridge? I know the light rail. When?
2020 or 2021, it keeps moving.
Yes, in 3 or 4 years. And what about the light rail, Ian?
2018 first phase, 2019 the second phase.
The first phase goes around two sides of our property and has its first stop right in the middle of the lake by our gondola station. That's the first stop from the ferry terminal. And it goes around the north and the west side of our property and stops right smack in the middle, next to our gondola station. No accident there, of course, we did it deliberately. And then that gondola station feeds the MGM, which is coming along in a few months.
It feeds Parisian. It feeds the City of Dreams and win the Palace. So, I like the interaction of the infrastructure as it comes on board and it sort of matches and enhances the performance of the buildings and the projects that have been built. That's how I look at it anyway. It's just sort of a but I tend to be a longer range looker at these things than quarter to quarter, but that's my job here.
So I'm feeling good about it. I love our position in Macau. That concession was one of the most remarkable benefits ever bestowed on companies. Those of us who are privileged to have such privileges in the SAR are very lucky. I mean, the amount of money we've been able to make and the opportunity to create these places has been fabulous.
Well, thank you.
Yes. Is there another question? Apparently not. I think there is. Is there another question?
Yes. Our next question is from Thomas Allen from Morgan Stanley.
So you announced about a month ago the opening date of Wynn Palace, and you started booking rooms. Can you give us any color around bookings? You also have been hiring hosts. Any color you're hearing from hosts on potentially pent up demand of people who haven't been coming to the market and maybe will start coming again once Wynn Palace opens? Thank you.
I think we're at 70% occupancy already and we've only had the booking machine turned on for a matter of days.
June 21, Steve, we've started online sales and taken reservations and we've had a strong demand basically and our rate is at a premium on both the gaming and the non gaming. So we're looking very, very strong for the 1st 5 weeks prior to Golden Week and then we go up from there into the 80s.
That's helpful color. Thank you. And then just talk about the Wynn, the Macau Peninsula property. Your slot volumes were really weak this quarter. I think it's the weakest number I've seen or we've seen since 2,009.
Anything driving that?
Just the movement of big players. They can affect a month and they can affect a quarter. So the previous quarter was excellent. So they'll be coming back.
The slot machines are very much like the tables. There are very big slot players in China. And in our particular case, when they show up, it gets very exciting. When they don't, it's a little bit more subdued.
Thank you very much.
Our next question is from Robin Farley from UBS. Great, thanks. I have two questions. One is, how should we think about for the Palace, what percent of rooms will be sold cash sales versus given to players? Just how to think about that?
And then also, I wonder how you think about how the U. S. Election outcome may impact business in Vegas?
Good question. That is Rob. Rob. To take the second question, we Yes, go ahead, Ian.
Steve, this is Jamal. We basically plan for the initial period to be at 30% non gaming or cash business and 70% gaming. And then we will eventually get into a 75% gaming, 25% cash business.
Okay. Great.
The election in the United States, I think we're all in the same position. It's almost impossible to predict exactly what effect that will have. Without getting into an economics discussion, I mean, we have sooner or later, our political establishment is going to be forced regardless of party affiliation to deal with $19,000,000,000,000 in debt that's climbing by around $1,600,000,000 a day. That means that in the treasury auction each month in downtown Washington, we're printing money at the rate of $40,000,000,000 or $50,000,000,000 a month, which is of course increasing the money supply and directly impacting the living standard of the buying power of the U. S.
Dollar for people who are being paid like everybody on this call today. Now part of the frustration in America and is the fact that the deficit is having an enormous impact on the living style and the living standard of Americans, but not all of this is well understood by the folks, to use Bill O'Reilly's term. The folks are being their living standard being clipped by the deficit and by the printing of money and the increase in the money supply. How long can this go on? In the history of the Western world, inflating your way out of this kind of a problem taken to its extreme, to use the Weimar Republic as an example, people went grocery shopping with wheelbarrows versus full of currency.
Now when before the recession, the euro was $0.87 $0.85 on 1 dollars During quantitative easing 1, 2 and 3, it went up to $1.48 That was the valuation of American currency by 20%. Now it's $1.10 And to use that as a benchmark for a moment, it isn't that the dollar got stronger, it's that the euro got weaker because they started quantitative easing and printing money in the euro community. So this deficit issue impacts the mental health, the frustration, the positive sense of tomorrow that working people feel in America. It hasn't got to do with rich folks. It's got to do with government, fiscal and monetary policy.
We have $14,000,000,000,000 in public debt and $5,000,000,000,000 in intergovernmental debt. The coupon on that $19,000,000,000,000 and climbing is around 2.3 percent. And that's with short term interest rates at 0, virtually. Now the Fed, the current Fed, the lady is going to keep interest rates where they are. That, of course, protects all of the credit card debt of $1,000,000,000,000 that's out there.
And so we don't have mass panic on the credit card interest. But I know that the government is in a quandary as to what to do about this. Now the issue about what's going to happen with the election isn't so much an issue of Trump versus Clinton at the moment. It's a question of whether the House and the Senate and the executive branch can get together and make Americans feel safer and have a fiscal and monetary policy that isn't self destructive, which currently it is. Now I know that in this time of year, everybody is making all kinds of promises and declarations that they can do without without exacerbating problems that are currently plaguing the country.
What is lamentable is that the public discourse today on both sides misses the point entirely. We're in the chicken for every pot season where everybody is promising the moon. I recall that one of the most popular themes this year is that we've got to get student loans and the burden of student loans off the back of the kids. Well, when the Affordable Care Act was passed and it was going to have a negative impact on the deficit, which its sponsors had promised it wouldn't, the sponsors went looking for a way to offset $8,000,000,000 or so in additional deficit. And they came up with the kind of a stunt that we did with Fannie Mae and Freddie Mac when we eliminated mortgage brokers and we just took the loans directly into Fannie Mae and Freddie Mac and that led to the collapse at $5,000,000,000,000 of the system.
Well, they did the same thing with the Department of Education. They gave the student loans directly from the Department of Education and eliminated any middle people. And then they charge 6.5 points or 6.50 basis points for student loans instead of passing the savings because Department of Education doesn't really have a cost of money. But they're making the student loans direct since the Affordable Care Act. Bernie Sanders didn't talk about that.
But that 6.50 basis points that carry is being made by the government to offset what would have been even greater impact on the deficit by the Affordable Care Act. Well, if you really were sincere about making a better life for the kids, you would have passed the loans from the Department of Education to the kids at cost, which would have been interest free. But this kind of hypocrisy, which sort of is endemic to the whole system, regardless of party, has got to come to a halt, because if it doesn't, then it insinuates itself into economic demand for services and products. It certainly insinuates itself into the price of everything from Walmart to shoes and sneakers. Those things haven't been by themselves become more precious.
The value of the dollar has declined. I know that we talk about China pulling with their currency. The United States is fooled with this currency even more aggressively than the People's Republic of China. I'm not an apologist for China or anybody. I'm simply stating the fact, but you won't see this in the conventions of either party.
You won't hear this sort of thing, because it's so uncomfortable to talk about it. But the election, the election can put America on a better track if all the senators and congressmen and the presidents and the cabinet members decide that they should or won't. I don't know about anybody on this call, but I'm not in a position to make that prediction. But it surely, surely impacts the life of every American. Tax policy and all the rest all roll into this.
And businessmen across the country and people that work in businesses will be affected by this as sure as sunrise tomorrow. And there seems to be a fear to deal with it directly. So count me as one of those old white guys that's frustrating.
Okay. Thank you. And our next question is from David Katz.
If I can, I'm going to say something to Robin. Robin, there's 465 agencies in government and there's 4,100 and 50,000 federal employees, 1,500,000 are in uniform, 2,650,000 of them are civilians covered by the SCIU Union and the Civil Service Act. If you want to make government more efficient, you've got to have a big idea that resonates with all of the government employees, all 2,650,000 of them in 460 agencies. And it's going to have to be the kind of big idea that we use to run businesses, which is namely to reinforce positively the behavior that we wish to encourage. And that can be done with tax policy and with employment techniques in the federal government that work so well in the private sector.
If we told everybody in those 4 65 agencies, you ran the business for X amount of dollars last year, If you maintain service levels and you can save a dollar, we'll distribute $0.20 on every dollar you save to those of you in those departments, you'd see the government contract in terms of its cost of operation overnight. But you'd have to incentivize the people in those 2,650,000 employees, the way we incentivize people in the private sector and gain efficiency and better functionality. But those big ideas don't seem to apply in Washington.
Our next question is from David Katz from Telsey Group.
Hi, afternoon. Two quick ones. And now that Boston is becoming a more of a tangible property and that this may involve getting Bob into the act. I'm curious how you can update us on how you plan to position it. As we look around the geographic region, there are other large properties, other small ones, but I think they tend to be more slot driven.
If you can talk about who your target market is? And then I'm curious what your kind of long term commentary might be around the table game business in Las Vegas, which candidly has been a little bit hard to model. Whatever thoughts you have would be welcome. Thank you.
Bob and I'll do that together and I'll lead. That building in Massachusetts is the win in every sense of the word. The rooms, the suites, the service, the food, the beverage, the public entertainment, the theatrical entertainment is everything that we do here. We're bringing a 5 star frontline integrated resort right into the center of Massachusetts. We're the largest private investment in the history of that Commonwealth, and we're the 2nd biggest employer except for the hospitals in the Commonwealth.
And it's going to be a doozy, and it will deal to the same level of the market that we are dealing here. Bob DeSalvio, we're very lucky to get him to come join us. I spent I was with him this week on the East Coast in Pennsylvania. And Bob, you can pick it up.
Sure. We think of this market in a couple of different ways. First of all, an incredible local market. We've got the only casino with 5,000,000 people in the Greater Boston area. And then when we branch out from there, we've got about 25,000,000 people of gaming age within a 400 mile radius of the property.
So probably the most incredible local market available with 1 casino. Massport has been excellent in terms of the international destinations coming in and out of Logan and we're now up to 54 nonstop international destinations coming into Logan. So the opportunities for picking up areas that are very good for Wynn with direct service Hong Kong, Shanghai, Beijing and of course all the major capitals around the world provides us with a great opportunity for the international market. And so we look at this on many different levels, local, regional, national, international and feel we can qualify for all of them. So we're very, very bullish on it.
What about room rates in that city of Boston, Bob?
Right now, extremely high and continuing to climb. There's a real shortage of rooms. Of course, with the healthcare, life sciences, biotech, the universities, there's so much activity and so much building going on in the area and not enough quality hotel rooms. So the rates continue to climb and we'll be at the top of the market. There'll be nobody in the market that will have rooms even close to this.
So we're actually predicting that we'll do very high ADR in this particular property.
And we're the largest hotel in the metropolitan area in terms of total rooms. The biggest room in the East Coast, the largest room outside of Las Vegas in the United States of America in terms of footage and decor and the most amount of rooms in the Metro by in Central Massachusetts. 12 minutes from Logan Airport, the first hotel we've ever had that had nonstop service from China. No Gulfstreams needed.
I think the other part of my question was about the table game business in Las Vegas, which has been a little bit hard. If you have any sort of longer term thoughts on it, it would be very helpful. Thank you.
Well, we do and it's what I led the conference call with. Gaming hasn't changed the price of gambling in 70 years. And yet, our cost of operating these places has climbed steadily over that period. And the mentality of the marketing people and the gaming people that deal directly with that sector of the business has been trained, has been grown and matured with a focus on the top line. The average bet, the length of play, how often does the customer come, what is our chance of winning X dollars, And then let's get that customer, give him a room, pay for his airfare, send a limousine, give him a bottle of Lafitte Rothschild, do anything, give him a shopping spree.
These are the earmarks of the superficial thought that has guided casino management for decades. When it should have been focused on what is the profitability of every table and every customer. Now I'm not suggesting that they don't have profitability meetings and reviews at these various enterprises, but I am in a position to say that any examination by any financial person in or out of the industry will reveal that the profit margins of table games in the gaming industry in the United States of America stinks. Lousy, less than 20%. Now these businesses end up with margins close to 30% because they have slot machines in rooms and bars and nightclubs.
But the forgotten sector has been profitability of table games. We decided to take another look at that a year ago. I remember exactly, it was at the end of the Q2 and I went after it the 1st week of July and started moving furniture and changing rules in collaboration with my colleagues like Maurice Wooden, Webb's be on vacation in Hawaii this week, Matt Maddox, Linda Chen, Ian Cuchman, Kamal Aziz, Steve Cooney, my Chief Financial Officer and everybody in China. And we decided that there had to be a better way to do this. You say it's tough to model table games.
You, I don't know how you do your model. But if you do a deep dive in companies like the ones that line the strip in Las Vegas or regional casinos and take a look at the profitability of table games, that model is shaky. We've changed that here. We don't care about the drop. We don't care about that.
We care about the profitability of every foot in the casino. We take a very merchandising retail approach to the floor. Incidentally, I think Sheldon has done that in China when he opened up years ago. It's harder to do it when you're not living in an avalanche of revenue, the way we did when casinos first started in Macau. In a day to day disciplined grind of normal operation, it requires re educating all of the marketing and casino personnel to look at the customers differently.
We don't even issue promotional allowances or comps based upon past performance. We do it on current business activity. That is to say, if you play this trip at a certain level, we'll give you free meals or free rooms. But if you played that way last year and you show up this week, we're waiting to see what happens this week. That's a big change in the way they thought in this business.
And it requires a lot of discipline and frankly reeducation of the people that work in the casinos. It took us months to get to where we wanted to be in Las Vegas. But imagine we were able to overcome the loss of $50,000,000 or $80,000,000 in Baccarat drop and make the same money or more in Las Vegas. That's hard to do. But now when someone plays, it's a business.
It's a business. Otherwise, we sell the rooms to cash customers. And we reallocate the space in our building. The business model is constantly morphing and changing. And is it not doing so we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're trying, we're We're trying we are, so to speak, in a commercial sense, constantly in a yoga class.
So factor that into your modeling, maybe you'll be able to follow us.
I appreciate it. Thank you.
And there are no further audio questions at this time.
Thank you everybody for paying attention today and giving us your time. Looking forward to sharing the results of all these exciting new projects