Good afternoon. My name is Jennifer, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wynn Resorts 4th Quarter 2015 Earnings 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. And I would like to turn the conference over to Stephen Cootey, CFO of Wynn Resorts. Sir, you may begin.
Good afternoon, and welcome to the Wynn Resorts 4th quarter 2015 earnings call. Thank you and good afternoon. Joining the call on behalf of
of the company today are
Steve Wynn, Matt Maddox, Maurice Woodin and myself here in Las Vegas. Also on the phone are the operational management teams from both our 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.
Well, we released the numbers a few weeks ago. And so there's no real revelations to discuss. I think probably what's interesting is to say that January in Macau, if I can anticipate some of the questions, was our best month in a long time, happy to say so. And Chinese New Year is in progress, but early in the week, little too soon to say. The mass component clearly looks a little stronger than in the past.
It's too soon to tell because the weekend is coming up with the VIPs. So that's pretty much the way we feel about China in terms of current first quarter numbers. With regard to Las Vegas, January was terrific and Super Bowl and February are off to a roaring start. And between that and Presidents Weekend, Las Vegas is an apple pie shape up through 15th, which will be Monday. The question in Las Vegas will be how is the last 14 days.
But as of now, business is pretty good in the United States and holding its own in Macau. With regard to our project, we have issued some statements. We're working with our contractor to get them to catch up, so that we'll have an opening in June. They believe they'll make the June 25 date, which was the contract date of our relationship with our builder. And it's possible they could be late, but hopefully they won't be.
We're working very closely with them to try and catch up in any areas that need to be caught up. And our fancy hotel will be ready for public display later this year. We're going to start work in Boston, hard construction, we're doing remediation at the moment. We've come to happy terms with our neighbors and that was a relief. And now we're going to proceed with constructing this wonderful destination resort in Boston metropolitan area in Everett and benefit, I hope, people throughout the region and have a very exciting hotel to boot.
And with that and reminding you that all of us are here to take your questions, we'll begin to do so.
Our first question comes from Joe Greff with JP Morgan.
Good afternoon, everybody. Steve, one topic that has been noteworthy of late I have to be too personal or untoward, but Steve, it's been noticeable, your open market share repurchases here and it's gotten a lot of strong benefits. I was hoping we could get an answer as to your interest in buying stock at these levels. Is it really a valuation, Paul, or is this now you're sensing on the fundamental side and obviously given your comments about Macau in January and Chinese New Year's, is your sense that we're a turn or a bottom here?
I lost a part of your sense. What did he say, Matt? He was asking about your open market purchases. Okay. My view is that I like Wynn Resorts, especially because I think the management is great.
But I like the stock. I like the stock a lot. And I bought it on what I thought was extreme weakness in price. That's personally my own personal opinion. I don't give it investment advice nor do I have any there is no inside information to this company.
We tell you everything, including I just reported the 1st week and a half of February. I don't know anything that you don't know, Joe, but I like the company's long term prospects. I like our latent assets in Nevada. I like our opportunity in Massachusetts, and I like the long the I'm always prepared depending on my financial capacity to buy the stock on weakness. I reserve the right to do that at any time and I may very well do so.
I think I bought a few shares a few days ago. So that's just my mindset and I can't be any more clear about it. I'm subject to stepping into the market and buying my own stock at any time that I have the if I have extra cash and I think that the stock is a good buy and I certainly did and do at these levels. So off I go. Does that answer your question, Joe?
Answers it perfectly. That's all for me. Thank you.
Our next question is from Carlo Santarelli with Deutsche Bank.
Hey, thanks and afternoon everyone. If I could, Steve or anybody from Macau that would be willing to answer, as you guys contemplate a few things and this might be a 2 part question, but when you think about big picture China potential currency devaluation, how do you kind of handicap that as to what it means for the Macau enterprise? And then if I could take a bigger picture question as it pertains to your the future post the opening of Cotai, obviously, you'll be in construction of Boston. But Steve, could you talk a little bit about other potential contemplated developments or uses of cash flow once Cotai is up and running?
Well, currently, we've got a project that's going to start in the spring right here in Las Vegas. We sold our Ferrari dealership to the Rolls Royce dealer in town, Roger Penske and I. And reclaiming that valuable space, we're moving poker over to Encore. And starting at the casino corner where the ticket counter is now for the showrooms, we're going to have retail and a new retail mall that goes through where Ferrari was and a 2 story building with a beautiful glass roof, an atrium kind of structure that has 75,000 feet of rentable space and we expect that we'll pick up somewhere between $20,000,000 25 $1,000,000 in extra income and probably $0.30 worth of new payroll. I mean, just a pickup in EBITDA because we had 300 or more feet on the strip right on the sidewalk in unused real estate that was very, very valuable and along with other real estate that we own in Las Vegas represents an opportunity for future development that is quite unique.
I remind everybody that the golf course is 130 acres and we have 1,000 acre feet of water in our own wells that were purchased with the Desert Inn Water Company in 2000. I look at that as an asset. And China and its complexity has made us refocus on some of the things that we have going for us that are already under our control. So all of that is the kind of thing that we can examine. As I told you, the strip real estate, I've already committed to a drawing and the project's underway, probably cost 70 dollars 1,000,000 and the interest on the money is if we borrow 100% of it or if we use our cash, our cost of money is less than 5%.
And we pick up $20,000,000 or $23,000,000 in EBITDA just by plucking off something that we own for nothing. We've got a lot of options like that here and that makes the company exciting. It's another reason why I like the stock because none of our assets are a secret, none of the opportunities that this company possesses are unknown to plain view. I don't mind discussing them when someone asks, but I'm certainly not going to ignore them. I think Boston is going to be the Everett, Boston Metropolitan area opportunity is enormous.
And we can't wait to be there. It's the first time we've ever had a hotel that has nonstop service from every major capital in the world. Hainan Airlines and Cathay Pacific fly nonstop from Beijing, Hong Kong and Shanghai to Boston. So does every other world capital, nonstop to Boston. And we're 12 minutes from Logan Airport with our new hotel.
So all of that sort of makes me feel confident and positive about our future prospects.
If I could, if anyone from Macau was on, I'd love to understand a little bit about the experience with potentially the currency devaluation and what maybe some of the team has heard from customers as to what it could ultimately mean down the road and how maybe their circumstances, the impacts it would have on the business in their opinion, if any?
Well, first of all, I think Matt can comment on that or Steve Cootey.
Yes, sure. What I would say is the global currency wars are impossible to predict. Look at what the Fed is talking about interest rates now in the United States. So we look at how we hedge our risks with the debt that we borrow and the denominations of the debt, but there's really nothing we can do about countries trying to devalue their currency.
I think his question is, what impact will they have on our customers in their own Chinese domestic environment. You have an opinion about that,
Is it on mute? We haven't had any direct feedback from customers at this point, Steve. It doesn't seem to be troubling people. It's probably too early to call.
It's like any devaluation. If you're buying domestic products, you don't feel it. If you're buying and you're trading internationally, you do feel it. If you're an exporter and a businessman in China and you're one of our customers and they are, then devaluing the currency increases your ability to sell your products outside China. So a devaluation, which is of course a methodology of supporting the economy, tends to make our customers have more liquidity.
And when we talk about devaluation, QE1, 2, and 3 took the U. S. Dollar down by 18% or 20%. So you can judge what a devalued currency impact has on people by taking a look at what happened right here in the United States, where we did precisely that with our Federal Reserve interventions in QE 1, 2 and 3.
That's helpful. Thank you all very much.
And our next question comes from Stephen Kent with Goldman Sachs.
Hi. Couple of questions. First, there's definitely a narrative that seems to be gaining traction that Macau is bottoming out broadly. I'd love to know if any of you agree with that. And what numbers do you think we can look at that are away from gaming that would suggest that that's bottoming out?
And what I mean by that is economic factors or anything along those lines or visitation or anything that we can look at that would suggest that. And then one other thing just because I didn't completely understand it. Can you just walk us through the $33,800,000 decrease in fair value of the redemption note is which resulted in net income attributable to Wynn Resorts of around $22,000,000 that should have been recorded in September 30. I don't I'm not sure I've ever seen that before. I'm not sure what happened there or what that means.
Sure. So where do we want to start? You want to start with the first part of the question or the second part?
I'll start with the Steve, that is like banks have to do. It's fair value accounting. So you have to go through and look at the yields on your debt and then apply those yields to that parent company $1,900,000,000 2 percent note. And because high yield gapped out, what that meant is that 2% note in theory should have had a higher yield. So you have to reduce the value of the note on the balance sheet and that increases profit through the income statement only to come back around later.
It is non cash fair value accounting and in fact the FASB is already looking at changing that starting next year and Bank of America is implementing it, where it will run through the balance sheet only because it's destroying financial institutions' income statements.
Okay.
Is that
a clarifying that?
Yes. Thanks. So then let's talk bottoming out, maybe you'll be that I understand better.
Okay. How about the bottoming out part? Well, non casino stuff, do you see any non casino economic information that would give us a statement, a clear economic view of the Macau market or China for that matter. Did I repeat your question properly?
Yes, you did.
Okay, good. So take a crack at it, Matt, because I don't have any idea how to answer that question.
Well, look, we focus on our retail volumes and we're noticing that some of our retailers are starting to stabilize a little bit more compared to last year and the previous visitation just like we do from each region and the visitation also feels like it's stabilizing. So all the China macro data is confusing for the moment, but what we see in our building and visitation to Macau feels like it's been stabilizing since November. And I think you'd hear that from all the operators.
Our next question comes from Robin Farley with UBS.
Hi. Thank you very much. It's actually RPNF for Robin. Could you comment at all on the health of the junket system in terms of what you saw through Chinese New Year? What did you guys see that has changed versus, let's say, couple
of months ago? Any color on further consolidation? We see junket operators going,
retracting. We have less than we had. We were at 14 at one point. I think we're down 8 or 9 now and probably heading for 4 or 5 before we're done. The strong ones with liquidity and balance sheets are doing good business, but the ones that were newer or the less firmly capitalized, they seem to be having trouble staying in business.
And that's pretty much the story, I think, around town. The ones that we have, we check up on regularly and they're fine, but there's fewer of them.
Right, right. And again, when
they show any weakness, we cease relationships with them and we've done that with 5 of them already.
And just one more quick question. As you prepare to open Wynn Palace on Cotai, what are some of the return metrics internally that you're looking to meet? Any color on those expectations? What would meet your near term EBITDA hurdle on run rate basis? In other words, has anything changed post Chinese New Year of what you were looking at sort of internally versus now?
Well, we're not post Chinese New Year yet. As a matter of fact, we haven't really seen Chinese New Year in full bloom until this weekend.
Right, right.
Okay. Just I know that doesn't necessarily impact your question, but or our answer for that matter. Matt, you want to take a shot at that?
I don't think anything that's happened in the last few weeks has changed our outlook on PALLAS. We still believe that it's going to be a market share taker out at Cotai and predicting the Macau market has been hard. All we're saying is the market feels stable right now and we're confident in our product. We don't put out EBITDA projections for new projects.
Right. I was more asking about how those expectations have changed just internally versus couple of months ago.
They haven't. To answer you. Now I understand your question. I can't answer that. Our expectations haven't changed.
The assumptions we've made in the business plan remain the same. Remember, when we got to the point of doing those assumptions, changes already occurred in the marketplace. So, we haven't made any changes recently to our assessment.
Great. Thank you very much.
Yes, ma'am.
Our next question comes from Shaun Kelley with Bank of America.
Hi, good afternoon, everyone. Steve, I just wanted to ask about in your prepared remarks you mentioned a little bit about the filing that you had with the contractor for Cotai. Just given how important the project is to kind of the next phase here for the company, could you just give us a little bit more color on if that were to slip or move at all, any kind of any potential on the magnitude? Is it down to relatively small kind of differences at this point? And just any more color on what could move around on that would probably be helpful?
Well, it's nothing more complicated than they got a little bit behind and they have a plan on catching up. We're working very closely with them and there's a very good chance that they will and even if they don't, it will be close. So that's pretty much the way we see it now. That's a description of where we stand. Now, in the trenches, the work is feverish.
There are 9,500 people on the job and everybody has got their chins down and are paying attention. It's a very, very ambitious, extravagant product. I've talked about it over a period of year or 2 to all of you in these conference calls. We aimed very high and that's put pressure on the finishes of the building. Of course, it's a fancy place to say the least.
And all the subs are working to do their best job and they'll get there. They'll get there. Give or take a few weeks, I think it'll be fine. There's not much more you can say about it than that. I mean, when they told me they were going to finish early in September, they gave us a written notice that they were going to achieve the early completion bonus of $38,000,000 And so we shared that with you, because they notified us in writing.
And then when they told us that, that was doubtful, because we had shared it with the public, we thought it was incumbent upon us to also share with the public that there wasn't going to be an early bonus or an early completion. But I want to remind everybody that the original contract was for June 25 that we will complete this project in the first half of twenty 16. And hopefully that date will stand or right close to it. And that's where we are at the moment.
That's helpful. And then maybe just one follow-up would be, as you start to get into sort of your staffing levels and plans for the property for the actual casino level employees, should we be sort of expecting that that starts to move over and see some cost savings at the kind of Wynn Macau property level sometime in early Q2? Is that probably appropriate given the timeline that you've laid out?
There's a really good question and it goes to the heart of my instructions. Usually, the way it's worked in the past, we have 2 critical paths. 1 is that of the completion, the construction and the finishing of the building and the other one is the critical path that is the spooling up and the hiring and training of the full staff of thousands of people to run the place. And under ideal conditions, those two critical paths move in exactly parallel and coterminous step. They meet at the exact same point on the opening day.
When the construction gets behind, in and of itself, that's not a big deal. I mean, so the building is a few weeks late. But what is important is that you don't go and hire a whole bunch of people that are sitting, getting paid and twiddling their thumbs. That's very, very damaging financially. So, what I did with Matthew when we were there a couple of months ago, I've changed the order of March.
And I said, I want our landmark dates on turnover of the building to occur before we do the hiring, if possible. In other words, let's make sure that our critical path of hiring doesn't get ahead of the critical path of the building. Then the impact of being a few weeks late is not quite as serious as it might have been if we went to full staff. So that's where that stands. And I'm happy to say that we're in equilibrium at the moment.
Great. Thank you very much.
Yes.
Our next question is from Thomas Allen with Morgan Stanley.
Hey, how are you? So Steve, in your prepared remarks, you said that Las Vegas was an apple pie shape. And if you think about from where we sit, it seems like the economy is anything but an apple pie shape. So why do you think there is that disconnect? And do you think it can realistically continue?
And if it can, for how long? Thank you.
Well, we're holding high and we've got this very privileged kind of patronage. It's one of the advantages. There are advantages and disadvantages of having a high end super quality resort. For example, your average customer tends to be a little wealthier, a little better able to afford more expensive food and wine and hotel rates. On the other hand, if you are the place of choice for Baccarat for international visitors, anything that interferes with that tends to work against you because had more Baccarat business than anybody else in Las Vegas.
So when Baccarat is affected from China, we are the ones that get the biggest impact. On the other hand, there's still a lot of good customers around and from what we can see, we're still the one of the places of first choice, if not the place of first choice. And we do everything we can to keep it that way, of course. And since New Year's, it's working It's working as it was designed to work. We've got better room rates and our casino is profitable.
Our margins in the casino, even though sometimes our drop or our handle is off, we tend to be very fastidious about having all of our games be profitable. We don't pay so much attention to the top line as we do to the bottom line. So when we evaluate the casino, we don't evaluate the handle or the win. We evaluate the contribution to EBITDA of our games and we try to maximize every foot of the casino with one metric in mind, contribution of EBITDA per foot. Well, that sort of thing comes home after a while and we get the benefits of it and we see it now.
That's why I said the place was in good shape. I'm happy with the performance And our turnout for New Year's, for Christmas New Year's, January with the conventions, It's another thing, when there's a big citywide convention and corporate leaders and high paid people come to the conventions, they want to stay here. And their propensity to gamble is higher, as is their desire to eat in better restaurants and shop in better stores and so forth. So I'm happy with the way Wynn Vegas is performing. And that's what I meant when I said it's an apple pie shape.
That's an old fashioned expression. Did I answer your question?
You did. I guess just following up, I mean, if we are going into a recession, I mean, how do you think Vegas can hold up? Obviously, you have a lot less supply growth this time than we did in 'eight and 'nine. And then just as a follow-up also, you did mention you're exposed more to more of that high end back wrap play. Have we seen any signs that that's stabilized in Vegas over the past few months?
Thank you.
Well, Chinese New Year will certainly be interesting and it's not we're just starting it. We're 3 days into a 7 or 8 day event. I'd say Baccarat business is off in Las Vegas unquestionably. Is it going to get worse or is it stabilized? I don't know, too soon for me to answer that question.
But if there's a recession in America and it's hard to see why there won't be if we keep going the way we are, then Las Vegas will ultimately reflect whatever is going on in the rest of the United States. It always has. There's sometimes been a delay if conventions are booked and things like that. But at the end, we always seem to be just like anybody else, part of America and a big reflection of it. So I don't want you to construe my remarks about a healthy January and a promising February to mean that we're running counter to anything else you're seeing.
We're just lucky, that's all. Just luck, we're holding high. I don't want to make too much of it.
Very helpful. Thanks, Steve.
Our next question comes from Harry Curtis with Nomura.
Hi, good afternoon. I did have a follow-up to Thomas' last question. Do you have any visibility into the second half of the year for Vegas? I mean, if we don't go into recession, what's on the books that gives you some confidence that you'll see some continued pricing power?
The perfect guy to answer that question is sitting next to me, Maurice Wootton, who runs America for us. He's the boss man of Las Vegas and for that matter, Wynn America, that's where we've tucked in Boston. Bob DeSalvio is not on the call, but he's working on construction. Maurice, you want to come over here and deal with that? Sure.
So, I mean, when we look when we're looking forward into the Q2, I mean, I think we see very stable, very confident business on the books that we believe that for the next quarter, we'll be in good shape, consistent with where we are today with the first quarter. When we look at Las Vegas, the question was asked about baccarat play and others. And I think again, this is too early to tell about the gaming side of it. But on the non gaming, we're very focused on cash contribution. And we figured out different ways to make sure that we make up any shortfalls in the casino with looking at other parts of our business that we believe that we can get that cash contribution.
My question was really focused on the second half. And can you share any data points that give you some confidence
as to how that looks?
Sure. And again, looking at Q2 or the second half, it's the very same answer I would give you is that we look at our books and we see what's on the books and we're very comfortable and confident that we have a healthy base of business in the second half of the year.
Okay, great. Steve, I wanted to switch gears going back to the Palace because it was originally designed for to the Palace because it was originally designed for premium players. And while there may be still some of those left by the time you open, the question I have is, how have you changed or are you changing your marketing several months before it opens, given the focus on more of the less of a premium player?
Well, I'm not sure that the premise of your question is one that I want to accept on the face of it. I'm not sure that our marketing strategy should change one spec. We may not have 12 junket operators at 14, we may have 4 or 5, but there is no there are no shortage of wealthy gamblers in China And there are no shortage of premium mass players in China. And our building was we made an adjustment to allow for some of the junket areas to be premium mass and stuff like that. We made modest adjustments in the facility presentation and the furniture, so to speak.
But look, there used to be this avalanche of revenue for all these casinos and all these junket operators in Macau. So now there are fewer of them. So where are they going to gamble? I mean, they're going to go to the place that somehow meets all of their expectations. We designed a place to be that.
So I think that considering how many casinos there are in America and in Las Vegas and we get more than our share of the business, to worry about whether you're going to get more get a proper share in Macau is really a waste of time. The answer is positively yes. We'll be able to fill our casino with the most selective customers available in the market. I'm sure of that. And we'll have a demonstration of that shortly this summer.
But let's not think that all VIP players have disappeared, because that's simply not the way it works. They have been lessened in number, but there's still a lot of them
around. But Steve, where I was going with this is that we've seen in the last 12 months, 2 casinos opened, visitation has not increased. And what I'm really interested in is how you plan on reaching deeper into China to increase your odds of having 100% occupancy more times than not? Are you going to be expanding the number of marketing offices? Just how are you going to do it?
We're not allowed to promote with our offices in China. We can advertise very limited ways about rooms, but they're very, very careful about that. And I'm not sure that a place like Wynn Palace lends itself to mass marketing techniques, places like the kind we operate, 99% of the marketing is word-of-mouth. People the The percentage of the population that comes to Macau is relatively small compared to the total size of the country. And that group that comes to Macau, they know everything about every hotel.
They go to the one they can afford or they go to the one they think is best depending on their income status. So what happens is within 60 or 90 days of when Wynn Palace opens up, an enormous percentage of that market will the people who attend that market will know all about it. And word-of-mouth will take place the 1st 12 months that place is open and it will establish itself as Wynn and the Peninsula did is the nicest place to stay. And we never advertised in the Peninsula, in the first win Macau, nor did we advertise in Encore. And we filled those 1,000 rooms and we could have filled 2,000 of them.
And we got 1700 new rooms and I'm not sure what we would gain if we could advertise in every place. But you can be sure that any wealthy guy that's in Beijing, Shanghai, Fujian, Guangzhou or Dalian, whose ever goes to Macau, they know all about us already. That's one of the good things about the gaming type of visitor. They're very, very hip to everybody knew about Caesars Palace and Bellagio and Mirage within a few months of when they opened. And so commercial advertising and traditional marketing isn't quite as important when you open up really grand destination hotels.
Everybody writes about them and talks about them. So that's not actually one of the problems that I'm trying to solve at the moment.
All right. Just as one housekeeping item and then I'll be done. Can you give us some estimated date on when you think that Everett might open?
Yes. We start in April May as we expect to do. What are we thinking about? 28 months. Yes, 30 months.
30 months from April.
Okay, perfect. Thanks a lot.
So that's April 'sixteen, April 'seventeen, April 'eighteen, late fall, 'eighteen, Before 2019.
Your next question comes from Felicia Hendrix with Barclays.
Hi, good afternoon. Thank you. So Steve, last quarter you expressed your frustration with planning for an opening at Wynn Palace without knowing how many tables you have and so forth. If I may use the word zen, you sound more zen about things today. Just wondering if something's changed now, maybe you have more information regarding the size of the casino, maybe you've run scenario analysis that made you more comfortable.
If just you could touch on that.
I'm more comfortable. Zen was a good word. I feel good about it. I'm convinced that the government of Macau is doing everything in their power to make sure that the citizens of Macau and the employees who are citizens are protected and safe to the extent that they're able to contribute to that process. So that is to say, the government industry.
And I think all of us have managed to work our way through some of the complexities and ramifications of that process. And so I've spent a lot of time there in the last few months and I'm feeling better about it.
Have they given you some kind of comfort level with the number of tables that you'd get or you just is it more of a general comfort?
Well, we don't have a specific allocation of tables. I have a general confidence that the government wants the operators to be successful and they want these new hotels to take their place as very vibrant, successful destination, multifaceted, diverse tourist attractions that they are in fact designed to be. I'm confident that the government wants these places to get off on the right foot. And I think that the government will do what they have to do to see that that happens. And that's the basis the
market. I think that's probably the best way to express it. Okay. And then, I'll just add to that. Okay.
And then, I'll just
add to that. Okay. And then, the market. I think that's probably the best way to express it.
Okay, that's very fair. And if I may, I have a my second question is a bigger picture question. And Steve, when you and most of your peers talk about Macau and its future, everyone's optimistic about the future growth of Macau. Last quarter, you said that your long term confidence was strong and you said it again on this call. And I'm just wondering given where we stand now, we're in the midst of a market transition from VIP to mass, there's uncertainty.
We talked about some government policies, you're feeling more comfortable now, but there are government policies that have inhibited growth. Just wondering, can you discuss what drives that longer term optimism? And what do you think the inflection point is? Is it a period of time? Is it an event?
Is it a political change? What's driving that optimism longer term?
Very intelligent question. Good for you. It's just the size of the country, the priority that the central government has put on the success of both SARs, both special administrative regions, both Hong Kong and Macau. Dynamism of that country is overwhelming. And remember that the Communist Party is a meritocracy in China.
And although one leader may be a bit more conservative than his predecessor or a bit more liberal. Generally speaking, they want a successful life for the citizens of China and for the people in Hong Kong and Macau. The personalities of those cities are highly developed and not under discussion anymore. Macau is the destination resort place along with Henson Island and Hong Kong is a financial center. There is no argument in the higher echelons of government of Republic of China on what role those cities play in the overall scheme of things in China.
And so consistent with what I said a moment ago that the government seeks to make the country successful. I'm positive that they will. That doesn't mean that in the short term, the enormity of problems they face is directly proportional to the enormity of the country. It's 4 times the size of the United States. And imagine the problems we have and
the complexity that our
government faces with 3 would you like to add a $1,000,000,000 to that would you like to add a $1,000,000,000 to that without the kind of infrastructure we've got? I mean, managing China is a daunting careful study of the past. And starting with Deng Xiaoping in 1979, when he said if it's a black cat or a white cat, it doesn't make any difference to me as long as it catches mice, it's a good cat. The government of Macau of China has been empirical and pragmatic and has brought 100 of millions of people out of poverty, a feat unequaled in the history of civilization in any country. Obviously, somebody is doing something wrong, some doing something right rather, they're tapping into the latent energy of that population.
Why would we consider that that would not continue? And when it comes to recreation, Macau is the place of choice. That big picture kind of common sense based upon history is the basis that's so when you ask where's the inflection point, I don't know that. But when you ask me why do I think the long term prospects in Macau are incredibly positive? That's my answer.
I love being part of the Chinese scene as a businessman. That doesn't mean that there aren't short term discomfort and adjustments, but hell, what kind of adjustments do we have to make in the United States considering what's going on? It's just as tricky here as it is there. Did I help you with that answer? You made an intelligent question.
I don't know if I gave an intelligent answer.
No, that was very helpful. I appreciate it. Thank you so much.
Our next question is from David Katz with Telsey Advisory Group.
Hi, afternoon all. This may be construed as a follow-up on Harry's question, but I think there is probably little argument about the quality of buildings that you develop and the execution that you've demonstrated over the years. But as we look at the Macau market and I hate to be too short term about it, but looking at this year and perhaps next, there are, in addition to fewer VIP junkets, as you described, and still a lot of patrons, but fewer of them, there are also a number of other properties and hotels competing for them. And if I can just ask what other than doing what you always do, what differences to your strategies are you contemplating in whatever terms you're comfortable sharing them to deal with that elevated competition and what can only be described as a compressed demand environment at the moment.
Well said, compressed demand. And you're spot on. If I had some new technique or marketing device up my sleeve
You shouldn't tell us.
I shouldn't tell. But if I don't have one, I think it's only honest to tell you that I don't. But I have an answer, however satisfying or unsatisfying it may be. If you set out to take a resort hotel to another level, and when you say another level, superior level. And you thought by so doing, you would give yourself a competitive advantage almost as if you had a trick up your sleeve, then I will tell you what you would have to do to get to that point.
And if we've got a trick up our sleeve, here it is and I'm going to confess. The way you make a hotel go to another level is you start with every single minute element of it and as you construct the plan for the building and the design and the human resource engineering, you revisit every single assumption once again from day 1 using all of your experience and asking how could we make each individual component better. And if you did that from the bottom up, starting with the back of the house, the doorway, the lighting, the hallway width, the training of the employees, the compensation of the employees, the way you cook their food, the way you clean the floor, everything, what it's like when you're laying in the bed, what do you see when you're in this room or that room type. If you had the patience and the experience to take that journey, which would take you at least 2 years before you could bid the building, then you would have traveled our in the creation of Wind Palace. And that is what we did.
That's how we're doing it. And if we're right, it'll work. And if not, boo boo. Does that answer your question?
Very well. Good luck. Thank you
very much. We're going to do what we've always done. We're going to keep trying to make
it better in every way. And that look, the customers aren't
going to change. And whoever gives them that product, and whoever gives them that product consistently and fully wins the race to the top, I guess the way to put it, or ends up in 1st position. Now that doesn't mean that we're going to be bigger than anybody else. It will mean that our hotel will be successful and we'll have a proper return on its investment and that sort of thing and will have a loyal and growing clientele. Now we took the long way home at the Peninsula.
We weren't the 1st to open in Macau. We just made the most money when we built the place downtown and that's Wynn Macau now. So I don't see any reason to change our strategy. It's not broke. We don't need to fix it.
And in the hospitality business, whether you're in Boston, Macau, Las Vegas or anywhere else, the rules aren't going to change. We know who our customers are, we know what they want, and we're going to try and figure out a better way to give it to them. That's my ace in the hole. That's my secret.
Thank you.
I appreciate it. Just blabbed out. So now everybody knows.
Thank you very much.
Funny thing is they haven't copied it in the past.
And your next question comes from Adam Trifson with Gedalia and Company.
Hi, thank you. With reference to Macau, can you tell us how you're thinking about the positioning of the Peninsula property once Wynn Palace is up and running and more traffic shifts to Cotai?
We're going to run it exactly the way we are now. There's a market for downtown or the peninsula that seems to have a personality and life of its We were examining that when I was in China a week ago. We're looking at what were the changes in some of our competitors once they opened up in Cotai. Specifically, we were looking at the Galaxy people. They had that place right next door to us.
And it's interesting. There's a clientele downtown down in the peninsula and there's a clientele at Cotai. The Cotai clientele is different. It's more mass oriented. Have you noticed?
With the people coming across the border? Ian, what Kamal, what do you think the difference is between Downtown and Cotai? And what do you think is going to happen in do you envision any changes in the Peninsula when Kamal start opens the Palace?
Every new joint that's opened in Coltaie has been allegedly the death of downtown and it hasn't happened. So we continue to thrive down here. We have history, the history of Macau, old Macau. We've got the Ljuboa, the Grand Ljuboa, which is somewhere where everybody visits when they come to Macau. The geography is very different and the scale of the resorts is completely different.
We run the best joint and it's 10 years old. You continue to reinvest in the property. It looks like it's brand new. We've got a very strong loyal customer base and it's going to complement Wynn Palace.
Okay, great. Thank you very much.
Liam Irishman would call $1,500,000,000 hotel a joint. See how relaxed know.
Our next question comes from I'm sorry, we did have another question in queue and they have removed themselves from queue and we have no other questions at this time.
Thank you, everybody. I'll talk to you next time.
Thank you for your participation. This does conclude today's conference call and you may now disconnect.