Good afternoon, and welcome to the Wynn Resort Third Quarter 2010 Earnings Call. Joining the call on behalf of the company today are Steve Wynn, Mark Shore, John Stripp, Mathematics, Andrew Pascoe, Scott Peterson and on the phone, Ian Collin, President of Wynn Macau and Robert Gansma, CFO of Wynn Macau. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Now, I would like to turn the call over to Mr.
Maddox. Please go ahead, sir.
Thank you, and good afternoon, everyone. I'd just like to remind everybody that we will be making forward looking statements under the Safe Harbor of federal securities laws. And with that, I'm going
to turn it over to Steve Wynn for opening comments. Okay. So we had a nice quarter, made a couple of $100,000,000 in Macau and we made we've not been in Las Vegas either. This is the first time in a conference call that I'm going to say, I believe that we've seen the bottom in Las Vegas. And I don't know how fast it's going to get better, but I don't think it's going to get any worse.
And we had a really nice October too and we had a record breaking October in China. So business is pretty good actually all the way around. I think with 2 months to go, we're over $900,000,000 in EBITDA. So speaking after my 40 odd years, 1st year, we're going to go well over $1,000,000,000 in profit in EBITDA at least. Although I stress again that this EBITDA number, which is what everybody likes to flash around is sort of a fake number, because you have to pay your interest.
So a lot's got to do with what you make is how much money you owe. And depreciation isn't something that can be discarded. The more hotels you have, the more depreciation you've got and the more money you have to spend taking care of these places, which reminds me that our remodel and upgrading of the whole Las Vegas facility, the Wynn Las Vegas facility is proceeding greatly and the public is receiving it well. It's caused our room rates to go up in the newly remodeled and refurbished rooms. Our baccarat is closed until Christmas.
It's being reconfigured. And we opened a restaurant a few days ago in Las Vegas called the Lakeside Grill, which is jumping and doing big business for us. And our nightclubs continue to be as a group probably the most successful on the planet. We're going to do $150,000,000 or $60,000,000 in nightclub business in Las Vegas and make 45% profit or something. So generally speaking, we like the way we're configured and we're happy that things aren't going to get worse.
I think the election today is a great moment in stabilizing what has been overwhelming uncertainty and fear of this administration by businessmen around the country. And I think that the message that the American people are sending to Washington tonight is clear decisive rejection more positive a more consumer confidence after tonight as the administration sort of gets put in its place about overwhelming government control and ridiculous spending and stuff like that. We were damaged as a company by the health care bill. We have been the victim of 8% escalation of healthcare costs in our insurance program and we self insure. We are a healthcare provider.
And we have never touched the benefits to our employees or raised their costs of their contributions in co pay and such since we opened this hotel 5 years ago. We've just taken the hit on 8% a year. As a result of this Congress passed, our escalation of healthcare costs is going to go closer to 11% or 12%. Thank you very much, Congress, for all the help. They made it tougher on large businesses, small businesses.
They've made it tougher on unions. In many cases, the culinary union contract with us, for example, calls for a fixed contribution or cost of living escalation every year to be put into healthcare or wages, whichever the union wants. And when it goes to health when it all goes to health care, the wages can't be increased. Or put it even more in even a worse situation, the amount of money that we can give the union to cover their healthcare escalation doesn't equal what the union has to pay out and its policy to our employees. So the healthcare bill was a fiasco across the board.
We can only hope that maybe when the new legislature is very important to companies like ourselves, which employ and ensure tens of thousands of people. But so I think that the election is a very positive moment and maybe we'll get some relief from the government in the months ahead. The President, as you know, told everybody not to go to Las Vegas in more or less terms and that didn't help us. And so all of this is going to get cleared up, I think now. And we're feeling terrific about China.
Now I think I'll finish my part of this meeting before getting into questions about Cotai. My design partners and I have been working on an average of 6 hours a day, as many as 12 this summer, but 6 hours a day every week for months now. And maybe it was because of experience and maybe it was because of opportunity, but it's gone much faster than it usually has. And we have a plan and we have our building drawn. We haven't finished construction documents for bidding, but we're ready to begin and we will.
We're doing soil testing on the location of the tower as we speak in China. It has begun and site clearance begins in a few weeks. And we're off to the races with the Cotai project, which is a stunning, remarkable piece of this job. And I believe that it's a breakaway property physically and conceptually and operationally compared to any other facility of its kind in the world. I'm very, very proud of it.
And we're going to be showing pictures and models in a few weeks as we complete renderings and other visual studies that will allow us to explain this hotel to the public. But it is a dilly and it's going to be the photo op of China's gaming scene in much the way that our other properties in the past to become the photo op of each community. It will introduce concepts and ideas into the casino architecture and casino organization of parts as they relate to the whole that have not been seen before. So I'm very happy. And that will also introduce concepts in terms of a room product that have not been seen before.
Now I know I'm creating a lot of expectation with that kind of talk. And I wouldn't be doing it if I hadn't seen the building and knowing that we could keep that promise. On a phone call like this, it's not possible to create to show you pictures, but they will be available soon enough. And I think that since everybody has sort of done what they're going to do, it'll be tough for everybody to copy it. Now we'll take questions.
Your first question comes from Joe Greff of JPMorgan.
Hello, everyone. Steve, on the Cotai project that you just discussed with us, what's your expectation for a timeline? When do you break ground? When do you think you'll open? And what sort of CapEx are you talking about?
And then another question on Macau. We obviously have been hearing and reading a lot about, I guess, heightened competition for the junket business and I guess some others in the Macau market, I guess, upping
the revenue share arrangements.
Can you talk about that? And if there is a reaction from you all or just what you are seeing in the marketplace, that would be helpful understanding that?
Okay. We make forward thinking forward leaning statements or whatever they're called. So I'll tell you. Some of the other fellows will desperate about their performance and they've been trying to buy business, I guess, in order to make an impression for an IPO or something, it's a scheme that doesn't work very well. They increase the top line, but they don't increase the bottom line.
October was the best month we ever had. We made over $90,000,000 last month in Macau. And so they don't really lay a glove on us. We've got our own customers. And you've all written about the fact that we tend to be resistant to such change.
Our fair share increases. That comparison of the percentage of tables to the percentage of money compared to the percentage of equipment, our fair share improves. Our competitive posture improves with competition that doesn't deteriorate. So we like it. We like the fact that the market is strong and growing
and vital.
We would prefer that the competition adhere to the rules, but we'll leave that to the government. But we run our business based upon creating a good experience for our customers and that's what pays off. So with regard to Cotai's cost, we know what the building looks like now and how where all the parts are and how they relate to one another. We don't want to publish our estimated budget for the building till we've had a chance to finish certain parts of the back of the house that we have to place and then we're going to do a final takeoff and we're going to budget the footage. And I'll do that and have the budget by the next time we have a conference call this in 3 months.
But it's a little early for me to say it, but I could say it's between $2,000,000,000 $3,000,000,000 probably closer to $2,500,000,000 But I'm not sure. I'd like to finish doing the whole takeoff. We'll break ground and we'll actually get started because remember, it's a landfill. We'll be working on the site and what is the beginning project within a few weeks. Let's do site clearance immediately.
We're doing the test borings this week because we know the exact location of the high rise. We'll be cleaning up the site and starting the remediation. Remember, it's a dump in effect. It's a landfill. They dump all kinds of junk in the ground and they put dirt over it.
And then the ground settles unevenly because of the unstable base. And in order to put our foundation in, we have to clean that stuff out and go through it with pilings and other forms of foundational structure. And all that will be done during the year of 2011. We're underway and we'll finish and be open for business in 2015. So 4 years from now, that's what the whole thing takes.
And we'll show you the building in great detail probably next time the end of the next quarter. We'll start using showing all the pretty pictures and stuff that my Board saw today. We had our Board meeting a few minutes ago and I showed the building to the directors enjoying it as we have been. Does that answer your question, Joe?
It does. Thank you, Steve.
Sure. Your
question comes from Carlo Santarelli of Wells Fargo.
Hey, guys. Thanks. Steve, I was wondering if
you can comment a little bit about your strategy for Japan and
how you see that process playing out?
I just came from one room talking about Japan after the Board meeting. The situation in Japan has come to the point where a committee of inter party committee, cross party committee formed to study the matter and to advise or report to their to the Diet. And our people have just spent a couple of weeks in Japan and we are following the situation carefully. Exploratory committees or individuals are visiting Las Vegas in the near future and they're visiting Macau, Singapore. You can imagine that all the companies that have an interest in international gaming are queued up, taking their making their moves and creating their best relationships and doing all of the other finagling and maneuvering that they could possibly do and we're included in such a group.
Where it all ends up is murky at best at this moment. There could be a they've got to accept the budget. And in a parliamentary form of government in Japan, it could fail or be accepted. It could cause a crisis that would require an election. And there could be a change of power or a continuation of power.
There could be consolidation of power by the Democrats or the LDP and the players could change and the attitudes could change. Matt, what did you tell me that the average lifespan of a Prime Minister in Japan is how long?
I think in the last 5 years, it's about 1 year. They've had 5 in the last 6 years.
Yes. So situation in Japan is provocative as inviting and as potentially wonderful as it might be for the citizens of Japan and for a company that could be of service in the construction of such an industry like ourselves or any of the other fellows, we're not quite clear on a schedule or the exact description of a chain of events that would lead to the development of an industry like this in Japan. There are some very influential and intelligent men in government in Japan that feel that it may be appropriate to do this and that's encouraging. And of course, everybody knows who they are and is trying to put the best foot forward. That's it.
Thanks. I appreciate it.
Your next question comes from Shaun Kelley of Bank of America.
Hi, good afternoon guys. Just a quick question again to go back to Cotai.
Wondering if
you could talk a little bit more maybe about the just kind of both the land concession there. Is that something you need before you're going to feel comfortable putting a lot of capital into the ground there maybe timing around that? And then also just your thoughts on financing the project maybe from Matt. Thanks.
Well,
I'll talk about one part of it because Kim Sinatra is here. It's a strange thing for Westerners to understand how it works from Macau sometimes. But you lease the land with a ground rent from the government for a specific purpose and you must comply with that purpose when you ask for the concession and the amount of money you pay for the concession directly related to the purpose and the amount of footage and the description of the footage on the property. They commit to the property for you in advance and allow you, in our case, to put a fence around it to build a warehouse. The final lease payment is determined by the publication of the plan in the Gazette.
Prior to that time, you're encouraged to go ahead and begin. And we do and hotels are built that way. Sometimes the gazette process trails. But in all cases, you are given instructions by the government in advance on what to do and what you're allowed to do as we have been given in the past 2 years. So that's why there's a warehouse and plans and our procedure has gone all the way to the end of the regulatory process to execute the final lease and that will happen in the next several weeks.
But as far as the commitment that you have to use the property and do your project, you get that way in advance. And we got that and it comes in writing as a matter of fact. That came quite a while ago. So that there's stability, there's predictability there. Again, I stress it's not like here where nobody knows what to expect tomorrow, because of our particular political problems we've had in the past 2 years with this administration.
But in Macau, it's not that way at all. I mean, there's rules and there's procedures and you follow them and then you go about your business. About the
On the financing, as you see in the press release, Sean, we are talking about Wynn Macau Limited being a regular recurring dividend paying company with a target yield of 1% to 3%. So, if you run through the math, you'll see that that's anywhere in the neighborhood of less than 50% of the cash flow. So, when I think about financing it, we'll probably put an extra add on to our bank facility down there once
we really know what
the final budget is and then use the substantial free cash flow. But what you get with Wynn Macau is you're you get both the dividend paying company and the growth of Cotai. So, we want to be able to execute and will execute both.
Great. Thanks, Matt.
Sure. While we're at it, the Board of Directors today voted a special dividend of $8 a share payable on December 7. Another
the freedom
that many of our competitors don't enjoy financially. But it's good news for our shareholders who we believe should be the principal beneficiaries of this company's activities And that has been our pattern over the past ever since the inception of Wynn Resorts to take the interest of the shareholders first. And considering the whole picture in this country, it was a good time for special dividend.
Your next question comes from Mark Strawn of Morgan Stanley.
Hi, guys. One question on Las Vegas. It sounds like you're calling something of a bottom with maybe a slow recovery. As you look at the core segments of your business, are there any segments that you see outperforming at this stage and any segments that are still consistently weak perhaps?
I'll take it. So,
I mean, I think we've talked in the
past couple of calls about one segment where I think we're starting to see more stability and that was hardest hit coming into the recession was the and group business. And so, we've seen that improve. I feel pretty good probably in the next year as to the amount of business that we currently have on the books committed. Mean to give you a comparison last year coming into this year, we had about 35% of our convention room nights on the books. And going into next year, it is about 65% of our convention room nights on the books.
So, we're happy to see that that segment is going to return to somewhere between 18%, 19% of our overall occupancy. And also, we're seeing some rate improvement. That was the hardest hit in terms of the segments, in terms of the overall rate decline and we saw that bottom out. We're starting to see some rate improvement there as well.
So, if I think about
the different segments, I would say the convention segment is the one that is showing stability and signs of growth.
One second. I was just for a second while Andy was answering that question and I mentioned the dividend a moment ago. After the dividend, this company throws off cash flow that's almost half as much as our total debt, net debt. It's a very comfortable position to be in. I just thought I'd mention that.
I love that ratio. I try and keep it conservative like that. We don't worry about coverage of our interest payment. We worry about coverage of our earnings compared to the total debt. We like it when our earnings are half of our total debt, that keeps us in a very strong position and we that's after we pay a $1,000,000,000 more dividend.
So what's the next question?
Your next question comes from David Katz of Jefferies.
Hi, afternoon. So many things that seem to be going right in Macau. And clearly, this is a happy release and a happy conference call and not to spoil that in any way. But what should we consider that could potentially go wrong? What are the biggest concerns or issues we should think about going forward as we model out the next couple of years, particularly in Macao?
What concerns you?
You want me to hypothetically think if everything could go wrong on a conference call? Who do you think you're talking to anyway? You got no chance of me doing that. You do that. That will give you something to do.
I'm not going to do it. You understand the market clearly enough. Why would I hypothecate about stuff like that? I don't know.
Fine. And if I may turn it around as it relates to Las Vegas and talk about some of the issues that could drive the market higher. You made a comment earlier, which I think we took note of that it shouldn't get any worse. What are the issues as it relates to air traffic, as it relates to the overall business climate that you would recommend we keep an eye on in plotting the trajectory of Las Vegas getting better?
That's a great question. Thank you. We are a top end operator. We cater to better people with the 5 stars, the 5 diamond service and the Michelin. We are a niche operator.
We try and have the best hotel in every market that we're in. That means our customers are discriminating well-to-do very intelligent people and they have money. And in the United States of America, people with money have been in the defensive crouch if they run a business because of the administration in Washington. It's an anti business, socialistic and aggressively anti business. We've never seen it like this in our life where there's a crosshair printed on the back of anybody that creates jobs or makes money.
My customers, my guests are frightened of these people. And so they're clutching their bankrolls and hiding out. Now what's going to affect Las Vegas and companies like MGM and The Venetian and myself, our gang will be the phrase they use is consumer confidence, but it's absence of fear. Once the businessmen and the all this cash in America is being held on the side, it may be a couple of trillion. It's locked up.
Unfortunately, most of it is being lent to the government at no interest in treasuries. Between the family and the company, we have probably a couple of $1,000,000,000 in treasury bills with no interest. Nobody wants to take their bank roll out of their pocket, because they don't know what's going to happen to them. The minute that this election is straightened out and this administration is properly
put in
its place, I believe there's going
to be a change Washington to not fuss with the tax rate that we enjoy now, you will see businesses heave the sigh of relief and there'll be a lot of unexpected
good things happen. If this money that's
on the side comes out, it's And if we get some people in there that stop squandering money and the government will even be in better shape and we get some intelligent leadership on entitlements, there's going to be a wave of confidence and optimism in America that will radically and rapidly change the doldrums that we're in. One of the problems we got is that the people who are in elected positions in Washington do not have the intellectual firepower to deal with the problems or understand them in America today. The damn farm system for the Washington is the state legislature. For example, that really affects our business, we've been told over and over again by the President that everybody who's got 250,000 a year income or more is a rich person that should pay their fair share, presumably because we're not now. Well, the fact of the matter is that the personal tax rate is the business tax of small and medium businesses in America.
And the people that are making $2,000,000 $3,000,000 $4,000,000 in subchapter S corporations or proprietorships or partnerships, they're paying their taxes as individuals. They're subtracting their income expenses and then paying the tax as ordinary tax rates and then opening up shops and new offices with what the balance of the $2,000,000 or $3,000,000 or $4,000,000 or $5,000,000 they're making. And incidentally, they're not really making the $2,000,000 or $3,000,000 or $4,000,000 usually 25% or 30% of it is tied up in inventory or accounts receivable. And yet in spite of this overwhelming truth, the President of the United States and leaders of the parties that support him keep calling everybody who files a tax return with 200 and $50,000 or more, a rich person. It is a total and deliberate misstatement of the structure of the American economy.
It's a
form of hypocrisy that defies understanding. It's also an insult to the intelligence of of the American people, an insult which I think is going to be answered as this day proceeds very clearly by the voters. But this kind of foolishness and hypocrisy has to stop. And that's when people come to Las Vegas, spend money, go shopping and do all the other things they do that will loosen things up. And we call all of this consumer confidence.
Right now, it's consumer disgust and fear of when our leaders in Washington are guilty of blatant hypocrisy, anybody with a brain in their head is frightened by it. And I think that when that disappears, if it does tonight, we're going to see a much more optimistic frame of mind in the United States that will directly benefit Las Vegas. And if Harry Reid survives his challenge in his election, I think Harry will go back to a Senate with a different flavor. And I think that maybe Harry will be in a position to help Nevada more than he has in the past with a different constituency in the Senate and will be good for Las Vegas. Those are the things to look at for this town.
We are very much a sounding board for America.
Thank you. If I could ask one more very quick one, if you don't mind. With your financial strength and the Cotai project, which you discussed earlier, are there any other areas or markets or projects that you would consider between now and Cotai opening since it's a few years away and you do have the strength to pursue things?
The answer is yes, but I think it's probably a pretty good idea to keep our cards close to the vest and talk about deals we've made instead of ones that we want to make. Okay. Thank you very much. Sure.
Your next question comes from Tom Marceco of Marceco Capital Markets Management.
Hi, Tom.
Hey, Steve. How are you doing?
Hi, buddy.
First of all, I would as a long time shareholder, I would just like to express our gratitude of the execution and transparency that you've provided for our shareholders in the manage that we in the money that we manage for our clients. I think that the $8 dividend, we bought stock back again at 2019 on the during the terrible periods of time that we went through a couple of years ago. And I think in total now this is about $24 of dividends that we've received. I commend you for making taking a public stance as far as what was happening in Washington. I think that you definitely as you always have understood the feelings of your guests who are the citizens of the United States and of the world.
And you definitely tapped into a feeling that people were frightened and scared. And I hope that you're right. If we see some difference as a result of the election tonight. But I would just like to say on behalf of our clients, your leadership, execution and transparency, the company has been terrific and we applaud you. Thank you.
Ami, thanks. We went public so that we could have shareholders like you and our other strong institutional shareholders and Ron Baron and others. And it's been a source of strength because the institutional shareholdings that company like ours hold when we're lucky enough to enjoy that kind of institutional ownership, it gives us stability to the base of the company that would otherwise be impossible. And incidentally, Tom, I don't know how since you and I are talking to each other in front of everybody else, I don't know after tonight how this administration could possibly interpret the mood of America any differently than what the results are clearly going to show, which is a rebuke and repudiation this move towards massive government expansion, over control and ridiculous, ridiculous is the only word for spending. And I don't know how this President or any member of that administration or politician regardless of party could stand up and not get the message from the citizens of this country that that stuff doesn't go.
It's got to change, Democrat or Republican. And I vote both ways. It's got to stop or America is headed for problems that I mean, the one of the reasons I'm so angry about this and there's no question I am is that I have always had a sort of a protective attitude towards my employees. I consider this a family. And I've always thought that we as a company, if we stayed healthy, that we could dollar, lowering the quality of life and the standard of living for the working class of America, the very people that they're supposed to represent.
And sure, we're going to give paychecks out, but they're going to be $0.60 on a dollar paychecks. And all these people that are coming up for Social Security and Medicare, they're going to get paid with $0.60 $0.70 on $1. I remember hearing the President say that the middle class has gone down and the rich get richer. The reason the middle class build companies, it's because of the government. And what's happened now is the American public has awakened to this miserable truth and they see right through the phony rhetoric.
And if that's true, we're going to get a different kind of leadership in that's the reason that I think that this stinging rebuke that the President is going to get tonight has to have a proper effect on him and other like thinking hypocrites.
Your next question comes from Cameron McKnight of Buckingham.
Good afternoon. Thanks.
Steve, would you
mind commenting on some of the general macro trends you're seeing in China? And as it relates to your business, are you seeing more customers? Or are you seeing more spend from a similar number of customers?
More customers, longer stays, everything that the government of Macau intended to happen in Macau is happening. Here's a government with a plan, with a common sense plan and they employed experts to execute the plan, a bunch of us that do this sort of thing. Instead of it being a day trip market, the length of stay has elongated, the amount of spending on non casino has increased. The total amount of visitation has grown at a steady wonderful pace under the control of the government. Employment is stable.
Earnings are stable or growing. It's another example of solid political leadership in the local Macau government level and in the policy and the contrast, the last 2 years between this and China is something I've commented on publicly before. But it's even more clear at the very moment that we're speaking today than ever before. I mean, everything that they wanted by opening the monopoly situation in 2,002 has happened right on Mark. Very Chinese.
Have a program, outline the program and stick to it. That's what they do over there. And if you're part of it, you're fortunate. And we are very fortunate to have been allowed to participate.
Okay, great. Thanks. And switching gears over to Las Vegas. A few quarters ago in 2009, you commented that the win rate on the on table games was impaired because of shorter time on device. And over the last couple of quarters, we've seen the whole percentage start to come back.
Have are customers feeling more confident? Or is there or is it something else going on with the mix of business?
Well, as we've raised our rates and our hotel rates have started to slowly climb again, we're getting that visitor that is more well rounded and got a deeper pocket too, so they play longer. Andrew can comment or Mark Shore is here, either one of those guys really this is the ballpark they live in every day. A better customer, a better player, it's as simple as that. That's what we're seeing, just better play in the casino, playing for play is what's happening. It's improved over the last year.
And Andrew, it's sort of directly related to the room rate we get. Yes.
We've seen more stability in our domestic
segment of our market and
the gaming side, so that's helpful
a lot. Especially the last two quarters, domestic has been Domestic business in the last two quarters has been better. Yes. I think it's all anticipation of this election to be honest with you. It's been pretty clear what's going to happen in Washington for about 4 or 5 months, and I think that has taken hold.
The effect of the government on this economy, the perception of the government in this economy cannot be overstated. The psychological impact that has been that the government's policies have had has been a major factor in prolonging the recession.
Great. Thanks very much.
Your next question comes from Grant Chum of UBS.
Good morning. Good evening. Thanks for taking my question.
Steve, just a question
on the casino side in Macau. As you look at the configuration of the VIP and mass market capacity in Macau, do you have any sense as whether we should expect you to add more junket partners over the next 6 months or so? And related to that, what's your feeling now on credit extension environment in Macau? I mean, you've been so cautious since middle of 2,008. What should we expect from that going forward?
Okay. The boss lady is here, Linda Chen. And I'm going to let her deal with this because it is her since she graduated Cornell, I won't say when, it's been her issue with us.
Last year. So first question on the junket, yes, we do have plans to add more. We are capacity constrained. As you always know, Grant, you know our property very well, but we're looking to add 2 or 3 more junkets within the next year. We have one actually coming up before the end of the year.
As far as credit, you know, you like this conversation, I think the worst mistake someone can make is use credit as a marketing tool and to buy the business. And it's stability. You can't do whether it's credit or incentive for short term purpose. And there are operators, whether they're trying to boost up their revenue for whatever purpose that they go in and out of increased commission or credit.
Linda, could you speak a little louder and a little slower? I want them to understand the points you're making. Start that explanation over again.
On our credit, so what I think a lot of operators do, whether it's with credit or incentive, which is commission, is they use it for short term purpose to increase revenue to increase market share. So obviously, they go hand in hand. 1 is giving more incentive, which is commission back to the customer to bring the business. The second is you need credit, you need to give them facility to get the business. So they use both of them hand in hand to gain short term market share.
Well, whether it's for IPO or they're trying to do different purpose to gain that short term market share. However, the danger with that is first, we believe in stability. Obviously, if you give something more away on the commission, then you have to cut something back, whether it's salary or renovation dollars. So you're taking there's only so much dollars in the 100% that you can give away. So if you're giving it too much away on the commission, then you got to cut back to other places.
That creates an unstable business model for the whole operation. But second, it's not good for the customer where you're going in and out. Today, I'm giving you more and then tomorrow, I found out that it's not a profitable business and I'm going to take it back. It doesn't buy long term loyalty with the customer or the junk.
That's right.
And that's what we do well is, if you look at it, people always talk about market share. They said, have we lost market share? Actually with the growth of the whole Macao market, we've maintained our market share quite well. That speaks a lot with even additional tables from Encore. So our penetration level has actually increased with the additional tables.
People don't look at that. They just keep saying as a whole market share has decreased. But in a growing market that's grown 60%, maintaining market share is already a lot of dollars and we maintain a very healthy business model where we take all those additional business to the same profitability down to the bottom line.
We don't owe any more money.
Yes. And we haven't overextended credit. We do credit by junk good, by customer 1 on 1. You can't take credit as the overall picture says, I'm just going to increase 20% credit to get born business. It doesn't work that way.
You have to know your customers. It's based on can that person, can that junket pay or can they sustain their long term collection efforts. So it's hard for an operation come in and just say, I'm just going to go buy the business. It doesn't work on the long term. They can do that for a month to buy the business.
Once they can't collect, they can't turn their money around, then the business goes away. We've seen that happen in the past.
For example, she has used the phrase short term advantage. The reason it's short term is because you don't make any money, you get bad debts. And what happens is the companies fire the dim witted executive that did it. I've been watching this for 42 years. And you see, 1 President after another get dumped, 1 marketing guy after another gets switched.
And then a new guy comes in or a new lady comes in and Sanity returns and the bottom line returns and they realize finally and irrevocably there is only one way known to mankind to increase business and that is by increasing the quality of customer experience. This market in China is a repeat market. They come once a week and the quality of their experience is the only thing that matters. Consistency is what they depend upon. Predictability is what they want, just like everything else in life.
Predictability, consistency. When you get the short term thinking, nitwidge jumping around, it just means that pretty soon there'll be a new name on the business card. We've been watching it for 42 years. I mean, it's very difficult. It's almost unimaginable that you would need to explain at this day and age that all the casinos in Macau were paying the right amount of commission, that is to say the most amount they could give and maintain a stable business.
And then some Yahoo! Shows up and says, we'll go up by 20%. We just discovered Juicy Fruit. It is the dumbest thing I've ever seen. We've watched this happen because there's always a new dumbbell and then there's an ex dumbbell and then until finally they end up with someone who knows how to run the business properly and they pay attention to what really does increase market share or market penetration and that is the quality of the customer experience.
And that is all there is to say about this subject. And if you see somebody giving more money away than the rest of us can give to attract customers, more promotional allowances, then you are looking at the walking dead. Call that person a zombie, because their days are numbered.
Your next question comes from John Oh of CLSA.
Hi, Steve. This question goes back to Cotai and I know that it's a bit impatient, but to the extent that you can share with us on Cotai, assuming that you will continue to leverage on the Wynn branding, what are some of the key elements of this new property that you inject? And also how should we go about thinking about cannibalization of the existing Wynn Macau?
Well, the second part of your question is an interesting one for the moment, cannibalization. When I sit down with my colleagues and although my name may be on the sign, the projects belong to all of us and are a reflection of all of us, not me. And when I sit with them and say, who are we going to be in Cotai? And can we afford to have the 2 places? Are we just going to cannibalize the one we've got?
The answer comes back from Linda and Company and Ian and Company and JD and Doreen and Frankie Zhao and all my colleagues, no Steve, we're not going to cannibalize it. This market growth, we're right on schedule. We didn't build each one of the things we built, we built in due course. We let Sands go first with one that they built, the down and dirty quick one, the Sands. We took our time and we opened Wynn.
And then we took our time and we added that tower at Encore and our penetration got better. We didn't cannibalize anything. We increased our fair share. We planned and took our time and we're ready now to build and we're going to we're starting to build Cotai because we knew understanding market rates of growth and seeing the operation of our competitors and learning from that, that we would arrive at a date of opening that would allow us to achieve parity with our operation on the Peninsula and grow intelligently with our feet underneath us, gathered and collected like a good show horse that goes over a jump, collected. So I think that we're going to make a lot of money on Cotai.
I think we're going to have 10,000 or so 12, 15,000 employees and it's going to be a very stable, happy experience, because we did it in due course. We didn't try and do it all at once. We didn't think of being master of universe. We thought only of one thing, how do you build with a solid foundation, a steady, predictable, long term business and be a useful part of the community to be welcomed as a good addition to the community to sort of be part of keeping the promise of the plan, in this case of the government of Macau. And that's a slower, more carefully studied and considered process.
And that's why our 3rd hotel is going to open up in 4 years. The first one was in 2006, the second one was in 2009 or 2010 and the third one is going to be in 2014 or 2015. That's the arc of our 'fourteen or 'fifteen. That's the arc of our development in China. But those hotels will be there forever, long after I'm gone.
When my time is up in this world, those hotels will still be viable wonderful businesses providing security for their employees and the people that run them and the shareholders. And as far as giving you more information about what Macau looks like, I want to do that when I got the pictures. I've shown it to all of us here know what the hotel looks like and what it's got in it. But to dribble it out conversationally in this format, I think there's better ways of us to doing it. I think we probably will call for an investment conference, 1 in China and 1 in Las Vegas that Matt Niall put on with Linda and Ian and the guys and all of us and we'll show what we're going to do.
We'll have a model and we'll unveil this beauty to our joy and to the chagrin of our competitors. I have one word to explain what I've seen of Cotai. I think it's just irresistible is the way I would describe it. If I were the customer going from a cash? Yes.
It's the best work we've done in 42 years. What's fun is that previously the best work we had done was the Encore in Macau. But you see we get the chance to do this. Think of the wonderful serendipitous coincidence of opportunity and timing. We're in the right place at the right time and we're the right company with the right experience to build the nicest hotel in the world.
Think how lucky we are to be in that position and to know that we can afford to do it right. I am so grateful for this position we're in, in Macau that I can't say it enough times. How many developers have been given the opportunity to build really remarkable places for people to visit the way those of us in this industry in China have been blessed. And for that matter, in Singapore, KT Lim and Sheldon Adelson's operations are enjoying a wonderful opportunity to create wonderful places because Asia has offered up this moment historically to our industry. It's wonderfully exciting.
And I think that all of us, whether I'm speaking for Sheldon and KT, my friend KT Lim at Genting, Resorts World is the name of this company or where I'm speaking for my gang here, my family, we are all feeling very grateful and excited about being alive and participating at this moment. Great fun. Don't want to screw up the opportunity. Sorry about no more information about Cotai. I'd rather do it when I can show it.
Okay. Thank you.
Your next question comes from Janet Brashear of Sanford Bernstein.
Thank you. Two questions. The first is relative to Cotai and the pictures. It's a little unusual to hear you showing renderings ahead of time versus secrecy that's been around some of your other designs. I'm just curious as to what caused the change in modus operandi there?
And second, a question for Linda perhaps. As you think about the VIP market in Macau, it's obviously grown over the years as a percent of total to over 70%. Looking forward to the next year or 2, do you see it stable at that level, growing more or receding as a percentage of the total?
Thank you.
First answer. We have never been secretive about our projects. We had the Cotai model the excuse me, the Wynn Macau model on display the day that we had the groundbreaking. We had a three-dimensional model. I showed it publicly, had pictures out.
We had a model of Mirage on display at the Golden Nugget before it was even started construction. We had the model of Bellagio on display. I'm sorry if you misunderstood, but we've never kept it secret. What we do is we don't discuss it till we're finished designing it. But once we're finished designing it, we shout it out.
We just never had a place to display the wind model. Yes. We built this? When this place, we didn't we displayed it, but it was nobody came to see it. It was in a lot
of the floors. We were at
the Desert Inn and people used to go in the Desert Inn and never be heard from again. And for 5 years, finished. I think that's what you may be maybe we've
I think I was thinking more of Encore Macau where there weren't tours or whatever until it was open and then we saw But
we couldn't get in there. It was such a small site we couldn't get in. That's what happened. But we had a model of Encore Macau. On the Wynn Macau model, we attached it and we had it on display upstairs in the executive offices and showed it to everybody.
Anybody could have seen it. So we don't intend to keep our set. Once we design the hotel, we show it. And if somebody wants to I remember going to Atlantic City this past year. I was making a tour of various jurisdictions to learn about what was going on in America because I hadn't done it in so long.
And I was walking out of the Borgata, which I wanted to look at. And there next door was Harrah's with a curved tower and an asymmetrical roof, a very poor homely copy of the Wynn Las Vegas. And I called up Gary Loveland and I said, hey, man, have you no shame? I mean and the building was in the wrong proportion. In order to do what we do with our building, it has to be horizontal in its proportion or it doesn't look right.
And this one was vertical, so it just looked like sort of a tall rectangle with a point on one end. And he said and he gave me an answer. He said, well, duplication is the sincerest form of flattery. I found that relatively unsatisfactory answer. I think maybe someone ought to try and do their own thing And it reminds me of a story when Waylon Jennings met a kid And it reminds me of a story when Waylon Jennings met a kid that imitated him as a singer.
He told the kid, listen, I know you're a nice kid and you sing good and you're good looking. But if you do Whaling Jennings, I'm already doing Whaling Jennings and you got to be yourself if you want to be successful in life, because I'll tell you something, son, and the boy's name was Wendell Adkins. He said, Wendell, I said Waylon Jennings, if you do me, you're always going to be 1 record behind. And I thought that was a very funny remark. I was standing there when he said it.
So if people copy our hotels, they're always one hotel behind. It's okay with me.
Linda?
On the mass market and VIP, I think so far we've seen a tremendous growth in mass market is because until all the new casinos open, they weren't good mass market products. So that is the obvious market where it can grow the fastest. But the good news is, I think right now and it's also added a good mix, but the good news is both markets are growing tremendously. So in the future years to come, we hope that both markets maintain about the same percentage, but keep growing as the new product comes in the market and new visitors are staying longer. So they're bringing new more visitors in town and they're staying longer, which benefits both segments.
Until this recession, the history of Las Vegas has answered your question for you. Las Vegas always grew not in spite of the addition of capacity, but because of the addition of capacity. It was the developments themselves that allowed the market to grow. And I think that China, Macau is showing the exact same profile and as usual in a more magnified sense because of the amount of people that are available. But that's what Linda thinks.
And your
product.
Yes. The market grows because of the development, not in spite of it. That was the last question. Thank you, everybody. Everybody.
We'll have more stuff for you next time we get together and hope you all have a nice Christmas holiday and a nice Thanksgiving holiday on behalf of all of us.