Las Vegas Sands Q3 2007 Earnings Call Transcript

Las Vegas Sands Corporation (LVS)

Q3 2007 Earnings Call

November 1, 2007 4:30 pm ET

Executives

Bill Weidner - President, COO

Sheldon Adelson - Chairman, CEO

Brad Stone - EVP

Rob Goldstein - SVP

Scott Henry - SVP, Finance

Bob Rozek - CFO

Dan Briggs - VP, IR

Analysts

Larry Klatzkin - Jefferies & Co.

Harry Curtis - J.P. Morgan

Celeste Brown - Morgan Stanley

Joseph Greff - Bear Stearns

Steve Kent - Goldman Sachs

Bill Lerner - Deutsche Bank

Operator

Good day ladies and gentlemen and welcome to the Las Vegas Sands Corp Earnings Call. My name is Solomon and I'll be your coordinator for today. (Operator Instructions).

I would now like to turn the presentation over, to your host for today's call Mr. Bill Weidner. Please proceed sir.

Bill Weidner

Thank you Solomon, and thank you all for joining us this afternoon or evening. We apologize for the slight delay here and I guess there was bit of a traffic jam at the call center, but last time we checked there only 10 people in queue, so we will get going.

With me here today in the Las Vegas area is Mr. Sheldon Adelson, our Chairman; Brad Stone, Executive Vice President; Rob Goldstein, President of The Venetian in Las Vegas; Scott Henry, Senior Vice President; Bob Rozek, Chief Financial Officer; and Dan Briggs, our Vice President of Investor Relations.

Before we begin I do need to remind you that today's conference call contains forward-looking statements that we're making under the Safe Harbor provisions of Federal securities laws.

I would also like to caution you that the Company's actual results could differ materially from the anticipated results in those forward-looking statements. Please see today's press release under the caption forward-looking statements for the discussion of the risks that may affect our results.

In addition, we may discuss adjusted EBITDA, adjusted net income, adjusted EPS and adjusted property EBITDAR, which are non-GAAP measures. A definition and reconciliation of each of these measures to the most comparable GAAP financial measures are included in the press release. Please note also that this presentation is being recorded.

By now, you should have all received our press release detailing our financial results for the third quarter of 2007. We’ve put quite a bit of detail on our release today and the numbers speak for themselves. So we’ll keep our prepared remarks short, beginning with some highlights for the quarter, moving on to a few concluding thoughts and then we’ll move on to your questions.

In Las Vegas the story of the quarter is pretty simple, everything is up with the table hold. Other than that, the property is firing in all cylinders as we prepare to open the Palazzo in just seven weeks. Gaming volumes set third quarter records, while hotel ADR and occupancy statistics were also record-setting across the board.

Our entertainment offerings continue to mature, our upgrading and re-merchandising of property have been increasingly successful and we have had much momentum as we prepare for the Palazzo opening on December 20th of this year. At the Sands Macao, our year-on-year increases in our VIP gaming revenues were normalized for hold, and more than made up for the weaker mass market revenues, as mass customers share more their gaming time with new entrance to the marketplace.

We’re satisfied with the resiliency of the Sands as our VIP business remains robust. Both before and since The Venetian opening and our mass settled in approximately $800 million. It's important to recognize that the drop represents the largest portion of current mass market business for any single property at the marketplace, and more than twice the amount any of our nearest competitors.

We opened the 238 suite hotel tower at the Sands of September 28^th, and in the month of October, we’ve seen significant increases in our high-end mass table drop, as a direct result of the edition of those rooms. We remained convinced that the now completed Sands product offering with more amenities like our 25th floor gambling club will be a formidable competitor on the Macao Peninsula for years to come.

Turning now to the Venetian Macao, some of the notable items from the opening of The Venetian Macao include nearly four million visitors in the past 65 days of operation. Strong hotel operating performance for with ADR north of $200 and occupancy of our 3000 suite hotel growing from 77% in September to over 86% in October, while REVPAR started the $161 million in September and expanded nicely to $179 million in October.

There were outstanding retail sales figures at the Grand Canal Shoppes with more stores opening in the weeks ahead and greater visitation. Circulation increased traffic flow, to come, as we open the remainder of the mall. A tremendous reception for entertainment offerings including the NBA China games, Black Eyed Peas last week and then Beyonce, which is expected to be a sold out performance this Saturday evening.

Our group meeting at convention business was also off to outstanding starts, with more than 200 group meeting set to occur and The Venetian Macao of the fourth quarter alone, along with seven trade shows this year at approximately 30 trade shows booked for 2008.

And finally, our VIP volumes have significantly exceeded our expectations and our non-rolling table game drop is steadily increasing, just as it did at the Sands in the early days. It was up over 32% in October when compared to September. So the transformation of the market is coming on strong and The Venetian Macao is paving the way. And as dramatic that this transformation is, we are clearly just at the top of the first inning, we are quite literally just getting started.

Looking ahead, our investments and infrastructure, including our soon to be launched ferry services in Hong Kong harbor, Hong Kong airport and the new Pac-On ferry terminal at Taipa, will drive increases in both customer visitation and in customer satisfaction with Macao as a destination.

While we are making additional investments in Macao's infrastructure, including the expansion of ferry services, additional buses and planes are to bring new first time visitors to Macao. These will also serve to drive visitation, increase customer satisfaction, as well as elevate the status of Macao as a leisure and business destination.

Our marketing and entertainment activities, sports such as soccer, basketball and tennis and entertainment attractions like Beyonce, I just mentioned continue to put Macao on the map, as the destination for leisure and entertainment, in Asia. These high profile events were just the beginning of a series of activities position The Venetian Macao as a just first true Las Vegas style, multi-night stay destination resort.

With respect to the retail progress at The Grand Canal Shoppes in the adjoining mall of the Four Seasons Macao we are over 150 stores in food and beverages open now, up from a 130 at the grand opening on August 28, representing approximately 350,000 square feet including shops and restaurants that were on the main casino floor. We expect another 350,000 square feet will be opened before the end of the year, with the remaining space set to open in early 2008.

The 211,000 square foot shops at the Four Season Macau, featuring prestigious fashion and luxury brands including Armani, Cartier, Dior, Fendi, Gucci, Aramis and many others which will directly connect to the shops at The Venetian Macau will open in late spring 2008.

Our average base minimum rents for The Grand Canal Shoppes and the shops at the Four Seasons Macau continue to exceed a $135 per square foot. While our early retail sales numbers give us confidence that the mall will be an extraordinary economic success, as well as a powerful attraction for Macau.

Moving on to our proposed development of Trade Shows at Convention Destination, Hengqin Island, our development team continues to extensive collaboration with the project coordinating committee and their consultants. Those plans are currently being integrated into the overall plan for the development of Hengqin Island.

At Singapore our construction continues to advance at a steady pace. As we mentioned in our press release we have now completed terms with over 100 retailers and others to hope to be tenants in our approximately 800,000 square foot mall at shops at the Marina Bay Sands, and at rates far in excess of rates in any other major market in Asia, reflecting the tremendous potential for our unique retail asset developing there.

We remain on track for an opening of Marina Bay Sands in late 2009. In Bethlehem, Pennsylvania, we received site plan approval from the city and are now moving forward with construction there.

That concludes the highlights. We are clearly executing across the board, but before go on to the Q&A let me summarize how we feel as a company and as a management team.

First, in Las Vegas our properties are performing exceptionally well, and on December 20, we will preview the 3068 suite Palazzo, ramping up to full power in the first quarter of 2008, to extend our successful business model here, driving growth while capturing the efficiencies manifested in our master plan. The Palazzo will feature even more products, specifically designed to appeal to our increasingly important high-end Asian gaming customer.

On the Macao Peninsula, we will continue to reposition the Sands and capture more operating efficiencies and on Cotai we will continue to dial in the various synergistic profit centers for The Venetian Macao. The rooms, the retail, the entertainment, the convention, the trade shows, the VIP table business, mass table business and slots, to maximize revenues and income as we complete additional infrastructure and product features. Retail outlets, as well as our purpose build 1800 seats showroom to drive traffic into the facility.

We’ll convert the pre-booked business, our tour and travel book, our convention book, our contracted trade shows to operating profits, which will ramp up occupancy ADR and also continue to grow our VIP and mass market volume. This is all while executing our construction plan to fully develop the potential of Cotai Strip, Asia’s Las Vegas. We remain confident that the execution of these plans will lead to superior returns for our shareholders.

And with that I want to now open the line; I am sure for any questions that you may have to ask our management team. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Larry Klatzkin with Jefferies & Co. Please proceed, sir.

Larry Klatzkin - Jefferies & Co.

Hey guys. Could you guys quantify what you think how effective luck might have been on you if you would actually held 3% in Macao and held your normal percentage in Vegas what you might have seen?

Brad Stone

I started with Vegas, Larry this is Brad Stone. Yeah, we dropped $356 million; our mid-range of the normalized hold is 21% here in Las Vegas. That would have made a difference of about $24.3 million in revenue and surviving that would be at the high end and discounts along projecting at roughly a 50% profit margin, we made a difference of approximately $12.5 million here in Las Vegas.

You look over to Macao and you look at the Sands first of all, if you look at surely adjusting the whole percentage against the roll, would have made a difference of about $9.3 million in revenue at the Sands property during the third quarter. Obviously, dramatic difference on a year-to-year basis, because we held 4.22% and that is a much more dramatic number having an impact of about $83 million on year-to-year basis. If you look at the actual hold and roll in at the Sands Macao in '06 versus the actual roll and the 3% hold in the Sands in '07. At the Venetian Macao we held about 2.44% versus the 3% that was a difference in win of about $26.6 million.

Larry Klatzkin - Jefferies & Co.

Alright and so in the case of bad luck in Macao you still pay the 39% tax so it’s about, what you say again about 50%?

Brad Stone

If you look at the Venetian you take out the tax, it's about a $16 million EBITDA impact for the 34 days that we are reporting under this period. And at the Sands, Macau would be a difference on a taxation basis of about $26.2 million. On a year-to-year basis, on a normalized basis of about $5.7 million.

Larry Klatzkin - Jefferies & Co.

Alright, so we’re looking somewhere around $30 million of bad luck. Okay. Brad.

Bill Weidner

Larry, I would add to that, inconsistent with our last conference call, the plan in Macau at the Venetian was to open [four] more as we add to for the opening on the 28 to 29. It then backed down to approximately 50% occupancy, while we trained people, because we couldn’t do any pre-opening training. So, that will ramp back up at the end of the month so we end up with a stronger occupancy than we had anticipated ourselves. For a lot of the day of the month we purposely held back in order to be able to the pre-opening; soft opening that we could have done or we should have done, if we could have. So it’s hard it use that as measurement criteria, I don’t know how to measure that. I think partially the increase in the mass business of 32% from September-October had a lot to do with the fact that we didn’t have people in those rooms while we were training people and while we were getting ready for them, will be ready for the MIF show and the more, call it sold out condition on the second half of October.

Larry Klatzkin – Jefferies

Alright and then as far as timing of future projects, Four Seasons, sites five, six what would you well Brad could give us on that kind of stuff?

Brad Stone

Okay. Four Season project is scheduled to be completed in April with that being the Four Seasons Hotel and the mall space and opening late April early May, as we turn that over to operations. The condo tower, which is part of the Four Seasons complex, will be completed at the end of the year. Sites five and six, which is the Shangri-La [Sheraton] complex. The first phase of that project which include the Shangri-La Traders and Sheraton Towers Complex, it’s schedule to open in May of '09, with the second part of that project as you know we went ahead and we are building out the St Regis Residence as well as another Sheraton Hotel, that complex will open approximately four months to five months later.

Larry Klatzkin - Jefferies

Okay. And how about '07 and '08, or that's just too early to say that it?

Brad Stone

'07 and '08 is, we are looking to start construction on that project next month, in terms excavation and piling work at the beginning of the year and that probably would be 32 months from next month.

Larry Klatzkin - Jefferies

Okay. 32 months alright, and then as far as the story goes I understand Hong Kong is now realizing that they can actually get hotel business by connecting to your convention centers, does that mean that the Ferry Terminal is going to start working at this point?

Bill Weidner

We received the license from Macao. The procedure then is to submit that license to Hong Kong. And when I talked to Steven this morning, he said he has still not heard, although he talked to the coordinator in Hong Kong and they are working on the approval of that permit from Hong Kong.

Larry Klatzkin - Jefferies

Alright. And in October, I understand did you also have some bad hold in October in Macao?

Brad Stone

We are not going to discuss the October’s hold Larry at this time.

Larry Klatzkin - Jefferies

Okay. That’s fair. Alright, I would allow other people to ask questions. Thanks guys.

Operator

Your next question comes from the line of Harry Curtis with J.P. Morgan. Please proceed sir.

Harry Curtis - J.P. Morgan

Good afternoon. I am wondering if you could give us a sense of trends in the convention business in October. What impact has it had on your visitation? What impact also has it had on your casino volumes primarily mass, as well as other segments like retail, and food, and beverage?

Sheldon Adelson

This is Sheldon Adelson; I just wanted to say that we are having an internal eternal discussion about what we could say about October. What I would say is that, having more internal discussion.

Bill Weidner

Probably let's avoid it for a few minutes and then queue it okay so you can.

Harry Curtis - J.P. Morgan

Well here's what I was following up and you would though you had made a comment that VIP was up 32% in October?

Bill Weidner

No I said mass business was up.

Sheldon Adelson

Mass drop Harry, that was 32% in October at the Venetian Macao compared to the (inaudible).

Harry Curtis - J.P. Morgan

Okay. I misunderstood I thought that was VIP.

Bill Weidner

VIP, Harry going back to your question.

Sheldon Adelson

We could say something here, VIP was up, mass was up, we believe that all of the elements of the Venetian Macao were up in October versus September.

Harry Curtis - J.P. Morgan

Okay. I am just trying to get a sense of the impact of some of these new resources of business that you didn't have in September?

Brad Stone

If we look at our group business Harry in the month of October, we had about 18,000 room nights that came through, out of the total of 71,000 occupied guest rooms. So in the range of about 20% to 25% of our total room nights. It's hard to distinguish obviously other than try and visually account for what the impact is in terms of casino pour. Obviously that business will primarily affect the mass.

And as Bill said on a sequential basis mass business is up 32%. Part of that combination as Bill said is more occupied room nights, as well as, it could be a factor, that the quality of the consumer that’s coming into the property. And obviously as we occupy more room nights at the property, there is a higher capture of that budgeted play, particularly on the mass side.

Additionally we are starting the events. We did have some events in the month of October that stimulated business such as the NBA. The Kenfair was a huge success in terms of drawing and I guess you got to segregate that from room nights that the Kenfair generated significant visitation, many of which did not stay in the Venetian hotel rooms.

So, more traffic to the building, particularly on the mass, high margin mass plays a good thing, as those shows start ramping up, that means a lot of people coming through the doors. Besides those that are just the mass base business that you already see every here in Macao. And we look forward to, I think next year we have 17 major, we consider significant shows, 30 shows in total, but 17 full hall type shows, that should generate significant visitation to the property and that continues to ramp up.

Harry Curtis - J.P. Morgan

And then my last question had to with Sands. The EBITDA number even adjusting for hold was so much below where we had expected. And I’m trying to get a sense of the sequential decline from before Venetian was open. If you could us a sense of, is the sequential weakness more VIP, is it more mass, if it's more mass what is you plan? And if you can include in your response the impact of the new hotel tower.

Bill Weidner

Sequential stock in second or third quarter, we have, we did it year-on-year.

Brad Stone

Right.

Sheldon Adelson

So, Harry the big picture, we’ve got the mass market going from about $900 million in drop in the quarter ended June 30 and about $800 million in drop in the quarter ended September 30. With the Hotel Tower opening at the end of the month there in September and October, we’ve seen that the high-end of mass has actually increased substantially, once that Hotel Tower was opened. The lower-end of mass has more or less stabilized in the month of October compared to September, but there are the big broad strokes on the mass market piece.

Harry Curtis - J.P. Morgan

And would you say that you’re trending in terms of the quarterly drop back to the $900 million or are you still somewhat below that?

Bill Weidner

Oh, how we answered that. We are not really giving you any the forecast on the fourth quarter.

Bill Weidner

And we’ve been talking a bit about the month of October we can give you a flavor of how we’ve responded post the end of the quarter, but we don’t want to give you forecast for the entire fourth.

Sheldon Adelson

I think the important one and that’s very important point, it's somebody hasn’t asked, how is the Sands impacted by the opening the Venetian? In September the attendance at the Sands was down by about 1.7%. And in October, it is year-to-year I am talking about, October it’s up approximately the same, so there is about a 3% swing on the attendance at the Sands.

From September to October in the Venetian there was as significant, and I would say significant, I mean not single-digit, but double-digit increases on the roll and to answer Larry Klatzkin's question the percentage is up, the percentage of win on the roll is up, not as significantly as percentage of increase on the rolling program.

Harry Curtis - J.P. Morgan

In terms of the roll itself?

Sheldon Adelson

In terms of the roll itself, so roll was up somewhat at double digits and the win percentage on the roll was up, not as significantly as we would like to see it, but up. And the bottom line is that the Sands is not been negatively impacted by the opening of the Venetian. And the Venetian, from its first four month in September to the second month in October is -- we are extremely happy with the progress in all directions.

I am looking at the attendance figures on the days that we held the first two trade shows on and we were up from the week before attendance figures, and from the highest of the month. 20,000 to 30.000 visitors a day, on what would have otherwise been comparable to the price two weeks [and that’s one week].

And so we are up anyway from 20,000 to 30,000, and at one stage 40,000 during the days these shows were open. The exciting part about what's happening is that not withstanding the fact of the Ferry Terminal, we are not yet servicing but we look to service within days.

The enormous numbers of people that have still not been in the like six figures, like hundred thousand plus, can make it from the Peninsula to The Venetian in a single day, so what we were concerned about the infrastructure considering the absence of light rail system, that won't we up for few years yet, and the fact that we don’t have any ferry terminal service for Taipa, has an affect on ferry terminal. We’re extremely happy with the number of visitors we get everyday, somewhat in excess of that, which we anticipated, and we’re all quite surprised at that. And we do expect that when we start the ferry service, it will have direct day trip players, people wanting to come to gamble, coming directly to Taipa, we expect that will have a favorable impact on our mass drop and win.

Brad Stone

Just one think last time I said about the same Harry, is that, as we’ve talked about in previous conference calls, we have initiated our reduction in the junket commission program. The junket programs in Macau are very aggressive. We've got to keep our eyes on it. But, what you saw in the third quarter it was only one month of the reduction of the rolling program.

Additionally, we’ve reduced payroll at the Sands, and a run rate based upon what we’ve experienced so far about $20 million annually, as we got more efficient. Obviously, we just opened the guest rooms and that happened in the last three days of the third quarter so that has seen no advantage.

We also utilized our show room there, we’ve created bar rooms, space for parties and we’re going to opening a very high end gaming/night clubs at The Venetian on the 25 floor around the end of the year.

The one think that I’m not happy with so far is we are working and it’s part of opening a property, the efficiencies with the Sands. We are looking for reductions in overhead as consolidate the operations between The Venetian Macau and the Sands Macau. I think at this point we haven’t seen more of that yet, but I know there is a lot of ability to mine additional EBITDA out of getting efficient in their operating structure, as we get through these opening periods and smooth that out.

So, there are some bright spots that really don’t show up in the third quarter, that will start showing three months worth of value in the fourth quarter that being the payroll, reduction of junket retention program, the utilization of the asset we just created at The Venetian, the Hotel Tower as well as a better job lets say, of attacking operating efficiencies and synergies between the Venetian Macao and the Sands Macao.

Bill Weidner

I’d like to extend what Brad said earlier about with cooking, we are firing in all cylinders. The mall is going on all cylinders in the month of September, that’s in the third quarter. So we have been some stores that would have been in over trends, had they been and if you extrapolate what they were doing in the first couple of few weeks of the month. On the conventional side, it seems to be the attendance, the trade show organizers were extremely happy and I am surprised that one of them even got a lot of traffic, it wasn’t really a trade show, it was an investment promotion fair. But the other one I think got about 30000 attendees and that is fantastic.

The rest of them were doing game busters when the people were there. The rooms we see a higher room rate, ADR potential then what we, originally when we originally came up with the vision of the strip anticipated and I dare say that there was a possibility that we can equal the rates we are getting in Las Vegas at The Venetian Macao and perhaps even exceed them. The good thing about this is, since this is the original vision was mine and I can tell you that it’s clear that we are cooking on all cylinder, the convention, the Congress Center, the restaurants, the shopping, the anticipation of the shows, the sports arena, everything being sold out. We are truly cooking on all cylinders and I would say that the vision of the Cotai strip with the opening of the Venetian Macao is in emphatically

Brad Stone

One thing though is now the dialing in-process as I mentioned. If you recall the early days of The Venetian here in Las Vegas, while we were doing convention business, we are doing room business, we are doing business from this different profit centers, it took us a while to really dial it in to say ok, what are our weak periods, how do we fill in our weak periods with this with that, what are patterns look like, how do we maximize the value of each of the profit centers.

And while we can see that each of the profit centers can in fact perform, now we got to figure out, for example how do we price the arena when you have Beyonce in the 11,000 seats versus the Black Eyed Peas of 11,000 seats, what do you charge for a ticket for an NBA game, what will the market bear or the higher price tickets surprising and sell better than the lower price tickets, so how do we scale those venues. There is so many different ways and we have to try to figure out how each of these profit centers can be maximized, while doing well we need a dial all that in while then looking at the duplications and the back of house functions and the efficiency so we can then deliver that dialing into maximize operating income.

Harry Curtis - J.P. Morgan

That's all from me guys. Thanks.

Operator

Your next question comes from the line of Celeste Brown please proceed.

Celeste Brown - Morgan Stanley

Hi guys, good afternoon.

Bill Weidner

Hi.

Celeste Brown - Morgan Stanley

Couple of questions for you, you gave the timing for the additional opening on the Cotai strip could you give us an updated CapEx forecast please?

Bill Weidner

Celeste, how much time you've got.

Celeste Brown - Morgan Stanley

Well, last year I think you said the range was 9 to 12 maybe if you can give us another range.

Bill Weidner

I think that range is still valid, probably towards the higher end of that range as we go through it. We’ve expanded the prime part of it is we see opportunity, not only do we build we have, but we added additional capacity to these elements and so whether we are adding more showrooms, more entertainment venues. The projects are very fluid, but we’re still probably not moving ahead of that range at the $12 billion level.

Celeste Brown - Morgan Stanley

Okay.

Brad Stone

Adding more assets as we develop our projects in Macau.

Celeste Brown - Morgan Stanley

And we’ve heard some pretty positive things about the anticipation for the Four Seasons service departments. When do you think you’ll be marketing these?

Bill Weidner

What we are in the process of Celeste is now the government has invited our comment and our development of the regime for individual ownership. Currently in Macau you can essentially sell a leasehold right, but you can’t really have title. So, we’re in the process of developing a regime, which will allow us to sell that title. And our last meeting with the Chief Executive, he confirmed once again and we are moving through the legislature and our lawyers are now working on that regime.

The value of that regime is – some sort of premium to as much as 35% or more on a sale, if you can deliver title. So, we’re working closely with the government to develop that regime. We won’t go into the marketplace until we get a better handle on the timing of that process here.

And Brad said the product itself would be completed somewhere around the end of the year. We are certainly pre-marketing we have hundreds of prospects that have indicated interest. We just need to be able to the regime before we can formally begin to actually signing contracts.

Celeste Brown - Morgan Stanley

Okay and then in terms of the rooms, just so we can calculate it correctly, how many rooms were open for the 34 days at The Venetian?

Bill Weidner

It changed throughout the entire period, so for the most part I would say that we had an average of about 2200 room open.

Celeste Brown - Morgan Stanley

Okay.

Brad Stone

That’s above average, maybe 2300 and some of them had it do with furniture delivery, some had do with staffing levels and just efficiencies. As Bill said we kind of rolled ourselves back, because we saw that we needed to make sure these people are trained, largest hotel by a factor of three that’s ever been be opened in Asia. And now we are up to just about almost 2900 room at The Venetian.

Celeste Brown - Morgan Stanley

Okay. Finally just one last question. In terms of the retail that’s working well for you right now, can you talk about why it’s working well, is it brand, is it the location and how much you think the Four Seasons will help us to stop this now working as well?

Bill Weidner

I think the trader say that the critical mass of retail is what’s going to help it. And we started off with about 110 and through the month of September we opened more, I think we finished in the month of September with about 130. And that will drop just somewhere between 140 or 150 retailers. And we are opening some more during another 23, 30 during the month of November. As we get to the 300 plus retailers, that critical mass will be attracting more and it will make more attractive as this shopping destination and when we open the Four Seasons high-end with 211,000 people that will also be a very significant attraction, because it’s all high-end, very high-end.

And I want to make a comment about rooms. What we are also proving in the validation of the vision Cotai strip is that as day, each day goes by and each week goes by, the number of multi-night stays continues to increase and that’s evident in our numbers when I just take a daily look at it; the number of daily check-ins is down significantly from where it was which means the people are staying and we are achieving higher occupancy rates. So, it means that people are staying longer. And that is one of the things that everybody said, all the doomsayers that always seem to follow us. End up wrong and typically end up coughing dust, only in Macao they don't stay for more than 1.2 nights, while we are not [closing] that they do and the market is convertible and there will be more and more multi night stays.

Celeste Brown - Morgan Stanley

Thank you.

Bill Weidner

Thanks a lot.

Operator

Your next question comes from the line of Joseph Greff with Bear Stearns please proceed sir.

Joseph Greff - Bear Stearns

Hi everybody. I was just hoping if you can give us a better sense as, as you look over the next 12 months at Venetian Macao. What do you think the fixed cost is to run that property? Obviously you are going to have the biggest expense it’s going to be the gaming tax which is variable, but how do you look at the fixed operating expense of running that building?

Brad Stone

That’s something we are trying to really get our hands around Joe quite frankly, as we work into the operation. I think there is significant opportunities for us, the fixed cost that are out there that are variable are things like energy and things that is very expensive, we've got energy committees now together to make sure we dial in as Bill says in terms of those efficiencies. As I said earlier I think there’s a lot of synergy between the two properties that we haven't capitalized on yet.

We are just now, as you go through a property opening of this magnitude, you start learning things like average length of stage, you start translating that into productivity analysis, which translates into staffing guides. And it's really early for us to tell that, we are pretty efficient operators and pride ourselves, and I think as we mature, The Venetian here in Las Vegas, as we matured at the Sands in Macao. Part of what we’re trying to do is make sure that we focus in on those things and establish service standards that meet the criteria to the quality of operation, yet translate that into efficient operating expenses.

We aren’t quite there yet. Our biggest challenge has been opening the property, and giving a great customer experience. I think we've been very successful at that. The good news is I think we have a lot of road to hoe in terms of making sure that we operate as efficiently as possible. So, I am putting in those tools that quite frankly to some degree at the opening of a property of this magnitude, and again we are in uncharted territory, here in Macao. This isn’t like opening a 3,000 room hotel in Las Vegas, where there is a manual written on it.

There we're learning about multi night stays as Sheldon alluded to earlier. When we first opened the property, we had a lot of one night stays, lot of people from Hong-Kong and Shenzhen. If we had been smart we would have had a minimum two night stay, but we didn’t, crushed ourselves a little bit at the opening. And we’ve recovered now. We learned something every single day about Macao and how to make the property work more efficiently for the customer, and how to drive more cash flow out of it.

So, just to be frank we got ways to go there, and the good news is, the business is there, the business is growing. We will eventually get our hands around the operation, and get past the training of people of running 3,000 room, room service department, and house keeping departments, and the vile of people going through that casino and mall. The transportation systems that have never existed in Macao before, and conventions, and banquets, that have never existed there before. And we’ll get there and the good news is we are not seeing it yet in the numbers, so there is a lot of upside for us in terms of driving more margins out of our business. Wish I could tell you we’re there today, we aren't.

Sheldon Adelson

If you take the cumulative numbers that we’d talked about, we’re talking about an average of 65,000 people a day on average. And obviously on weekends we get a significantly high number though. So, getting that many people to be it from the Peninsula, the border gates are fit to be gangway gated in the Peninsula on the ferry terminal in the Peninsula. They are going to make a big, big difference when we open, when we start servicing we get more ferries in to [Pacon] terminal and open the Lotus gate with people around that. So as Brad we are fine tuning the opening and we are learning more about what’s going on everyday. We are reallocating -- what we are learning is that tour operators have become the significant part and the FIT is high, the tour operator participation is high and getting higher and we are learning which category of rooms are going to be more profitable to us. And how the mid to high-end play will be profitable when we conventions in. So it’s a learning process now, but we are very happy that we see a diagonal line going upwards.

Joseph Greff - Bear Stearns

Great and then I have a separate question on Singapore. I guess where are you now in terms of the capital budget?

Brad Stone

We are working already through that Joe. We have some challenges in Singapore in terms of the cost structure that’s happening in that country and it's well documented that certain materials. I think at one point Bill has misquoted saying the costs are up 40%. There are items and line items in our construction budget particularly it relates to concrete and think like that and sand because of raw materials that are up significantly. We are dialing the amount now. It’s going to be above our original budget by a reasonable number but we think that as we work our way through we are finding that certain aspects particularly superstructures in the buildings we are paying a premium for, whereas many of the things like mechanical, electrical finishes and all are being rationally priced in the marketplace. So we will be coming out shortly with some color on that, but we are working through those issues as we speak. But you can expect to see that project go up in price, because of the realities of that marketplace.

Joseph Greff - Bear Stearns

Great thank you.

Operator

The next question comes form the line Steve Kent of Goldman Sachs please proceed sir.

Steve Kent - Goldman Sachs

Just a couple of questions, first of it sounds like the retail trends as Sheldon, as you put it up in coming in very strong, so could you just discuss your appetite to monetize that asset in some way over the next 12 to 24 months? So that’s the first question. Second question is, just broadly, are you converting shopper’s convention goers, event goers to gamblers, can you just talk about that broadly at The Venetian Macao? And then finally just broadly it looks like your revenues came in just a little bit lighter than our expectations, but obviously the EBITDA came in much lighter, if you added just sort of besides whole percentage do you have any way to quantify the expense of this equation?

Sheldon Adelson

I think to answer the last one first, I think that it’s still too early to fine tune the expenses, gradually at this stage, but and the first question is, are we going to monetize the read down. First of all we are not going even think about until we got all the shops open and until we stabilize the trends or just get to the point where it’s full. And we don't see any rush to do this we feel quite confident that the cap rate in Asia will be highly favorable and better than what we've sold at a 5%, 5.1% cap rate here in Las Vegas. So, we don’t know how to sell that. We can provide that if want to borrow some money on that separately. I suppose we could provide that as with collateral, and get more favorable rates if we isolated that collateral.

What were the other questions you asked?

Steve Kent - Goldman Sachs

I think the experience there will be similar to your experience here, Rob, you have some information, some color on that too.

Rob Goldstein

Yeah, the thing about the Grand Canal Shoppes here in Las Vegas, we opened with about 20% of the stores open which I think is similar to our experience in Macau. We are running at $400 per square foot.

Bill Weidner

We’ve got about a 30.

Rob Goldstein

Okay, but we opened here less than half, less than 40% like Macau. We’ve grown now three times those sales per square foot. Obviously the early numbers in Macau were very good, but I think with body count and maturity, more luxury, more jewelry, more watches, more luxury fashion it only gets better. Our mall is just in its infancy and trading very well, there is no question we got that mature and grow and grow, with conventions, with special events it gets stronger everyday. The trends have been promising, but our experience in Las Vegas tells us that we have much, much better very, very quickly.

Steve Kent - Goldman Sachs

The one question I had about the revenue and then the ability to translate that down to the operating lines?

Bill Weidner

Thank you. Certainly as we discussed, we think we have significant opportunities to work on our operating expenses, you are seeing the first 34 days of a brand new type of operation. But also what you are seeing is the revenue and the quality in the mix of those revenues, which you are really seeing a very robust VIP business, which is below our margin business, and what’s encouraging is we saw a nice ramp up of the mass business in the month of October which wasn’t as evident in the 34 days of operation. So, one of the keys to driving profitability at our place isn’t managing the expenses, it’s managing somewhat the mix. So as we drive more mass revenues through the property, obviously that takes a lot of profitability down, you really don't have a lot of cost other than the gaming tax and most of your other costs are fairly well fixed on the property.

So seeing growth in the mass business and as we put assets in play like the ferry, as we have bring trade shows and which drive incremental visitation to the property, as with more the mall as a self desolate theaters opens, as we increase the number of boxes from boarder gates and infrastructure, those things should help fuel the mass visitation to the property. Mass visitation means increased revenues, but good quality increased revenues. The VIP business is excellent for us; I don't want to dismiss that at all. We do great profitability, but if not the same as mass.

So what we would seek to do is continue to grow the VIP business, but grow the mass just proportionately to that and I think that's when you are going to start seeing, when that mass business starts maturing, really no different than we saw at the Sands when you open the Sands Macao back in May of '04. As that business improves we should be much more efficient in taking revenue dollars down to the operating line.

Steve Kent - Goldman Sachs

Brad, that's why I was asking the question of whether you were getting the shoppers convention goers, the game goers to becoming gamblers, because you have plenty of people coming through the casino, but is the issue trying to get them to play at the tables?

Brad Stone

Yeah I think it’s a combination issues. I mean this is exactly the same pattern we saw with the Sands open. We had huge visitations as visitations flattened out at the Sands the quality of customer actually improved, we got a rid a lot of the lucky loose and people like that who try experience it. And we are learning things, like last night I had a meeting with a guys and we are talking about 5 and 6 and one of the things we are going to have to address at The Venetian is because you have people that are shopping and stuff like that, they've got bags, they've got things that all out taken to casino. So surprised nobody has a retail mall of this magnitude in Macao and we realize we have to build infrastructure to telling people have shopping bags they can park them somewhere for a couple hours to gamble. We make it difficult so we were sitting here last night in five and six adjusting based on what we have learned already at the Venetian to build storage areas right near the shopping areas at 5 and 6. We now have to go back and do the same thing out on The Venetian.

So it’s -- we certainly don't want discourage people from getting into our casino, because we won't let them coming in with bags and we don't have anything as simple as that completes story of damn thing. So we are going back and addressing that, it’s hard to see the direct translation, but when you have trade show and then you have 30,000 or 40,000 people coming to it, they aren't staying in a hotel, that’s people coming in and fueling that casino floor and they are primarily mass customers and we can see the spike up in business when a trade show comes in or we have a major concert, those body do translate into mass business.

And I think our job is to as with again, one of the things you do is you open these properties and you learn about them as how we cross market to mall into the casino, how do we cross market the arena into the casino, how do we cross market trade show business into the casino. Those are the things that we are good at and that we haven't addressed yet fully, because of the, just the challenge of opening this type of operation in an area that’s never had anything like it before. But those are the things we are focused on in terms of sending people coming out of the arena to place a bet, coming out of the mall to place a bet and we’ll get there and that are what we do.

Bill Weidner

To specifically answering your question I was watching the high limit play and the drop during the days of the convention, assuming that people have stayed all through night, have a higher gaming budget and play higher, they are worth more than the average mass customer there. I did notice although, I can't say that it contract to every convention, but I did notice an increase in the high limit play during the days of the conventions. We need a lot more experience to see to validate that.

Steve Kent - Goldman Sachs

Okay. Thank you.

Operator

Your next question comes from the line of Bill Lerner from Deutsche Bank. Please proceed sir.

Bill Weidner

Bill, are you there?

Bill Lerner - Deutsche Bank

Can you hear me, Scott?

Scott Henry

Yeah, we can hear now.

Bill Lerner - Deutsche Bank

Okay. Yes sorry. I will note that. Venetian 14.7% I think you got to go back to 1999, to get something close and then not even there so, I guess never seen hold that low at The Venetian Vegas. This is historically, is there something usually math is math right, but is there something structurally different about what happened this quarter or might have been going forward, that (inaudible).

Brad Stone

Yeah the guys either.

Bill Lerner - Deutsche Bank

It’s either. Okay, so it’s fine.

Bill Weidner

We can look to most recent history and it’s been a nice reversal of that.

Bill Lerner - Deutsche Bank

Okay. That’s great. Same guy that you that (inaudible) in Mexico little while ago?

Bill Weidner

No.

Brad Stone

No we won’t see him around for a while.

Bill Lerner - Deutsche Bank

Thanks.

Bob Rozek

There is nothing, Bob Rozek nothing fundamental, the volume was good. We just seemed like we could win a bet, particularly in the month of August, but.

Bill Weidner

No, I don’t think you have to go back that far though, I think that we experienced the same thing in 2002, 3 or 4. I think we had these quarters, and the good news is there is lots of volume, lots of non-baccarat, good growth on non- baccarat which is encouraging. And as Brad referenced, it bounced back, it’s bouncing back, and it’s not a big, to me it’s not a big issue at all, a 14% whole.

Bill Lerner - Deutsche Bank

And with the volume, volumes looked great

Bill Weidner

I just like to point out gentleman and ladies; this is the nature of the business we’re in. Some quarters are good some quarters are not so good. And I like to repeat a quarter does not trend make. There is nothing structural; there is nothing fundamental that’s changed anything. We just then have a good quarter, that’s the end of it. We think that that quarter is not lasting. We see what’s going on in April, things are up.

Brad Stone

October anyway.

Bill Weidner

Sorry October and things are up, things were up good and it just the nature of the business. And it makes a good trading opportunity for day traders and hedged funds.

Bill Lerner - Deutsche Bank

Hey thanks guys.

Brad Stone

Well that’s all it does. It doesn’t change the nature of the business.

Bill Weidner

I just want to close by saying; we have seen all these things. We’ve gone through this before. We’ve been here at The Venetian and so when the early days of The Venetian talking about conventioneers don’t gamble and lots of those kinds of things, exactly the same retail, sales – it’s exactly the same process repeated again only halfway around the world. The good thing about over there is that the initial returns are much, much stronger then initial returns were here at The Venetia in Las Vegas. So this process of maturing understanding, operating, marketing, dialing in each of the different profit centers to make sure that those synergies maximize their way to ought more result.

And over their in Macao we have lots of other things that we can put into the mix here in terms of delivering people directly to the back on ferry terminal and more infrastructure to be able to make this destination even more powerful. We are not hitting at all the cylinders of the physical things that drive people of the building, but yet we are averaging 65000 people a day. We have a big trade show on our NBA thing and we get over 104,000 people through the door. So it’s a lot bodies coming through the door, announce the process of then being able to convert those bodies and convert those activities to maximize operating income it’s going to take us a while but dial that in.

On top of that we get select in the first quarter we come out of the ship. So it is what it is so and we the numbers were there, but I think as you dig in to the macro numbers and you look at the actual kinds of body counts and the actual opportunities there maybe a lot of things here, but there are a lot of ponies in there also. And if you really go through that process you realize the power of what Macao is in terms of its macro growth, the power of the products in terms of the Sands product for the day trip market near the ferry terminal, the power of The Venetian product is a destination product out there on Cotai without the same infrastructure that is on the Peninsula. Then as we built infrastructure around the Cotai strip and add more critical mass it just gets stronger and stronger. So that’s I think will close our call for the day we appreciate it, appreciate you coming certainly.

Brad Stone

You forgot to make one comment, most important thing. Some of our competitors have a habit of picking up things. So I just wanted to clear, bigger is better, notwithstanding what our competitors say bigger is better.

Bill Weidner

And with that we'll end our conference for today. Thank you very much.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

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