Las Vegas Sands Corp.
Q4 2007 Earnings Call Transcript

Published: 5 Feb 2008

[Operator:]

Good day, ladies and gentlemen, and welcome to the Las Vegas Sands Corp. fourth quarter Earnings Call. My name is Maria, and I would be your audio coordinator for today. At this time, all participants are in a listen-only mode and we will be facilitating a question-and-answer session towards the end of today's conference. (Operator Instructions) At this time, I would now turn the presentation over to Mr. Bill Weidner. Please proceed.

[Bill Weidner:]

Thank you, Maria, and good afternoon, everyone. And thank you all for joining us today. On the call with me are Mr. Sheldon Adelson, our Chairman; Brad Stone, Executive Vice President; Rob Goldstein, President of the Venetian in Las Vegas and the Palazzo; Scott Henry, Senior Vice President; Bob Rozek, our Chief Financial Officer; and Dan Briggs, our VP of Investor Relations. Before we begin, I need to remind you that today's conference call contains forward-looking statements that we're making under the Safe Harbor provision 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 a discussions of 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 a reconciliation 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 all should have received our press release detailing our financial results for the fourth quarter of 2007. We again put quite a bit of detail into our release today, so we'll keep to our prepared remarks topline, beginning with some highlights for the quarter, the discussion of the Macao market factors as we see them, and then moving on to a few concluding thoughts, and then we'll move on to your questions. In Las Vegas, the Venetian continued it's solid performance throughout the product. Fourth quarter gaming volumes were up above the non-baccarat table drop and slot handle. Our hotel ADR and RevPAR statistics were also strong during the quarter with both ADR and REVPAR reaching records levels for the fourth quarter. Our entertainment offerings continue to mature. Our upgrading and remerchandising of the property have been increasingly successful that would carry much momentum into the soft opening of The Palazzo on December 30. With The Palazzo now open, we are extending our successful convention base business model to a far larger 7,100 room asset base and an 18 million square foot integrated resorts complex, which is the largest destination resort in the world. A resort featuring

[Operator:]

(Operator Instructions) Your first question comes from the line of Felicia Hendricks with Lehman Bothers. Please proceed.

[Felicia Hendricks:]

Hi, guys. Good afternoon.

[Brad Stone:]

Good afternoon.

[Felicia Hendricks:]

Hi. I have few questions. First one I guess is for Brad, just looking at the EBITDAR margins at The Venetian Macao, if you adjusted last quarter for hold, its look like they were about flat. And I’m just wondering how we should think about that going forward, I know it's a dig and divert that kind of get costs at normalized levels there, but are we going to see it kind of flattish for the next few quarters or do you expect -- are you seeing things now that would indicate that they might ramp?

[Brad Stone:]

I think personally and looking at the margins, we did hold about two points low what we expected that the segment at The Venetian, we expect to see that at the normal holds, you traditionally see as the property opens and of course we held slightly below what we expected to hold, we held 2.72 on the rolling program at the Venetian. So roughly a difference of about $32 million in EBITDA, a 60% margin after gaming tax. I think it's important to recognize, we are learning a lot at the Venetian Macao, as Bill indicated in his presentation. I am pleased to see, I guess in one sense I am frustrated to see, but pleased to see a lot of opportunity for us to work on margins as we figure out the various business segments, as we figure out exactly the staffing levels needed to efficiently operate that property. So I think you are going to see a gradual ramping up once we adjust the revenues and whole percentages and like you are going to continue to see a more efficient sales of the room product which will drive revenues. At the same times we're working very hard at staffing levels, looking at how entertainment venues work and how to price ourselves. I mean as Bill said the good news on the entertainment side is absolutely work to fill the place. Honestly if you look back, we missed some opportunities to maximize our revenues as we see more opportunities to sell tickets at a higher price for certain events. So we're learning a lot, each time we have an event, each time we enter a new market, as we get the ferries going, we just see a lots of opportunity to take this operation. And as the pioneers we are right now, improve those operations and see those margins grow.

[Felicia Hendricks:]

Okay. And anyone can take this next question. I was wondering, I know you don't give guidance. But if you can just give us some kind of update on what you have been seeing in January particularly since there has been -- in Macao since there have been news reports which have reported revenues in market share numbers. And I am sure you have seen those. And certainly these reports have indicated that you have lost some market share in January versus December. So I was wondering if could address that?

[Sheldon Adelson:]

This is Sheldon Adelson. Actually lose is coming out with every two weeks market share. I'm going to propose we have an organization come up with daily in that hourly market share statistics. Maybe that will be more meaningful. I think we're getting to the point where the whole thing is ridiculous. I mean these people that are coming up with minute by minute market shares and then make investment decisions on that, those are the kind of people I wouldn't want to handle my personal money.

[Felicia Hendricks:]

Okay. Having said that, can you give us...?

[Sheldon Adelson:]

Yeah. Having said that, we don't intend to, January is part of the first quarter of '08, so when we [report] the quarter, we'll talk about January.

[Felicia Hendricks:]

Okay. And then just a housekeeping question. I was just wondering if you could just tell me for the quarter, the average square foot that was opened in the mall, and then your revenues per square foot?

[Sheldon Adelson:]

We're not going to report any January numbers?

[Felicia Hendricks:]

No, for the fourth quarter?

[Sheldon Adelson:]

I can't judge the average number of stores or the number of stores ending?

[Felicia Hendricks:]

For the quarter, the square foot that was opened in the quarter and the revenues per square foot?

[Sheldon Adelson:]

I can't answer that question. It ramped up from zero to about 220 stores. So we haven't figured, we have to figure a daily average of the number of stores in the square footage and we don't think anybody would really want over that.

[Felicia Hendricks:]

Okay. I thought because I have it, I thought you gave the data for the last quarter or so.

[Brad Stone:]

Felicia, we did give the data for the last quarter, where we are at January or today is about 500,000 square feet of space open. For the fourth quarter we had an average of approximately, on a weighted average basis, in the neighborhood of 300,000 square feet open for the entire quarter, September 30 to December 31. And with respect to talking about sales per square foot, we may very well be able to talk about sales per square foot some time at the investor conference, but today we are not prepared to talk about that in any detail.

[Felicia Hendricks:]

Okay. Thanks.

[Sheldon Adelson:]

We haven't done the arithmetic on it and we'll do the arithmetic and we can answer that question off-line if you'd like.

[Felicia Hendricks:]

Thank you very much.

[Brad Stone:]

We certainly have the math on a week-to week basis, on a store to store base, but the key is going back and how many days of the week the store is open and then how many weeks of the quarter that is open. So all that math needs to be put together and we'll have some of that staffs next week on a more detail.

[Sheldon Adelson:]

I mean we could give you the opening day, we could give you the closed day and we'll give you the ramp up during the periods. But we haven't done the calculations on that.

[Felicia Hendricks:]

Okay. I look forward to hearing that next week.

[Operator:]

Your next question comes from the line of Larry Klatzkin with Jefferies. Please proceed.

[Larry Klatzkin:]

Hey guys. Let's do it minute-by-minute that will be better. That's how we can spend our time doing it. Question one, has the ferry got it going, how's that? Congratulations getting the ruling in your favor.

[Sheldon Adelson:]

Yes. The ferries are up and operating. We are operating about every half hour service during the day now. In my conversation, end of the day, Monday, with the fellows there in Macao, we now have qualified captains and crews to be able to do 24 hour sailing. All we wait for now is the approval of the additional slips in Hong Kong. So hopefully in a relatively short period of time, we will have ourselves to the point where we have enough equipment and the approvals for 24 hours sailing so we can do night cruising.

[Larry Klatzkin:]

All right. Great.

[Sheldon Adelson:]

This week we just started back in business again about five or six business days ago and it is beginning to ramp up to the levels that we were before we had to close down. We're very confident that that service is going to prove to be superior and the fact that you can go directly to the strip and in minutes from our door, I think it will do very, very well as we get into full service operations, add more ferries. Once we ramp-up in the next three to five months, with every 50 minutes service, I think we'll have an excellent generator of 1,000 of bodies to the Cotai Strip.

[Larry Klatzkin:]

All right. Well, great. And then the other question I had is just the timing or schedule of all the projects in the budgets as you see them -- sorry with The Four Seasons, Brad, what you were looking for an opening day, what should we use in our models ,you could just talk about maybe the Shangri-La and the budget with Singapore?

[Brad Stone:]

Okay. The first project it's going to open is in The Four Seasons. We're scheduled that for June in this year. And we'll go next (inaudible) I think it's in summer, but we are looking at June time period. The budget is roughly $1.1 billion that includes The Four Seasons itself, that include the service department complex, a 39-storey tower adjacent and include The Four Season's mall and that also included their mansions at The Four Season which was very high-end suite product 19, Florida suites with their own infrastructure that supports a very premier end of the market. That, I can say, without the main project will be open in June, the private mansions are at the end of the year and the service departments are some time in the first to second quarter of next year. But those sales are up things are beginning now. Of course, sites five and six that's known as the Shangri-La, St. Regis, Sheraton and Traders complex. That's roughly going to come in at about 6,600 total rooms, meet at the mix of the various frame, the huge building is just about 13.7 million square feet. Right now, I'm just going to get the hard, the construction cost which includes the actual construction, what we call, the built-in FF&E including guest room furnishing and designer's cost. It's roughly about $3.3 billion. We're still working on final FF&E budgets and pre-opening budgets. So that will probably be another area about $500 -- $300 million to $400 million in that project. That is opening the first stage of which is the Sheraton Tower and Shangri Las Vegas tower and in the some of the entire podium that will open in May of '09, as we talked in our prior call and then the St. Regis and Sheraton hotel towers are roughly in the fourth quarter of '09. That's the time period for that. Turning to parcels seven and eight, we're waiting. We have our piling rigs on site. We are waiting any day to get our permit to commence piling on the project this includes the Swiss Hotels, Fairmont, Raffles, Hilton, Conrad complex. This complex is about a 6200 -- and that's again about 6200 total rooms. This is the larger building yet about 13.9 million square feet. Again similar statistic to hard construction costs, which includes the designers, the opening non-owners, FF&E, slot machine et cetera, is about $3.7 billion roughly 266 per square foot. And that we're looking to open at the end of 2010. So we're right on schedule but we think we can make that. We have slight consolidation unlike that which we have five to six, the one phase opening that entire project. And again, we're just waiting for the permits then hopefully we will start piling this month. The rigs are there and the contracts are left and we ready to go. Part three, we're still at the end of the final design phase and we hope to start pilings in the second quarter and that's about 4,000 projects with Intercontinental Holiday Inn and Cosmopolitan, which is quite a [Far East] Consortium. About right now, the current design is about 6.4 million square feet for the construction cost and this is a broader estimate of the others, the other ones are closer to the home because we have much more -- we have pretty expensive design in the other projects. And currently we are looking at again at just the construction architectural and non-owner FF&E, about $1.65 million. And that we're looking to open up in second quarter of '11. Again, we hope to start piling that this spring. So it's roughly the same timeframe as the work. And then Singapore, Singapores project as of last week is an unbelievable project. It's going to be magnificent sort of modern room. This project is 2,700 rooms and we talk about the size of the building that you hear about, when these governments allows us to build up roughly 5.5 million square feet, 5.7 million square feet but the actual building including the land it doesn't state -- it doesn't include in our calculation though we've actually got 9.1 million square feet. Currently, we are looking at the hard construction cost of roughly $3.4 billion. This probably is coming at roughly at $372 a square foot and it's a magnificent building. I went through the whole process of constructing. It's going to be something else and that is slated for the end of '09 and we continue to hold a schedule at this point of time. We set prior meetings that are left. There are challenges in Singapore in terms of the construction market, materials and everything and from the site conditions we encounter, but we are looking very positively towards this property and believe we're going to get favorable ruling in the amount of units that we are able to put on this project,. We met with the government and will probably talk about that next week at our investor conference.

[Larry Klatzkin:]

Then I have.

[Brad Stone:]

Yes.

[Larry Klatzkin:]

So, sorry, say have a Bethlehem?

[Brad Stone:]

Let me take in my words.

[Larry Klatzkin:]

Sorry Brad.

[Brad Stone:]

Next one is the Palazzo condominium that project as you can see looking at the Palazzo is going up right now. We're going to end up with about $1,035,000 net salable square feet, it's hard constructions cost, it's just about all construction cost, it's just under $600 million and again that's looking for the completion in the fourth quarter of '09. And lastly Bethlehem, we start standing steel this month. We've done extensive ground work, all foundation systems are in. We start putting the podium up this month and at the 304 room project with 5000 slot machines initially and again our hope is to persuad thegovernment. I'm sorry 3000 stairs to [5006 feet]. Sheldon correct me.

[Sheldon Adelson:]

3000 at opening and 6 months later we'll go to 5000, but we are building the property to encompass the entire 5000. It has a couple of hundred thousand square feet of retail space at arena, total square footage on that about is about 2.4 million and a hard construction price of 552. When you have all the lights and fitting in and other issues, it's probably more in the range of $800 million to $825 million and that project will open up in the second quarter of '09 and the Hotel Tower will be about two months behind that.

[Larry Klatzkin:]

Thank you very much. That's all my questions. Thanks guys.

[Operator:]

Your next question comes from the line of Robin Farley with UBS. Please proceed.

[Robin Foley:]

Thank you. I wondered if you could talk about anything changing at Venetian to counter commission rates. I know you won't comment on January results. But can you talk about changes that may be implemented in February?

[Brad Stone:]

Yes. In February, given the competitive nature of the commission situation at Macao, we have now offered to our junket reps the program that's called the 60-20-20 program and that the adjusted commission rates on the 60-20-20 program were higher than the commission rates that were offering out your commission basis as they expect the whole percentage of 2.8%, I think it's approximately 1.22 is my recollection. And so we've offered a bit more competitive junket structure. The good news of that is they share a bit in the down side if we are going to reach our expected whole percentage, although they get more of the upside if our whole percentage is above 2.85. So, yes, we have adjusted our commission structure and we have adjusted the offerings to the marketplace in terms of the independent representatives.

[Robin Foley:]

I don't know if you can comment on in terms of when that begins, now that it is February when that will begin?

[Brad Stone:]

It began on February 1st.

[Sheldon Adelson:]

Can you speak up a little bit Robin please?

[Robin Foley:]

Sure. Can you talk about in terms of response to that in the marketplace and whether you expect others are going to have to move commission levels up now that you've moved to this kind of commission structure?

[Brad Stone:]

I think others already have. I think we were the outlier on the low side during the month of January. So to convert this more, it took us a while to divert this kind of program and getting additional chips etcetera, but we targeted February 1st and we are now in place with the new commission structure as of February 1. We don't know exactly how that has manifested itself yet because these are the slowest days of the year as you approach the Chinese New Year, we would expect to have a much better idea during the Chinese New Year time and we're expecting a very robust business during that period of time beginning the six or seventh of February.

[Robin Foley:]

Great. And just the last question is, announcement earlier today about the mall at Macao Studio City being sold for a price that suggests kind of, I guess $1300 per square foot. I wonder if you can comment on, is that, when you think about your mall sale, where do you think that's a level you expect?

[Brad Stone:]

That is a piece of property that doesn't have one lease sign yet, so it's pretty robust number.

[Sheldon Adelson:]

I don't know how this hypothesis leads into reality. They're estimating, they're going to do $1300 a footwork, they are estimating $13000.

[Brad Stone:]

And so now they are calculating back per square foot things what the effective sales price was?

[Sheldon Adelson:]

It was close to the mall, they've sold the mall.

[Brad Stone:]

Yes, there was an announcement.

[Sheldon Adelson:]

But what it was?

[Brad Stone:]

That was up today.

[Sheldon Adelson:]

They sold the mall for $1300 a foot?

[Brad Stone:]

Among themselves, they sold the (inaudible).

[Sheldon Adelson:]

Well, they had to have money?

[Brad Stone:]

So I don't think it's -- I think it's something of distressed sales in that. So I don't think, I don't think --

[Sheldon Adelson:]

We are not believers of selling properties or bringing in partners while your property has already gone down and then saying that it was a good thing to do. The property has got good promise and good potential. You want to stick with it and not sell it off to get some money, I think it's pretty cheap at $1300. If they go into to do business, then will be able to sell it at several thousand foot. If I can talk by myself, I just want to make one comment about the presentation. There's good news here I mean that's on a broad-brush basis. The good news is that there is no more waves of competition on the peninsula coming up. There are no more developments that we know that are being planned. Stanley Ho isn't doing any more developments in the foreseeable future and none of its sublicenses are doing any more developments there. So the good news is that the market is growing from 2002 from US$2.7 billion to US$10.3 billion or US$10.4 billion, whichever number you believe or whichever number is accurate, for 2007. That's almost a four times multiple over a five-year period. Now you're looking at the growth, I believe it was about $8 million in 2001 or so, give and take about the same here. And this past year we ended up with $27 million business. For those doubters who think that there was a prospective market in China, both to grow in terms of gaming volume and to grow in terms of visitor volume, I think that the facts clearly belie and contradict the doomsdayers' proclamations. The validation of the integrated resort concept of the Strip has been resoundingly proven. But each of the elements, each of the six elements that Bill mentioned are clearly on a one-by-one basis on a very, very strong ramp-up basis. The issue of the convention center, we've got 100% repeat business coming out of the exhibitions and I think it's 100% repeat business coming out of the groups. That is conferences and meetings, sales meetings, general meetings, et cetera. That group market is validated resoundingly. The hotel market have also validated resoundingly. And we are, as I mentioned in the last call, we are figuring out what are the components, either they're non-contracted FIT, let's call it FIT, the contracted joint travel business, that casino rooms, et cetera, et cetera. We're figuring out which of those -- well, not the casino -- which of those cash generation rooms are best for us, and we're adjusting the relationship with the tour operators, with the airlines, et cetera, et cetera. When Bill talked about the number of airlines coming in, he didn't mention the number of cities. For instance, in Japan there are five cities. I don't know all of them. I know that Tokyo and Osaka are the big ones. And there are a number of other cities. But it doesn't take lots of populated cities to fill up acouple of millions a day. So more and more cities are being serviced, as I predicted, but the left will accommodate the demand. And that's what's happening. The entertainment and the arena is one thing that's proven itself getting 15,000 people to come to a show and pay a price in the arena is validated, clearly and unequivocally. So we're looking to fine-tune, pick up those touring shows and the right kind of entertainers as that goes on. The room revenue, we think that eventually as we're fully ramped up and get all the pieces working together like the cogs in wheel, we will ramp up to a figure that I believe will match or exceed that which we've gotten over the last couple of years here in Las Vegas. On a broad-brush basis, those are two very good signs for the future that more critical mass that we get on the Strip, the greater the service of new customers bringing more money, staying longer, gambling more and spending more on the non-gaming activities.

[Bill Weidner:]

I want to add one thing to what Sheldon said as we're taping the call here. I was there last week and I was standing in the tower of the Sheraton Tower 5. When you look across the street, you see the Venetian, you see the Four Seasons complex getting completed. You look at the City of Dreams, what we call site core, which is pretty impressive looking properties, five and six. Now you get it, you see it's about to happen. We're just within a year of this critical mass that Sheldon was talking about, making that, one of the most important places in Asia. And that's before we add site seven and eight before we add sight three. So, couldn't help in getting a show when you look across there and say this is a powerful, powerful critical mass of product being constructed right there across the street from our Venetian.

[Dan Briggs:]

Next question?

[Operator:]

Your next question comes from the line of Steve Kent with Goldman Sachs. Please proceed.

[Steve Kent:]

Hi. Two questions. One, could you just give us more color on Hengqin Island, what kind of progress you're seeing there? And then, second, what are your conference convention sales reps telling you right now about the outlook for '08, given discussion of a slowing economy in 2008? This is for the US. But then, also, separately on the Macao convention market, what are you seeing there just as you start to book out into '09 and '010 from a utilization perspective? What's your gut sense as to how high that could go?

[Unidentified Company Representative:]

I think starting with Hengqin Island. Hengqin Island, we continue to pursue Hengqin Island. We continue to communicate with the guys of Zhuhai and Guangdong Province. It is China and it's a measured Asian step-by-step process. Well, it's a primary message that we are being told by the mainland Chinese, so we are taking a step at a time with piece at a time.

[Brad Stone:]

I guess, that leaves the convention part of the question to me. Here in the United States, I'd been saying this for years and people are concerned. People are always concerned about whether or not the slowing economy for the fact that's happening and will continue to happen is going to impact conventions. And I have said repeatedly that the one thing that people cannot do in order to stay competitive in their own business and only to be in their own business, get up-to-date, see new products, have new discussions about new technology etcetera, etcetera. They can't afford to stay away from their dealer meetings, their sales meetings, their trade shows and the association, both trade and professional conferences. If in fact, these things are so big, you can take a 50,000 person trade show and have a 20% drop, which is the maximum that was experienced within 30 days of 9/11, just 20%. All right, that means 80% of them are still coming and 80% of the 50,000 person show is 40,000 will have 7,000 rooms of which we only allocate about 4,000, 5,000 to groups and we'll certainly fill that with 40,000 people coming. If we have over 5,000 person company group or sales meeting, everybody has to go because they work with the company and they have to show up. And the company shows it. We don't think that there is enough demand to keep our Las Vegas rooms full. We are the largest convention facility. We have more convention meeting rooms, breakout rooms in the entire city of San Francisco and the entire city of Los Angeles. People that have largest shows have no where else to go and the attraction of being under one roof. All at once, I never had to believe that the property is very compelling and very difficult to generate opportunity for another meeting place. In Macao, I would say that in my experience over 35 years in the show business says that, many, many groups, are afraid to book in the first 12 months because no project in their mind ever gets ready on time then it expect us to be ready reasonably as we projected, when we book the shows, somehow the people who had gone there, the world is going after the sales community and the meeting plan community that that we are there with the best facility in Asia and pretty soon we'll have as many somewhere, I don't know the exact number between 800 and 1,000 meter, and 330 is the bigger single complex anywhere. In the world, 800 and the 1,000 will be just awesome. So it will be the only place in Asia, not in the world where somebody can have tens of thousands of people sitting down at onetime and the good news about it is that all of the trade shows that have occurred a 100% of them have repeated and we had a build in mansion to world tour. They sent one of their Chinese province group for one group of -- and I think it was 800, 1,100 people. Now, we have got one or two others from China, one or two from Japan, from Korea, from Thailand, from India and from I think Taiwan. So I mean that's the way that it's going and I think it'll only be a matter of time before the exhibition center is sold out. But hopefully, we will sell out the groups but I am not sure. I mean at this time, I can't say that, we'll be adding so many rooms, so many meeting rooms, so many sleeping rooms. We've got a long way to go before we sell all of that out.

[Steve Kent:]

Okay. Thanks.

[Brad Stone:]

Thank you.

[Operator:]

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

[Bill Lerner:]

Thanks, guys. Two questions. First may be for Bill or for Shel naturally, its a poorly kept secret so I guess I will ask, could you just talk about the strategy and maybe I guess you'll say but the economics of the two L1011 and as we are, kind of days away from Chinese New Year and then I have a follow-up?

[Bill Weidner:]

I don't think we will require to do that so

[Sheldon Adelson:]

Strategy…

[Bill Weidner:]

Yeah also the strategy of the L1011s.

[Sheldon Adelson:]

Strategy of the L1011s?

[Bill Weidner:]

They fly a long way. So we bring people along the way without stopping. People can smoke on them if they're done in private. So I mean its just...

[Bill Lerner:]

Its transport and no other activity?

[Bill Weidner:]

I don't think we need to comment on that

[Bill Lerner:]

Okay. All right. And then the…

[Bill Weidner:]

Comment on that

[Bill Lerner:]

I got you Bill.

[Sheldon Adelson:]

We don't want was to give our competitors the roadmap to success.

[Bill Lerner:]

All right. Just a follow up, it’s some of these smaller markets, can you just talk a little bit about the thinking there, markets like Kansas, I know it's sensitive because it's tending staff. But I guess it's similar in a way to Pennsylvania, obviously Massachusetts would be better. But, clearly, if you'd like, you have the bandwidth because you are moving forward with it, but where's the strategy, it feels like it's more intangible than the absolute amount of cash flow they generate?

[Bill Weidner:]

I don't think so. I mean look our hurdle rates 20 plus cash-on-cash yield. And our view is that if you have a land-based "monopoly" in an environment like that that competes better than having to put up with riverboats and the inconveniences of riverboats that you are in a market that generates now hundreds of millions of dollars of win out of less than attractive than optimally attractive facilities, everything people like make a lot of money out of it.

[Bill Lerner:]

Okay. Thanks Bill.

[Sheldon Adelson:]

This is Sheldon. I'd just like to make a comment somebody just gave me a piece of paper that talks about there's more than five cities open in Japan and Macao is launching a flight each to Nosaka, Fukuoka, Okinawa, Nagoya, and Hokkaido, and of course there is Osaka and Tokyo. And I think I have heard somebody saying something about Yokohama. Also Korean Air. AirKorea is going to start charter flights between Macao and Korea. So that is going, that's fix to the issue of bringing in multi-night overnight stay market and how you gave me budgets for our passenger.

[Operator:]

Your next question comes from the line of Joe Greff with Bear Stearns. Please proceed.

[Joe Greff:]

Hey guys. Bill and Sheldon, you spent a lot of time in the call talking about the increase in average length of stay for Macao as a market. Can you talk about what your experience was at the Venetian Macao in the 4Q?

[Bill Weidner:]

What?

[Joe Greff:]

In the fourth quarter?

[Bill Weidner:]

I didn't hear.

[Joe Greff:]

The average length of stay in the fourth quarter?

[Bill Weidner:]

Do we have that, Scott?

[Scott Henry:]

We don't have it presently. It's something we are preparing for the investors day next week.

[Bill Weidner:]

Okay. Guys, you can say in general, Joe that.

[Joe Greff:]

I asked about that.

[Bill Weidner:]

Actually I was trying to say increased from first sale from the property whenever operating challenges was, we didn't put like minimum days or weekends and the like and we had tremendous amount of transactions coming out of the Hong Kong, Shenzhen, Guangzhou markets. And so, we do at times, but certainly minimum stays, obviously as we have more group business, that business tends to stay several days. So, it's really evolved. Number one is as we moved into more group business, that generated more overnight stays, and even our FIT policies and tour policies at times dictate minimum night stays.

[Sheldon Adelson:]

Well, a lot of those exact statistics on a couple of different measurements next week at the Investor Conference.

[Joe Greff:]

Okay. Great. And then, have you yet received the proceeds from general growth on the Palazzo Mall, and I guess what is that amount?

[Sheldon Adelson:]

The intern is doing the final stages of negotiating the details of the franchise.

[Joe Greff:]

Okay. But you expect that by the end of this quarter?

[Sheldon Adelson:]

I don't know. I'm not involved in it.

[Bill Weidner:]

End of this quarter.

[Unidentified Company Representative:]

Well, I'm sorry, (inaudible) is not on the line, so I can't tell you, but whatever was anticipated to grow, I mean to close.

[Joe Greff:]

Great. And then just go back to your earlier comments on the United States conference convention business, Sheldon. You mentioned a lot of details and thank you very much for that. But I guess is it fair to say that where you sit you are not seeing much of an impact in conference and convention bookings. Is that fair to say?

[Sheldon Adelson:]

I think the opposite, Joe, I think it's fair to say that if you walk through The Venetian Palazzo and see the size of this complex demand for our space and then what happens U.S. economy, we have no idea of obviously what happened to the economy as demand on these conventions side is very, very strong, a little bit complex now. It's pretty amazing to see what it offers to the convention meetings business. I think just the opposite of our business will get stronger if we want to be stronger in that segment.

[Joe Greff:]

I think the key for us is this property and because of that infrastructure, we have many markets we can go to. A lot of people in this town are a lot more kind of on the touring FIT market. We certainly have that. We constantly look to tweak and change our mix of business and we are in fortunate position having most important meetings product in the world in this building. It's having the best of the best at your disposal to pick and chose when you want to open that tap and close that tap is what we have here. In the path there's been more of a challenge of turning off the group business to go after the FIT and we do see some weakness in the FIT market more likely on and happen in the economy. We have a strong group business and as Rob mentioned that demand to tell that our rooms and just make changes of mix to a more groups and types of it.

[Sheldon Adelson:]

At the risk of turning with credit of -- I have been saying for years that well I will say this now, not all operators, not all gaming and hotel operators or destination and resort operators are created equal. Some are created more equal than others. Our fundamental strategy convention base is what differentiates just from other properties in all of our developments. The reality is that midweek you don't get everybody coming because people have to work. Now there are a lot of people retired, a lot of people take vacation times at different times. So there's lot of FIT in tour and travel market out there. However, they don't pay as much as the commercial market pays, it's very compelling. Somebody works for the company who has got to get the information they need to do their job. That is the business experience and that continues. So, we are just created more equal than the other guys because they never, they're always derided, they always demonized our conventional strategy and look who is laughing last. Our ADR was the highest in the history for rooms, the sleeping rooms, in the highest history of the hotel industry. Our occupancy rate was the highest in the history of the hotel industry. The amount of money we took in the same in an annual basis. We've set the records. Now, we don't see any reason that businesses don't have to operate any more. As a matter of fact, they have to operate. In some cases, when things are not going very well, the guys that really get hurt from the general economy are the guys that go out there and cater to the mid market. They don't have a convention-based security to know that tomorrow's rooms are going to be filled. And if the economy starts to hurt people and it's always very sensitive in the United States, if the economy goes bad and people start tightening their belts, the operators are going to get hurt of the people that came into the mid market and to Mr. Joe's six packs. We're catering to the luxury market and the high end and the convention market. I know that 35 years of being in that business that that doesn't end. That just continues.

[Joe Greff:]

Great. Thanks, guys. See you next week.

[Operator:]

Your question comes from the line of Dennis Forst with KeyBanc. Please proceed.

[Dennis Forst:]

Yeah. Good afternoon. I had a couple of questions. Bob

[Bob Rozek:]

That is related to our inter-company lending arrangements is between the US and in Macao. And that's just really an accounting convention. Because it's an inter-company account we have to take to the P&L rather than taking it to equity. And if you look at in the quarter, it was a little bit bumpy, but if you look over the course of the year, the currency didn't move that much. And I think the total FX impact for the year is about $8 million, [$3 billion] of inter-company account. So it's really pretty good.

[Dennis Forst:]

And you had a nice profit in the third quarter.

[Bob Rozek:]

Yeah. So it levels out over the course of the year to a very, very material amount.

[Dennis Forst:]

Okay. And then

[Bob Rozek:]

They should all be in the balance sheet information that we have. I'm not sure what you question is, Dennis.

[Dennis Forst:]

Specifically just construction in progress, I don't see the balance sheet in the press release.

[Bob Rozek:]

Yeah. If you go to the talks about the CapEx in the quarter in the press release, the capital expenditure were about $1.07 billion.

[Dennis Forst:]

See that section. The balance sheet is above that. Talks about cash, debt 5.7.

[Bob Rozek:]

7.57.

[Dennis Forst:]

7.57. But it's always better in my opinion to break up that construction in progress, so that we don't kind of deal for that construction is not generating any cash flow so that it is --

[Bob Rozek:]

Will have that.

[Dennis Forst:]

We back that out usually.

[Bob Rozek:]

We'll have that for the Investor Day next Monday.

[Dennis Forst:]

Okay. Then looking out in to the future your tax holiday ends at the end of this year in Macau?

[Bob Rozek:]

No, at the end of '08.

[Dennis Forst:]

End of this year. So

[Bob Rozek:]

No. Our accounting for that reflects the fact that we fully expect that tax holiday to continue.

[Dennis Forst:]

You do.

[Bob Rozek:]

In fact, the government gave Stanley Ho his holiday, and there are laws in Macau that prevents anybody from being harmed competitively as a result of the income taxes there. So we fully expect that to continue for us as well, and that's where we have done to all of our accounting for income taxes.

[Dennis Forst:]

Okay. What is the status there about issuing new licenses come '09? Has there been any talk about changing that date? Either moving it up or moving it back for doing anything?

[Bill Weidner:]

Well, we have to tell you about this anecdotal information. The anecdotal information has it that there will be no new licenses issued in '09. At the end of '09, there will be a new Chief Executive and I think that the Chinese government -- and we can't state this as a matter of fact, but our relationship with them indicates that, if anything, there will be a contraction of some of the licenses. Some of the older individual non-knowns, what I call

[Dennis Forst:]

Golden Dragon.

[Sheldon Adelson:]

Golden Dragon and some of them in Greek Mythology and these other places. If there is a new Chief Executive that's being appointed, I think that, I'm hoping of course, that some of those sublicenses will be closed. Now, I have nothing, no statement to base that on, except appealing that when we talk to the Chinese government that they indicate to us that they feel there have been too many licenses out there. The good news is that it doesn't seem to be anything on the horizon between now and then to open. So we're going to make every effort to see that they don't -- that this doesn't expand at all. So we're going on the basis of being no new '09 licenses.

[Dennis Forst:]

Okay.

[Sheldon Adelson:]

Dennis, you and I haven't talked for many years, but good to hear your voice again.

[Dennis Forst:]

Thank you

[Sheldon Adelson:]

I do read about you once in a while. Dennis, I want to tell you it's a very good point about the currency exchange. In Singapore, we are winning, I think, we've got a very substantial upside there because we are borrowing at sing rates, and our sing rates are about 4%, give or take, I think the first I went personal down to….

[Bob Rozek:]

3.6

[Sheldon Adelson:]

3.6. And I think the next one if we pick 90, or 6 months, 90 days or six month neighbor of the 4…

[Bob Rozek:]

We'll pick six months today, it will be 3.9.

[Sheldon Adelson:]

3.9. Okay. That's good. We're building in Singapore dollars. But when we earn money, we'll earn money in Singapore dollars, but when we convert it, it goes way up in terms of dollars. So I think, maybe if I am an analyst, I'd probably make an adjustments for the exchange rate, it's tough to predict two years out, but it's on a -- maybe. When we started, I think it was 1.7. Rob, it's a 1.65?

[Bob Rozek:]

1.65. 141

[Sheldon Adelson:]

Today, it’s about 1.42. So we are down about 23 basis points, which comes to about a 15% number. So when we convert and we can look forward to converting Singapore dollars, we don’t see anything that will weaken the Singapore exchange rates. So that's good news for us.

[Dennis Forst:]

Good. I'm assuming you are going to combine going forward two Vegas properties will see the numbers combined as one?

[Bob Rozek:]

I think there will be some -- at the bottomline they will be combined, because of all the operational synergies and the way the businesses are managed, but I think on the topline, most were kicking around the tunnel, but there is some discussion of presenting separate topline statistics for The Venetian and then for The Palazzo.

[Dennis Forst:]

Yes, hope that is the case. Thanks a lot. See you next week.

[Sheldon Adelson:]

Thanks, Dennis.

[Operator:]

And your last question comes from the line of Celeste Brown with Morgan Stanley. Please proceed

[Celeste Brown:]

Hi, guys, good afternoon. If could you just clarify a couple of comments in the call, Brad? The budget you are giving for the various properties

[Brad Stone:]

Yeah. They exclude land, and I said that they see, they don't until pre-opening, or what we call owners FF&E which I think like slot machines, table games, computers, it includes kitchen equipment, includes anything built-in and it includes all the furnishing s for all the 6,000 plus rooms and suites.

[Sheldon Adelson:]

Yeah, but there is no incremental land cost for site two or three. We captured that already in Venetian land concession rate.

[Brad Stone:]

(inaudible) that cost, but sites two and three are already been captured in The Venetian, it does include land cost for sites five or six…

[Sheldon Adelson:]

What else they are doing? It's a good point something there is to talk about. Well, nothing (inaudible) Far East contributed to our cost of land, which we have been building for us. So, we are either going to get credit on what the builders are going to give us some money.

[Celeste Brown:]

And in terms of the land cost, its not been clarified whether the government

[Brad Stone:]

Land cost, remember, you have to understand what happens in Asia. Land cost is based on the square feet you build on the building. So it is imputed into cost of building. So, you don't really buy land, you buy the right to build the square footage you are going build. So your costs are based on the category of build space time is formula, that's way that it works. So land costs are then computed by what the final approval and the final development of the building is. While we're at it, because this premium thing is so confusing, our land cost things are computed, plus I noticed in Europe report, you're talking about selling of malls there. Understand that the Cotai Strip, any mall built on a Cotai Strip for example, can be sold, can be sold at almost anytime because there is no prohibition against malls. When they pay an additional premium, only difference between the mall in static state and the time which it sold, because you have to pay additional premium based on whatever the profit is of a mall itself. So malls are an entirely different category then service departments or condominiums. The Cotai Strip buy its approval process by the government, anything on the Cotai Strip cannot sell a strata title. That strata title only relates to residences, because residences are allowed on the Cotai Strip. So malls can be disposed out, malls are then revalued at the time of the sale and a higher lands premium is paid for all mall and they are transferable really pretty well at any time. The regime relating to the service departments, we are still working on in terms of developing a regime where long-term leases or rights to use may be sold in a different form than perhaps an individual title like a condominium. But I just wanted to clarify the point about the mall itself.

[Celeste Brown:]

That's really helpful. Hard to get straight info out of Macao sometimes. And then Bill you mentioned the 60-20-20 if I did miss here you on the commission structure?

[Bill Weidner:]

Yeah, it's sharing of risk, 60-20-20 or whatever we want to.

[Celeste Brown:]

Okay. Is it equivalent to what your competitor uses, I guess they call it the 40-40-20, U.S. competitor?

[Bill Weidner:]

120%, that's right 40-20-20.

[Sheldon Adelson:]

That's all the same thing that junket reps gets 40 ferry. However, the rest is allocated, at the relevant we get 60.

[Celeste Brown:]

And then Sheldon, it sounded like based on you comments about, is on selling early that it's given the choice you wouldn't sell the Palazzo mall, pre-sell Palazzo mall again and you wouldn't be willing to sell your Macao malls until they really prove themselves to get the highest prices. Is that a fair assessment?

[Sheldon Adelson:]

No, well, first of all, not a fair assessment, it will just. Let met clarify that, it looks like it's oblivious, but the Palazzo mall we had a 30 months true up, that means that we are not selling. The final price isn't arrived at until 30 months from the time we transfer the first day we transfer. So we've already got the future built into that deal. And so as far as what you are asking about Palazzo, the bottom line is that I don't think I would pre-sell any more malls because it's not a question where we put the mall whether or not it's going to succeed, it's only a question of if there's a ramp up time how long will the ramp up time be, three months, six months or would, because in our mind there's no issue. We've already proven it with the Venetian. The Venetian is the Asia's first integrated resort. Anywhere else in the world we build an integrated resort, it's going to be the first in that part of the world, whether we do it in South America, we do it in India, we do it in Europe, we do it in Timbuktu, it's going to be the first and only integrated resort and people are going to come to it because human beings are human beings. Every adult wants to be entertained and there's enough a lot of people around the world that would like to go to Las Vegas but can't to Vegas because of the distance to travel and why should they do all that if we bring the mountain to the customers, no doubt in our mind that the mall is going to succeed and whatever we do is going to succeed. And if you can see that I mean if it can't be seen by anybody out of The Venetian Macao I guess we'll just have to wait a little more, it's already happening. Our December run rate is in excess of what's some analysts have projected. $60 million, $61 million, $62 million EBITDA run rate for the month of December is satisfactory run rate as far as the projection's evolving analysts are concerned and not all pistons are firing at the same time as each of the pistons get fine tune and they all fire at the same time like an 8 to 12 (inaudible) than we believe that the cash flow coming out of that will be, it will be an opportunity maximized.

[Celeste Brown:]

Thank you.

[Sheldon Adelson:]

You are welcome.

[Operator:]

This concludes the Q&A session for today. I will now turn the call back over to Bill Weidner for final remarks.

[Bill Weidner:]

Well, thank you again for listening to our conference call. I mean, obviously, we are very excited about what's going on and about the trends that we see not only in terms of what happening at the Venetian Macao, what's happening in our building here in Las Vegas and what will be happening to Macao, as we finish more critical mass on the Cotai Strip. As the ferry operations ramp up, as more airplanes fly into Macao, there's nothing but a terrific upside in that marketplace. And as we begin to see our building coming out of Singapore, and as we recognize the value of additional capacity in that marketplace, we're very bullish about the future. So, thank you again for listening to our conference call. We look forward to talking to you again and more importantly we look forward to talking to you on Monday to go through a lot more details, lot more numbers, so we can get a better hand on exactly how this thing is going and the timing of the process of ramping up into the future. Thanks again for listening to our conference call. We look forward to talking to you again. Have a good day.