Las Vegas Sands Corp.
Q2 2008 Earnings Call Transcript

Published: 1 Aug 2008

[Operator:]

Welcome everyone to the Las Vegas Sands Corp. second quarter 2008 earnings conference call. (Operator Instructions)I would now like to turn the conference over to Mr. Weidner, President and COO.

[Bill Weidner:]

On the call with me here today are Sheldon Adelson, our Chairman, who is joining us by teleconference from Macau. Brad Stone, our Executive Vice President, is also joining us by teleconference. Rob Goldstein, President of the Venetian Las Vegas and the Palazzo, Scott Henry, our Senior Vice President, Dan Briggs, our Vice President of Investor Relations, and we are here in Las Vegas. Before we begin I need to remind you that today's conference call contains forward-looking statements that we are 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 a discussion of risks that may affect our results. In addition, we may discuss adjusted EBITDA, adjusted net income, adjusted EPS and adjusted property EBITDA, which are non-GAAP measures. The definition and reconciliation of these measures to the most comparable GAAP financial measures are included in the press release. Please note that this presentation is being recorded. By now you should have all received our press release detailing our financial results for the second quarter of 2008. Our agenda for this call will be as follows. I'll begin with some summary observations and spend a few minutes on Las Vegas. From there we'll turn our attention to Macau and spend some time on current operations, including the initiatives we have in place to grow cash flow at the Venetian as it continues to mature and approaches its oneyear anniversary and on our development pipeline as we prepare to open our second Cotai Strip integrated resort, the Four Seasons Macau in less than a month. I'll then make some closing remarks, and then we'll move on to your questions. In Las Vegas we delivered a solid performance in a challenging economic environment. The Palazzo's ramp up process continued throughout the quarter as we introduced additional features and amenities, including the Broadway hit Jersey Boys and additional retail shops and restaurants. The Palazzo's adjusted property EBITDA was approximately $35 million in the quarter, up from around $20 million last quarter. Turning to hotel operations, our hotel ADR RevPAR statistics were solid, with occupancy rates for both the Venetian and the Palazzo running north of 90% and ADR for both properties exceeding $240. The Palazzo's suite product has been very well received, with RevPAR up 17% sequentially. We are responding to the softer FIT market in Las Vegas by pursuing more group rooms, particularly the information technology and pharmaceutical sectors, which appear to be less impacted. Looking at the two properties as a whole, second quarter gaining volumes were up across the board, reflecting our now significantly larger asset base in Las Vegas. Table games volume for the combined Las Vegas properties are up 45% in the second quarter compared to last year's second quarter, while slot handle was up 63% compared to last year. We continued to see a steady ramp throughout the quarter as the Palazzo's gaming business continues to build as more of the property's features, including additional high-end suites, have come online. The strong gaming volume trend has continued into the month of July, with table game volumes up 58% and slot handle up 61%. We're on track for our best month of slot play in Las Vegas since the opening of the Palazzo. With the Palazzo ramping to full steam, we're extending our successful convention-based business model to a far larger 7,100 room asset base. Hotel operations in July remain strong. Through the first 29 days in July, the Venetian has achieved a 91% occupancy in July, while Palazzo has achieved 95%, with occupancy at a blended rate of about $210. We consider that pretty good performance in July in this marketplace. That performance illustrates the flexibility of our service offering, the attractiveness of our product itself, and our ability to effectively respond to evolving market dynamics in Las Vegas. We are, however, ever mindful of the challenging economic environment that we are in, which could continue for some period of time. Given our expectation the economic environment in Las Vegas may remain challenging for an extended period, we're focusing on tightly controlling our cost structure. Our original Las Vegas master plan was designed to deliver between $40 and $60 million in operating efficiencies across our two Las Vegas properties. In the current environment, we are pushing even harder for efficiencies. Our current plans reflect targeted efficiencies between $70 and $90 million and between the two properties on an annual basis, and we are looking to trim headcount by about 1,500 by attrition, not by layoffs. Looking ahead with the largest destination resort in the world now complete, with a proven business model that exhibits the agility and flexibility to respond to evolving market dynamics, we remain confident that our unique Las Vegas platform, with its resident efficiencies, inherent flexibility and broad asset base will continue to perform well in today's challenging marketplace. In the future, when the Las Vegas and the U.S. consumer economy eventually inevitably recover, this high quality product is positioned to perform extraordinarily well. Let's now turn to our Asian operations. Our progress in establishing the Cotai Strip in Macau as Asia's Las Vegas moves steadily forward. As the Venetian Macau approaches its first-year anniversary, we're now making final preparations for the opening of our second destination resort on the Cotai Strip, the Four Seasons Macau, which will open about four weeks from tomorrow on August 28th. The Shoppes at the Four Seasons Macau feature more than 100 of the most prestigious brand names in the world, including Louis Vuitton, Hermes, Gucci, Cartier among others, opened last Saturday in advance of the opening of the hotel. More than 100,000 people visited the Venetian Macau in the first day of the operation or the opening of the mall. Another 100,000 visited the Venetian last Sunday, an all-time record for the property for a Sunday. In addition, the first permanent Cirque show in Asia, ZAIA, recently began preview performance. The performance is in preparation for the world's premiere on August 28th. Looking further ahead, we are now less than a year away from the opening of the first of the destination resorts on the Cotai Strip on sites five and six, directly across the Cotai Strip from the Venetian Macau and the Four Seasons Macau. These destination resorts will feature hotels bearing the St. Regis, Sheraton, Shangri-La and Traders brand. In addition, our Singapore development moves steadily forward for the opening in 2009, so clearly execution on the development front remains steady. We will address our development in pipeline in greater detail in a moment, but first let's spend a little more time on the current period operations in Macau. As we mentioned in our last quarterly conference call, with the Venetian Macau beginning to mature, we're now approaching its one-year anniversary, we would naturally have the opportunity to focus more of our attention on current operating performance and the generation of incremental cash flow from the property. We laid out for you three initiatives last quarter on which I'd like to provide an update. Initiative number one, better management of our VIP business. Our objectives here include growing our rolling volumes and VIP market share by implementing a more competitive commission structure, developing more direct play, and, where appropriate, prudently providing additional credit. The ultimate goal of these initiatives is to generate more cash flow from the VIP segment of our business. While we are just getting started in the implementation of these strategies, early results are promising. We've experienced growth both in rolling volume and cash flow from this business segment in the quarter ended June 30 compared to the quarter ended March 31. Those positive trends have continued in July, which is on track to be our best rolling volume since last November at the Venetian and the best rolling month in over a year at the Sands. Initiative number two, grow our mass table and slot business, particularly by using our ferry services to drive more visitation to the property. While there are some bright spots in this area in our results for the quarter ended June 30, including significant growth in slot play and healthy non-rolling table drop, which is easily the largest in Macau, our real near-term opportunities are clearly beginning to crystallize as we increasingly utilize our ferry services and soon to be 434 weekly sailings to target the most profitable gaming customers and bring them to the property. After a long ramping up period, after weathering numerous administrative obstacles and delay, our Cotai Jet ferry services are now clearly beginning to gain traction in the marketplace. It took some time, but as customers have been introduced and have become familiar with the service, particularly the advantage of avoiding long immigration lines on the Macau Peninsula Ferry Terminal, average passenger counts have increased substantially. In the current month of July, the ferries have been running nearly 70% of capacity on average, representing more than 15,000 passengers a day. Last weekend our ferries ran over 90% capacity carrying over 20,000 passengers a day. This compares to an average of only 2,500 passengers a day in May and only about 3,500 passengers a day in June. Weekly passenger volume has increased every week since we expanded the frequency of our service in early June to 56 sailings per day. We are set to expand our schedule again on Friday night, when we will add our first sailings between the hours of 11

[Operator:]

(Operator Instructions) Your first question comes from Felicia Hendrix -Lehman Brothers.

[Felicia Hendrix -Lehman Brothers:]

So a few questions for you guys. One is I know it's very early days, but are there any mall statistics that you can give us following the opening of the Four Seasons mall? For example, has it improved traffic at the Venetian mall or, you know, are you getting any kind of indication of that yet?

[Sheldon Adelson:]

That's too early. We haven't opened. It just opened for advanced viewing, and I got calls in the last couple of days from some friends that were here that say that it's the most beautiful mall they've ever seen. I think the expectation  it's too early. It just opened for preview a day or two ago. And then yesterday, I mean, today's what? Wednesday? I think no earlier than Monday.

[Bill Weidner:]

They opened Friday. Yeah, I think, Felicia, you can say that, you know, with the combination of the ferry service and more things to see on Cotai drove 100,000 visits - actually 103,000 visits on Saturday and 101,000 visits on Sunday. So I think it's the combination of increased ferry service and more things to see that really kind of bodes for the future of the attractiveness of the Cotai Strip. So we open a new mall and we add enough capacity on the ferries, and the increase in visitation you can count.

[Felicia Hendrix -Lehman Brothers:]

Actually that's an excellent segue to my next question because, if you look at the mass market table drop for the Macau properties, they've been declining over the last three quarters, so what I'm wondering is is there a reason for that or, you know, now that you have another mall open, the ferry service has improved, do you expect that to increase going forward or what are you seeing?

[Brad Stone:]

Bill pointed out that the initial indications for July, for example, were going to set a new record for our property in Cotai at the Venetian, and I think we're, you know, it's been very sudden. I mean, it's really, when you look at the increase in the ferry business, the fact that we've got the night sailings and all, a month and a half ago we were talking about how to fill the ferries. Now, as Bill sort of indicated in his presentation, we're going to be faced at some point with making sure that we, you know, are selective on how we market to our own customers because we're reaching capacity on certain days very quickly. So, you know, I think the traffic flows are tremendous. You know, we're working hard to convert traffic throughout the property down to the casino floor. And we have more promotional and marketing things to come which we think will supplement as we get people into the property, to get them to play the games and to get them to extend their visitation at the Venetian property.

[Felicia Hendrix -Lehman Brothers:]

Is the increased volume on the ferries driven by demand or have you been promoting ticket prices and things like that?

[Brad Stone:]

It's really been a combination of both. And to that point, demand that we have driven internally we're probably going to end up scaling back because we're catching up with demand as people become familiar with it and as it became more convenient. We're going to, you know, be more selective in how we promote the ferry to our players at the Venetian.

[Sheldon Adelson:]

Felicia, at the - within the last few weeks we've started frequency at about every half hour instead of every hour, and I think by the - I can't swear about the date, but I think it's the end of August, the beginning of September - we will be running every 15 minutes, so we'll have a substantially great capacity in both directions. So if we're running 90% in a ferry, the average occupancy for [Shunttex] Ferry Service has been 70% or 80% over the last decades, as we understand. So we're very, very happy with the performance of the ferries. Although we don't want to provide any guidance, as Bill and Brad indicated, July is showing a very, very positive upward trend in the ferry deliverers.

[Felicia Hendrix -Lehman Brothers:]

I'm wondering if you could also give us some color on both of your current condo or Four Seasons service department project in Vegas with the Palazzo. First, on the Four Seasons, you've talked a lot about using a coop structure. I was wondering if that's still in place or if you have altered that. And I'm wondering where you are in the process? Do you have a sales office open, marketing materials out, that sort of thing. And then the same for the Palazzo in Vegas, the Palazzo condos.

[Sheldon Adelson:]

I'll tell you that about a month ago I personally spoke with the head of sales for the Four Seasons condo - God knows, it's the co-op project - and I asked him whether or not the model - they call it a show flat - if the show flat was ready and the marketing materials were ready. He indicated to me that he had expressions of interest from 150 people, and in talking to him and others, the 22 penthouses that are being offered, they have such a high demand for that that they think they're going to - they were proposing to take sealed bids on them. I suggested they do a live auction. So it certainly indicates a strong demand. Of course, you never know until the fat lady sings, but this is the indication. And they've stopped taking expressions of interest because they didn't know when they could deliver it. Without getting into any further detail, I would say that in the near future there will be a reason to announce that we'll be able to start converting those expressions of interest into orders.

[Felicia Hendrix -Lehman Brothers:]

Okay, so that's in Macau, correct? What's going on in Vegas?

[Sheldon Adelson:]

At Macau. In Vegas, Rob, do you want to say what's going on in Vegas?

[Robert G. Goldstein:]

Yes, our marketing materials are ready in Las Vegas. We will start actively selling or taking expressions of interest some time in the month of August. The tower's going up. It looks very, very good. We're obviously looking at what's happening in the marketplace. We are ready to start offering these things this summer and into fall, and we believe we're going to have strong demand for them.

[Felicia Hendrix -Lehman Brothers:]

And then final question, just, you guys seem very optimistic about the financing progress that you're making in Asia. Just wondering, is there any chance to augment that, that there might be, you know, Sheldon, you might issue some equity, [inaudible] equity?

[Sheldon Adelson:]

There will be no equity sold at these levels. What I could say - all right, go ahead.

[Operator:]

Your next question comes from Celeste Brown - Morgan Stanley.

[Celeste Brown:]

Can you talk further about this domestic liquidity, particularly given, Sheldon, your comment just now that there will be no more equity issued at these levels?

[Sheldon Adelson:]

Could you repeat that question, please?

[Celeste Brown:]

Bill talked about increasing the liquidity in the U.S. market, and you mentioned you wouldn't be raising equity. Can you just discuss how the liquidity would be increased at the parent if you're not issuing equity?

[Sheldon Adelson:]

Well, we want to maintain our flexibility. We see various options out there. We do have quite a bit of flexibility, but at this stage of the game I can't get into any of the details because obviously we don't want to upset markets or move markets. But we're evaluating various alternatives to put additional liquidity in the corporate parent level. Now let me say, I don't know if you were around nine years ago, in 1999, Celeste?

[Celeste Brown:]

I was covering media then.

[Sheldon Adelson:]

Covering media then, okay. But in 1999 we had a slow opening and a slow ramp up because of the construction problems we had with Bovis, the builder, and everybody was saying to me, Sheldon, we may need $50 million. Please tell us you're going to put it in. Put it aside in an escrow account, and tell us that everything's going to be safe. And I said no, I'm not going to do that, but I can tell you this - the payment will be made. And the reason why I didn't do that is because I wanted the market to accept Sheldon Adelson's verbal commitment, that his word is something to rely upon. A friend of mine says that - as all of you that know me know, I don't equal the height of Yao Ming or LeBron James or any of the basketball players. Ming isn't here, but LeBron James and Kobe Bryant and other top players are here in Macau. However, one of my closest friends says, Sheldon, don't worry about your height. You're the tallest person I know when you stand on your wallet. And I'm saying right now the company will not have liquidity problems. Need I say more?

[Celeste Brown:]

So you're saying you'll backstop the company if need be, in worst case?

[Sheldon Adelson:]

I don't want to, you know, my lawyers have - let me put it this way. My lawyers have cautioned me what I can say and what I cannot say. However, as I said back in '99, we're not going to have any problems, and I'll say it again. We're not going to have any problems. Those of you who want to believe it will act accordingly, and those of you who don't want to believe it will act what they think they want to do.

[Celeste Brown:]

And then I guess this question would be for Bill or Brad. The corporate expense in the quarter increased pretty substantial sequentially. Is that sustainable, especially given your comments on cutting costs in both Macau and Las Vegas?

[Brad Stone:]

Usually we'd be looking at each other to answer that question. I'm somewhere far away, so it's like the [inaudible] isn't quite right. I mean, tell the truth, who's going to take this one? I think the, you know, we don't believe it is sustainable. Some of those - Rob, do you have the details on some of those expenses in front of you?

[Robert G. Goldstein:]

Scott has the --

[Dan Briggs:]

I've got a piece of paper right here, so let me. Looking at second quarter '08 corporate expense, you know, we're talking about $33.6 million. And you've got some incremental legal fees up this quarter which probably won't be, you know, won't necessarily be ongoing at the same rate they're at today, and there's some other things moving around in there. But effectively, you know, you're not necessarily going to see a change from 25 to 33 and have it continue to go in that direction going forward.

[Celeste Brown:]

Sorry. So we won't see - it'll be somewhere between 25 and 33 going forward?

[Dan Briggs:]

We don't give guidance, obviously, but there's some legal expenses in there that we wouldn't expect to necessarily recur every quarter.

[Operator:]

Your next question comes from Larry Klatzkin - Jefferies.

[Larry Klatzkin:]

You guys mentioned that you're looking to go more direct to customers. Can you say what percent of your VIP was direct? And Four Seasons, I guess, you know, with the first real, intimate product, are you looking to go a very high percentage direct at that and compete with Wynn?

[Brad Stone:]

You know, we're seeing a ramp up in that, Larry. You know, the - I will tell you, without going to specific numbers, for example, in the month of June we were actually able to double what we were able to produce in the month of May. So they're not off large bases, but we are growing that business. And certainly the Four Seasons is a real positioning opportunity for that. We have a [inaudible] area in the Four Seasons which is about 19 tables. It's not designed to be a junket spot in itself, merely by its size and its connection into the Chinese restaurant there, and it's immediately adjacent to the Four Seasons Hotel. So we're going to look to leverage that product differentiation and offer, you know, a consumer who wants a more cloistered, intimate experience that experience. The Venetian offers a lot of excitement and fun and huge asset base for a customer to take advantage of, and many customers enjoy that. Some customers want to get away from that. The great thing about the Four Seasons, it really offers that premium customer the best of both worlds. They can be in the intimate settings of the Four Seasons or they can be 100 meters away and be in the action in the arenas and the [inaudible] rooms and the malls of the Venetian. So certainly we're going to look to take that as a stepping stone forward. I think the other thing that we're seeing, too, in the month of July is just an increase in utilization of some of the aircraft that we've been perhaps slow in utilizing. We have a 737 over there, which we are bringing in, you know, small groups from out of the immediate marketplace, and we also utilize a Gulf Stream there. So we have, you know, all the tools to work towards direct play. And we have the ultimate tool in terms of what we believe the Four Seasons will offer, particularly to that non-junket direct play-type customer.

[Larry Klatzkin:]

All right, because I think Wynn's up to like 30% direct. I mean, could you see the Four Seasons achieving more than 25% direct?

[Brad Stone:]

As far, you know, you mean, within itself, I mean, I think it's -

[Larry Klatzkin:]

Yes, within itself.

[Brad Stone:]

Within itself, I think it will probably have to do, you know, that or better simply by the size of its junket rooms. I mean, it's not designed primarily at this point for the junket. We do have junket expansion capabilities at the Four Seasons which are actually under development. But initially we're going to position that property primarily against a directed play customer.

[Larry Klatzkin:]

And Brad, as long as we're on it, you had some bad hold at the Sands in Macau. Could you quantify what that might have cost you?

[Brad Stone:]

The Sands Macau for the quarter was about 2.82%, and so you're talking about - we say our normalized, and if you look at Sands and Venetian for the quarter, we were about 2.94%.

[Larry Klatzkin:]

That's negligible. Okay. Compared to last year -

[Brad Stone:]

It's negligible as far as the overall company is concerned. The Sands played a little unlucky. The Venetian played, you know, just about where it should and blended. It's a couple million dollars.

[Larry Klatzkin:]

And then budget-wise, are we still looking five and six, around $3.3 billion plus land and the Singapore, around $4.5 billion plus land - including land, I mean?

[Brad Stone:]

I think the - when we talked about the project in - and we've talked about these at investor days and all for sites five and six, we classified the $3.3, $3.4 billion as hard costs. There's still, you know, pre-opening costs on top of that and certain other costs, but it's in line with what we've talked about in other investor days. So nothing has changed, for example, since February in terms of our budgets on five and six.

[Larry Klatzkin:]

Okay. And Singapore's still $4.5?

[Brad Stone:]

Singapore we haven't commented on lately. We're still trying to get our hands around that. I don't want to comment until I really feel sure about that number.

[Larry Klatzkin:]

All right. And then I guess the government's going around talking to everybody in Macau. What's you guys' feeling about the commission cap timing and where you see it happening?

[Sheldon Adelson:]

I'm meeting with [Edmond] today, late today. And, you know, bear in mind guys that the performance in the second quarter was based upon our offering 1.35 plus comps, and that's the highest that - as high as anybody else. And we can benefit by having the commission capped at 1.25 although we felt it should have been capped at 1.0, including comps. So it'll make a material difference between the [inaudible] - the 1.35 plus comps, whatever that comes to, and what we end up with, the 1.25 cap including comps. So we're looking forward to some benefit accruing out of that. There's something I want to say concerning development in Macau. First of all, let me say that the fundamentals of our company have not changed. Contrary to what everybody - some of the rumors that have been going around, we're moving forward with our development pipeline aggressively. It is acknowledged that the approval for seven and eight - we don't need three because, you know, that's the land we already own; we paid the premium for that, I believe we paid the premium - seven and eight has been delayed, and we have also done some more redesign. But our intention going forward with that, which I am led to believe - and I may have an answer within the next week; I can't guarantee it, but I may - I hope to have an answer on when we could start seven and eight; we've done ground work, we haven't done foundation, we've done ground work - would leave about $100 million in the financing package so that we could continue site development on seven, eight and three. And we've also left - and this is important - we've put into the $5 plus billion financing package an accordion feature that will allow us in two phases to take down $1 billion, which is exactly what we did with lots five and six. So we started off to get the pilings done, which take a few hundred million, for seven and eight, and then we start on the foundation and stuff and by that time the other properties will be open and we'll be able to generate more income and borrow money beside just going on a project financing basis. So things haven't changed there. It's taken us time to get approval. We're doing some redesign because of the cost of construction of the magnificent design we have. It's high, so we're going to - we're tweaking that design. And we're optimistic that we'll be - I'm optimistic that we'll be able to get an approval for that in the very near future.

[Larry Klatzkin:]

Do you think that the commission cap is enforceable? Some people are claiming that it's not. I talked to [Warren Sell] and he seems to believe that it really is. What is your opinion on that point?

[Sheldon Adelson:]

Listen, you know, you've got to look at it from a practical basis. You can - it depends how much the government enforces the law. There's going to be a pressure on the government because I think they've gotten to the point that I think if in fact - if in fact - the central government told Edmond, which is why he made that announcement that he's got to control it better. He made that announcement to the Legislative Council. It's got to be seriously enforced. I believe that certainly at the beginning it'll be enforced. Will somebody finds some way around that, I don't know. I mean, you never know. But people know and understand what they're back betting on the line, that if they continue to push they may be pushing - it may be the start of breaking the camel's back. And they're smart enough businessmen to know they don't want to kill the goose that's laying the golden eggs. So if the government says 1.25 based upon my conversations with a leading junket rep, I think they'll abide by it, at least the top guys will.

[Larry Klatzkin:]

Last question and I don't know if you guys will answer this, but can you give us some indication of Venetian versus Palazzo EBITDA?

[Brad Stone:]

$35 million for Palazzo.

[Operator:]

Your next question comes from the line of [Unidentified Analyst - Unidentified Firm].

[Unidentified Analyst:]

I was hoping, Bill, Rob or Brad, if you can comment on what you're seeing for forward convention bookings on the Las Vegas Strip the second half of this year and what your read is for next year?

[Robert G. Goldstein:]

Obviously, it's a challenging market, we can't deny that, in all segments, be it convention, be it group. Certain segments within the group market are especially challenging, obviously - auto, financials, freight transportation. However, pharmaceutical, IT, fast food, insurance, biotech all seem to bode pretty well. The pressures both external outside of the Las Vegas market [inaudible]. The market is sensitive within Las Vegas as well. I think we're going to rebound in the first quarter. We've had some disappointing cancellations, and especially in the automotive sector. But I think [year-over-year] we'll be up, albeit we have 3,000 rooms to fill. We're more sensitive to rate than we have been in the past. The trade show market's holding up well, and I think the group market will bounce back. But we're going to lose some important segments. I think, you know, auto, financial, freight transportation will continue to be obviously nonperforming segments within the group market.

[Sheldon Adelson:]

This is on the convention, the mice giant, sorry the mice rat - the rat giant.

[Bill Weidner:]

On your wallet.

[Sheldon Adelson:]

That's what they call me here in Asia. Listen, go back to 9/11 and see what happened. Now, I've been in the trade show business for 35 years. I've been in it and affiliated with it for 35 years, and I can tell you that what happened on 9/11 is a good example. It was much more drastic a hit on the market and more immediate than anything else, than any sort of economic slowdown. Everything is cyclical. There isn't anybody that doesn't think that we're in a trough right now, and hopefully we're at the bottom of the trough. And some people will even say we're at the beginning of climbing out of it. I could tell you that the convention market, the exhibition market, doesn't go sour for more than a year. So if somebody had a problem this year, typically they won't have any problem next year because the fundamental need of people in the exhibition and the conference market is to get the latest information in order for them to carry on making a living. If somebody is short information, they put their company at a competitive disadvantage, and other guys will come and eat their lunch. So they've got to see the new products, they've got to see what's going on in the industry, and they have to discuss what research is showing and, of course, other reasons that people go to shows and conferences is to recruit other people and to do PR. So I'm here to say that typically - and I've seen it several times over the past - in a recessionary contraction or in an incident like 9/11, typically will not last more than one cycle.

[Brad Stone:]

What is positive is that trade show business continues, you know, we're not losing trade shows. There is some slight attrition, but there's no lack of shows. Shoe is in town right now. ASD shows up in a couple of weeks, then Magic. So there's strong trade show support in Las Vegas, and we have the advantage of, if we want to, open up our rooms to more trade show business because we're usually the host hotel. So we have that advantage as well in the trade show market.

[Bill Weidner:]

Yeah, I think this kind of a testament to the business plan overall. I mean, the ability to be able to access the corporate market with the carpeted space that we have, access the exhibition market with the expo center that we have, all-suite rooms, be able to reach out into the gaming market further, to be able to then test the FIT markets. I mean, it just - it's a product that allows us to be able to react to poor times like this, and also a product that allows us to identify segments that may still be in good shape and then go out after those.

[Brad Stone:]

And lastly I think the fact that, you know, there's concern about some of the airlift into Las Vegas. If you're going to be at a group or a trade show, you're going to get there someway or another. There's less discretion on the travel and certainly lots of lifts still exist to Vegas. And somebody attending those types of meetings or those type of exhibitions is going to make sure they get there because they need to.

[Sheldon Adelson:]

A recent example - [inaudible] the point - the ICSC, the International Council of Shopping Centers, which is real estate oriented, it's been hit hard, had a drop from 50 to 30,000 and we still sold out and still at the same prices we had last year. We don't need 100% of a planned convention, unless it's tiny, in order to satisfy our demand - satisfy the supply we have.

[Robert G. Goldstein:]

It's true, also, with the Shoe show, Sheldon. We're very strongly seeing with Shoe the same way.

[Unidentified Analyst:]

And one final question. Did you guys - I made it the last quarter on the call, did you break out the 2Q EBITDA between the Venetian and Palazzo?

[Bill Weidner:]

Last quarter? Yes, we did.

[Brad Stone:]

We said it was about $20 million.

[Operator:]

Your next question comes from Robin Farley - UBS.

[Robin Farley:]

I wonder if you could give us some numbers that aren't usually available until the Q is filed but that would just give us a sense of liquidity, sort of where you're drawing down on different credit facilities? And the question is not to diminish Sheldon's height when he stands on his wallet, but just to get the information.

[Sheldon Adelson:]

Robin, did you at least laugh at it?

[Robin Farley:]

Of course.

[Sheldon Adelson:]

I thought it was funny. I even tried it, to demonstrate it. I still couldn't be a basketball player.

[Scott Henry:]

Robin, are you looking just for the specific debt balances at each of our various entities or levels? I mean, what specifically are you looking for?

[Robin Farley:]

Specifically, the credit facilities, what's drawn down and what's available in terms of liquidity today or at quarter end.

[Scott Henry:]

I have the drawn amounts in front of me. I don't have the exact remaining availabilities, but I can give you the drawn amounts at each of the various levels. And, of course -

[Sheldon Adelson:]

Just, Scott, I mean, if you're going to go into the analysis of the entire balance sheet and our debt structure, it's going to use up the rest of the time and bore everybody else. The bottom line is that we have plenty of flexibility and whatever liquidity we need we're going to have.

[Robin Farley:]

Okay. Scott, maybe I can follow up with you after the call. And then one other question that hopefully won't take up the rest of the call, but if you could just talk about your strategy with the Palazzo condo sales in Las Vegas. If you look at City Center and maybe the pace of sales, it's been a little bit slower than what was originally expected. But since they're condo hotels, the property can just, I guess, ultimately keep them in their hotel inventory. And you've made the point that you didn't design the Palazzo condos to be kind of hotels because of the conflict of interest, and so I guess what's the strategy if condo sales there are at that sort of slower pace?

[Robert G. Goldstein:]

Sheldon, you want to weigh in or you want me to take that?

[Sheldon Adelson:]

We don't expect the condo sales to come out at a slow pace. There's already a backlog of expressions of interest, and we expect to start selling - we had a meeting yesterday - what was yesterday? We had a meeting on Tuesday, at which time we also had a Board meeting. The sales group came in and made a pitch. And the approach that they're taking, we accelerated their efforts and tried to move them along. But since we can't deliver the property until the end of '09 or the first quarter of '10, nobody seemed to have been in too much of a hurry. And I reversed that kind of thinking and I said let's go and get our expressions of interest, and then let's see what the market looks like. We will have some news coming out about that in the near future.

[Robert G. Goldstein:]

Robin, also, I think in respect to your comment about City Center, two thoughts. One is what I saw in [inaudible] street condos is you - not condo hotel, so we're a lot less than their 3,000 plus. Two, even at their current booking  we hear their current sales pace - we'd be sold out in about 15 months with our inventory of 420 units. And lastly, I think the unique positioning of this property, where it sits between Venetian and the Palazzo, the amenity package, the views, I think it's pretty extraordinary compared to everything else. I don't think we'll have a lot of resistance. And lastly, if we priced this thing even at the low levels that some of the [inaudible] price went out at, we still have a very, very large profit margin based on our construction costs. We feel very optimistic. In the worst case, looking at MGM's numbers, we'll see this thing out in 18 months.

[Brad Stone:]

I think the other thing to point out is the wide variety of products down at City Center. This is more analogous to the Mandarin Oriental project at City Center, and that sold out extremely well.

[Robert G. Goldstein:]

Yes, it did very well.

[Sheldon Adelson:]

So, listen, we already had our first order. My wife called me up and said that she wants an entire floor.

[Robert G. Goldstein:]

We're charging the full size.

[Sheldon Adelson:]

And I'm going to pay full price, but I don't want an entire floor because I'll [inaudible] around in it. So I've got to convince her to take maybe half a floor. So we'll be the first buyer at a retail price.

[Operator:]

Your next question comes from Steven Kent - Goldman Sachs.

[Steven Kent:]

Maybe you could talk about the retail trends, the sales per square foot, in Macau, how that's working out, leasing pace for the rest of Macau on the retail side. And then, you know, you've said that July was pretty good or it continued to show strength. Any impact of any visa restrictions or expectations of tightening visa restrictions, what the impact would be?

[Sheldon Adelson:]

The impact of the visa restrictions have been compensated for by our own Cotai Jet ferry service and the increase of participation on the jet. So if there is any loss, we can't detect it at the Venetian. So, I mean, we just had two days on this past weekend, each day was over 100,000. One was 101,000, one was 104,000. Our increase in availability of seats on the ferry, on the Cotai water jet ferry service has manifested itself in substantially increased weekday and weekend attendance. So if there is an impact from the [inaudible], we're not - we can't see it. Now there may be. I'm just saying that we can't see it because our attendance is compensated for by some other factors.

[Bill Weidner:]

I just want to make sure that we're addressing the question. The question was retail sales per square foot, was it not?

[Steven Kent:]

Yeah, that was it.

[Sheldon Adelson:]

I don't have that answer. But he talked about retail attendance.

[Bill Weidner:]

Well, we know that attendance overall is up 28%, 29% month-on-month. We know retail sales is up about 12%, 14% approximately month-on-month. So there's a tracking. And the key thing here, the most important indicator I think is slot revenues. Probably the direct line is much better drawn between people coming into the building and then increase in slot revenues. It's just steadily increasing as more and more visitation comes. Now we're going to convert more of that traffic to more mass table play as we focus more on the incentive programs and we can identify our high-quality people on the ferries, but the foot traffic looks to be almost directly measurable to slot income. Our income's per unit and our overall slot income is growing dramatically as foot traffic increases.

[Brad Stone:]

And we see residual benefits in sales in the mall, also.

[Steven Kent:]

The sales in the malls, has that impacted the leasing out pace for five and six?

[Robert G. Goldstein:]

The quality - if you've seen the Four Seasons offerings in Macau, I think what it does is round out the luxury component of our overall mall. I think the Venetian's wonderful and it's got all the gondolas, etc., but I think the luxury offerings and [inaudible] guys, clearly they've done some outstanding numbers. I think some of the stores, like Hermes and Chanel, etc., are going to give us an offering we don't heretofore have at the Venetian. I think it's going to impact sales overall per square foot. It's going to help leasing in the future, parts of retail, but also it's going to drive just overall demand for that Cotai Strip on the retail side. I think it's really extraordinary what the Four Seasons has to offer.

[Bill Weidner:]

I think also I would weigh in that, you know, when you master plan these projects and they do them piece by piece, you know, the Four Seasons always was the upscale product against the upscale end of the marketplace, whether that's the VIP casino market, whether that's the high end leisure traveler, or whether it's the retail. And so we opened the Venetian, we're very pleased with the Venetian. The Venetian is what it is, and the way that it was planned. It's a mass product, a high-end mass product. It's got arenas, it's got showrooms, it's got meeting space, it's got all suite rooms, but the intention always was to have your VIP market and your high-end market focused on the Four Seasons and the Venetian being the more mass and meeting product. So, you know, we're looking forward to the completion, the first real piece of the overall Strip, and the ability to focus on market segments that we haven't had product - or at least ideal product - to attract.

[Brad Stone:]

You can insert Cirque into that mix as well.

[Operator:]

Your next question comes from William Lerner - Deutsche Bank Securities.

[William Lerner:]

I have a few. I'll fire them off real quickly in deference to the time. One, I guess, for Rob, is it possible to give us a sense for Venetian Las Vegas handle and drop, you know, percentage delta?

[Robert G. Goldstein:]

Sure. Let me pull my notes. You're talking - are you looking at tables and slots?

[William Lerner:]

Yes, just to get a sense for volumes.

[Robert G. Goldstein:]

Second quarter in Las Vegas at the Venetian, slot volume was about $500 million versus $562 last year. Win was down a few points due to the hold percentage on the slot. Win per unit per day down to 182 from 227. Obviously, an impact on the new offerings at Palazzo. Palazzo, I think, is starting to prove to be a very, you know, powerful slot player in terms of the quality of product and the room product. There's been [inaudible] however cumulative, we're heading for our best month ever in July. Very candidly, Bill, we've used the - [decline a few points back if we see that there's some slot rooms, it's the] slot players that's driving those occupancy in slot win. And we're hoping to see, you know, the two of these things get to the point where they can get to $60, $65 million a quarter together and work in tandem because the slot offerings are different. The product is different. On the table side it's not as dramatic. I think the table side, Q2, total drop was in the, let's see, Venetian side, $215 down from $280 previously year. A lot of that kind of baccarat year-to-year. Obviously, again, the Palazzo's had an impact, where you have newer suite product and a newer casino floor. I think you have to look at these properties at some point as working together, both slot and [inaudible] trading, you know, more amenities, more things to do, more places to gamble, getting a nice bounce back in both slot and table from customers who, you know, might play at Palazzo and then decide they're not lucky or they want to go and try something different, and rather than leave the building they go over to Venetian. So although it's definitely been some cannibalization, I think we're going to see some - especially in the second quarter and into the third quarter, some nice synergies working together in the gaming side.

[William Lerner:]

And then, Bill, you talked about $40 to $60 million - actually now $70 to $90 million, I should say, in cost saves in Vegas between the two properties, and then you talked about, I think, $60 to $70 million in cost saves in Macau going forward. I guess the question is

[Bill Weidner:]

Rob, do you want to deal with that?

[Robert G. Goldstein:]

Well, obviously there's going to always be some revenue risk. The goal is cut the fat and not the muscle. But I think we're trying - obviously, we're not going to do layoffs here. That's not in the vocabulary. The idea is cost containment through, you know, on the labor side, through freezes. We have a hiring freeze in place currently. It is downsizing some hours of some things we think we can do without off hours. It's just being more judicious in our spending and paying attention to every corner of the building. This is a big building. There's 10,000 restaurant seats. There's 7,000 plus rooms. There's a lot goes on here. We're just trying very hard to be really, really focused on every area we can save money, from the package center to the purchasing to our, you know, our light bills, etc. How much it flows through, I would not want to venture a guess, but I think at the Venetian, Palazzo it's going to be important. I don't want to put a percentage on that yet. We're still measuring how far we can get. We started this back in April, but obviously if you can reduce the headcount through attrition and if you can watch your spending, the flow-through's going to be dramatic if you can, again, avoid the muscle and just deal with the fat.

[Brad Stone:]

And in Macau, the majority of it goes right to the operating line. We're not talking about cutting back on the marketing programs. Most of the costs we've identified are costs associated with labor. Certainly the opening of the Four Seasons gives us an opportunity to take care of some of our labor sins at the current facility and, again, without layoffs and things, moving people, reassigning them to that property opened. You will see some additional spending at the Venetian in terms of some of the mass play, but we think that that's going to return itself in spades in terms of revenues and drive and grow our EBITDA. So the [inaudible] costs that Bill identified in his presentation in Macau were primarily driven to affect totally the bottom line.

[William Lerner:]

And last one, hey, Scott, when you've talked in the past or we've talked in the past, you guys have intimated that you needed an incremental $3 to $4 billion U.S. to build out the next 24 months in Cotai. And then as I do the back of the envelope for the $5.25 billion that you're saying you'll raise, which includes, obviously, a refi, you get to obviously a $2 billion incremental number to build out Cotai. So where's the - did something change? Is there sort of an apples and orange or did I miss something on the accordion feature, or where am I making -

[Sheldon Adelson:]

The accordion feature is in addition to that [inaudible] for the quarter.

[William Lerner:]

Okay, so that's the spread then?

[Scott Henry:]

That doesn't get us all the way there, Bill, but -

[Sheldon Adelson:]

It gets us to the point that we operated five and - the manner in which we did five and six. We did the ground work. We did the foundations, the pilings, etc. We got it out of the ground, and now here we are refinancing it. And that's the way it'll - with seven and eight.

[William Lerner:]

So all this -

[Sheldon Adelson:]

The accordion feature allows us to continue seamlessly.

[William Lerner:]

Yes. So basically all this concern out there that you need to raise $7 billion and obviously all the - the whole Cotai story's been backed out of your valuation, you know, the way to kind of think about that now perhaps is you can actually achieve what the market's not at all paying for by raising $2 billion. And once you're open there, the accordion feature's already part of the story, and you move forward. I mean, is that kind of -

[Sheldon Adelson:]

Yes. But - generally. Let me say that one, there's no surety we're going to have the approval this week. However, I have reason to be optimistic - I just want to clarify; I can't guarantee it - that we will have an approval to move forward on seven and eight imminently. That's item one. Item two, we are and we need some time to do some redesign, particularly structurally, because the cost of these buildings, that are very long, have to be redesigned structurally so that we can - they act like a sail, so what we have to do is cut up the big sail and cut the sail into several pieces so that it'll diminish the need for a substantial cost increase based upon structural requirements. Brad can address that better. But conjecturally, I think that's where we are. So, as I said, nothing fundamentally has changed in this company. And those people who thought that we wanted to go on and get - what am I borrowing money for when I'm going to have a negative carry, you know, for another few months? If we've got an accordion feature that we can pick up another billion dollars as time moves on, then what's the rush? I mean, I want to open it as quickly as humanly possible. We've got to get over two things. One is the permitting, one is the redesign. And both of those at best will take at least a quarter.

[Brad Stone:]

The realities are, you know, the spend at the beginning of the project, these construction projects, is very slow. I mean, you're sitting there drilling holes and pouring concrete for months and months and months. It's not until you start getting out of the ground that you start accelerating your spending. So there's no need to go out and raise this kind of money, you know, we're not going to need for us to get that money until, you know, latter, you know, second part of next year.

[Sheldon Adelson:]

Somebody asked about square footage sales. If you listen carefully to the numbers that the average rent, U.S. per square foot that we're booking in Singapore will indicate also - I mean, I wanted to get that plug in - the issue that we're doing there, that the rents that these people are willing to pay as base rents are absolutely extraordinary. And they certainly indicate that they expect to do a high level of gross volume to justify these high minimum rents. We expect that our mall in Singapore, the Marina Bay Sands, will be considered probably the most successful, the most profitable mall ever. Now that having been said, I also want to address another thing that somebody talked about, about the slot win in Venetian. It is ramping up, it continues to ramp up very handsomely. And what I want to say is that when we first started in Macau and started to do our planning in '02, everybody said that the Chinese people will not take to slot machines. Well, if that's the case we must have done something. We've got the Rumpelstiltskin touch. If I could tell you that the Venetian Macau is already ramped up to the point where the monthly income on slots is higher than the monthly income at the Venetian. That's been open for nine years. So it is true the Chinese will play and will learn to play more and that they like it. And we're doing very well on the slots. So the absolute dollar income is more than, on a monthly basis, than we've been experiencing and have experienced with the Venetian Las Vegas.

[Bill Weidner:]

And with that, I think that ends our conference call for this quarter. I didn't realize until Sheldon educated me that Rumpelstiltskin was a Chinese guy.

[Sheldon Adelson:]

What can I say?

[Bill Weidner:]

We appreciate your attention, and it was a long call.

[Sheldon Adelson:]

He ate Chinese food.

[Bill Weidner:]

It was a long call. We had a lot to explain and a lot to go over, and we appreciate your patience and look forward to updating you again at our next quarterly call. With that, thank you very much, and we'll talk to you again next quarter.