Q4 2021 Wynn Resorts Ltd Earnings Call

February 15, 2022

Please continue to standby for today's conference call will begin momentarily again, please continue to standby and thank you for your patience.

Yes.

[music].

Welcome to the Wynn resorts fourth quarter 2021 earnings call. All participants are in a listen only mode until the question and answer session of today's conference.

I'll ask a question press star one on your Touchtone phone record your name and I will introduce you. Please limit yourself to one question and one follow up.

This call is being recorded if you have any objections you may disconnect. At this time I will now turn the line over to Vincent Zahn Senior Vice President and Treasurer, Sir you may begin.

Thank you Michelle and good afternoon, everyone on the call with me today are Craig Billings and Brian <unk> in Las Vegas also on the line are Ian Colin Linda Chen <unk>, Carruthers, Frederic <unk> and Jenny holiday.

I want to remind you that we may make forward looking statements under safe Harbor Federal Securities laws and those statements may or may not come true I will now turn the call over to Craig billings.

Thanks Vince.

Hey, everyone. Thanks for joining us today.

I'd like to start by saying that Im.

Genuinely honored to be speaking to you with.

The resort's high join when in 2017, because I spent much of my career admiring the company for its dedication to its craft into its people.

I am excited to lead the company forward and I know that our best days are ahead of us.

Before we talk about the fourth quarter I'd like to give you. Some additional context around a couple of transactions that we've announced over the past few weeks.

First let's touch on the sale leaseback of our real estate at Encore, Boston Harbor that we announced today.

We've discussed the sale of real estate on past earnings calls and we've always maintained that we believe our valuation over any reasonable period of time reflects the value of our real estate.

We believe that could be the case today.

So why execute a sale leaseback.

A sale leaseback is after all and nothing more than a financing and capital structure decisions.

In our case this transaction benefits our capital structure in a few different ways.

First and foremost it provides long term capital to grow our business.

In this case capital to deploy adjacent to Encore, Boston Harbor, and the construction of additional parking and complementary non gaming amenities that will drive encore, Boston Harbor to even higher levels of performance and.

And capital to deploy in attractive Greenfield projects like our development in the UAE, which I will discuss in a moment.

Second it enables us to potentially retire near term debt with a higher cost of capital than the lease.

I would note here that this sale leaseback transaction was executed at 17 times rent for a five 9% cap rate a record for regional gaming assets by some two turns and an attractive long term cost of capital.

Third it brings a new partner into our capital structure summit and the team at Realty income have been great partners and executing this transaction and I would note that there are a number of highly bespoke terms in the lease that reflect our longer term goals.

These terms, we are only achievable due to the unique way that realty income is structured and their willingness to engage and align this transaction with Argos.

Overall this transaction gives us a lot of additional financial flexibility.

Transaction will close near the end of the year.

Some of you may ask what about Wynn Las Vegas.

In response to that I would note a few important points.

First Las Vegas is a very different market when compared to regional markets.

Potential operational deleveraging in an economic downturn is more extreme as we saw in 2009.

And the need for continuous and sizable reinvestment in order to stay relevant is high.

As many of you know it is fundamental to us that we maintain consistent service levels and capex throughout the business cycle and I never want us to be in a position where in the midst of the downturn, we have to choose between our world class service and is growing rent or between paying rent and investing in our property.

In fact, our 2021 results speak to the power of our proprietors mindset.

With a host of new investments bearing fruit and with our team intact. Despite COVID-19 , we continue to take market share and delivered the property is highest ever annual EBITDA.

Further the breakage costs related to a sale leaseback of Wynn Las Vegas would be significant.

Beyond the tax leakage, our capital structure in the U S has bond financing at both Wynn Las Vegas, and our holding company above it.

Our sale of our Las Vegas real estate would trigger an acceleration of that debt driving over $600 million in ticket.

For now we believe we will deliver far more long term shareholder value by continuing to own our real estate in Las Vegas, and I am confident our equity valuation will continue to reflect that.

Let's turn to our announcement regarding an integrated resort development in the UAE.

We are thrilled about this project, which will further diversify our business, while extending our brand into the middle East and Europe .

I'm sure all of you are familiar with the UAE and with Dubai in particular.

It's a dynamic country and we're proud to have the opportunity to deliver our exceptional hospitality there.

Ross I'll highlight is about 45 minutes north of the Dubai Airport via a first class multi lane highway.

The location on margin on island is stunning and will be a great setting for our resort.

I do want to provide some clarity on a topic I have seen in a number of analysts notes and media reports regarding the project.

And any new jurisdiction there are three things that need to happen to have an integrated resort with gaming.

The first is enabling legislation is gaming legal.

The second is regulation, how will gaming be conducted.

<unk> is licensure, who can operate again gaming establishment.

With respect to this project no further enabling legislation is required we're not looking at a multi year process for legalization like we've seen in some other markets.

Regulations are well advanced having been modeled on those of Singapore and the United States.

Tax rate and license structure, a very reasonable.

And finally with the regulatory framework, taking shape and the regulator in place, we will be license to conduct gaming and rather high.

In other words, where we go with this projects, we're commencing master planning now and will begin mobilizing architecture and design in due course.

I expect our ultimate design will be one or more iconic buildings that both take advantage of the pristine beach location and also show respect for the unique cultural aspects of the region.

We're big believers in the potential for Roswell hymer to be an amazing tourism and hospitality destination.

Lastly, I would point out that this is the first transaction, where wynn resorts as being paid for its Knowhow and service excellence via a management agreement I expect it to provide a very high return on invested capital.

We have a lot happening around here and I'm personally very excited about the future.

Turning to the fourth quarter and starting in Las Vegas.

The team at Wynn, Las Vegas had an absolute stunner over quarter.

$186 million EBITDA, despite holding a bit low drop was strong handle was strong revpar was strong I could go on and on.

To us the quarter's results are a further indication of the fact that our unrelenting focus on service and great products are resonating with premium customers, who after being cooped up for 2020 and the first part of 2021 are traveling and spending again with a vengeance.

As you've heard from some of our peers January results in Las Vegas were impacted by Omicron, particularly in the group side.

Encouragingly forward bookings in January were very strong in February to date has accelerated further positioning us well into March and beyond to.

To give you some context, our hotel occupancy in January was 61% and with the latest wave of Covid quickly receding, we expect occupancy to increase to the mid <unk> in March.

As we increasingly distance ourselves from our competitors. We believe we have strong pricing power on rooms, food and beverage and nightlife during 2022.

In Macau the market continued to experience dude visitation during the fourth quarter and our results reflected that enroll and drop in volatility it holds.

Of course, you need only look at Chinese new year to remind yourself of the power of that market and the pent up demand for visitation during the holiday period turnover per day in our direct program was up nearly a 175% from 2021 and down only 12% from Chinese new year 2019.

Encouragingly, we are seeing both strong spend per customer and significant new customer sign ups in our direct business highlighting the strength of our market, leading product and service offering.

On the mass side table drop was up 34% versus 2021 and that drop was 60% of our Chinese new year 2019 levels.

As we have seen before Wynn Macau is more accessible demand snaps back.

Long term I remain incredibly enthusiastic about the prospects for Macau.

Between the shift to higher margin premium mass customers and to customers, who have more motivation to visit them just gaming the market is evolving and we are prepared to adapt and grow our business as we embrace those changes.

Further the concession process continues in a methodical and logical manner with the amended gaming law current currently sitting with the Assembly Committee.

We continue to be pleased with the process and with the content of the amended law.

Turning to Boston like Vegas, Encore had an unbelievable quarter and both gaming volumes and Revpar, resulting in $68 million of EBITDA in Q4.

The team in Boston has really done a tremendous job, particularly in the casino, but we're just getting started.

Our next phase of growth in Boston will be driven by database growth, particularly growth outside of adjacent areas and through our upcoming expansion project across the street from the property.

That expansion will see us add additional amenities and importantly additional parking.

Parking, particularly on weekends remains a constraint for us.

Though oncor is now run rating higher EBITDA and a number of strip properties.

<unk> still has a tremendous amount of growth ahead of it.

Lastly, on when interactive we generated about $785 million of turnover across casino and sports betting in Q4, which drove a 29% sequential increase in revenue.

This was despite a meaningful curtailment and marketing spend in November and December .

As you May recall on our Q3 call we were very explicit about our view on the unsustainable nature of the current competitive environment in sports betting and we stated our intention to manage the business with a long term shareholder friendly view.

To that end, we began shifting our user acquisition mix in early November focusing only on proven performance marketing channels, where we know we can achieve positive ROI on spend particularly in casino.

By doing this we meaningfully reduced our overall burn rate and has a remaining brand advertising commitments tailed off with the Super Bowl I expect EBITDA burn levels to reduce even more drastically.

Overall, we estimate Q1 2022 burn should be down some 60% from Q3, 21% to the $40 million range and I expect Q2 2022 to be even lower.

With that I will now turn it over to Vince to run through some additional details on the quarter Vince. Thank you Craig when launched Las Vegas, we generated a record $186 2 million of adjusted property EBITDA on $493 9 million of operating revenue during the quarter.

We estimate low table hold negatively impacted EBITDA by approximately $10 million in the quarter.

Overall, our hotel occupancy reached 86% in the quarter with 91% occupancy on weekends imports.

Importantly, we have stayed true to our luxury brand and continue to compete on quality of product and service experience with our overall ADR, reaching $4 41 during <unk> 21, 37% above for 2019 levels.

Our other non gaming businesses saw broad based strength across F&B and retail which were also well above pre pandemic levels.

In the casino or <unk> 21 slot handle was 40% above for 2019 levels in our table drop was 41% above for 2019 levels. Despite still suppressed international play due to COVID-19 related travel challenges.

The team in Vegas has done a great job of controlling costs without negatively impacting the guest experience delivering adjusted property EBITDA margin of 37, 7% in the quarter or approximately 39% when adjusted for low table hold.

This was unchanged sequentially and up 1350 basis points compared to <unk> 19 on a hold adjusted basis.

Opex per day was $3 8 million in <unk> 'twenty, one approximately 145000 per day above for 2019 levels due to a combination of higher cost of good.

Woods on materially higher non gaming revenue, along with special event costs, including the Kafka Shambo golf match among others.

We remain committed to maintaining a cost structure that appropriately balances margin and our exacting service standards and Las Vegas.

In Boston, we generated another record quarter with adjusted property EBITDA of $68 2 million and <unk> 21, with an EBITDA margin of 33, 4%.

We saw broad based strength across the casino combined with solid hotel performance, which was aided by a favorable calendar set up during the quarter.

As Craig noted regarding Wynn Las Vegas.

And consistent with some of our original peers omicron, along with bad weather temporarily disrupted our performance at <unk> and January <unk>.

Encouragingly, we are already seeing signs of improvement in the business as case counts have decreased across the region.

At aviation, we have remained very disciplined on the cost side with Opex per day, a $1 million and <unk> 21, excluding a 2 million nonrecurring accrual reversal.

This was a decrease of over 20% compared to $1 3 million per day in 2019, and a modest increase relative to 950000 per day and <unk> 21, with a sequential increase driven by improved business volumes and increased operating hours, most notably from the hotel opening a full seven days per week beginning on September one.

Looking ahead, we expect opex to increase modestly due to higher payroll stemming from onetime contractual labor agreements coming into effect in 2022, which will add around 45000 per day to our Opex base, we are well positioned to drive strong operating leverage as we continue to grow the topline over time in Boston.

Our Macau operations delivered an EBIT loss of $25 9 million in the quarter on $325 7 million of operating revenue or.

Our EBITDA included a onetime bad debt provision that negatively impacted EBITDA by $24 million during the quarter. So we would've been essentially break even adjusting for that.

While business in <unk> was challenging due to the evolving COVID-19 situation, we remain disciplined on costs, our opex, excluding gaming taxes and the onetime provision I noted was approximately $2 2 million per day in the fourth quarter essentially unchanged sequentially. We.

We continue to be well positioned to drive strong operating leverage in Macau as our businesses recover.

Turning to win interactive and <unk> the business generated approximately 785 million and total turnover, 20% sequential increase relative to <unk>.

Topline growth combined with decreases in marketing spend and other opex drove an improvement in our EBIT of burn rate to $79 million or <unk> 21 versus $104 million and <unk> 21.

Since quarter end, we've continued to thoughtfully grow the business with launches in New York in Louisiana, and the initial reception from our customers has been very encouraging.

Turning to the balance sheet, our liquidity position remains very strong with global cash and revolver availability of $3 6 billion as of 12 31 in Macau, We had approximately $1 7 billion of available liquidity as of 12 31 in the U S. We had total available liquidity of approximately $1 9 billion at 12 31 five.

Our capex in the quarter was $78 million.

We remain prudent with respect to Capex, while we gained further confidence in the recovery.

With that Michelle we will now open the call to Q&A.

Thank you to ask a question press star one on your Touchtone phone on mute your phone record your name clearly after the pumped and I will introduce you for your question.

Please limit yourself to one question and one follow up question to withdraw your question you May Press Star two.

Our first question comes from.

Carlo Santarelli from Deutsche Bank, You May go ahead Sir.

Hey, Thanks, Thanks, Craig and thanks for all the color.

Guys, if I could just Vince you talked about it a little bit with the provision.

In the quarter in Macao.

Think about some of the new regulations around VIP and kind of around running that business, whether it's the share of.

Ah handle as opposed to Rev share agreements or the single job good model of the heavier reliance on VIP.

Direct VIP I should say could you talk a little bit about your strategy in navigating that obviously it will be a little bit more cumbersome for balance sheet perspective, but how you guys are kind of thinking about the outlook for that business run from a direct platform with some of the new requirements.

Sure Carlo.

I'll start and then I'll ask Ian.

To give you his thoughts as well.

As you know the situation is evolving the charge that we took in the quarter was frankly due to primarily due to <unk>.

Historical jump it positions. So it really doesn't have anything to do with the business going forward and as Vince mentioned, if you adjusted for that charge, we would have effectively been at at breakeven in Macau, but the.

The amended law in general I think we are quite pleased with.

The various components of it in the process as we've said many times has been impactful in terms of administration.

So the market's evolving the markets moving quickly we have the best product best service in the market and so.

It's not surprising that we saw the activity on the direct on the direct side of the business over the course of Chinese new year, we were pleased with it some of those were former junket players kind of.

Indicating that there has been movement among the.

Among the different groups of customers from jumping to premium mass and junket jump into direct.

We have a very very prudent approach towards deployment of.

The balance sheet.

And I expect it will.

We will continue to take that approach.

And to your last I guess, two one of the subsets of your points.

The use of agents, who use of referring parties et cetera, that's all kind of happening in real time. So we are exploring all potential options in the market that are consistent with the amended gaming law.

And we'll figure it out in due course, but it's really too early to say and do you have any additional thoughts.

Just the disappearance of junket operators, it's a very recent development. So the only way we can actually judge the impact is pretty much over Chinese new year, when we saw meaningful growth in both premium mass and in our own direct VIP program and we have seen that migration.

A former junket players they have the desire to gamble they have a desire to come to Macao, we have the best product in the market and the best service. So we feel very confident that we will capture more than our fair market share.

And I would just add to that Carla we've said.

Before I can't remember if it's been on calls or in other in other forums by 2000 1980 something percent of our EBITDA was from sources other than VIP.

So we started our journey of diversification drilling with the opening of palace in 2016, and we have become very very capable pass marketers over the course of the past five years. So I kind of look at Macau and I see an amazing set up where investor expectations are pretty low.

And we have the opportunity to kind of chart, our own our own destiny and frankly, that's what this company has done for years and years and years, particularly here in.

In Las Vegas. So we're excited about a market that is higher margin premium mass and customers that may be traveling to Macau for motivation other than just <unk>.

Just purely gaming.

Great. Thank you Craig and thanks Ian.

Just one follow up as it pertains to the master lease.

Our encore Boston Harbor.

First of all Craig is there any breakage on the $1 seven and secondly, I see the escalator is 175% are there any coverage ratios that trigger that one way or another.

Let me start and then I'm going to ask Vince can give you some details.

We've been pretty explicit about our views on sale leasebacks and I think this one is unique because the lease which youll see attached to the 8-K, you can tear it apart yourself.

He is incredibly unique it's very very flexible and very friendly to us as the opco and that was incredibly important to us because as I said in my prepared remarks, I'd never want to choose between the landlord and our people our people our service levels and our service levels of our brand so you're going to find a whole bunch of unique things in that.

At least that I think many of them.

Probably precedent setting.

But to your specific questions I'll ask Vince to to China.

Carlo do you mean, you mean debt breakage costs.

Yes, I'm, sorry, yes, I was more referring to kind of the way that Craig articulated the 600 million plus of breakage costs related to the debt in Las Vegas is there any leakage associated with a $1 7 billion.

Cash proceeds of this transaction.

Seven and beyond it's the greater of CPI or 175% and that's capped at two 5% and you can go look at some of the lease comps, particularly in Las Vegas, and see how favorably that that package compares.

There are no minimum capex requirements, which was very important to us.

So those are kind of some of the high level details of the least Carlos.

Great. Thank you very much guys.

Got it.

Our next caller is Joe Greff with Jpmorgan you May go ahead.

Good afternoon guys.

Craig Vince how are you thinking about utilizing the I guess, the $1 $65 billion of net proceeds coming in from the sale of <unk>.

Sure.

It's important I want to remind you it doesn't close until the end of the year. So we'll be in a different position.

At the end of the year vis vis Macau.

Our hope is that Vegas, and Boston continue to Hum, along so with that caveat.

Sale leaseback really isn't any different than and raising debt in the bond market. So if we were raising debt in the bond markets. At this rate today, we would think about it is how do we grow our business and are there more expensive or more restrictive pieces of debt that we should be taking out.

So we'll see how things evolve over the course of the year, but that's that's how we think about it today, we've got our room remodel in Vegas, We've got a show in Vegas, We've got an expansion in and around Encore Boston Harbor, and we have a really exciting project in the UAE that is kind of almost shovel ready so across all of those theres a whole bunch of <unk>.

Things, we can we can do to drive incremental EBITDA and then there are some expensive pieces of debt, including the bonds that we did when we I think reopened the high yield market in.

In the midst of Covid.

That would prove beneficial to shareholders as well.

Great.

And then maybe can you comment on how you're thinking of potentially monetizing.

Went interactive obviously there was a.

A press report.

Potentially looking to monetize that through a sale can you talk about the delays youre thinking of.

That business and how it can drive net equity value fee only been a very broad way for you. Yes sure. So first we don't comment on market rumors or random press reports, we've been pretty we were pretty explicit on the third quarter call about not engaging an unsustainable and the unsustainable user acquisition Blitz that has emerged no pun intended this NFL.

All season, and that we would take them more.

A more measured approach.

The I gaming business, where we have actually seen pretty reasonable success.

There is a logical place for us in that business longer term. Unfortunately, it's not a humongous Tam right now.

Sports betting is the total addressable market in sports betting is where most of the irrational behavior is is taking place.

No.

We will generate shareholder value from that business I think the way we think about it is we're going to we're going to be really focused on the user acquisition side, we're going to be focused on the product side and we're going to see how the end markets really behave over the course of the next several quarters and then we'll we'll figure it out accordingly.

Great and then one final thing.

Craig you talked about.

Additional investments in Las Vegas, and potentially at <unk> can you talk about what's committed in terms of Capex for 2022.

Yes, sure I'll take that Joe.

So in Vegas, we're pretty much back to regular maintenance maintenance levels of $75 to $85 million per year in Vegas.

The encore maintenance Craig noted that we are reconstructing the Rep theatre, putting a new show in place that has a budget of $120 million of which about $30 million is spent through 12 31. The rest are against the remainder will get spent ratably in 2022, we're renovating the Wynn Las Vegas tower rooms, with a total budget of $220 million of which $1 two.

<unk> has been spent same thing there the balance will be spent over the remainder of 2022.

In Boston the properties essentially new so maintenance will only be in the $20 million range, there, mostly repositioning of non gaming amenities at that property.

Could have some modest capex towards the end of the year for the Easter Broadway expansion that Greg noted.

Budget, there is going to be somewhere in the two to $2 50 range and that will that will basically be spent under a normal capex S curve over 'twenty three 'twenty four.

And in Macao were still being very judicious with capex until the return of stronger demand levels. There. So core maintenance is expected to total $60 million to $80 million for 2022 on a property combined basis.

And Joe just just one other point on the Boston Capex I wanted to ask one of the unique aspects of the lease that we entered into is the ability to put some additional rent into into the lease.

Really upon completion of that expansion at a specified cap rate, which will in turn allow us to more than get our money back.

Great. Thank you guys.

Thank you. Our next caller is Thomas Allen with Morgan Stanley You May go ahead Sir.

Hey.

Thanks for taking me.

Just on the Macau prior to Covid hitting your running at 99% occupancy for your rooms, I think running at over 90% comps can you just talk to us how youre thinking about that on a go forward basis.

Sure I'll start and then I'll ask Ian.

To provide some thoughts as well I mean the <unk>.

Market is I think the fundamental question.

So you have to ask yourself is over the course of the next five years 10 years.

Will a.

Our leisure business emerge in Macau, and if so does that mean.

Thank you have a yielding mechanism like we do in Vegas to yield cash shrimps I don't think we.

Our close today, yet I think we would assume that we're going to continue to be a comp room business.

And we don't have a ton of rooms relative to some others in the market. So we have a lot of opportunity to.

To yield those rooms, and do you have any additional thoughts.

Well, what we've seen in the periods when we've actually been recently opened to Chinese consumers. When they are being able to travel is there is a huge pent up demand at all levels of the business and Theres cash business out there as well and there is family travel. That's increase we're also seeing an increase in millennial travel.

And we're seeing new customers come to Macau, we've seen that again over Chinese new year. So during the week when we had rooms available at times, there is a cash business and rich cash business from influential customers to come. So we feel that we can we can fill rooms when they are available.

Alright. Thank you and then just on the UAE project. I mean, you guys know this is kind of the first of a tie in where youre being hired for kind of management expertise and development expertise do you think there's a lot of other opportunities how are you thinking about that.

Yes, it's.

Great question Thomas.

As we think about logical adjacencies for our business, we think about everything under the Sun, we're constantly thinking about ways to increase shareholder value.

I think it is a pivotal moment cannot be replicated, we'll see but it's an important moment.

We're entering into really a four season style management deal for the creation of an integrated resort is that extended bolt two smaller properties in gateway cities. It may be that's something that we will.

That will explore.

Thank you.

Thank you our next caller is Steven Grambling with Goldman Sachs. You May go ahead Sir.

Hi, Thanks, maybe as a follow up to that I guess, how are you generally thinking about underwriting.

The ROIC in a market like the UA as you think about the structure of this transaction a potential structure can you give any kind of color on what you foresee from a customer standpoint, and you're looking at your global database, maybe what spending patterns have emerged in that market.

Sure.

I'll start with the latter and then move to the former so.

Think about it this way when we opened that property, 95% of the world's population will be within an eight hour flight of Wynn resorts property.

I don't think anybody else can say that.

So this is not only an opportunity to leverage our pre existing database, but it's an opportunity to grow database to Dubai Airport has some 80 plus million passengers passing through it every year.

It is astounding.

UAE is already a substantial destinations for not only the region, but for Europe for branch procurements.

For really folks from all over the place. So this is a significant customer acquisition opportunity.

Really material extension of our brand in terms of how do we underwrite it to $2 billion projects. My presumption is that it will be 50% debt, 50% equity of which we will be 25% to 40% and then obviously we have the.

The management contract sitting on top of it the land is astounding beautiful and like I said before nearly shovel ready so execution risks from a construction perspective.

As we see it is pretty low.

That's helpful.

And I know you don't like to give a lot of guidance, but maybe looking to Las Vegas and looking at the fourth quarter EBITDA run rate I guess, what are some of the biggest puts and takes to think about the year ahead across either various customer cohorts or spending categories.

Fluids, both margins and ultimately EBITDA from here.

Sure I'll start and then I'll ask Brian to provide you with these thoughts yes.

Yes, Q4 was was definitely definitely arrangement because it is impressive team did some really incredible job. If you look back over the course of 'twenty. One we saw a pretty substantial leisure and gaming demand I think thats consistent across the market. Although I would say we have continued to distinguish ourselves from our service and quality.

Perspective.

And but there are also a lot of customer types that weren't around international play wasn't around group and convention was quite spotty and very concentrated into a couple of periods one of which was in fact.

The fourth quarter.

So that obviously helped the fourth quarter.

January if you look then if you look forward January was as we noted soft because of <unk>, we're already seeing the demand snapback from that Brian do you want to comment on kind of the structure of that demand or any additional thoughts you might have sure Greg I.

I think overall, our booking pace is back to pre pandemic 2019 levels now and we have a built in rate premium. That's also sustainable as we see it and on the group side. The group lead volume is now actually exceeding 2009 to 19 level. So.

I think people want to meet again, and we're very bullish on the future things are pacing ahead, and we're looking really solid.

That's all Super helpful. Thanks look forward to seeing the rage or continue and perhaps resume in Macau.

Yes.

Right.

Okay. Thank you. Our next question comes from David Katz with Jefferies. You May go ahead Sir.

David Katz your line is open.

Apologies, thanks for including me I was on mute.

Good afternoon, I wanted to just ask about the.

Thought process around.

Deciding.

To sell the real estate in Boston, obviously, the the terms that you achieved are compelling.

But in the context of.

Other opportunities there may have been.

Divest assets such as excess land on the strip.

Et cetera, how did you sort of think about that choice versus maybe some others.

The land being one example, maybe there are others that we could discuss.

Sure.

First I would say Theres really two factors that come into play. The first is cost of capital, which is important consideration, but not the only one.

Second is.

The operational structure of the asset and how can do cities to operating with a lease.

So in Boston in the transaction in Boston, we were able to achieve both an attractive cost of capital and that asset just based on the stability of revenues in the regional markets and a much lighter capex burden relative to say in Las Vegas.

At a logical financing source for us, which is really which is really what it was.

We're not we weren't in the market just to raise cash right. This was a cost of capital question first and foremost so we're not going to be in the market with land or any other.

Any other ancillary assets around the property and the property is anytime soon.

Alright understood.

And just for our own.

<unk> information.

Yes.

Since you talked about the buildings in Las Vegas in your prepared remarks.

Do the golf course or the other.

Other excess land across the street would they have considerable leakage as well or had you not looked into that at this point.

Well I'm not I know, we know every nook and cranny potential source of leakage, but we're not interested in selling land. We have a 20 year view 20, plus year view, when we think about Las Vegas, we love our portfolio here.

And all of that land has real long term value to shareholders. So it's not even worth talking about David.

Okay Fair enough. Thank you very much you got it.

Thank you our next caller is Dan <unk> from Wells Fargo.

Hey, good afternoon, guys. Thanks for taking my question.

So in Vegas, the Opex per day for the quarter. I believe you said was $3, one 8 million, which was a little bit higher than third quarter.

How should we think about this kind of evolving over time, given the changes in mix.

Occurs over the next year or two but let me let me start and then I'll ask Vince to provide provides some of the details so.

We are down from an FTE perspective, we talked earlier in 2021 about our commitment to enact certain permanent cost saves really.

How we how we run and manage the business day to day. So we've been very disciplined on on head count and we've been.

We've stayed true to our prior commitments.

Q4, we had some incremental cost of goods you can see it in the revenue numbers, it's kind of kind of goes part and parcel with that with the revenue numbers that you saw and then we had some onetime costs really around special events that we had in the quarter new year's.

Some some other events that impacted costs during the period. So we're not we're not prepared to guide you to a specific margin or.

Specific opex per day at this point, what I would say is at any given revenue level, we will be running margins higher than we did in 2019.

Vince do you have anything you got it.

Yes, the only thing I would add is just to kind of pay attention to the seasonality right as we had seasonal amenities and <unk>.

<unk> into <unk>, there is some seasonality to opex that obviously comes with additional revenue streams.

Apart from that I think Greg covered it really well.

Got it thanks.

Moving to Macau, how do you think about.

The shift of your of your customer base from VIP into the premium mass or direct VIP product is there a certain.

Percentage that you look for I think is a reasonable level to recapture and how.

How does it work in terms of the margin dynamics is it like recapture half half the customers at two times margin. So you end up being kind of on.

On the same level or how do you think about those moving pieces in terms of the margin mix in revenues there.

Well I guess first of all when.

When you think about the customer motivation and demand.

<unk> customer in Macau as a gaming customers are gaining customer. It's really just a question of how they're choosing to play whether they're playing with role playing with with cash we have the best kit in the market. We have the best service in the market. So we like our odds.

Longer term in Macau as I mentioned earlier, we started a journey of becoming very adept to mass marketers with the opening of palace and 16 by the time, we got to 19.

More than 80% of our EBITDA was derived from sources other than VIP. So we already have what it takes to be competitive with respect to.

To the mass market, and obviously VIP VIP direct and would you add anything to that.

You are completely right Greg.

Alright, thanks, so much guys I appreciate the color.

Got it.

Michelle were going to take one final question.

Thank you and our final question comes from John Decree from CBRE.

Hey, guys. Thanks for taking my question.

Maybe to stick with Macau I think in the prepared remarks, you mentioned that you are still being prudent on capital spend until demand returns.

When demand returns is there anything earmarked.

For repositioning or any capex that you would have planned given it's going to be 18 months to two years. Since you saw real demand there or is there anything youre thinking about in Macau.

Yes, we're always thinking about something that's kind of who we are.

We have a number of.

A number of things that we're looking at.

Really in response to the evolution of the market across food and beverage across the adjacent land.

I guess the best I can say at this point is stay tuned.

Fair enough. Thanks, Craig.

Maybe one more kind of further looking question plenty on the plate right now but.

Other potential projects that youre looking at in a meaningful way and I guess I ask in the context with.

New York picking up some momentum.

Pretty large opportunity there or is that something that would be on your radar or any other maybe larger capital intensive projects that you would give a good look at.

Yes, we're interested in a number of jurisdictions if its a gateway city. If it's a limited number of licenses if it is reasonable tax rates and reasonable regulations.

We are interested in it so everything as you follow New York carefully everything is too early to really provide any.

Any concrete guidance at this point, but we are we're at.

Active in New York, where active anywhere there is a material opportunity to deploy capital.

Thank you Frank that's helpful. I appreciate all the color today.

You got it alright.

All right everybody. Thank you for joining US today, we look forward to talking to you next quarter have a great day.

And thank you. This concludes today's conference call. You May go ahead and disconnect at this time.

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Welcome to the Wynn resorts fourth quarter 2021 earnings call. All participants are in a listen only mode until the question and answer session of today's conference.

Ask a question press star one on your Touchtone phone record your name and I will introduce you. Please limit yourself to one question and one follow up.

This call is being recorded if you have any objections you may disconnect. At this time I will now turn the line over to Vincent Zahn Senior Vice President and Treasurer, Sir you may begin.

You Michele and good afternoon, everyone on the call with me today are Craig Billings and Brian <unk> in Las Vegas also on the line are Ian Colin Linda Chen <unk>, Carruthers, Frederic <unk> and Ginnie holiday.

Want to remind you that we may make forward looking statements under safe Harbor Federal Securities laws, and those statements may or may not come true.

Now I'll turn the call over to Craig Billings.

Thanks, Vince afternoon, everyone. Thanks for joining us today.

I'd like to start by saying that I'm.

So annually honored to be speaking to you as CEO of Wynn resorts join when in 2017, because I spent much of my career admiring the company for its dedication to its craft into its people.

I am excited to lead the company forward and I know that our best days are ahead of us.

Before we talk about the fourth quarter I'd like to give you some additional context around a couple of transactions.

We've announced over the past few weeks.

First let's touch on the sale leaseback of our real estate at Encore, Boston Harbor that we announced today.

We've discussed the sale of real estate on past earnings calls and we've always maintained that we believe our valuation over any reasonable period of time reflects the value of our real estate.

We believe that could be the case today.

So why execute a sale leaseback.

The sale leaseback is after all nothing more than a financing and capital structure decision.

Our case this transaction benefits our capital structure in a few different ways.

First and foremost it provides long term capital to grow our business.

And capital to deploy in attractive Greenfield projects like our development in the UAE, which I will discuss in a moment.

Second it enables us to potentially retire near term debt with a higher cost of capital than the lease.

I would note here that this sale leaseback transaction was executed at 17 times rent or a five 9% cap rate a record for regional gaming assets by some two turns and an attractive long term cost of capital.

These terms, we are only achievable due to the unique way that realty income is structured and their willingness to engage and align this transaction with Argos.

Overall this transaction gives us a lot of additional financial flexibility.

Transaction will close near the end of the year.

Some of you may ask what about Wynn Las Vegas.

In response to that I would note a few important points.

First Las Vegas is a very different market when compared to regional markets.

Potential operational deleveraging in an economic downturn is more extreme as we saw in 2009.

And the need for continuous and sizable reinvestment in order to stay relevant is high.

As many of you know it is fundamental to us that we maintain consistent service levels and capex throughout the business cycle and I never want us to be in a position where in the midst of a downturn we have to choose between our world class service and is growing rent or between paying rents and investing in our property.

In fact, our 2021 results speak to the power of our proprietors mindset.

With a host of new investments bearing fruit and with our team intact. Despite COVID-19 , we continue to take market share and delivered the property is highest ever annual EBITDA.

Further the breakage costs related to a sale leaseback of Wynn Las Vegas would be significant.

Beyond the tax leakage, our capital structure in the U S has bond financing at both Wynn Las Vegas, and our holding company above it.

Our sale of our Las Vegas real estate would trigger an acceleration of that debt driving over $600 million in breakage.

For now we believe we will deliver far more long term shareholder value by continuing to own our real estate in Las Vegas, and I am confident our equity valuation will continue to reflect that.

Let's turn to our announcement regarding an integrated resort development in the UAE.

We are thrilled about this projects, which will further diversify our business, while extending our brand into the middle East and Europe .

I'm sure all of you are familiar with the UAE and with Dubai in particular.

It's a dynamic country and we're proud to have the opportunity to deliver our exceptional hospitality there.

Ross I'll highlight is about 45 minutes north of the Dubai Airport via a first class Multilane Highway.

The location on Marsh on island is stunning and will be a great setting for our resort.

I do want to provide some clarity on a topic I have seen in a number of analysts notes and media reports regarding the project.

And any new jurisdiction there are three things that need to happen to have an integrated resort with gaming.

The first is enabling legislation is gaming legal.

The second is regulation, how will gaming be conducted.

Third is licensure, who can operate again gaming establishment.

With respect to this project no further enabling legislation is required we're not looking at a multi year process for legalization like we've seen in some other markets.

Regulated are well advanced having been modeled on those of Singapore and the United States.

The tax rate and license structure, a very reasonable.

And finally with the regulatory framework, taking shape and the regulator in place we will be licensed to conduct gaming Kinross, Ohio.

In other words, where we go with this project, we're commencing master planning now and will begin mobilizing architecture and design in due course.

I expect our ultimate design will be one or more iconic buildings to both take advantage of the pristine Beach location and also show respect for the unique cultural aspects of the region.

We're big believers in the potential for Roswell highlight to be an amazing tourism and hospitality destination.

Lastly, I would point out that this is the first transaction, where wynn resorts as being paid for its Knowhow and service excellence via a management agreement.

I expect it to provide a very high return on invested capital.

We have a lot happening around here and I am personally very excited about the future.

Turning to the fourth quarter and starting in Las Vegas.

The team at Wynn, Las Vegas had an absolute stunner over quarter.

$186 million EBITDA, despite holding a bit low drop was strong handle was strong revpar was strong I could go on and on.

As you've heard from some of our peers January results in Las Vegas were impacted by Omicron, particularly on the group side.

Encouragingly forward bookings in January were very strong in February to date has accelerated further positioning us well into March and beyond to.

To give you some context, our hotel occupancy in January was 61% and with the latest wave of Covid quickly receding, we expect occupancy to increase to the mid <unk> in March.

As we increasingly distance ourselves from our competitors. We believe we have strong pricing power on rooms, food and beverage and nightlife during 2022.

In Macau the market continued to experience dude visitation during the fourth quarter and our results reflected that enroll and drop in volatility.

Of course, you need only look at Chinese new year to remind yourself of the power of that market and the pent up demand for visitation during the holiday period turnover per day in our direct program was up nearly 175% from 2021 and down only 12% from Chinese new year 2019.

Encouragingly, we are seeing both strong spend per customer and significant new customer sign ups in our direct business highlighting the strength of our market, leading product and service offering.

On the mass side table drop was up 34% versus 2021 and that drop was 60% of our Chinese new year 2019 levels.

As we have seen before Wynn Macau is more accessible demand snaps back.

Long term I remain incredibly enthusiastic about the prospects for Macau.

Between the shift to higher margin premium mass customers into customers, who have more motivation to visit them just gaming the market is evolving and we are prepared to adapt and grow our business as we embrace those changes.

Further the concession process continues in a methodical and logical manner with the amended gaming law current currently sitting with the Assembly Committee we.

We continue to be pleased with the process and what the content of the amended law.

Turning to Boston like Vegas, Encore had an unbelievable quarter and both gaming volumes and Revpar, resulting in $68 million of EBITDA in Q4.

The team in Boston has really done a tremendous job, particularly in the casino, but we're just getting started.

Our next phase of growth in Boston will be driven by database growth, particularly growth outside of adjacent areas and through our upcoming expansion project across the street from the property.

That expansion will see us add additional amenities and importantly additional parking.

Parking, particularly on weekends remains a constraint for us.

Though oncor is now run rating higher EBITDA and a number of strip properties Encore still has a tremendous amount of growth ahead of it.

Lastly, on when interactive we generated about $785 million of turnover across casino and sports betting in Q4, which drove a 29% sequential increase in revenue.

This was despite a meaningful curtailment and marketing spend in November and December .

To that end, we began shifting our user acquisition makes in early November focusing only on proven performance marketing channels, where we know we can achieve positive ROI on spend particularly in casino.

Overall, we estimate Q1 2022 burn should be down some 60% from Q3, 21% to the $40 million range and I expect Q2 2020 to be even lower.

We estimate low table hold negatively impacted EBITDA by approximately $10 million in the quarter.

Overall, our hotel occupancy reached 86% in the quarter with 91% occupancy on weekends.

Lee we have stayed true to our luxury brand and continue to compete on quality of product and service experience with our overall ADR, reaching $4 41 during the <unk> 21, 37% above <unk> levels.

Our other non gaming businesses saw broad based strength across F&B and retail which were also well above pre pandemic levels.

In the casino or <unk> 21 slot handle was 40% above for 2019 levels in our table drop was 41% above for 2019 levels. Despite still depressed international play due to COVID-19 related travel challenges.

Tim in Vegas has done a great job of controlling costs without negatively impacting the guest experience delivering adjusted property EBITDA margin of 37, 7% in the quarter or approximately 39% when adjusted for low table hold.

This was unchanged sequentially and up 1350 basis points compared to <unk> 19 on a hold adjusted basis.

Opex per day was $3, one 8 million and <unk> 21, approximately 145000 per day above for 2019 levels due to a combination of higher cost of goods on materially higher non gaming revenue along with special event costs, including the Kafka Shambo golf match among others.

We remain committed to maintaining a cost structure that appropriately balances margin and our exacting service standards and Las Vegas.

Boston, we generated another record quarter with adjusted property EBITDA of $68 2 million and <unk> 21, with an EBIT margin of 33, 4%. We saw broad based strength across the casino combined with solid hotel performance, which was aided by a favorable calendar set up during the quarter.

As Craig noted regarding Wynn Las Vegas.

And consistent with some of our original peers omicron, along with bad weather temporarily disrupted our performance at <unk> in January .

Encouragingly, we have already seen signs of improvement in the business as case counts have decreased across the region.

At <unk>, we remain very disciplined on the cost side with Opex per day, a $1 million and <unk> 21, excluding a 2 million nonrecurring accrual reversal. This was a decrease of over 20% compared to $1 3 million per day in 2019, and a modest increase relative to 950000 per day and $3 21.

The sequential increase driven by improved business volumes and increased operating hours, most notably from the hotel opening a full seven days per week beginning on September one.

Our Macau operations delivered an EBIT loss of $25 9 million in the quarter on $325 7 million of operating revenue.

EBITDA included a onetime bad debt provision that negatively impacted EBITDA by $24 million during the quarter. So we would've been essentially breakeven adjusting for that.

While business in <unk> was challenging due to the evolving COVID-19 situation, we remain disciplined on costs.

Our opex, excluding gaming taxes, and the onetime provision I noted was approximately $2 2 million per day in the fourth quarter essentially unchanged sequentially. We.

We continue to be well positioned to drive strong operating leverage in Macau as our businesses recover.

Turning to win interactive and <unk>, the business generated approximately $785 million and total turnover, 20% sequential increase relative to <unk>.

Topline growth combined with decreases in marketing spend and other opex drove an improvement in our EBITDA burn rate to $79 million and <unk> 21 versus $104 million and <unk> 21.

Since quarter end, we've continued to thoughtfully grow the business with launches in New York in Louisiana, and the initial reception from our customers has been very encouraging.

Our capex in the quarter was $78 million and we.

We remain prudent with respect to Capex, while we gained further confidence in the recovery.

With that Michelle we will now open the call to Q&A.

Thank you to ask a question press star one on your Touchtone phone on mute your phone record your name clearly after the prompt and I will introduce you for your question.

Please limit yourself to one question and one follow up question to withdraw your question you May Press Star two.

Our first question comes from.

Carlo Santarelli from Deutsche Bank, You May go ahead Sir.

Hey, Thanks, Thanks, Craig and thanks for all the color.

Guys, if I could just.

About it a little bit with the provision.

In the quarter in Macau as you think about some of the new regulations around VIP.

Kind of around running that business, whether it's the share of.

Handel as opposed to Rev share agreements or the single job good model or the heavier reliance on VIP.

Direct VIP I should say could you talk a little bit about your strategy in navigating that obviously it will be a little bit more cumbersome from balance sheet perspective, but how you guys are kind of thinking about the.

The outlook for that business run from a direct platform with some of the new requirements.

Sure Carlo.

I'll start and then I'll ask Ian.

To give you his thoughts as well.

As you know the situation is evolving the charge that we took in the quarter was frankly due to primarily due to.

Historical junket position. So it really doesn't have anything to do with the business going forward and as Vince mentioned, if you adjusted for that charge, we would have effectively been at at breakeven in Macau, but.

The amended law in general I think we are quite pleased with.

The various components of it in the process as we've said many times has been impactful in terms of administration.

So.

The market's evolving the markets moving quickly we have the best product best service in the market and so it.

Indicating that there has been movement among the.

Among the different groups of customers from jumping to premium mass and junket jump into direct.

Have a very very prudent approach towards deployment of.

The balance sheet.

And I expect it will.

We will continue to take that approach.

And to your last I guess, two one of the subsets of your points.

The use of agents that use of referring parties et cetera, that's all kind of happening in real time so.

We are exploring all potential options in the market that are consistent with the amended gaming law.

And we'll figure it out in due course, but it's really too early to say and do you have any additional thoughts.

Just the disappearance of junket operators is a very recent development. So the only way we can actually judge the impact is pretty much over Chinese new year, when we saw meaningful growth in both premium mass and in our own direct VIP program and we have seen that migration.

<unk>, a former junket players they have the desire to gamble they have a desire to come to Macao, we have the best product in the market and the best service. So we feel very confident that we will capture more than our fair market share and I would just add to that Carlo we've said.

Before I can't remember if it's been on calls or in other in other forums by 2000 1980 something percent of our EBITDA was from sources other than VIP.

We started our journey of diversification drilling with the opening of Dallas in 2016, and we have become very very capable pass marketers over the course of the past five years. So I kind of look at Macau and I see an amazing setup, where investor expectations are pretty low.

And we have the opportunity to kind of chart, our own our own destiny and frankly, that's what this company has done for years and years and years, particularly here in.

In Las Vegas. So we're excited about a market that is higher margin premium mass and customers that may be traveling to Macau for motivation other than just <unk>.

Just purely game.

Great. Thank you Craig and thanks Ian.

Just one follow up as it pertains to the master lease so our encore Boston Harbor.

First of all Craig is there any breakage on the one seven and secondly, I see the escalator is 175% are there any coverage ratios that trigger that one way or another.

Let me start and then I'm going to ask Vince to give you some details.

We've been pretty explicit about our views on sale leasebacks and I think this one is unique because the lease which youll see attached to the 8-K, you can tear it apart yourself.

Incredibly unique it's very very flexible and very friendly to us as the opco and that was incredibly important to us because as I said in my prepared remarks, I would never want to choose between the landlord and our people our people our service levels and our service levels for our brand so you're going to find a whole bunch of unique things in that.

Is that I think many of them.

Probably precedent setting.

To your specific questions I'll ask Vince to to China.

Carlo do you mean, you mean debt breakage costs.

Cash proceeds of this transaction.

No there isn't it doesn't trigger any of those provisions that would cause the breakers, you can call us and forced us to call. The debt. So the answer is no to that.

Total transaction cost should be somewhere in the $50 million range. The net proceeds will be 165 billion as far as it relates to the ESCO. The escalator. There are no coverage provisions on the escalator, it's 175% for the first 10 years, then after at least Youre 11 and beyond.

The greater of CPI or 175% and that's capped at two 5% and you can go look at some of the lease comps, particularly in Las Vegas and see how favorably.

Package compares.

There are no minimum capex requirements, which was very important to us.

So those are kind of some of the high level details of the Luis Carlos.

Alright, great. Thank you very much guys.

Got it okay.

Thank you our next caller is Joe Greff with Jpmorgan you May go ahead.

Good afternoon guys.

Great Vince how are you thinking about utilizing the I guess the $165 billion of net proceeds coming in from the sale of <unk>.

Sure it's.

It's important I want to remind you it doesn't close till the end of the year. So we'll be in a different position.

At the end of the year vis vis the Macau.

Our hope is that Vegas, and Boston continue to Hum, along so with that caveat.

Things, we can we can do to drive incremental EBITDA and then there are some expensive pieces of debt, including the bonds that we did when we I think reopened the high yield market in.

In the midst of Covid.

That would prove beneficial to shareholders as well.

Great.

And then maybe can you comment on how you're thinking of potentially monetizing.

Went interactive obviously there was a.

A press report.

Potentially looking to monetize that through.

Can you talk about the delays youre thinking of.

El season, and that we would take a more.

A more measured approach.

The <unk> gaming business, where we have actually seen pretty reasonable success.

There is a logical place for us in that business longer term. Unfortunately, it's not a humongous Tam right now.

Sports betting is the total addressable market in sports betting is where most of the irrational behavior is is taking place.

No.

Great and then one final thing.

Craig you talked about.

Additional investments in Las Vegas, and potentially at <unk> can you talk about what's committed in terms of Capex for 2022.

Yes, sure I'll take that Joe.

So in Vegas, we're pretty much back to regular maintenance maintenance levels of $75 to $85 million per year in Vegas.

Beyond core maintenance Craig noted that we are reconstructing the Rep theatre, putting a new show in place that has a budget of $120 million of which about $30 million of spend through 12 31. The rest are against the remainder will get spent ratably in 2022, we're renovating the Wynn Las Vegas tower rooms, with a total budget of $220 million of which $1.

<unk> has been spent same thing there the balance will be spent over the remainder of 2022 in Boston and the property is essentially new so maintenance will only be in the $20 million range, there, mostly repositioning of non gaming amenities at that property.

It could have some modest capex towards the end of the year for the Easter Broadway expansion that Greg noted.

The budget there is going to be somewhere in the two to $2 50 range and that will that will basically be spent under a normal capex S curve over 'twenty three 'twenty four.

And Joe just just one other point on the Boston Capex I wanted to ask one of the unique aspects of the lease that we entered into is the ability to put some additional rents into into the lease.

Really upon completion of that expansion at a specified cap rate, which will in turn allow us to more than get our money back.

Great. Thank you guys.

Thank you. Our next caller is Thomas Allen with Morgan Stanley You May go ahead Sir.

Hey.

Thanks for taking me.

Just on the Macau prior to Covid hitting your running at 99% occupancy for your rooms, I think running at over 90% comps can you just talk to us how youre thinking about that on a go forward basis.

Sure I'll start and then I'll ask Ian.

To provide some thoughts as well I mean, the market is I think the fundamental question.

But you have to access offerings over the course of the next five years 10 years.

Will a leisure business emerge in Macau and if so does that mean to you.

Thank you have a yielding mechanism like we do in Vegas to yield cash shrimps I don't think we are.

Our close today, yet I think we would assume that we're going to continue to be our compound business.

And we don't have a ton of rooms relative to some others in the market. So we have a lot of opportunity to.

Yield those rooms, and do you have any additional thoughts.

Well, what we've seen in the periods when we've actually been recently opened to Chinese consumers when they've been able to travel is there is a huge pent up demand at all levels of the business and Theres cash business out there as well and there is family travel. That's increase we're also seeing an increase in millennial travel.

And we're seeing new customers come to Macau, we've seen that again over Chinese new year. So during the week when we had rooms available at times. There is a cash business and rich cash business format Fluence will customers to come. So we feel that we can we can fill rooms when they are available.

Alright. Thank you and then just on the UAE project. I mean, you guys know this is kind of the first of a tie in where youre being hired for cloud management expertise and development expertise do you think there is a lot of other opportunities how are you thinking about that.

Yes, it's.

Great question Thomas.

As we think about logical adjacencies for our business, we think about everything under the Sun, we're constantly thinking about ways to increase shareholder value.

I think it is a pivotal moment cannot be replicated, we'll see but it's an important moment.

We're entering into really a four season style management deal for the creation of an integrated resort is that expandable to smaller properties in gateway cities. It may be something that we will.

That will explore.

Thank you.

Thank you our next caller is Steven Grambling with Goldman Sachs. You May go ahead Sir.

Hi, Thanks, maybe as a follow up to that I guess, how are you generally thinking about underwriting.

The ROIC in a market like the UA as you think about the structure of this transaction on potential structure can you give any kind of color on what you foresee from a customer standpoint, and you're looking at your global database, maybe what spending patterns have emerged in that market.

Sure.

I'll start with the latter and then move to the former so think about it this way when we opened that property, 95% of the world's population will be within an eight hour flight of of Wynn resorts property.

I don't think anybody else can say that.

So this is not only an opportunity to leverage our pre existing database, but it's an opportunity to grow database to Dubai Airport has some 80 plus million passengers passing through it every year.

<unk> it's astounding.

The UAE is already.

Substantial destinations for not only the region, but for Europe for branch procurements.

For really folks from all over the place. So this is a significant customer acquisition opportunity kind of really material extension of our brand in terms of how do we underwrite it to $2 billion projects. My presumption is that it will be 50% debt, 50% equity of which we will be 25% to 40% and then obviously we have the.

The management contract sitting on top of it the land is astounding beautiful and like I said before nearly shovel ready so execution risks from a construction perspective as.

As we see it is pretty low.

That's helpful.

So it's both margins and ultimately EBITDA from here.

Sure I'll start and then I'll ask Brian to provide you with these thoughts yes.

Yes, Q4 was was definitely definitely arrangement.

As impressive as the team did some really an incredible job. If you look back over the course of 'twenty. One we saw a pretty substantial leisure and gaming demand I think thats consistent across the market. Although I would say we have continued to distinguish ourselves from our service and quality.

Perspective.

And but there are also a lot of customer types that weren't around international play wasn't around group and convention was quite spotty and very concentrated into a couple periods one of which was in fact.

The fourth quarter.

So that obviously helped the fourth quarter Janney.

January if you looked at if you look forward January was as we noted soft because of <unk>, we're already seeing the demand snapback from that Brian do you want to comment on kind of the structure of that demand or any additional thoughts you might have sure Greg.

I think people want to meet again, and we're very bullish on the future things are pacing ahead, and we're looking really solid.

That's all Super helpful. Thanks look forward to seeing the major continue and perhaps resume in Macau.

Yes.

Yeah.

Okay. Thank you. Our next question comes from David Katz with Jefferies. You May go ahead Sir.

David Katz your line is open.

Apologies, thanks for including me I was on mute.

Afternoon, I wanted to just ask about the.

Thought process around.

Deciding.

To sell the real estate in Boston, obviously, the the terms that you achieved are compelling.

But in the context of.

Other opportunities there may have been.

Divest assets such as excess.

Excess land on the strip.

Et cetera, how did you sort of think about that choice versus maybe some others.

The land being one example, maybe there are others that we could discuss.

Sure.

First I would say Theres really two factors that come into play. The first is cost of capital, which is an important consideration, but not the only one.

Second is.

The operational structure of the asset and how can do submit is to operating with a lease.

In Boston in the transaction in Boston, we were able to achieve both an attractive cost of capital and that asset just based on the stability of revenues in the regional markets and a much lighter capex burden relative to say in Las Vegas.

At a logical financing source for us, which is really which is really what it was we're not we weren't in the market just to raise cash. This was a cost of capital question first and foremost so.

We're not going to be in the market with lance or any other.

Any other ancillary assets around the property and the property is anytime soon.

Understood.

And just for our own.

Information.

Yes.

Since you talked about the buildings in Las Vegas in your prepared remarks.

Do the golf course, or the other excess land across the street would they have considerable leakage as well or had you not looked into that at this point.

Yes.

I'm not I know, we know every nook and cranny potential source of leakage, but we're not interested in selling land. We have a 20 year view 20, plus year view, when we think about Las Vegas, we love our portfolio here.

And all of that land has real long term value to shareholders. So it's not even worth talking about David.

Okay Fair enough. Thank you very much you got it.

Thank you our next caller is Dan <unk> from Wells Fargo.

Hey, good afternoon, guys. Thanks for taking my question.

In Vegas, the Opex per day for the quarter. I believe you said was $3, one 8 million, which was a little bit higher than third quarter.

How should we think about this kind of evolving over time, given the changes in mix.

Really occurs over the next year or two so let me let me start and then I'll ask Vince to provide provide some of the details so.

We are down from an FTE perspective, we talked earlier in 2021 about our commitment to enact certain permanent cost saves really.

How we how we run and manage the business day to day. So we've been very disciplined on on head count and we've been.

We've stayed true to our prior commitments.

Q4, we had some incremental cost of goods you can see it in the revenue numbers.

It goes part and parcel with.

The revenue numbers that you saw and then we had some onetime costs really around special events that we had in the quarter new years and some some other events that impacted costs. During the period. So we're not we're not prepared to guide you to a specific margin or.

Specific.

Opex per day at this point, what I would say is at any given revenue level, we will be running margins higher than we did in 2019.

Vince do you have anything you got it yes.

Yes, the only thing I would add is just to kind of pay attention to the seasonality right as we had seasonal amenities.

<unk> into <unk>, there is some seasonality to opex that obviously comes with additional revenue streams.

Apart from that I think Greg covered it really well.

Got it thanks.

Moving to Macau, how do you think about.

The shift of your of your customer base from VIP into the premium mass or direct VIP product is there a certain.

Percentage that you look for I think is a reasonable level to recapture and how.

How does it work in terms of the margin dynamics is it like capture half half the customers at two times margin. So you end up being kind of.

On the same level or how do you think about those moving pieces in terms of the margin mix in revenues there.

Well I guess first of all.

When you think about the customer motivation and demand.

Gaming customer in Macau is gaining customers are gaining customer. It's really just a question of how they're choosing to play whether they're playing with role playing with with cash we have the best kit in the market. We have the best service in the market. So we like our odds.

<unk> term in Macau as I mentioned earlier, we started a journey of becoming very adept to mass marketers with the opening of palace and 16 by the time, we got to <unk> 19.

More than 80% of our EBITDA was derived from sources other than VIP. So we already have what it takes to be competitive with respect to.

To the mass market, and obviously VIP VIP direct and would you add anything to that.

You are completely right Greg.

Alright, thanks, so much guys I appreciate the color.

Got it.

Michelle were going to take one final question.

Thank you and our final question comes from John Decree from CBRE.

Hey, guys. Thanks for taking my question.

Maybe to stick with Macau I think in the prepared remarks, you mentioned that you are still being prudent on capital spend until demand returns.

When demand returns is there anything earmarked.

For repositioning or any capex that you would have planned given.

Given its going to be 18 months to two years since you saw real demand there or is there anything youre thinking about in Macau.

Yes, we're always thinking about something that's kind of who we are.

We have a number of.

A number of things that we're looking at.

Really in response to the evolution of the market across food and beverage across the adjacent land.

I guess the best I can say at this point is stay tuned.

Fair enough. Thanks, Craig.

Maybe one more kind of further looking question plenty on the plate right now but.

Other potential projects that youre looking at in a meaningful way and I guess I ask in the context with <unk>.

New York picking up some momentum.

Pretty large opportunity there or is that something that would be on your radar or any other maybe larger capital intensive projects that you would give a good look at.

Yes.

We're interested in a number of jurisdictions if its a gateway city. It's a limited number of licenses if it is reasonable tax rates and reasonable regulations.

Well, we are interested in it.

So everything as you follow New York carefully everything is too early to really provide any any concrete guidance at this point, but we are we're active in new York, where active anywhere there is a material opportunity to deploy capital.

Thank you Frank that's helpful. I appreciate all the color today.

You got it alright.

All right everybody. Thank you for joining US today, we look forward to talking to you next quarter have a great day.

And thank you. This concludes today's conference call. You May go ahead and disconnect at this time.

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