Tom Reeg
Chief Executive Officer at Caesars Entertainment
Thanks, Anthony. Hello, everybody. I would echo Anthony's comments thanking our team members. I'm particularly heartened by the way that the team came together in a very difficult environment post closing the Caesars acquisition. This was our first full year owning Caesars, and we're excited to talk about what we accomplished. I'm going to give you some greater detail behind the larger numbers that Anthony went through on the brick-and-mortar side, and I'm going to talk about what we have said in the past and let you measure how we have performed relative to metrics that we've put out. So speaking about the quarter, we were on track for an all-time record in Vegas until the last two weeks of the quarter when Omicron spiked across the country and kind of knit us in the bud in the last two weeks of the year. Omicron continues to impact us in January. January occupancy was about 75% in Vegas. As Anthony said, we were 86% for the fourth quarter. February month-to-date has ticked up to 80%, and we expect March to be into the mid-80s. All of our forward demand indicators look very strong. In Vegas, Anthony talked about the group business, our measure of cancellations to new bookings, so that number peaked in early January and has been coming down quickly since. So we're set up for -- we've got a good setup in Vegas going forward. Regional, similar story, Omicron clipped the last couple of weeks. If you think about New Orleans and Caesars and Atlantic City that we call out, New Orleans and Caesars Atlantic City, both did a little less than half of the EBITDA that they did in the prior year quarter for different reasons. New Orleans because there's a City of New Orleans vaccine mandate and mask requirement.
Competitors of ours that are easily drivable from the city don't have to deal with the restrictions, and we have a minimum tax requirement in New Orleans relative to that license that makes margins difficult as volumes decline. We're building our way out of that. We're hopeful that the restrictions go away post-Mardi Gras, which is what has been indicated by the mayor and prior to the restrictions being imposed, we were doing $12 million a month of EBITDA. So we expect a significant snapback when that opens. Caesars Atlantic City had the bulk of its room product out in the quarter. That's part of the construction program that Anthony described. The bulk of that construction project will be completed by this summer. So all the room remodels, new amenities in Atlantic City should be online for the high season, but that's going to impact our results to construction for the next quarter or so. So that's the current environment. I wanted to go back and look at kind of what we laid out in prior transactions, what we've told the market to expect and give you an update. We don't give you a property-level EBITDA anymore, and I'm not going to get in the habit of doing that. But I think it's instructive and useful as we move to the Digital conversation to talk about how we deliver on numbers that we put out and that we don't take them lightly.
So I'm going to take you all the way back to the deal that took us public when we bought MTR Gaming. The only remaining property from that transaction is Scioto Downs. And as we've discussed with many of you multiple times, what we recognized was inefficient marketing subsidization of revenue in the regional space generally. And that's what we found in Scioto. And then as we move down the road and ultimately bought Caesars. We said as we roll out Caesars Rewards into these properties, there's going to be a significant positive impact. And so if you just take Scioto as an example, when we bought it, that asset was doing $45 million of EBITDA at a margin a little over 30%. And in 2021, Scioto did just shy of $115 million of EBITDA at a 46% EBITDA margin. And keep in mind that's in a state where our tax rate is 42%. So a 46% margin and a 42% tax rate stay. Then we went to Reno. We bought out MGM's interest in Reno. That -- those three assets at the time were doing $60 million of EBITDA. We redid all of the rooms at Circus Circus, ultimately all of the rooms at Silver Legacy, spent a fair bit of money. We talked to investors about how we thought we could get that to maybe $90 million or $100 million of EBITDA that would have Caesars Rewards to the property. In 2021, we did just shy of $130 million of EBITDA in Reno at over a 40% EBITDA margin, beating the prior all-time high by about 50%.
So then we went down the road to Ohio. And this is where we've finally gotten large enough to where investors were paying attention to what we were doing. So we bought Isle of Capri in 2017. And we said this company is doing $200 million of EBITDA, we think we can generate $30 million of synergies. And we had investors and our peers that were skeptical to say the least, saying that you couldn't find that kind of opportunity in these assets. They've been picked over. Fast forward to last year, again, do the same work that we've done in terms of removing subsidies, removing the corporate expense and rolling in Caesars Rewards into these properties. Since that acquisition, we sold four properties that totaled a little over $60 million of EBITDA. So for us to get to that $35 million of synergies, we'd have to be doing $175 million of EBITDA out of the remaining Isle properties. In '21, those remaining Isle properties did a little over $260 million of EBITDA within our system. Then we went to Elgin. And when we bought Elgin, it was doing $36 million of EBITDA. We bought it for 9x. And we said we think we could -- we think we could get that multiple to 6x through synergies. In 2021, Elgin did $62 million of EBITDA, bringing that multiple down to 5x. And recall, that's in Elgin was closed for the bulk of January last year because of COVID restrictions and faced a competitive opening of Rockford late in the year.
And going back to Reno, Reno faced social distancing for the first quarter of last year. So these are results in a year that had headwinds, challenges to navigate, and those are the numbers that we put up. So then we went to Tropicana. Tropicana, we bought, we said we could do $40 million of synergies. And if you look at just one asset in Tropicana, Lumiere in Saint Louis, we took that over -- was doing $33 million of EBITDA on a trailing basis when we bought it. In '21, that did $72 million of EBITDA. So Lumiere alone was enough to cover all of the synergies that we targeted in the Tropicana transaction. And then, of course, we came to Caesars. And that was obviously the subject of a lot of conversation when we bought Caesars and we said we could find $500 million worth of synergies in Caesars. We had to fight through the skepticism of the Caesars Board at the time. We actually had to go through with the existing management team and have them present our synergy case before the Board ultimately approved the transaction. If you look at what we did with our first year post owning Caesars, first full year, the synergy realization is over $1 billion at this point. The Las Vegas assets had their largest EBITDA year on record in the history of Caesars in a year where there was very little group business, very little entertainment for most of the year and social distancing for the first quarter of the year and masking for the bulk of the year. And then you look at some of the Regional assets. Report -- I'm sorry, Horseshoe Bossier City, we took over, it was doing $37 million of EBITDA. In 2021, it did $72 million of EBITDA. And if you look at Tunica in Mississippi that was doing about $65 million of EBITDA when we took it over, it did over $100 million last year. And so I want you to understand what's in the bigger numbers that are driving our performance.
And more importantly, that we put out targets because we know we're going to meet them and exceed them. And the nice thing about this business is this call is being transcribed. Every call we have done with investors has been transcribed. You can look back at every call that we've had look back at all of the predictions that we've made and I think our track record is 100% today. And so that leads me into Digital, where I know the market is struggling. Investors are struggling with. Can this be a profitable business? We've gone from kind of ever increasing bullishness to unlimited bearishness at this point. What we told you was we saw a significant opportunity to acquire customers and grow this business. We think this -- we told you at the time, we think this is the most exciting growth opportunity this space has seen in three decades. We thought we had a significant advantage with our Caesars Rewards database of 65 million people. We told you that we'd expect to lose on a cumulative EBITDA loss basis over $1 billion before we inflected to EBITDA positive in the fourth quarter of 2023, effectively, football season of 2023. We were behind. We were an afterthought in this business. We were buying William Hill last year. So, we effectively set out the first full football season in a number of jurisdictions. So we had ground to make up -- we had the launch an app. We had to launch a brand, and that's what we set out to do. And I would tell you that everything I just laid out in that framework remains in front of us. Nothing has changed. We still expect to lose on a cumulative EBITDA loss basis in excess of $1 billion and generate better than a 50% EBITDA return on that investment at maturity. That has not changed.
What has changed is we launched our brand. And we went from that afterthought in the market to, if you look at us through the last month that's been reported in each state that reports sports betting handle, we're 21% of the sports betting market in the United States. And notice I'm not cherry-picking markets. We're I'm doing well and leaving out markets where I'm not. That includes big handle markets like Pennsylvania and Illinois, where we have 1% and 2% market share of handle because we've not rolled out the Liberty brand yet. That has exceeded our expectations. In that original framework, of course, we had market share expectations. We've already exceeded them. So what you're going to see from us as we move forward is you're going to see us moving toward profitability. I'm not going to get into the -- how did this happen at the state level, that's been debated by others for quite some time. What I'd tell you is we have a window into states that are profitable within our own business. And we know the trajectory that they're going to -- that the newly launched states are going to move down. And we are -- you are going to see us dramatically curtail our traditional media spend effective immediately. We have accomplished what we set out to do. We set out to become a significant player, and it's happened significantly quicker than we thought. And I think most of you know me as someone who's not one to spend any money needlessly. So, we've gotten to where we need to be. You're going to see our commercials largely disappear from your screens. You're going to see some that we couldn't -- there's some media spend that we couldn't get out of coming into March madness in a couple of states. But we will largely be off of traditional media other than in new launch states from here and launch dates in both iGaming and sports.
So talk about what we've seen. New York was obviously an eventful launch for everyone. The volumes in New York were about 2x what we were anticipating, and our market share was about 2x what we were anticipating as well. So we signed up about 0.5 million customers in New York since we launched. New York is approaching as large as the rest of the business in Caesars Digital combined. And we -- we're extremely pleased with how we came out of the box. But because of the launch of New York and Louisiana in the first quarter, you should anticipate that this current quarter is our peak EBITDA loss that you're never going to see a quarter like this again, that the quarterly loss is going to be larger than it was in fourth quarter. But you're going to see us moving toward profitability and making moves both in traditional media and ultimately through the offers to the customers because we have reached where we want to reach in terms of customer acquisition. If you look at what's happening in Caesars Rewards. So our view was Caesars Rewards was a distinct advantage for us. If you look at numbers, numbers of customers since we've launched, Caesars Rewards represents about 28% in number of the customers that we brought into Caesars Digital. In terms of volume in Caesars Digital, those customers are almost half of the volume of the digital business. So the thesis was we had already identified a lot of the most valuable gamblers that were out there, and our job is to convert them to the Digital business. And that's what we're finding.
We also discussed that we expected the Digital business would help us to drive incremental value in the brick-and-mortar business. That we would source customers in digital that would show up in our brick-and-mortar business. And what we've seen to date is extremely encouraging. We have not done a lot of cross-marketing from brick-and-mortar into digital yet, largely because most of our digital customers are very new, particularly if you look at a place like New York that just opened about five weeks ago. In the brick-and-mortar business, if you look at customers that were sourced out of Digital. So either they're brand-new customers in the enterprise or they were dormant Caesars Rewards customers, we're on a run rate of over $150 million of gaming revenue annually out of Digital into brick-and-mortar. That's extremely high volume -- high flow-through revenue, all that comes out is gaming taxes. That doesn't include any spend beyond gaming. So 2/3 of that -- about 70% of that business is sourcing into our destination properties. So if you add assumptions on nongaming spend, we're doing over $200 million a year of revenue that's coming out of digital into brick-and-mortar right now. So that's what makes us excited about what's happening here. We still have work to do in iCasino. We're at 6% national handle share. We've been creeping up as we add additional games. We should have in excess of 350 games on the site by May this year.
So we should have a competitive product. You should expect us to roll out Liberty in Pennsylvania and Illinois in '22. And you should expect us to market in those states as we do, but that's a very different launch than somewhere where all the customers are up for grabs. So you're not going to see the expense of the launches that you saw in places like New York, Arizona and Louisiana except for Ohio and Brasilia, Maryland, if they both come online this year. Ontario, I would describe as similar to Pennsylvania and Illinois, where there's been an existing market. It's a great market there. But that's not all the customers are up for grabs. So we couldn't be happier with where we are in Digital in terms of the pace that we've become a meaningful player in the state -- in the space and the ability to start pulling back levers that will move us to profitability as quickly as we can get there. But again, the framework of we would expect cumulative EBITDA losses to be over $1 billion and EBITDA at maturity. So we're talking about 2024 and onward EBITDA should be 50% or greater ROI on that business. And I have the same confidence in those numbers that I added all the numbers I outlined in the previous transactions that we laid out. And so the other thing I want to touch on before I turn to Bret in terms of remainder of this year, we've talked about -- we expect to sell a Vegas Strip asset and launched that process in early '22. You should expect that, that remains the case. There are documents within our VICI agreements on the right of first refusal that they have that govern the timing of that, but you should expect that, that is in motion. And that the next time that we talk to you, we'll be talking about. The next time we talk to you about a strip asset sale, it will be to announce that sale.
So with that, we can invest in Digital. We can invest in the projects that Anthony described that are going to generate significant returns in the business, and we can significantly delever this year. We expect to accomplish all of that and we're excited to keep the momentum going in '22. And with that, I'll turn it to Bret.
