Las Vegas Sands Q2 2022 Earnings Call Transcript

Quartr
Provided by Quartr
July 20, 2022

Key Takeaways

  • Following the relaxation of pandemic restrictions, Marina Bay Sands generated a record US$319 million of property EBITDA in Q2, driven by strong premium and base mass play but still constrained by airlift at less than 50% of pre-COVID levels.
  • A US$1 billion capital investment is underway at MBS to deliver new luxury suites and premium amenities through 2023, positioning the resort to capture higher-value travelers and support stronger ADR as occupancy continues to rise.
  • Macao’s operating environment remains challenging, with second-quarter EBITDA losing approximately US$110 million (about US$1 million per day), yet premium mass and retail spending have shown resilience during intermittent reopenings.
  • The company has committed to a US$2.2 billion expansion at Four Seasons Macao and is prepared to invest an additional US$1 billion pending the concession retender, underscoring optimism about a return to pre-pandemic levels once borders fully reopen.
  • While facing margin pressures from a 3% increase in gaming taxes, higher utilities and labor costs, management expects that revenue growth from enhanced premium offerings and stabilized operations will restore pre-COVID margins.
AI Generated. May Contain Errors.
Earnings Conference Call
Las Vegas Sands Q2 2022
00:00 / 00:00

There are 14 speakers on the call.

Operator

Good day, ladies and gentlemen, and welcome to the Sam's Second Quarter 2022 Earnings Conference Call. At this time, all participants have been placed on a listen only mode. And we will open the floor for your questions and comments following the presentation. It is now my pleasure to turn the floor over to Mr. Daniel Briggs, Senior Vice President of Investor Relations at Sands.

Operator

Sir, the floor is yours.

Speaker 1

Thank you. Joining the call today are Rob Goldstein, our Chairman and Chief Executive Officer, Patrick Dumont, our President and Chief Operating Officer Doctor. Wilfred Wong, President of Sands China and Grant Chum, Chief Operating Officer of Sands China. Today's conference call will contain forward looking statements that we are making under the Safe Harbor provision of federal securities laws. The company's actual results could differ materially from the anticipated results in those forward looking statements.

Speaker 1

In addition, we may discuss non GAAP measures. A definition and a reconciliation Of each of these measures to the most comparable GAAP financial measures is included in the press release. We have posted supplementary earnings slides on our Investor Relations website. You may refer to those slides during the Q and A portion of the call. Finally, for those who would like to participate in the Q and A session, we ask that you please limit yourself to one question and one follow-up, So we might allow everyone with interest the opportunity to participate.

Speaker 1

Please note that this presentation is being recorded. With that, I'll turn the call over to Rob.

Speaker 2

Thank you, Dan, and thank you for joining our call today. A few brief comments and then move to Q and A. The recovery in Singapore at MBS accelerated during Quarter with property EBITDA reaching US319 million dollars the relaxation of pandemic related restrictions in Singapore And many of the source markets has enabled this encouraging improvement in the financial performance at MBS. We expect a more robust recovery over As additional airlift in Singapore comes online and further relaxation measures in the region are implemented. Our conviction, the long term opportunity Singapore market remains steadfast.

Speaker 2

Our $1,000,000,000 capital investment is underway at Marina Bay Sands has introduced exceptional new suite product and premium segment focused amenities to the resort. More offerings will be added throughout the remainder of 2022 2023 And this one hands the property's appeal to premium customers seeking the highest level travel experiences. In addition, we look forward to substantially increasing our investment in the Let's turn to Macao. The operating environment there remains very difficult. In periods when the restrictions have been lifted, the customer demand and spending in Macao have proven resilient At the premium mass level from both the gaming and a retail perspective, as the market eventually recovers our $2,200,000,000 Investment program at Four Seasons in London will provide outstanding growth opportunities in both the premium and mass customer segments.

Speaker 2

We appreciate the clarity of the revised gaming law in June. We look forward to participating in the concession retendering process as it proceeds. We continue to have the largest footprint in this incredible market. We retain great optimism at our ability to perform to pre pandemic levels and beyond the Macao Once visitation returns. We would welcome the opportunity to invest 1,000,000,000 of additional dollars in Macao.

Speaker 2

We continue to believe Macao is an outstanding market for We consider our portfolio of Resorts at Asia to be an ideal platform for growth in the years ahead. Additionally, we continue to pursue other opportunities in large land based destination resorts in the U. S. And Asia. Let's go to Q and A.

Operator

Thank you. Ladies and gentlemen, the floor is now open for questions. And the first question is coming from Joe Greff from JPMorgan. Joe, your line is live.

Speaker 3

Hello, everybody.

Speaker 2

Hi, Joe.

Speaker 3

Look to start with Singapore here. When you look back at trends within the 2Q, which were obviously encouraging, and you look at the premium mass and the VIP segments, was there anything notable In one segment versus the other throughout the quarter, how even was the recovery month to month in the segments throughout the quarter Other than seasonality, you talked about source markets driving improvement. What geographies are driving that improvement? And then lastly, With my multipart question number 1 here, can you talk about what you've seen so far in July and

Speaker 4

the 1st 20 days here? Thank you.

Speaker 2

A lot of questions there, Joe. We're not going to break out the quarter. I think we'll be it's a fight to say we're pleased to be back in the In a strong position in Singapore. And the fundamental growth there comes from obviously both base and premium mass. I don't think either one I'll try and the other is consistent movement in the right direction.

Speaker 2

I think the biggest thing we're seeing is the airlift is opening up and that also remains to be the It remains to be the most challenging part of the Singapore recovery. Airlift is still a challenge. We're getting a lot of good business out of the region, Especially of Indonesia and Malaysia, but I think there's a lot more opportunity as the airlift returns. And I think you see that in our deck. The Changi monthly visitation numbers are still relatively less than 50% of what they were Pre pandemic.

Speaker 2

So although we're delighted with Singapore, the numbers reflect that. We think there's reasonably optimistic in the months ahead.

Speaker 5

And Grace, I might just follow-up on

Speaker 2

That's the right question, Joe. If you want to just keep that's what I think I heard you say. Is there more to it?

Speaker 3

No. I mean, I can you just talk about

Speaker 4

what you've seen so far

Speaker 3

in July? Has that trend continued?

Speaker 2

I think we're not going to do that. We're not going to talk about July. I think the numbers our deck gives you a real good sense of what happened in Q2. And Again, I think the story in Marina Bay Sands is a regional story and a Singapore story. As that place gets more visitation, I I think if you look on Page 16 of your slide presentation, your deck there, you'll see that we've not even reached 50% capacity in the Chinese, like 46% what it was May of 2019.

Speaker 2

So we're doing these numbers with still very, very distressed airlift. And I think you know, unlike the U. S. Where there's unfettered ability to get to regional markets, airlift is back, transportation is still a place you need to fly to. And so the airlift story can just hamper the recovery.

Speaker 2

So I think the $300,000,000 plus quarter is a pleasant upside It's what we thought we'd do, but there's I think a lot more room to run as this market opens up into places like Japan, Korea And more travel. We're really more dependent right now on the closer in foreign markets.

Speaker 6

Got it. And

Speaker 7

Joe, one other thing is, Patrick, I think one thing to note when you look at Marina Bay Sands is that we're not at capacity. And what I mean by that is, To Rob's point, if you look at the amount of airlift coming into Singapore, it's not where it can be, but we're at levels that are very strong relative to 2019. If you look at Our non rolling volumes, which are really speaking to the premium mass segment from the catchment area, this is only going to grow. And the good news is we have our team together. One of the things that's been slowing some of the growth coming out of the pandemic and really capturing some of the pent up demand and the return to normalcy is the fact that many operators in the luxury segment Didn't necessarily keep their team together throughout the pendency of the pandemic.

Speaker 7

We were fortunate enough to do that. And so now our team is ready to respond. So we have plenty of capacity to absorb the growth as it comes So our view is that this is a good start, but we have more room to run.

Speaker 2

To Patrick's point, Joe, one more thing to make you aware. We were there, I guess, a month or so ago. One thing that's disturbing is the hotel business, even the luxury brands haven't been able to get open to 100%, some running 40%, 50% capacity because they don't have adequate personnel and that obviously feeds into Marina Bay Sands. So as they get open fully this year, As that market returns, as employment grows, I think we'll grow with that. There's a lot of room to run here if we get that place fully open and airlift returns to pre pandemic numbers.

Speaker 3

Great. Thank you for your thoughts there. Switching over to Macau, can you just talk about what your average daily operating expense, average cash burn rate has been during this most recent No closure there?

Speaker 2

Grant, are you awake? Grant?

Speaker 8

Yes, we're here. So yes,

Speaker 4

good morning.

Speaker 8

Sorry, just momentarily lost you. Yes. Joe, I think, obviously, second quarter, we were running at this $110,000,000 EBITDA loss. So we'll basically just over $1,000,000 a day. Now as we went into second half of June, we have a local outbreak Of COVID in Macau, and therefore into the Q3, clearly the revenue environment It's lower than it has been in the Q2, especially with the last week's quota of the casinos as well.

Speaker 8

So I think you can look back to where we were in 2020 in a very, very low tourism environment In the middle of that year, and take it from that in terms of the actual daily cash burn rate, Although, I think our operating expenses have moderated a little bit since then, but that's the ballpark region.

Speaker 4

Thanks, guys. Thanks,

Operator

Thank you. And the next question is coming from Shaun Kelley from Bank of America. Shaun, your line is live.

Speaker 5

Hi, good afternoon everybody. Rob, just sort of going back to Singapore for a moment. The Changi numbers are really interesting. Is that a Pretty good guide for, I guess, visitation levels of the property and sort of where I'm going is thinking about Spend per visitor, right? We've obviously seen the pent up demand and that those numbers rise across U.

Speaker 5

S. Regional gaming, Las Vegas Strip. And I think we're all struggling a little bit to know exactly what Asia is going to do, but we can all, I think, do the math. If visitation's Down 50% and obviously you're 75% or 80% of your productivity levels already. That's just very good spend per visit levels, but obviously don't want to extrapolate just from the airport, if you could give us a little bit more guidance.

Speaker 2

One thing to be careful in terms of extrapolating without recognizing we are running high occupancies already at Marina Bay Sands, where I think your struggle a bit Is the factor in when the rest of the market recovers? That's why I referenced the other high end luxury hotels. There are lots of sleeping rooms who we benefit from. They come to shop, eat with us, We're not getting that lift. I think that's the could be very impactful down the road.

Speaker 2

We're very happy with the spend levels we're seeing, and We're happy with the occupancy we're getting, but we're not getting that extra people don't sleep in our hotel necessarily coming over to gamble, Shop, etcetera. So I think that's where we're trying to point out the visitation levels. I also think it will be helpful in driving better levels of play And spend as these other markets. So you can't lose 3,000,000 people in a month like May and not have some impact to your numbers. The question you raised is how high is up?

Speaker 2

I don't want to I'm not prepared to answer that. I don't know. But you can't ignore the fact that you're losing tens of millions of people versus pre pandemic. The point here is just to make it clear how different is it over there versus in the U. S.

Speaker 2

Where visitation levels are back and Access to these properties is back here in Las Vegas and regionals. It's not the case yet in Asia, and I think we'll benefit as that rises. Spend will get better. There are retail numbers that you might look at on Page 31 as some indication of is how powerful The recovery is happening even without full visitation. You can see the sales per square foot at MBS and the power what's happening over there.

Speaker 2

So the good news is we're getting we're profitable, we're seeing growth. The better news is there might be a lot more ahead of us if we can access more people in the Changi, Fill up more hotels around our hotel and see a full visitation return. It's not there yet.

Speaker 5

Great. And maybe just as my follow-up, Thinking about margins in Singapore, right, without the revenues being back online, it's been hard to analyze. But can you just talk a little bit about Puts and takes there now as we get back to very recovered levels on the revenue side about some of the kind of on a stabilized basis as different segments come online because I think There was a tax change there that impacted the market and some other things. So can you just help us think about pros and cons or segments of business that could Impact margins on a stabilized basis?

Speaker 2

Pat, you want to take that?

Speaker 7

Yes, sure. So a couple of things to think about. First off, just as you mentioned, After March 1, our gaming tax increased both by 3% in the premium and the non premium side. So that 3% does impact margin. Now, I think there are some other things going on in Singapore.

Speaker 7

There are some higher expenses. There's Utility costs that have gone up, there's other costs to operate in the market that have gone up, inflation that you've seen in other markets are impacting some of the things that we buy. There's also some wage inflation because of scarcity of labor in the marketplace in Singapore. It's a high quality environment to work in. It's just a high demand As our economy continues to grow for high quality labor, so we've seen some labor increase.

Speaker 7

So there's some things that from a cost basis side are impacting our margin. The flip side of this is we're not at full revenue yet. So as we grow revenue and as we make investment in these higher value suite products and as we grow Some of the services that we offer to our patrons, in the long run, we'd like to believe our margins return back towards where they were before. We just need to be operating under a normal environment. So we still have some startup, What's called fits and starts related to some expenses, and I think our goal is to get our margins back to where they were, but it's going to take some revenue growth for us to get there.

Speaker 5

Great. Thanks. That's very clear. Thank you both.

Operator

Thank you. And the next question is coming from Carlos Santarelli from Deutsche Bank. Carlos, your line is live.

Speaker 4

Thank you. Hey, guys. Thanks for taking my question. Rob, maybe you could help here. Just in terms of the at Marina Bay Sands, obviously, I think VIP recovered to close to 75% of Q2 2019 levels.

Speaker 4

As you think about that kind of moving forward, are clearly some channels, as you mentioned, Korea, Japan, and I would assume to some extent Mainland China It is curtailed to say the least, but when you think about like the stability of that In the current environment, does it feel as though that's a number that's kind of a new baseline, thereabouts at least as we move forward?

Speaker 2

You mean this current quarter's results being a baseline?

Speaker 4

I'm referring more to VIP rolling chip volume and kind of the stability of that

Speaker 2

I think there's room to run. I think there's room in there. I mean, look at what's happened in Singapore. Let's begin with we glossed over I glossed over in the beginning, but We're putting $1,000,000,000 in that product. It's to be very blunt about it, it's always been a very appealing building, but it's never had the FF and E component in the suite And room product, I think it deserved.

Speaker 2

It now has that over the next 18 months, it will finish. We were there and the product we're putting together is as good as Any place we've ever operated, I think that's going to be very helpful. 2, let's be clear that Singapore is more desirable than ever As a destination, it's growing in appeal to a lot of people for a lot of reasons. We referenced the airlift. You referenced China.

Speaker 2

You're absolutely right. China Obviously, not there. But I think you add these things together, the desirability of Singapore as a destination, The rethinking of the FF and E in that building, the return of a lot more airlift Then there was hopefully in 2019. Yes, I think that segment can run. Yes, I do.

Speaker 2

I think we can we also have less competition in the region. Obviously, Macau is not operating at this point, but I think this Singapore business is going to continue to grow because the region, The city state of Singapore is very desirable and more and more people are going to come to us. So if you add our better building with a more desirable Singapore With the airlift, with the opening of China, with the opening of Japan, Korea at all, I think the cumulative impact here is every segment can grow. I have a lot of belief that we can drive. We have to drive it because there's going to be this cost side as was referenced by Sean and Patch So we will drive revenue in all segments and we'll be very attuned to it.

Speaker 2

But I think we're in a very, very privileged position right now And what's happened there, both of our building and with the destination itself.

Speaker 4

Great. That's helpful. And then Just as it pertains to the expansion, the 1,000 new rooms, I believe you guys had the construction start kind of, I guess, it was an Thanks, and on when you had to begin construction in the 2Q of next year, if I'm not mistaken. Is there anything firmer that you guys have around cost and or plans there that you'd be able to share?

Speaker 2

Yes. Patrick, do you want to?

Speaker 7

Sure, absolutely. So Rob referenced our visit to Singapore. It was a great visit on a lot of fronts. I think we spent We are very excited to begin. I think one of the things that the pandemic did unfortunately was slow down that process.

Speaker 7

There's just a lot of things that have to be considered to fit it in to this very complex and very busy environment to make it sort of fit all the requirements that are necessary to get The approval is to begin. And so I think we're working on that now, and it's something that we hope in the coming months that we'll be able to get more firm about a start date. But we're excited about it and we're The government currently and hopefully we'll get a chance to begin soon.

Speaker 4

Great. Thank you, Patrick. Thanks, guys.

Operator

Thank you. And the next question is coming from Chad Beynon from Macquarie. Chad, your line is live.

Speaker 9

Hi, good afternoon. Thanks for taking my question. Wanted to ask about M and A in this environment. And I know that's not a normal question for you guys, but given your strong cash flow position, your balance sheet And just compressed multiples kind of across the gaming lodging leisure space, how are you thinking about maybe considering some opportunistic looks across the world? Thanks.

Speaker 2

Patrick?

Speaker 7

So I think one of the things as a company that all through the pandemic and part of the pandemic, always focused on is how we allocate capital and how we drive the highest returns for shareholders. And you may have heard us in the past say that our highest and best use of capital is new development from the ground up. That's really what we're focused on. If you look at the history of the company and its success and the way it's delivered outside shareholder returns is exploiting a Strategy of building large scale integrated resorts in new jurisdictions, and that's what we're focused on. And so for us, I think we have opportunities unique to who we are.

Speaker 7

We have a long track record with Rob and his decades of experience, the rest of the team's decades of experience in developing these resorts. And so we're going to look to do that before we look to buy anything. I don't think the idea is that we would never look at something. I think we're always interested. I think we're interested in See if there's a way to create greater returns for our shareholders, but as a practical matter, we're not an M and A driven business.

Speaker 7

And I think for us, our priorities are going to be look for new markets, Develop, build and scale and invest over the long term to create sustainable and durable returns. And that's really what we're going to look to do. So I understand that there's Variability, particularly the digital side, there's a lot of things that have valuations now that make people see them as compelling for the long term. There's Perhaps some land based opportunities that may come up over time. But as a practical matter, like everyone else, we'll look at it, see if it makes any sense for us, but we're really going to be focused on ground up development.

Speaker 7

That's who we are.

Speaker 9

Thank you. And then, on MBS, again, just on margins, you kind of touched about some of the different pieces of that. Has the promotional environment between you and your competitor in the market changed versus pre pandemic? Or does it feel as rational as it was at that time. And do you expect anything to change from a promotional environment once Macau opens back up?

Speaker 9

Thanks.

Speaker 2

We've always been lucky that that environment is not promotion driven. I don't think it will be in the future either. And I'll have to wait and see what happens in Macau. But my sense is Macau, when This will not be a challenge either. There will be plenty of demand and usually promotional activities get out of control and there's lack of revenue.

Speaker 2

I hope there will be a lack of revenue in Macau or Singapore. So I feel pretty good about it.

Speaker 9

Appreciate it. Thank you.

Speaker 5

Sure. Thanks, Jack.

Operator

Thank you. And the next question is coming from Brandt Montour from Barclays. Brandt, your line is live.

Speaker 10

Hey, everyone. Thanks for taking my questions. First one was on Singapore, a follow-up on that last question, but more just for the Singapore market Specifically, and we've heard a bunch of chatter out there in terms of potential interest in your main competitor in the Singapore market. Is there any scenario in which a different operator would come in and take that over and that would change the way you look at that competitive landscape?

Speaker 2

We don't have any opinion on that. That's up to the government to make that decision. But it's a duopoly market, and I don't see it having an impact either way.

Speaker 7

Yes. I think one thing that's important to note is that, we view Marina Bay Sands as the best building in the world. And in our mind, it's an unbelievable opportunity to continue to invest and operate the building and grow it over time. So I I don't think we view it any differently. We think the market opportunity in Singapore is absolutely unique and we're very committed to long term investment there.

Speaker 7

So For us, I'm not sure it matters who operates it. That's up to the Singapore government and to the owners of that business. But for us, we're just focused on continuing to develop our property and grow the market as

Speaker 2

The one thing I would say about Singapore, we said it before, but I'll just reiterate is that, that place has evolved to even better than it was when we started years ago, And it keeps getting better. And you look at Changi running at such a still 40%, 50% capacity, look at the desirability of that market, The things we're doing, I'm sure Genting is as well to improve the product. It just feels like that market has a lot of room to run and to grow for us and for our competitor. The offerings get better. Our Phase 2 will be even stronger.

Speaker 2

So to me, that's a market just beginning to feel its muscle.

Speaker 10

Okay, great. Thanks. That's helpful. And then just as a follow-up on that, as we sort of think about how to think about the constraints for how fast that MBS property can recover. The Singapore Tourism Board recently put out a number For 2022 international visitation that or something along the line of $4,000,000 to $6,000,000 for 'twenty two, That it doesn't seem like that would incorporate a ton of ramp from here.

Speaker 10

And I know that's not necessarily exactly what you guys would see. But does that make it seem like the Changi airlift is for the rest of the year is baked into the cake now? Or is there can that be flexed up, do

Speaker 2

you think? I'm not going to speak for the government or what their numbers say. I think the capacity opportunity speaks for itself. I think it's more dependent not on Singapore, but only airlines themselves and the other countries wanting to reengage and to open them all. I think the airport can obviously handle the capacity.

Speaker 2

I'd be surprised if Singapore wouldn't welcome more access, more flights. It's a question of getting the requisite employees in these airlines to get the lift going and open up these countries in a major way. I think it's hard to forecast where the world has changed every day is different. And I'd like to think there's a lot more opportunity than that, but Remains to be seen if the governments want to engage and if the airlines can get the employees to make it happen. I think demand, Undying demand is absolutely there, just getting the ability to get there.

Speaker 10

Great. Thanks so much, guys.

Operator

Thank you. And the next question is coming from Robin Farley from UBS. Robin, your line is live.

Speaker 11

Great. Thanks. Just a quick one on, I don't know if I missed in your introductory comments, any comments on what you've talked about in the past related to Online gaming and sports betting and kind of looking at B2B investments, I didn't catch if you had an update there. Thanks.

Speaker 2

We didn't have an update, Randy. We didn't mention it. We've got focus right now on what's happening. We remain committed to our digital investments and looking at that market. But right now, the story for us is this Land based recovery, which we're filling in Singapore and we've made some major strides in this company in terms of liquidity, The reopening of Singapore and we think the upside potential in Singapore, the licensing process in Macau, we're focused on that.

Speaker 2

And of course, most importantly, The return to a normalized operating environment in Macau is paramount. We've just been so busy with that. Your focus was on digital right now. We continue to look at that Opportunity, we continue to invest. We made a few investments, as you know, in the past.

Speaker 2

So just simply a focus right now on land based.

Speaker 11

Okay. Great. And then also, has there been a change in what you expect for timing and spend at a potential New York project since last

Speaker 2

I'm sorry, I missed your about New York.

Speaker 4

Timing and spend.

Speaker 2

Timing and spend. No, I think we remain I believe in that market and the process is taking longer than I thought it would, but hopefully it will come to hopefully this year or early next we'll know what's happening there. No, still the density of population and the ethnicity and the access in New York makes it very appealing and lack of capacity Still remains a premier market in my mind, if we can get there. A lot of competition. We're one of many in the hunt there.

Speaker 2

So nothing new to report. We have a plan in place. We're executing to it. We'll just wait for the RFP to unfold. So we're nothing new in New York.

Speaker 11

Okay, great. Thank you.

Speaker 1

Thanks, Robin.

Operator

Thank you. And the next question is coming from Steve Wieczynski from Stifel. Steve, your line is live. Yes.

Speaker 12

Hey, guys. Good afternoon. So this will probably be for Grant and it's probably going to be a difficult question to even answer. But Grant, I guess for us Non Chinese citizens, it's extremely tough for us to understand where China is with respect to the reopening process. But I don't know if you can help us understand maybe what you're hearing around the 0 case policy, which I mean, I think the rest of the world Probably fully knows at this point, it's never really going to work.

Speaker 12

And if some of these harsher stances toward the virus could start to get relaxed before, Maybe is there a time frame you guys are watching? Or is there anything you've heard? Maybe is it the October election? I guess anything around that would be Very, very helpful. Thanks.

Speaker 8

Yes. Thanks for the question. I think as you alluded to, there's not much that we can help with in terms of any speculation on timelines or changes. I think what we are focused on is what's happening in Macau. So I think The things that we can effect is to make sure that we do help the prevailing government policy So that we can actually get Macau reopened back with Zhuhai, the neighboring city in Mainland as quickly as possible.

Speaker 8

And that means, I think aligning ourselves fully and safely With the overall COVID policy, and that's what's happening right now. And so hopefully, over the coming weeks, We will be progressively reopening all of the facilities that we've had to close in the past week. That's what we're really focused on. And it's really not our place to speculate On future changes on the overall health policy, I don't know if Wilfred has more to add on that. I think, Grant, you're right.

Speaker 8

At this stage, I think the whole country is also employed in this COVID situation. And obviously, Policies will evolve and we in Macau is trying our best To support the local government in order that Macau can return to normalcy.

Speaker 12

Okay, great. Thanks for that guys. And then Rob, obviously, there's been some movement with regards to the new Macau Gaming Laws, regulations, whatever way you want to think about it, which actually seem pretty favorable. But wondering how you guys are viewing those regulation changes and maybe any of the pros or Cons that you see emerging from those?

Speaker 2

Well, we're grateful for the clarity from the government. I think the process is moving very well. And I think a lot of the concerns some people have have been Eliminated. So we're just going through the process and hoping to complete this thing in due course. But Obviously, we're all pleased.

Speaker 2

I think all the operators are pleased how this is playing out, and we're hoping for a positive conclusion. I think a lot of their fears have been erased. Brent or Wilfred want to comment, that's as far as I can take it.

Speaker 8

I think that's right, Rob. Yes, absolutely. Frank, go ahead. No, I was just going to add that, obviously, we're very appreciative During this difficult time on the COVID front that the government and the legislature were able to move forward To complete the passing of the revised gaming law towards the end of June and that we were able to Also execute the 6 month extension that takes us to the end of this year. So I think The whole process is moving forward expeditiously.

Speaker 8

And as Rob said, we look forward to participating in the tendering process.

Speaker 2

Steve, one thing I would say, our company, as you know, has been through, it's been an awfully difficult couple of years more than most because we're Asia focused. But We've now completed the sale in Las Vegas gives us more than ample liquidity no matter what happens. Singapore is up and making money and there's more to come. It's a very we're very grateful for what's happening in Singapore. We see a lot better days ahead.

Speaker 2

The Macau licensing process is the Same way. It feels like we've survived what was a lot of people are concerned, but in the end, it's worked out for everybody in a positive manner thus far. I hope that continues. And we're just waiting for the thing you referenced initially, which is when does Macau, when does the government rethink the 0 COVID or how does that play out? We don't know, Don't pretend to know, but that's the last thing we're waiting for to get our company back to a much better place.

Speaker 2

But 3 of the 4 have been achieved. So We'll continue to press on with the license and wait patiently for the government to advise us on the reopening of Macau.

Speaker 12

Okay, great. Thanks, Rob. Really appreciate it.

Speaker 8

Thank you. Thank you.

Operator

The next question is coming from David Katz from Jefferies. David, your line is live.

Speaker 13

Hi, afternoon. Thanks for taking my questions. Number 1, I wanted to ask about just the physical plant And Macau, and we're calling that those are have a significant number of Private rooms that were historically used for VIP, how do we think about kind of that spatial layout and planning Going forward, and then I have a follow-up in another direction.

Speaker 2

Fran, you want to take that because I have my own views, but I think you should.

Speaker 8

Sure. I think we've been watching as the market has been evolving and Also planning for the future, I think a lot of the salons And certainly that applies to the new salons that we've developed as part of the Grand Suites of Four Seasons And the London and Macau projects, I think they're really premium salons, premium gaming salons that Could be applicable and used by the different segments, Whether that's the VIP rolling or the premium mass. So clearly, I think Macau overall Maybe relooking at how they each operator redeploys the assets. But as far as we're concerned, Especially the new products that we've developed over the past 2 years, we feel pretty positive about redeploying A lot of those gaming spaces for the premium mass segment, but also over time as we look towards The future, also the premium direct segment and attracting The overseas markets in the rest of Asia into those products. So we've been currently going through a planning exercise on the future deployment of those areas.

Speaker 8

But as the market evolves and as things normalize, we'll be able to get more definition around that. But Even as of the past 12 months, we've been redeploying some of those rooms that were Aside to the rolling segment, to the non rolling segments.

Speaker 2

Hey, David, no one ever thought additional gaming space Macao is a bad thing as we focus more on base mass and premium mass. I think it actually expands our ability to make more money. The junket business, we always know is a margin challenge business. I feel grateful we have all this new space coming back to us that we can redeploy and we're still going to be the world's biggest gaming market for land based and we'll have the biggest footprint. So as this as we as Grant and Wilfred and the team rethink that space, I think it adds all kinds of premium opportunities for base mass, premium mass And direct premium as well.

Speaker 2

So to me, it's a very valuable transition to a higher focused margin business That enables us to again, Singapore, I mean Macau, the penetration in China is still, I think, sub-three percent for the China population. It's going to be a growth market. Capacity will be an issue down the road because there are new casinos opening. So I think that space may prove to be very valuable as we get back to work in Macau, hopefully this year or next. But I think we're lucky to have all that extra space.

Speaker 2

We can redeploy in a more profitable Way down the road, so happy to have it back.

Speaker 13

Understood. And as my follow-up, you've done obviously the Singapore, MBS did a lot better than what we had. But just looking at the ADR of I think $330,000,000 and I'm not sure that you cover this directly so far. When we look back to 2019, it was there's still some headroom There, it was about $90 ADR higher. How do you sort of see that evolving as we roll forward?

Speaker 2

Josh, you want to take that?

Speaker 7

Yes, sure, happy to. I think some of it has to do with sort of start up across the quarter. I think one of the other things to note is that it's not fully recovered in With all the different segments, because there is, sort of not as much FIT and mice demand as we had across 2019. So you're going to see some ADR spread from that. But I think the most important thing to note is, we're making, as Rob referenced, dollars 1,000,000,000 investment in our product there.

Speaker 7

Over time, our ADR will be higher. So across the next six quarters and let's sort of focus on at the end of 'twenty three in time for Chinese New Year of 'twenty four, We're going to have 400 new suites that we never had before, and they're the highest quality suites we've ever done as a company, and we're going to drive different ADR. So While we're out a couple of 100 suites now, we've got rooms out of inventory. We've got a lot of things going on through the building. It's start up period.

Speaker 7

I wouldn't look at this as ADR as representative. And so over the next couple of quarters, as we have rooms out of inventory, it's going to there's going to be some choppiness. But by the time we're done getting into 23 and getting across 23 when the project is completed, then you'll have a good look at what ADR can really be under The value of the full investment, which is substantial. It's basically a complete redo of Towers 1, Towers 2 and some of the common spaces And amenity spaces that we have. It's going to be a fundamentally different experience for our guests and we hope and believe very strongly they'll pay a lot more for it because it will attract a higher value tourist and that's really our goal.

Speaker 2

Our biggest problem that days ahead in MBS is as that Changi recovery continues and passengers come back Our biggest problem won't be ADR. It's going to be putting having enough rooms to accommodate all the demand. ADR will climb either through casino, direct or Through cash customers or through convention, there'll be no problem getting back. That's not the issue. The issue has always been, we're capacity constrained at MBS.

Speaker 2

We need more sleeping rooms and we'll get the ADR. That market is in the recovery you're seeing here is in its infancy. It's just beginning. And be assured that we can get the ADR back to pre COVID levels and above. In fact, I hope we can do much better With casino demand and driving casino ADR as well.

Speaker 2

So

Speaker 13

Perfect. Thank you so much.

Speaker 2

Sure. Thank you.

Speaker 1

Thanks, Dave.

Operator

Thank you. And the last question is coming from Dan Politzer from Wells Fargo. Dan, your line is live.

Speaker 6

Hey, thanks for taking my question. So given the momentum you're seeing in Singapore and the recovery is still in its infancy, how do you think about the long term path To getting back to pre COVID, the $1,700,000,000 of EBITDA in the event China doesn't open, do you need China to reopen to kind of get back or get Close to that level or given what you're seeing now, do you have a line of sight to getting near there in the absence of China reopening?

Speaker 2

It's a good question and we're watching like you are. I think let's not ever dismiss the importance of China in any of our businesses. China is still a powerhouse as Consumer market and we should never dismiss it as powerful. Can we get to $400,000,000 a quarter without China? Mostly would think not, but then again, I would have thought we wouldn't have done this well with Changi still having underperforming in terms of visitation.

Speaker 2

It depends on like the U. S, I think you have to question where will the over indexing come from? Will Indonesia, Malaysia and other source markets Over index? And that's the question. We don't know the answer to that.

Speaker 2

Will there be pent up demand coming out of Thailand and Vietnam and Indonesia? And could Korea outperform? I just don't know. We'll have to wait and see when those markets open up again. We're in uncharted waters here.

Speaker 2

It's new. But I would never dismiss the importance of China as a market for anybody in our retail business, our hotel business, our casino business. China is very, very critical to everybody In Asia, and you can see that in any market you participate in. But how high is up without China returning? I do have to wait and see together.

Speaker 2

There's a lot of good drivers here that make us feel good. The visitation makes us feel there's opportunity there. Our renovation feels like it's going to be very impactful as it comes online. The over indexing of non China markets feels like it's coming on strong, but I think we'll revisit that and we'll have a better answer for you next quarter We print our numbers.

Speaker 6

Got it. And then, just as a follow-up. I know COVID cases in Singapore actually have been rising lately. Given your experience working with the government and your perception, I guess, on their stance of living with COVID and the stage of reopening we're in, do you see

Speaker 11

any risk with additional restrictions coming back or being put in place? Patrick, I'm going to grab that.

Speaker 6

Okay. Things coming back are being put in place.

Speaker 2

Patrick, do you want to grab that?

Speaker 7

Yes, sure. Happy to. I think at this point, All we can do is be optimistic about the public health posture that Singapore has shown. They've shown a lot of leadership. They have a significant history of investment In their hospital system and their public health infrastructure, and I think they're proceeding as they've said.

Speaker 7

I think they broadcast it all along and they followed what They've laid out. So as we sit here right now, I think they're moving in the way they said they're going to do, which is continue to have visitation, continue to be involved in the growth in their economy and move forward with this is an endemic situation. But we don't know. And I think this is something where we've Obviously, showing flexibility to respond as needed to support the government and their initiatives. But at this time, it seems like we're heading in the right direction.

Speaker 7

But could that change in the future? We don't know.

Speaker 6

Got it. Thank you.

Operator

Thank you. And thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.

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