Las Vegas Sands Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 19, 2023

There are 14 speakers on the call.

Operator

Day, ladies and gentlemen, and welcome to the Sands First Quarter 2023 Earnings Conference Call. At this time, all participants have been placed on a listen only mode. But 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 Brakes, Senior Vice President of Investor Relations at Sands.

Operator

Sir, the floor is yours.

Speaker 1

Thanks, Paul. Thank you all for joining the call today. With me today are Rob Goldstein, our Chairman and Chief Executive Officer Patrick Dumont our President and Chief Operating Officer Doctor. Wilford Wong, the President of Sands China And Grant Cheung, EVP of Asia Operations and COO of Sands China. Today's conference call will contain forward looking statements.

Speaker 1

We will be making those statements under the Safe Harbor provision of federal securities laws. The company's actual results may differ materially from the results reflected in those forward looking statements. In addition, we will discuss non GAAP measures. Reconciliations to the most comparable GAAP financial measure are included in our press release. We have posted an earnings presentation on our website.

Speaker 1

We may refer to that presentation during the call. And finally, for the Q and A session, We ask those with interest to please pose one question and one follow-up question, so we might allow everyone with interest the opportunity to participate. This presentation is being recorded. I'll now turn the call over to Rob.

Speaker 2

Thank you, Dan, and thank you for joining the call. The results speak for themselves. There's a powerful recovery underway in Macau in both gaming and the non gaming segments. The future looks very good for both markets. Our commitment to investing in both Macau and Singapore has never wavered.

Speaker 2

In Macau, following a relaxation of travel restrictions, increased visitation has driven gaming volumes, Retail sales and hotel occupancy during the quarter, in other words, business is back. Sands China is in a unique position to capture the opportunity Our diversified IR model with continuous investment in non gaming segments, MICE, Hotel Suites, Live Entertainment, Retail, Food and beverage positions us well to deliver strong growth in the years ahead. Our focus is on all segments of Macao market, including international tourists. We're excited to have the opportunity to develop to deploy more capital to expand our non gaming offerings in Macao. The $3,800,000,000 commitment we made as part of the concession tender is just the baseline.

Speaker 2

We will invest more in this extraordinary market. I look forward to everyone having the opportunity to see to witness The Londoner and The Four Seasons. The quality of our new product is exceptional. Maria Bay Sands delivered EBITDA of US394 $1,000,000 for the quarter. Mass Wind was an all time property record of US549 $1,000,000 Rolling volumes have nearly equaled to 2019 level.

Speaker 2

Our US1 $1,000,000,000 suite and casino renovation program is progressing. More suite inventory will continue to come online throughout the remainder of the year. We'll have 400 suites available by the end of 2023, up from just 150 prior until our renovation. Okay, let's take some questions and please ask away.

Operator

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

Speaker 3

Hey, everybody. Congratulations on these results.

Speaker 2

Thanks, Joe.

Speaker 4

Rob, Patrick or Dan, whoever wants

Speaker 3

to take this first one. In Macau, presumably, March was better than February and February obviously was better than January from an EBITDA and an EBITDA margin perspective. I was hoping you can maybe help us understand maybe the margin exit rate coming out of the quarter as we head here into the 2nd quarter. If you reported 31% margins for the quarter, March was something much higher than that. I was hoping you can help us maybe understand the cadence of EBITDA generation by month and Yes, maybe the same thing for margins by month, just so we're, I guess, thinking about it the right way in terms of our projections going forward.

Speaker 2

Joe, I'll ask Patrick to take it. But before I do, I'll just say, I think you have to realize, I think you do realize that Macau is in his infancy as far as the return to a More normal operating environment. It's not even I think we're it's so early days there. This Q1 is still not representational of what Can happen, but can't will happen. So I wouldn't call it normal operating mode.

Speaker 2

And then as you referenced, the acceleration of revenues is clearly there And that will accelerate margins. Patrick, do you want to add some more color?

Speaker 5

Thanks, Rob. Joe, it's an interesting question. I think we've been very focused on margins For many years at SCL, unfortunately, the operating environment during the pandemic made it very hard to see the benefit of some of the work that the team has done over the years to make the business I think in the long run, we're going to look to see some significant operating leverage in the performance out of Macau, particularly as we reach a higher level of I will say that there was a material difference in performance across the quarter. January was obviously impacted because On January 8, the opening occurred and then subsequent to that, February is typically a very slow month post the Lunar New Year. But March was a very exciting time.

Speaker 5

A lot of things were going full steam ahead. It was very exciting to see the recovery, the increase in tourism, and so margins did recover to a more normal level. There is a lot of noise in the quarter because of the start up, but I think overall our long term outlook for margins is quite strong. I think we've Done a good job managing costs historically. I think the business itself was set up to be efficient.

Speaker 5

And I think in the long run, given the mix of business, we should see a favorable margin Operating environment. Grant, I don't know if you have any comments you'd like

Speaker 6

to add to that? Sure.

Speaker 7

Yes. Thanks, Patrick. Yes, maybe I can just give Some color on the March trends. I think, Joe, you're right. The market experienced strong recovery through the quarter.

Speaker 7

So pretty much across all operating metrics, March was better than January February average. I I mean, just as a starting point, the Macau overall visitations citywide were up 22% in March versus the 1st 2 months of the year. For our portfolio, the gaming volume, non rolling drop and slot handle were both up 10% in March versus the 1st 2 months. Rolling volumes accelerated a lot more than that during the month, not least because we're starting to get some traction on the foreign VIPs Coming to Macau to our properties, hotel occupancy improved, occupied room nights increased by 8% in the month versus the 1st 2 months As we were able to operate more hotel rooms with the additional manpower that were coming on board in the second half of the first quarter And that will significantly increase further into the Q2. So overall, yes, March was a very pleasing month in In terms of evolving trends, and as Patrick said, operating margin did recover and did recover more in March, But hopefully, this is just the beginning.

Speaker 3

Great. Thank you for your comments there. You mentioned that 31% of your rooms in Macao route of service related to labor constraints. Where does that stand now? And can you talk about labor constraints now?

Speaker 3

And how are you remedying that?

Speaker 7

So Rob, should I take that?

Speaker 2

Yes, please, Grant. Yes, you're closest to that. Sure.

Speaker 7

Yes. I mean hotel room in Vitritio, availability, the actual availability for the Q1, Yes. It was around 7,700 rooms for SCL portfolio wide. So effectively, We were accommodating as many rooms as we could given the manpower constraint during the quarter. As I just referenced, it did improve Somewhat in March as the first additional hiring of the labor came on board And the Macau government and the labor bureau have been very supportive in helping us to bring on the labor that we need to operate, especially the hospitality side of the business, the hotel and the restaurants.

Speaker 7

As we go into second quarter, we would expect that On average, Q2, we can reach 10,700 rooms in terms of our operating capacity. So that's roughly 3,000 additional hotel rooms that we'll be able to operate in the second quarter. And that obviously takes us up to Much close to our physical available inventory, and we will reach the 12,000 Probably sometime in Q3 in time for the summer peak season as additional hiring and training completes Through the Q2.

Speaker 2

So Grant, is it safe to say that labor issues are not event for the entire market by summertime?

Speaker 7

Yes. Yes, Rob, I think for most of the market for the Q2, it's effectively a non issue from a hotel Our capacity, obviously, the size of our inventory is the biggest. We'll take a little bit Time to get up to full capacity, but obviously, there's a big difference already that we can see between operating 10,000 700 rooms versus 7,700.

Speaker 2

Thanks, Graham. Good job.

Speaker 4

Thank you, guys.

Speaker 2

Okay. Thank you.

Operator

Thank you. The next question will be Carlo Santarelli from Deutsche Bank. Carlo, your line is live.

Speaker 8

Hey, everybody. Thank you. Rob, just as it pertains to MBS, obviously, now Macau has gotten up and running and you're starting to see things normalize with obviously the comments there on March. Have you guys seen anything change behaviorally? I mean, we see the results.

Speaker 8

It doesn't look like anything's changed. But I was just wondering if there was Anything that you've seen change in terms of demand around either the high end or the premium mass segments In MBS post kind of resumption of activity in Macao as it continues to ramp.

Speaker 2

So, Karl, the one thing I thought I understood and I think I was wrong in retrospect was the super high end premium customer In Asia, I thought we would dominate completely in Singapore. What we're seeing is Singapore is doing very well. We have equaled our 2019 rolling volume. But what surprised me to the upside is the international demand for Macau and our rolling volume in Macau has been very pleasant. Much more I thought that we could be rolling in that market far in excess of $20,000,000,000 $25,000,000,000 annually.

Speaker 2

This keeps going. So There's been a pleasant surprise. It has not hurt us in Singapore if you look at the numbers, but of course, there's only so much money out there, so it may have some impact. Singapore, as you see, had record numbers on the the SOD numbers are astounding to be at 900 plus per unit. I've never seen that in any market I've worked in, especially the Scale of machines to market plus our non rolling wind to exceed 6,000,000 a day is pretty extraordinary.

Speaker 2

And that's what the impediments and the big headwinds of our rooms being down, our casino being torn up and there's yet to be a recovery of the Chinese consumer into Singapore, the level I think we'll get to. So the pleasant surprise is Macau is attracting a very strong international Asian high end customer, And yet we're doing fine in Singapore. We may be sharing a very large rolling business between Singapore and Macau for a long time to come. I had that wrong pleasantly. I do think the stock business in Singapore and the non rolling is just the beginning of our of a trend, a very strong trend.

Speaker 2

Once we get these rooms back in the So you know, and who knows where it goes. If we make $2,500,000,000 $3,000,000,000 out of those segments in years to come, maybe. But clearly, we're very happy with the results. For Singapore to do this well this early today without a full blown China recovery, it's pretty impressive. I think we can Believe we can make $500,000,000 a quarter in the near future when things get back to us going to place.

Speaker 2

So we're very pleased in both markets for different reasons.

Speaker 8

Great. That's helpful. And then just as a follow-up, I guess my question is more along the lines of are you surprised by When you look at the deck, obviously, your premium mass business looks like it's recovering or I should say your base mass business is recovering relative to the first Quarter of 2019 very similarly to the premium mass business. And given where visitation is today relative to 19, is that dynamic surprising to you guys at all?

Speaker 2

It is to me. I think we note Page 14 of our deck to see the visitation Be like 40% and yet see a recovery where it's at. It's very encouraging for future. The trajectory of Macau feels very good to us. And as Joe alluded to, the growth between January, February, March, it looks very how can you not be encouraged when you see We made $400,000,000 roughly without visitation, you'll be coming back very much, without hotel rooms being fully occupied, without A lot of impediments, a lot of headwinds and yet here we are.

Speaker 2

So yes, it's very encouraging for us into the market. Of course, we're the biggest beneficiary of the recovery of base mess and sweetie, that's our dominant position. But I want to also allude to the fact that we believe with our new Londoner In Four Seasons suite and physical product, we're going to compete very favorably, not just the base mass, not just retail. We're going to the very top end of the market as well to dominate that. We believe we can do it in both the rolling and non rolling segments.

Speaker 2

We have both scale in terms of sweet product, but also a great aesthetic. When you see we've done, we were there and you see the new Lunder, you see the new Four Seasons, I promise you, you will be overwhelmed with the product, the quality. What that team has done It's exceptional work. So for us, we see no segment in the cattle to our competitors. We want to be first in every category.

Speaker 2

I believe it's possible with our new products.

Speaker 7

Great. Thanks very much. Rob, maybe I should just add something on the

Speaker 2

Rob, please. Yes, please. Jump in, Greg.

Speaker 9

Sorry, can

Speaker 7

I just add something to Rob's comments on the premium mass versus mass of the question? Yes. It looks like from the deck that we recovered at a similar rate on the premium mass and the mass win versus Q1 of 2019. But overall, in terms of volumes and headcount, it was definitely a premium mass led recovery, and the quality of customer Has been increasing and the spend ahead, the wind comparison with 2019 It's more a hold related issue on the premium mass segment for both 2019 2023. But overall premium mass gaming volume, gaming drop And headcount recovery is faster than base mass.

Speaker 7

But I think to Ralf's point, we've been It's actually out competing in the premium segments in both VIP and premium mass, as you can see from the market share in the Q1. Our non rolling drug recovered to 2 thirds of the Q1 of 2019 level. That's in line with the overall market recovery in mass Despite a much bigger dependence on base mass, so as the base mass, which has been lagging in the recovery, Starts to ramp up, especially as more hotel rooms come online for city for the whole city and for our portfolio And also that visitations pick up and transportation logistics improve, we should obviously be the biggest beneficiary of that base mass recovery. And some of that you can already see in the way we've outperformed in a slot electronic gaming market, Slot handle recovering to over 73% of 2019, and that has a lot more exposure. I mean Hong Kong base mass is a much bigger part of slot The tables and also Hong Kong base mass has recovered faster as you can see from the visitations where Hong Kong visitations are already 75% of where they were In 2019, and you can see that our performance in electronic gaming has been strong both in absolute terms and relative to the market.

Speaker 8

Certainly. Thank you very much for the additional context. I appreciate it.

Speaker 2

Thanks, Carlo. Appreciate it.

Operator

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

Speaker 10

Great. Thank you. Following on your comments about the Strength of the recovery being led by the premium mass side, I'm curious if you're seeing any impact at all from Visa policy that is sometimes turning down kind of frequent visitors or multiple visits in a period Sounds like it's not impacting the recovery in your view, but I'm just curious if you're seeing any impact from that?

Speaker 2

Grant?

Speaker 7

Rob, should I take that? Please, yes. Yes, Robin, I think for if you look at the visitation Overall, we're seeing a much faster recovery from Guangdong than from the non Guangdong provinces. I think that's For office reasons, the proximity, the ease with which the visitors from the neighboring province can get to Macau, From my point of view, I think the biggest impediment to a higher rate of recovery in non Guangdong visitation It is actually the amount of hotel room inventory that was unavailable in the Q1. I mean, we're the biggest Repository of hotel rooms went offline by 36%.

Speaker 7

And for the city, As a whole, obviously, the percentage of out of rooms availability was also very significant. So I think people have kind of high propensity to think about coming to Macau. I think the hotel room inventory issue has been a big impediment, but that's obviously easing dramatically as we get into the 2nd quarter. And the transportation is still only a fraction of what it was, especially in routes Right from Hong Kong to Macau, our ferries are only at 20% of where they were in 2019 During the Q1, and yet, obviously, the visitation from Hong Kong has been so strong. So I think overall, The visitation recovery is progressing very well, but you've got to bear in mind a couple of those

Speaker 10

Great. That's helpful. Thanks. And then just as my follow-up, if I could, understanding it's going to take a couple of quarters for all your Hotel rooms to be up and running. At that point, when you think about the run rate where you are for operating expense, How would you compare that to 2019?

Speaker 10

Is there any kind of permanent reduction in some way in operating expense? Or in fact, Does the labor issue mean that costs are going to be higher when you're kind of fully ramped up? Thanks.

Speaker 2

Thank you, Grant.

Speaker 7

Yes. I think clearly, as we add headcount To man, to operate all of our inventory on the hospitality side, our payroll costs will start to go up. But obviously, we expect the revenue to be rebounding a lot more. So I think this is just The ordinary course of ramping up the capacity, we achieved Multiple rounds of cost savings over the years after the 2014 downturn, we achieved Some sustainable savings from that round, we made some additional structural cost savings on our expenses during the pandemic, and we hope to hold on to Some of those savings, but in terms of the labor portion, Absolutely, we have to invest in the manpower and to get our assets back up to full operating capacity. And obviously, the cost will grow in line with that.

Speaker 7

But clearly, we want to be operating 12,000 rooms, Not 7,700. So this is something we're trying to do as quickly as we can.

Speaker 10

Great. Thanks very much.

Operator

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

Speaker 4

Hi, great. Thanks. Just maybe to start, if we could go back to a couple of your comments, Rob, on the Base mass versus some of the premium mass mix and the surprise there. I mean, is A healthy way to think about the mix that we're seeing in the market today, this kind of low double digit increase in Spend per visit, is that if I look at the 62% in base pass versus, let's call it, 48% overall visitation growth, Is that reflective of market conditions? Or is there some subtext or some difference that we should be thinking about?

Speaker 4

Or did that change throughout the quarter at all? Just trying to kind of A sense of what's pent up demand and how much is this is just getting the bodies back into the property?

Speaker 2

I think one thing we'd be careful of, we're again, we're in early innings here. In fact, I would say if you're playing golf, we're still in the driving range. I mean, we haven't even gotten the 1st tee yet. This market, 100 days ago, Grant reminded me we're kidding about the market, hoping to see a profitable quarter in 2023. We now just gave you a $400,000,000 number.

Speaker 2

I think My point is, it's evolving so quickly. And the movement, if you look at the I don't think it's easy to spot trends. I think clearly the base mass, to Grant's comments, Has been somewhat confusing and its thoughts have recovered much better than base mass tables. But again, I think it's very difficult to assign Certainty to where the trends are going, I just think when you look at the Page Slide 16 or 14, you see the non Guangdong visitation, which is pretty weak And so there's so much more room to run here. I think when this is all said and done, we'll make a lot more money with a very healthy margin and all this We'll be left behind the dust.

Speaker 2

I just don't think we can take what really is effectively half of January 2 months subsequent And assign real value to it. Yes, it's just too early to figure it out. Brent, please jump in.

Speaker 7

No, I had not a lot more to add to that, Rob. Yes, I think you covered it well.

Speaker 2

So what else you got?

Speaker 4

Great. I mean, the other question would be the follow-up and maybe a little bit indulgent, but I'll try. Just trying to get a sense of market share as we, let's call it, exited the quarter, be it March or some amount of run rate. As we looked at it, some of the checks suggested that it was accelerating and you did very well. It probably depended a little bit of the timing on Some of that base mass recovery, but for the quarter, we calculated you at around 27% share and just kind of curious if that was Level across the quarter, did you kind of was your exit rate meaningfully higher than that?

Speaker 4

Just kind of trying to, Again, probably extract a little too much from where we are in the recovery, but we want to try anyways.

Speaker 11

Patrick, you want to take a look at that?

Speaker 5

Yes. It's an interesting question. I think When we look at Macau, it's a story of investment. So if you think about the growth in Macau and the asset base that we have and why we're able to get the visitation and the productivity out of the assets, It's because of our scale of investment in non gaming. It's the rooms, it's the retail, it's the entertainment, it's the food and beverage, it's all the things that drive tourism value.

Speaker 5

And so we invested $2,200,000,000 across the pandemic. So from our standpoint, it's a new day. We have probably one of the most important assets We were created in the Londoner, which was Sands Cotai Central. There's a lot of productivity that's available there. We have 6 50 new suites that we didn't have Pre pandemic, there's a lot of volume that we're going to be getting that we never had access to now that the pandemic recovery is underway.

Speaker 5

And I think the other thing that's important to note is we've done this 2 other times. So we were in the Las Vegas market during the recovery and we saw the schedule and let's call it the slope of recovery related to kind of demand in the marketplace and recovery of tourism. We went through that. We saw it in Singapore and the different stages of tourism access that occurred in a very controlled market in that recovery. And now we're seeing unfettered access to what is probably the best cluster of tourism assets in all of Macau globally.

Speaker 5

And they've been continued to be invested in. There's a lot of depth to the market and it is the beginning innings. It's early. So to call a market share now is a little tough because it's not really comparable to because of the amount of investment and some of the dynamic changes that have happened to the market in the last 3 years. So from our standpoint, I think we put up a good quarter.

Speaker 5

I think we're positioned well. As Grant mentioned, we're very excited about the additional inventory coming online as we get manpower into the buildings. And I think we're in a good place So we're not really looking at market share right now as much as we're looking at investment, visitation, access, customer service and then margin and outcome. And you saw the results of that in the quarter that we just had. So March was really good.

Speaker 5

We're really excited about it. We're in a great trend and we're going to keep pushing.

Speaker 4

Congratulations. Thanks very much. Thank you.

Operator

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

Speaker 12

Hi, afternoon. Thanks for taking my questions. I wanted to just go back to the The direct VIP business in both markets, and I know you made some commentary about sort of where Singapore is coming from and where some of that Extra business coming from, but can you help us understand the direct VIP opportunity in Macau? And are there any insights that we can learn from about where that could evolve to over time relative to what we saw in the past, understanding that's Completely different business today.

Speaker 2

Yes, I think we're all in the same boat here as far as not really knowing where how I think the Q1 is indicative that there's a VIP market. Our rolling volumes indicate that. We wonder if it can increase, keep going. One surprise to me has been the acceptance of foreign visitation From non China countries into Macau, it makes sense to me the quality of product there, the diversity of product, the experience there is very it's an exciting place to visit, Easy to access, getting easier, especially for the foreigners. So I think that's going to continue to build.

Speaker 2

Also the people there it's obviously because the structure of junk is disappearing. It's a much different approach. And these are people you have to know who they are credit wise, etcetera, to be in business with them. But I don't think it slows down. My sense is Macau has such a A compelling product and such diversity of compelling product and has such great food, retail, it's just an exceptional place for a visitor internationally.

Speaker 2

I think you'll see more and more of that trend. I don't think it will cost us business in Singapore in terms of I think people still obviously get to Singapore for the same reasons. But Macau, I think, has a better future on the direct rolling business than I anticipated. And I think it's driven by, again, access, quality of product, And people want to go there. And it's evident here in the first.

Speaker 2

Obviously, it's impacted by our retail Sales as well. You can see the quality of our retail business in Macao, which is a direct relationship with the super high end to come to visit. That's our again, early innings, non junket, liquidity issues, a lot of unknowns at this point. I don't think we should pretend to know what the future looks like. But I think there's a very positive trend in the right direction.

Speaker 2

Grant, do you want to comment?

Speaker 7

Sure. Yes. I think Rob is absolutely right. The attraction of Macau to the foreign VIP gamer is immense. And I think that the pleasant surprise, although we were obviously redoubling our efforts post the Concession tender in bringing international visitation to Macau and the VIP gaming was the first natural place to start given that the General airlift commercial air flights are still a fraction of where they were in 2019.

Speaker 7

So So I think this direct VIP performance that you referenced, it was very healthy during the quarter and kept growing. And we don't know where it grows to, but there's no reason to believe that it wouldn't continue to grow Given the quality of the product, and you can see not just the strong product appeal for the premium customer that we provide, but We provide such a diversity of it, such a clustering effect of so many world class resorts, and we already have 4 of them in our portfolio, but together with all of the other colleagues in the industry, It's an amazing clustering of well cost premium gaming destination That should appeal to the Asian regional players over time. And then I think the other point that is, I think specifically for us, we've been doing this for a long, long time in terms of our international direct VIP around the Asia region, Las Vegas, Macau, Singapore, this is not a new structure to us. We've just got Enormous ability to promote Macau now to the foreign countries because we have the capacity. And to Patrick's point, We have the new product that we've never had before, the availability of the top quality suites, the top quality salons.

Speaker 7

So we're going to be we have been and we're going to continue to use our international sales network that we have The biggest infrastructure across Asia in the industry, and that's where we're going to combine the benefit of this premium product, Macau is a destination for these Asian gamers with our sales infrastructure that will continue to expand. So I think the future is very bright for foreign visitation and foreign VIP market into Macau.

Speaker 12

If I can just thank you for that. And if I can just follow-up quickly, in terms of which Any color on sort of which countries and where this is sort of coming from and any sensibility about So to the sustainability, obviously, you feel like you can continue to grow them, but the non Chinese other countries and the degree to which extending credit may cost A little bit more along the way, any color there would be helpful

Speaker 2

too. We won't be, David, Country specific, I'll do that. I will just say to you, the demand is in a number of countries. And I think Grant's last point was very interesting. I Jacqueline, you're absolutely right.

Speaker 2

We've been doing this for decades. In Asia, we have a very strong sales force. A lot of the same people have been with us for 20 years It represents in Las Vegas and of course Singapore Macau. So we are the beneficiaries of that sales system. But I think the high end product we built now in Singapore Macau is going to drive that Customer, is this sustainable?

Speaker 2

Does it grow? I don't want to predict the future. I just don't know. But if it does, I think we'll be the biggest beneficiary of it because again, we have the biggest network And we have all these different places that we can take people within Macau, of course, to Singapore. So it's hard to predict because again, it's early innings here.

Speaker 2

Well, I think we are if there's a strong growing business in Macao, I think we'll get a big chunk of that. And time will tell how big it is, Liquidity issues, but the demise of the junket business clearly is a new day there, but we could roll $20,000,000,000 $30,000,000,000 it would feel like a good place to be, if that's possible.

Speaker 12

Thank you very much. London, it looks great.

Speaker 2

Thank you. You saw it. Yes, we love people seeing it because It's only halfway there, but what we've built so far is we're just very proud of it. Thank you. You're welcome.

Operator

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

Speaker 13

Hey, everybody. Thanks for taking my questions. Grant? Thanks. So given Grant laid out a pretty good case Based on the transportation impediments and the hotel room inventory impediments, that premium mass visitation Could very well outgrow base mass visitation from here.

Speaker 13

I'm not putting words in anybody's mouth. But could you give us an insight into what you're seeing In terms of premium mass win per visitor and compare that to other markets that you saw Reopening post COVID in sort of an index for 2019, just trying to get a sense for how the pent up demand on a per person basis is really trending.

Speaker 7

I'll just make

Speaker 5

a few comments and I'll pass on to Grant. I think the key thing here is having seen this, as we said before, in several other markets, This is an impressive recovery. It's very strong. The people who can get there are consuming meaningfully in all segments, retail, food and beverage, On the gaming side, on hospitality side, so it's great to see. It's very exciting.

Speaker 5

I don't know that In any of our markets, we had a quarter with this amount of EBITDA recovery this quickly after opening. So that's a good indicator. And so I think we're very excited about that. I think it's hard to call. These things are it's I wish we had a crystal ball, but I think at this point, We look at the recovery, and it's very encouraging.

Speaker 5

I will turn it over to Grant to see if he has any additional remarks.

Speaker 7

Yes, yes. I would say the points that we're making on the hotel room inventory and transportation, it's more a reflection of What happened in the Q1, I think if anything, those factors obviously improve Have been improving dramatically into March and into the second quarter. We obviously hope that the base mass will catch up as seeing as we're the Biggest beneficiary of that segment. And then I think spend per head for the entire market It is clearly up. The quality of customer is very high.

Speaker 7

And I think it really applies to all segments. You only have to Walk through the different properties, you can see the level of spending power, Not least in our retail, more we're up 18% in overall retail sales versus 2019, but Clearly, the luxury segment is up a lot and that's with obviously only 40 something percent of visitations that we had in 2019, so not just in gaming, but also in the non gaming As we tell, you can see, those trends were consistent in the Q1. But hopefully, we can start See the base mass visitation growing and the hotel room occupancy growing for the entire market.

Speaker 13

Great. Thanks for that. And switching gears maybe to New York, just curious if you're willing to give an update updated thoughts on the RFP process there, If you think the timeline has shifted since we've talked about it, since we talked about it 3 months ago, any other comments on the factors for winning that 3rd license? Thank you.

Speaker 2

Yes. New York, a work in progress, waiting the response from the government. Obviously, it has pushed back. We're here and we don't know for a fact, let's begin there, but we've been told it could be early Q1 of 2024. But again, we have no definitive date at this time.

Speaker 2

We do believe we have a very compelling bid. The project is in sync with our historical Approach to development is a large scale resort with enormous non gaming amenities, hotel, convention space, entertainment, Spa, etcetera, very beautiful design, very much in the LVS spirit, the way a hotel should be designed as a real resort, a real destination. We have close to 80 acres. So I think we have a very special bid, a very compelling bid, and I hope the market sees it that way. Timing will reign with New York State's Government and again, we hope it's the 1st part of 2024.

Speaker 2

No more to say about that at this time.

Speaker 7

Thanks, Fran. Great. Thanks again.

Operator

Thank you. The next question is coming from Steve Wieczynski from Stifel. Steve, your line is live.

Speaker 9

Hey, guys. Good afternoon. So Rob or whoever wants to take this, I mean, If we look at visitation into Macau over the last, let's call it month or so, it seems like there might have been or there might has A change in the makeup of the typical visitor coming into the market. And based on some reports that have been out there in the market, it seems like There potentially are more tour groups and stuff like that coming into the market versus pre pandemic. So just I'm just trying to just wondering how you're thinking about the spending characteristics Or wallet size, the typical customer today versus what that typical customer looked like previously.

Speaker 9

I'm not sure I asked that question really the right way. So if I didn't, let me know.

Speaker 2

I think it ends perfectly. Yes, it's a good question. Grant, do you want to tackle that first?

Speaker 7

Sure. Yes, I mean, I think We're trying to get recovery in all segments of the market. And as a tourism market, it's multifaceted In terms of the different segments, and the 2 groups were the last segment to really The recovering, so that's only been taking place in the second half of the first quarter. So yes, the first visitors to come back have been more at the premium. And over time, you're going to get all the other segments recovering in good time.

Speaker 7

And I don't think there's any difference fundamentally in terms of how these different segments behave or perform Versus 2019, I think in general, of the people who've been coming back, I think you've seen a higher propensity to spend, but over time, As the other segments come back, I don't think we should necessarily expect a fundamentally different Mix or fundamentally different profile within each of those segments, yes, so The only different point to make at this juncture is that, yes, across all segments, The spend, spending power is higher than what it was and the propensity spend is higher, And we see where that evolves over time.

Speaker 2

Stephen, I think we all agree that what Grant just said. We have total confidence that this market will look a lot like it did The only difference structurally is the junket situation, but maybe the more affluent have gotten better access earlier, But I'm a staunch believer that, that market will come roaring back in the base mass. If you walk around the peninsula, you'll see already the base mass is booming down there, although it's Lower quality spend than previous base mask. But I think the base mask market will come back as a question how quick it does come back. But this market will look fundamentally the same in 2023, 2024 as it did in 2018, 2019.

Speaker 2

I'm completely confident of that.

Speaker 9

Okay. Thanks for that, guys. I appreciate that. And then Rob, I think your the slide, what number is it, number 23, It's pretty interesting in terms of how you laid out your Macau Capital commitments for the next 10 years or so. I I don't know if you'll answer this, but if you think about that potential all in, the $4,500,000,000 that you might have to spend over the next 10 years, Is there any way you can help us think about what you guys are kind of targeting for a potential return on that commitment?

Speaker 2

Patrick?

Speaker 5

Yes. I think we've always said publicly that we look towards a 20% return on invested capital there. But I have to tell you Macau has been a fantastic market Invest in over the last 20 years. We're very excited to follow through this commitment and we look forward to the opportunity to actually invest more. If you look at the growth of our company, it's because of the investments we've made Cow in non gaming, it's an extraordinary tourism market.

Speaker 5

The consumer responds very well. And we're very excited about the opportunity in this new concession to invest More than what we have on this page. So it's something that we're very focused on and we look forward to the opportunity to do it.

Speaker 2

I think we're going to be raging bulls on Macao investment in the future. And the further you look back to our past, the further you can see our future, which is going to be, we believe non gaming assets are wildly profitable, but they also drive gaming assets. It's all in sync. So when we build more hotels or we build more retail or anything, it drives the gaining wind. We've got plenty of positions to fill and to grow those numbers.

Speaker 2

When you look at the slot numbers coming out of Singapore And the win per unit and tables, you realize just how far Macao can get to. So we never saw the investment in the concession being An ending point, we saw a beginning point. We much believe that Macau next 10 years will make a lot of money for us. We're very bullish on the market and we're thrilled to be there.

Speaker 9

Okay, great. Thanks guys. Appreciate it.

Speaker 7

Sure. Thanks, Steve.

Operator

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

Speaker 6

Hey, good afternoon, everyone, and congrats on the quarter. First, I wanted to touch on Macau. Can you talk a little bit about the recovery level across the properties there? And which have been most impacted by room and labor constraints versus mass versus Premium mass mix. And then similarly with Londoner and the sweet investments that you've made, what's kind of been the kind of the early read out of the gate and your expectation on on recouping that typical 20% return on those investments in terms of timing.

Speaker 6

Thanks.

Speaker 11

Brent, are you still awake?

Speaker 7

Hello.

Speaker 2

Hello. Brent, please take that.

Speaker 7

Yes, sure. I think between the properties, Londoner clearly is most impacted by the hotel room availability. So you can see that The reported fiscal inventory occupancy is only 46%, 47% for the property as a whole and that's the biggest repository hotel rooms in our portfolio. So clearly, the impact for that property was the greatest. But at the same time, it kind of flips into your The second part of your question, the portion that we were operating, especially The new product on the north side of the building and the new suites, we've really had an exceptional customer response To the product.

Speaker 7

I think not just the excellence of the design and the hardware, But also combined with the actual programming of hospitality and just the levels of service And the bespoke hospitality that we're offering, but doing so at scale. So in terms of those return questions

Speaker 5

that you

Speaker 7

asked, We see the early signs are very, very positive from the new product, including the new suites At Londoner Hotel and also the brand new Londoner Accord, which offering very different Kinds of bespoke luxury hotel experiences for the customer. But Overall for the property, it's a big property. We're hampered by the lack of hotel room availability During the quarter for sure, but of the new product that we're actually operating, the initial results have been very, very pleasing.

Speaker 6

Got it. Thanks. And then just turning to Singapore, maybe if you could talk a little bit about the puts and takes for the reopening of China. And I know inbound travel from China has been a little bit slower to recover. But I guess, how do you think about that recovering over the course of the year?

Speaker 6

And then similarly of your China customer base that had been in Singapore, are you still seeing that customer? Or have those has that base gone back to China?

Speaker 2

Patrick? Thanks.

Speaker 5

It's a very interesting question. I think with the opening of China on January 8, there hasn't A huge influx of Chinese visitation in the early part of the quarter, but there is an ongoing ramp Of outbound tourism from China that we would be the beneficiaries from. And that's something that we've been anticipating a long time. There is not the normal level of flights. There is not the let's call it the normal airlift capacity that you would expect during a normal run rate period, which they're going to slowly ramp into.

Speaker 5

So across the year, our expectation is that, that visitation will recover. It's such a strong market for Singapore, has been historically, And yet we're able to execute these levels without that market really contributing. So we're very bullish on the opportunity of outbound tourism from China To support Marina Bay Sands and its ultimate growth, to where Rob has mentioned earlier in the call and beyond. There There is one other comment that I do want to make. We had a very interesting question from Steve, just prior to yours about the level of investment that we were willing to make in Macau.

Speaker 5

And I think we're very optimistic about our investments there. It's a high return environment. We're very focused on continued investment there, Not only through the fulfillment of our concession rule, but also in general, to grow our non gaming asset base. But the same thing was true in Singapore. I think we're very focused on growing Singapore as a market.

Speaker 5

The opportunity there is very unique. It's a really high value tourism market That has a different cash burn area than Macau. We're very excited about the Marina Bay Sands expansion. Although just to sort of comment on it, Kind of going down that vein, we have very high expectations for return on invested capital in both these markets. But when we first went into the Marina Bay Sands expansion in 2019 And we entered into development agreement in April of 2019.

Speaker 5

A lot of things have changed. So it's probably going to be a lot more expensive. The pandemic brought additional costs. There's been material labor and material cost increases. There's been significant inflation globally as everyone knows And just overall marketing additions.

Speaker 5

But I think from what you see in this quarter is that the strength in the market is on full display. We really believe that it's going to get stronger over time and particularly With investment in high quality tourism assets, which is what the Murray Bay Sands expansion is. But I think it's really important to note That there's been significant inflation since we began discussions a year ago. So the cost of Murray based sands expansion is going to be a lot higher. The good news is the market is so good, we think the opportunity is going to be a lot stronger and we're going to do a lot better.

Speaker 5

So I think to set expectations, The investments that we make both in Macau are going to be very strong return. We're very excited about them over the next concession period. We're really looking forward to invest In Marina Bay Sands expansion, we think that's going to be a great asset, but both of these are going to be expensive. The good news is that we believe the returns are there or we wouldn't be doing them. So I don't think our investment thesis has changed in either market with the cost inflation.

Speaker 5

We believe in our long term success. In these markets, we sort of have a very long term thesis in both of them. We're going to deploy capital into both and scale. And we're going to look for high returns and We feel very strongly about the opportunity in both of these markets. But I did want to say that it's going to be expensive and it's going to be worth it.

Speaker 2

We are fortunate to be in 2 markets that, 1, are expensive, but 2, reward the money you spend. And I think we're very fortunate to be in markets that can grow and grow. And we will continue to invest heavily because we believe we'll get back to much bigger numbers in both markets. So stay tuned. We appreciate your time today.

Speaker 2

Thank you very much.

Speaker 6

Got it. Thanks so much.

Operator

Thank you. Ladies and gentlemen, this does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.

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Earnings Conference Call
Las Vegas Sands Q1 2023
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