Craig Billings
Chief Executive Officer at Wynn Resorts
Thanks, Vince. Good afternoon, everyone. Thanks for joining us today. I'd like to start by saying that I'm genuinely honored to be speaking to you as the CEO of Wynn Resorts. I joined Wynn in 2017, because I had spent much of my career admiring the Company for its dedication to its craft and to its people. I'm excited to lead the Company forward, and I know that our best days are ahead of us.
Before we talk about the fourth quarter, I'd like to give you some additional context around the couple of transactions that we've announced over the past few weeks. First, let's touch on the sale leaseback of our real estate at Encore Boston Harbor that we announced today. We discussed the sale of real estate on past earnings calls, and we've always maintained that we believe our valuation over any reasonable period of time reflects the value of our real estate. We believe that to be the case today.
So why execute a sale leaseback? A sale-leaseback is after all, nothing more than a financing and capital structure decision. In our case, this transaction benefits our capital structure in a few different ways. First and foremost, it provides long-term capital to grow our business. In this case, capital to deploy adjacent to Encore Boston Harbor in the construction of additional parking and complementary non-gaming amenities that will drive Encore Boston Harbor higher levels of performance and capital to deploy an attractive greenfield projects like our development in the UAE, which I will discuss in a moment.
Second, it enables us to potentially retire near-term debt with a higher cost of capital than the lease. I would note here that this sale-leaseback transaction was executed at 17 times rent or a 5.9% cap rate, a record for regional gaming assets by some 2 turns and an attractive long-term cost of capital.
Third, it brings a new partner into our capital structure. Sumit and the team at Realty Income have been great partners in executing this transaction. And I would note that there are a number of highly bespoke terms in the lease that reflect our longer-term goals. These terms were only achievable due to the unique way that Realty Income is structured and their willingness to engage and align this transaction with our goals. Overall, this transaction gives us a lot of additional financial flexibility. The transaction will close near the end of the year.
Some of you may ask what about Wynn Las Vegas? In response to that, I would note a few important points. First, Las Vegas is a very different market when compared to regional markets. Potential operational deleveraging in an economic downturn is more extreme as we saw in 2009. And the need for continuous and sizable reinvestment in order to stay relevant is high.
As many of you know, it is fundamental to us that we maintain consistent service levels and capex throughout the business cycle. And I never want us to be in a position where in the midst of a downturn, we have to choose between our world-class service and escrowing rent or between paying rent and investing in our property.
In fact, our 2021 results speak to the power of our proprietor's mindset. With a host of new investments bearing fruit and with our team intact despite COVID, we continue to take market share and delivered the property's highest-ever annual EBITDA. Further, the breakage costs related to a sale leaseback of Wynn Las Vegas would be a significant. Beyond the tax leakage, our capital structure in the US has bond financing at both Wynn Las Vegas and a holding company above it.
A sale of our Las Vegas real estate would trigger an acceleration of that debt, driving over $600 million in breakage. For now, we believe we will deliver far more long-term shareholder value by continuing to own our real estate in Las Vegas, and I am confident our equity valuation will continue to reflect that.
Let's turn to our announcement regarding an integrated resort development in the UAE. We're thrilled about this project, which will further diversify our business, while extending our brand into the Middle East and Europe. I'm sure all of you are familiar with the UAE and with Dubai in particular. It's a dynamic country and we are proud to have the opportunity to deliver our exceptional hospitality there.
Ras Al-Khaimah is about 45 minutes north of the Dubai airport via a first-class multilane highway. The location on Marjan Island is stunning and will be a great setting for our resort. I do want to provide some clarity on a topic I have seen in a number of analyst notes and media reports regarding the project.
In any new jurisdiction, there are three things that need to happen to have an integrated resort with gaming. The first is enabling legislation, is gaming legal? The second is regulation, how will gaming be conducted? The third is licensure, who can operate a gaming establishment? With respect to this project, no further enabling legislation is required. We're not looking at a multi-year process for legalization like we have seen in some other markets.
Regulations are well advanced, having been modeled on those of Singapore and the United States. The tax rate and license structure are very reasonable. And finally, with the regulatory framework taking shape and the regulator in place, we will be licensed to conduct gaming in Ras Al-Khaimah. In other words, where we go with these projects.
We're commencing master planning now and will begin mobilizing architecture and design in due course. I expect our ultimate design will be one or more iconic buildings that both take advantage of the pristine beach location and also show respect for the unique cultural aspects of the region. We're big believers in the potential for Ras Al-Khaimah to be an amazing tourism and hospitality destination.
Lastly, I would point out that this is the first transaction where Wynn Resorts is being paid for its know-how and service excellence via a management agreement. I expect it to provide a very high return on invested capital. We have a lot happening around here, and I'm personally very excited about the future.
Turning to the fourth quarter and starting in Las Vegas. The team at Wynn Las Vegas had an absolute stunner of the quarter, $186 million in EBITDA despite holding a bit low. Drop was strong, handle was strong, RevPAR was strong, I could go on and on. To us, the quarter's results are a further indication of the fact that our unrelenting focus on service and great product are resonating with premium customers who after being cooped up for 2020 and the first part of 2021 are traveling and spending again with a vengeance.
As you've heard from some of our peers, January results in Las Vegas were impacted by Omicron, particularly in the group side. Encouragingly, forward bookings in January were very strong and February to date has accelerated further positioning us well into March and beyond. To give you some context, our hotel occupancy in January was 61%. And with the latest wave of COVID quickly receiving, we expect occupancy to increase to the mid-80s in March. As we increasingly distance ourselves from our competitors, we believe we have strong pricing power on rooms, food and beverage and nightlife during 2022.
In Macau, the market continued to experience subdued visitation during the fourth quarter and our results reflected that in roll, in drop and volatility on hold. Of course, you need only Chinese New Year to remind yourself of the power of that market and the pent-up demand for visitation. During the holiday period, turnover per day in our direct program was up nearly 175% from 2021 and down only 12% from Chinese New Year 2019. Encouragingly, we are seeing both strong spend per customer and significant new customer sign-ups in our direct business, highlighting the strength of our market-leading product and service offering.
On the mass side, table drop was up 34% versus 2021, and that drop was 60% of our Chinese New Year 2019 levels. As we have seen before, when Macau is more accessible, demand snaps write back. Long-term, I remain incredibly enthusiastic about the prospects for Macau. Between the shift to higher-margin premium mass customers and to customers who have more motivations to visit than just gaming, the market is evolving, and we are prepared to adapt and grow our business as we embrace those changes. Further, the concession process continues in a methodical and logical manner with the amended gaming law currently sitting with the Assembly Committee. We continue to be pleased with the process and with the content of the amended law.
Turning to Boston. Like Vegas, Encore had an unbelievable quarter in both gaming volumes and RevPAR, resulting in $68 million of EBITDA in Q4. The team in Boston has really done a tremendous job, particularly in the casino, but we're just getting started. Our next phase of growth in Boston will be driven by database growth, particularly growth outside of adjacent areas and through our upcoming expansion project across the street from the property. That expansion will see us add additional amenities and importantly, additional parking. Parking, particularly on weekends, remains a constraint for us. Though Encore is now run rating higher EBITDA than a number of strip properties, Encore still has a tremendous amount of growth ahead of it.
Lastly, on Wynn Interactive, we generated about $785 million in turnover across casino and sports betting in Q4, which drove a 29% sequential increase in revenue. This was despite a meaningful curtailment in marketing spend in November and December. As you may recall on our Q3 call, we were very explicit about our view on the unsustainable nature of the current competitive environment in sports betting and we stated our intention to manage the business with a long-term shareholder-friendly view.
To that end, we began shifting our user acquisition mix in early November, focusing only on proven performance marketing channels where we know we can achieve positive ROI on spend, particularly in casino. By doing this, we meaningfully reduced our overall burn rate and as our remaining brand advertising commitments handled off with the Super Bowl, I expect EBITDA burn levels to reduce even more drastically. Overall, we estimate Q1 2022 burn should be down some 60% from Q3 '21 to the $40 million range, and I expect Q2 2022 to be even lower.
With that, I will now turn it over to Vince to run through some additional details on the quarter. Vince?
