Thank you for holding, and welcome to the Galaxy Entertainment Group's management update for the third quarter results of 2023. Joining us today are Mr. Ted Chan, Chief Financial Officer, Mr. Roland To, Senior Director of Strategic Planning, and Mr. Peter Caveny, Assistant Senior Vice President of Investor Relations. At this time, all participants' lines are in listen-only mode. The presentation will be followed by a question and answer session, and instructions will be provided at that time. This conference call is being recorded. I would now like to pass to Mr. Chan for a presentation. Mr. Chan, please go ahead. Thank you.
Thank you, operator. Hello, everyone, and thank you for joining us for the update call on GEG's Q3 2023 results. Joining me here on today's call is Roland To and Peter Caveny. Copies of our media release, stock exchange announcement, and PowerPoint presentation are available on our website, which also include our customary disclaimers. Macau has demonstrated a remarkable rebound, capitalizing on the relaxation of travel restriction earlier this year. The third quarter has proven to be highly promising, with noteworthy growth across key metrics, such as gaming revenue, hotel occupancy, retail, and food and beverage. For Q3, GEG reported EBITDA of HKD 2.8 billion, up 576% year-on-year, and up 12% quarter-on-quarter. We play unlucky in Q3, which reduced our EBITDA by HKD 122 million.
We are pleased to see a continued ongoing recovery in both visitor arrivals and associated gaming revenue. In Q3, group's mass gaming revenue was approximately 102% compared with 2019's level. Specifically, Galaxy Macau performed exceptionally well, achieving 121% of 2019's level, while StarWorld was approximately 71%. Moreover, retail sales and subsequent mall rental has seen demand normalize post-reopening. Mall rental in Q3 across our portfolio was HKD 379 million, which was equivalent to 114% of 2019's level. Hotel and F&B revenue reached 112% of the pre-COVID level. Overall, we are pleased with the solid performance of the quarter. We pay a special dividend of HKD 0.20 per share on 27th October this year.
Our special dividend certainly demonstrate our continued confidence in the Macau market and GEG's future performance, as well as our commitment to return capital to shareholders. We are already halfway through Q4. Let me give you some color on the outlook. Following a solid Q3, we are pleased with the recovery trajectory flowing into Q4. We continue to grow our market share, spearheaded by Galaxy Macau, while we actively reposition StarWorld. Indeed, we continue to see encouraging business performance. Quarter to date, the continued recovery has been verified by the performance during National Day Golden Week holidays. Our hotels were effectively fully occupied for the period. In Q3, the successful launch of Raffles at Galaxy Macau, Horizon Premium Club, and the Andaz Macau has resulted in a meaningful improvement in gaming performance. Q4 to date, we have seen further market share gains.
We have signed a number of multi-year agreements with well-established entertainment companies. In coming months, we will continue to host a number of great events and concerts. We continue to work hard at managing our cost structure while ramping up the business. Our current staff number is equivalent to 88% of 2019's level, even after the opening of Phase 3. Staff costs represent around 76% of our OpEx. We are on track to deliver some headcount savings, even with the resort expansion after the full opening of Phase 3 by year-end. Our unwavering confidence in the future prospect of Macau is reinforced by our significant investment in the business. During Q3, we invested approximately $1 billion into development, bringing the year-to-date investment to $5 billion, and we are on track to invest $7 billion for the full year.
This is a testament to our long-term dedication to helping Macau achieve its vision of becoming a world center of tourism and leisure. The development of Cotai Phase 4 is well underway. We are committed to creating a stunning destination that showcases renowned hotel brands, unrivaled entertainment options, and world-class amenities. Phase 4 will include multiple high-end hotel brands new to Macau, together with a 4,000-seat theater, extensive F&B, retail, non-gaming amenities. It is approximately 600,000 square meters of development and is scheduled to complete in 2027. We will continue to adjust the development timeline in accordance with the market demand. We believe that with the many amenities that we have added, and will continue to add in the future, will position us strongly for long-term growth.
Additionally, we have opened our first overseas offices in Tokyo and Seoul, and we're in the process of opening another office in Bangkok in order for us to tap into the international tourist markets and opportunities. We do acknowledge that the competition for high-value international tourists is significant, and we'll do our best to support this Macau government initiative. Last but not the least, on the balance sheet, cash and liquid investments were $24.8 billion at the end of September, and we're in a net cash position of $23.3 billion. That concludes my prepared remarks. Operator, please begin the Q&A session.
Thank you, sir. We'll now begin our question and answer session. If you have a question today for today's speakers, please press star one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, please press star two to cancel the question. So once again, please press star one on your telephone keypad to ask a question. Our first question comes from Angus Chan from UBS.
Oh, hi, Ted. Hi, everyone. Thanks for taking my questions. Yeah, congrats on the top line and market share gains in Q3. My question is more on costs. Can you comment on your OpEx Q-on-Q, how much has that gone up? And also, I guess, there's been some questions around the promotional environment and reinvestment rates. Can you comment a bit on that, as well, Q-on-Q, how that's trended Q-on-Q and into October? And lastly, Ted, if you could comment on the non-gaming commitment to the government this year. You know, off that budget, how much have you spent? And are you on track to delivering that commitment this year? That would be all.
Thank you.
Thank you, Angus. So first of all, on the OpEx, you know, we start with a very low number this year, because the opening of the borders. And as you know, the OpEx numbers represented by, mainly by the staff force, which represent roughly about 80% of our total OpEx. And in Q3 in particular, it's actually 76%. And currently, the Q3 number, staff number is actually 88% of the 2019's level. To be exact, it's 19,500 head count at the moment. And we believe that with this runway, after we open up all the hotel rooms and amenities, we're still ramp up the end user operation and the rest of the service staff require.
By the end of the year, we believe that the number will be ramp up a little bit, but we still see a certain percent of saving compared to 2019. So we believe that it will be roughly more than 10,000 head count save after the full opening of Phase 3. And staff force, as I said, represent roughly 80% of the total OpEx for your better modeling purpose. Promotion environment, I think, currently, after the three quarters of the opening and ramping up business, I believe that the promotion environment in Macau is quite in the range that we believe is quite acceptable.
I think, all operators are really, really, stick with the principle that we are really competing, in service and facilities rather than, price. So I think, we're still in a range of, comfortable range of competition, at the moment. For the third one, I think it's the commitment for our, non-gaming commitment to, the license for the next 10 years. A year today, we spent our committed amount, and, this year, will be around HKD 3 billion, and 2/3 of it, which is, OpEx, and, 1/3 is actually, CapEx. I think we are spending, almost like 78%, and we are, we believe that we will be committed fully for the year.
More importantly, I think, for Galaxy, Galaxy's commitment to the market, I think, we are 2/3 OpEx for the 10 years, and 1/3 being CapEx. Also, we are in the early stage of development and still in the phase of development and negotiation with the government at the moment. So I think the number could change in terms of the mix of the CapEx and OpEx. So we'll give you more color when we have more information going forward in the next few quarters.
Great. Thank you very much, Ted. I'll jump back in the queue. Thank you.
Our next question is from DS Kim, from JP Morgan. Please go ahead.
Hi, Peter. Hi, Ted. Thanks so much for taking my question, and good afternoon. Actually, Angus just asked all my questions that I wanted to check. But my follow-up here would be, A, when you remarked, "We have continued to gain market share in fourth quarter to date," can you give us some numbers, say, versus third quarter or versus 2019, so that we can have a better color and sense of where we are? And if possible, maybe if we can talk specifically about mass GGR or non-VIP GGR today, or fourth quarter today to October versus anything that we can benchmark, would be really helpful.
Second question, for the modeling purpose, and, you know, like, when we look at retail revenue in third quarter, we couldn't help but notice it came down a little. It is still very strong, it's well above pre-COVID level, but sequentially, quarter-over-quarter is down about 7%. I think we asked in Q2 why it was down sequentially, and I think it happened again. So just wanted to check any particular reasons here and how has been the, the tenant turnover, the retail turnover itself, been tracking over the past couple of quarters to have a sense on our underlying demand?
And maybe if I may ask one final question, can I confirm or double check what kind of room ADRs we are using for internal transfer pricing for the compings and whatnot in recent quarters? I mean, have you changed this practice or reset, readjusted this ADR for the comping? Because I think when you talked, when we talked to some of your competitors, some of the other operators have been adjusting this a bit, making it more realistically higher than what they have been using, hence in turn, boosting both non-gaming revenues and contra revenue or reinvestment ratio on the accounting perspective, although in reality it has zero impact on EBITDA.
Just wanted to have some sense on what kind of room ADR we have been using, and have we been adjusted for the internal transfer pricing purpose here? Sorry for lots of questions, Ted.
Oh, don't worry, yes, I'm happy to answer all the questions. So why don't we start with the last one? So the ADR gaming or internal transfer. I think the purpose, as you know, is not really for getting up the non-gaming revenues. More so on looking at the incentive for our sales team on the programs. So, actually, we really increased the ADR gaming ADR this year compared with last year, because, you know, during COVID time, we would like to reduce as much as we can, as long as we can cover all the costs of the operation is fine, so during COVID. So we really adjust the ADR this year.
Quarter to quarter, Q2 to Q3, we did not really change that much, or in fact, we stayed intact in terms of the non-gaming in terms of gaming ADR. So that's for the room. In terms of retail, first of all, I think we have to acknowledge that Galaxy's rental income recognition is a bit different from the other gaming company, I believe. We do recognize the rental income in terms of both a base rent as well as the turnover of rents on a monthly basis, not on a cumulative basis. So we reflect accurately on the monthly income and sales volume directly on a monthly basis. So that's one.
Secondly, I think we did experience in the last few quarters, perhaps that's because of the revenge spending behavior of our customer after border reopened. We see a huge trading volume in Q1 and Q2, and also, we also see a lot of volatility on the high jewelry segment of the retail sales. So these are the two major areas that we experience, and we still see a very solid base rent and some of the drop and increase in the turnover rent for various different segments of the mall. So I think that's the outcome resulted into Q3. We see some of the reduced rental income from Q2.
I must say, in a more forward-looking perspective, you should see Q3 and Q4 as a more normalized period after the revenge spending behavior in the first quarter and the second quarter. In terms of the market share performance quarter to date, we did experience an improvement for the fourth quarter. Q3 total market share was around 18.5%. But of course, our mass revenue is actually our performance mass is much, much bigger. So I think in the Q4, it continued with the trend. I'll give you a better reference, if you like. In Q3, our mass revenue was just over 100% of 2019's level.
And, quarter to date, on a company level, we achieved 110%-120% range, already. So, you see some improvement in that particular area. So you can back calculation in terms of the market share, if you like.
Thank you so much. That's very insightful and, a really great color. And just to add on to that, ADR point, I totally understand, and I think it makes a lot of sense. And, but the reason why I asked is not because there was any economic impact or anything, but it's just that some investors, seem to have been confused by a surging reinvestment ratio, for some of our peers, not us, who reported today as well. And one of the reason is, they readjusted the ADR this past quarter, and, you know, just wanted to clarify if there was anything like that. But glad to hear that we didn't have such, one of issues, this quarter. Thank you so much, Ted.
Thank you.
Thank you. As a reminder, to ask a question at this time, please signal by pressing star one. The next question is from Simon Cheung from Goldman Sachs. Please go ahead.
Hey, hi. Hi, Ted. Thanks for taking my questions. I think I have two questions. One, in relation to, again, your Galaxy Macau Phase 3, I know the opening schedule for Raffles and Andaz is actually a bit, you know, one in August, one is in September. And that resulted in a bit of a volatility in terms of the room occupancy capacities, et cetera, et cetera. So, maybe my question is, if you... I remember, I think in the second quarter, your room capacity was running at about 85%. Perhaps you can share with us, you know, what is the third quarter room capacities, and equally, what's the fourth quarter room capacity? So we running at 120%-130%.
And correspondingly, I think on Andaz questions, just wondering if you can share with us the exact daily OpEx per day number in the third quarter. So that's on the first question. The second one is, when you look at your mass market GGR back to 110%-120%, obviously looks like it's driven by Galaxy Macau, but I think StarWorld, this last quarter, the EBITDA momentum was still quite slow. I remember in the last set of results, you mentioned some ramp that you're preparing at StarWorld. Perhaps give us an update on that. And obviously, your competitor are also doing some ramp on the property in Peninsula. How are you thinking about your you know recovery trajectory going forward? Thank you.
Okay. So, Simon, in terms of the room count for the whole company, we're currently roughly about 5,000 rooms, and for Andaz, let's say 700 rooms. So we are able to only ramp up to around 300 rooms at the moment. So in Q3, Raffles was actually started early July. And we are successfully open fully for that 450 suites. And Andaz actually opened in middle of September, and we will be only opened roughly 100 and then 150, and then now ramp up to around 300 rooms. Our goal is actually to ramp up fully not later than the Chinese New Year. So hope that will clarify with that.
For the OpEx, I think I explained quite a bit on in terms of the StarWorld, but, and also the total OpEx level. Pre-COVID level, we are running on a daily basis, $3.4 million per day. Currently, it's about 90% of that numbers. And, we should experience a little bit higher after we add on all these headcount to ramp up the Andaz and the remaining non-gaming facilities. So we're, as I said, we'll effectively save around 1,000 headcounts after all these incremental facilities being added. Finally, in the StarWorld, I must say, StarWorld starting from middle of August, we experienced a total casino floor re-layout and also some changes since middle of August to end of September.
So almost a half of the quarters, we experienced some business interruptions in terms of the re-layout. It's quite a major one, and effectively, by the end of the quarter, the number of table counts from in StarWorld is reduced by 54 tables. So currently, we are running about 160 to 166 tables in StarWorld to better utilize the table inventory, to support the need of better service, the needs of Galaxy Macau in Q4. So the guideline, I think, is actually from October going forward, we see a more normalized operation in StarWorld. Having said that, we still see some opportunities in repositioning StarWorld in this peninsula side.
We see some unique, unique opportunity in the Cotai area, among MGM, Wynn and, and StarWorld area. So we continue to see a great opportunity over there. So, the repositioning plan, we think that it will be a year-long plan for StarWorld. But having said that, we believe the operation is actually normalizing October going forward.
Thanks, Ted. Can I just so you know, as I remember, can I have one quick follow-up? Just remember last quarter or last time when we met, you mentioned that you're very pleased with how Raffles, particularly the Horizon Club, is doing in terms of capturing-
Yeah.
the premium mass segment. I'm not sure whether quantitatively or qualitatively, you can maybe share with us how you're thinking about the performance of Raffles, in particular on that premium mass segment, which obviously is the highly competitive segment that everyone's been focusing in.
We were extremely happy with the performance on that particular area. I'm sure you visit the place and in both terms of metrics such as drop and hold percentage, and in terms of the occupancy is also the highest amount of all the premium mass area that we have experienced. So with this experience, I think we are going to perhaps extend to some of the area in the proximity area in the casino floor next to Raffles going forward in the next few quarters that we'll... You'll see. So the number is actually by far the best performing area that we have.
Great. Okay. Thanks a lot. Congrats on the solid sales result. Thank you.
Thank you, Simon.
Thank you. There are currently no more questions.
Thank you so much, and I will see you in the next quarter.
Thank you. This is the end of the GEG's conference call. Thank you for joining us today. You may now disconnect.