Thank you for holding, and welcome to the Galaxy Entertainment Group's Management Update for the First Quarter Results of 2021. Joining us today are Mr. Michael Mecha, GEG Board's Non Executive Director Mr. Robert Trait, Group CFO Mr. Roland To, Senior Director of Strategic Planning and Mr.
Peter Kavani, Assistant Senior Vice President of Investor Relations. At this time, all participants' lines are in a listen only mode. The presentation will be followed by a question and answer session and instructions will be provided at that time. I would now like to pass the conference over to Mr. Drake for presentation.
Mr. Drake, please go ahead.
Thanks, operator, and greetings, everyone, and thank you for joining us for the update on GEG's Q1 2021 results. The GEG team joining me here on today's call include Mike Mecha, a member of the GEG Board of Directors Roland To, Senior Director of Strategic Planning and Peter Kiveny, Assistant Senior Vice President of Investor Relations. Copies of our media release, stock exchange announcement and PowerPoint presentation are available on our website, which also include our customary disclaimers. On behalf of our Chairman, Doctor. Louis, Francis Louis and the entire GEG family, we greatly appreciate everyone's contributions across the board during the pandemic as well as our heartfelt sympathies to everyone globally who have been impacted by this crisis.
The sacrifices that everyone has made are paying off as Greater China continues to effectively contain the pandemic and life gradually returns more and more to normal. We are certainly encouraged by the fact that Macau's little sprouts that we mentioned back in February have grown into healthy green shoots as the market's gradual and managed recovery continues to build positive momentum, including most recently the improving performance over the May Golden Week holiday. Here are some of our thoughts on why we continue to be optimistic about the recovery of Macau as well as its longer term future. 1st and foremost, the Macau government continues to effectively handle the COVID-nineteen crisis where they have simply done an outstanding job over the past 16 months. As we have said many times before, the Macau government has demonstrated proactive and decisive leadership, while simultaneously generating critical community support, which is a huge accomplishment.
You may be interested in knowing that Macau has not experienced a new locally transmitted case for over 1 year since April 9, 2020, limited imported cases due to effective screening protocols and 0 fatalities. This is simply a remarkable achievement, especially when you consider that they gradually began to reopen the market in Q3 2020, experienced a healthy increase in visitation throughout the Q4 and proactively supported the well signaled Chinese policy of eliminate travel during the critical winter period, including Chinese New Year, where Macau visitation growth abated in January February of 2021. Although visitation was down 7% sequentially in Q1 2021, as expected, we finished the quarter on a positive note in March with the best monthly visitation and revenue performance since the pandemic began in early 2020. The positive momentum is definitely carried into the 2nd quarter with a very solid Golden Week holiday in early May, we experienced some of our best visitation and revenue days since the pandemic. We also continue to be very encouraged by the improving Chinese economy and recent consumer trends over the May Golden Week holiday, which certainly indicated strong demand for leisure, retail, tourism and travel.
Having said all of that, we are definitely not taking the recent trends for granted and remain as committed as ever to the health and safety of the community, our team members and guests as well as the economic and social stability of Macau where the continued containment of the virus remains the highest priority. Let's move on to our Q1 2021 performance where our effective cost control efforts introduced throughout 2020 continue to yield results in a gradually improving revenue environment, while at the same time, we continue to make progress with our enhancement projects at our existing properties as well as with our game changing Phase 3 and Phase 4 development projects in Copac. G and G's Q1 2021 EBITDA more than tripled year on year to $859,000,000 but declined 15% sequentially. There was a lot happening during the quarter worthy of note that impacted our results. Let's begin with our construction materials business where EBITDA grew 31% year on year to $156,000,000 but declined 52% quarter on quarter or $170,000,000 due primarily to seasonality, which impacted the group's overall results.
If you exclude construction materials, then EBITDA increased more than 4 times year on year and grew 3% quarter on quarter to $703,000,000 Let's move on to Macau. GDG's Q1 EBITDA also benefited by approximately 100 and 69,000,000 of good luck. You may also recall that in Q4 2020, the group benefited from a $100,000,000 COVID insurance claim, which was partially offset by playing unlucky, which reduced profitability by approximately 60,000,000 And for good order's sake, we experienced good luck in Q1 2020, which benefited EBITDA by approximately $84,000,000 If you adjust for the insurance claim, the luck factors and construction materials, G and G's EBITDA in Macau totaled $534,000,000 which was up significantly versus $80,000,000 in Q1 2020, but down 17% quarter on quarter. Our Q1 2021 results were also impacted by year on year and quarter on quarter shifts in revenue mix. We also continue to work hard at leveraging our cost structure as business gradually improves.
To that end, our Macau OpEx burn rate has declined by over 30% from approximately US3.4 million dollars per day under normal operating conditions and essentially remained in the US2.3 million dollars range for the Q3 in a row in Q1 2021. Even as business ramps up in Q4 2020 and Q1 of 2021, we were able to virtually maintain the same OpEx burn rate as Q3 and Q4 2020, which indicates that we are well on the road to delivering operating leverage. We'd like to pause here like we have previously and make a very important point on fiscal management, especially during these challenging times. We certainly acknowledge that OpEx burn rate is an important part of the expense equation, but there is certainly more to the overall cost picture than that. Daily cash burn is more indicative of the cost structure as it includes interest expense.
We are very fortunate that we are the only concessionaire in Macau that generates net interest income, not interest expense. In fact, our net interest income also remained unchanged in Q1 2021 at approximately US300000 dollars per day. If you deduct the US300000 dollars per day of interest income from the US2.3 million dollars per day in OpEx burn, you get approximately US2 million dollars per day in cash burn excluding CapEx. It's a powerful example of how conservative balance sheet management really pays in challenging periods in general and in our case significantly differentiates us from the competition. We would like to thank everyone on the G and G team as well as our valued suppliers who continue to support the company in these difficult times by contributing to our cost management programs.
We are proud to report that virtually all team members made voluntary contribution during this challenging period, including the Board of Directors, which waived their directors' fees, management who participated in our non paid leave program and the many team members who joined our Flexi Family Care program. It has truly been inspiring. We've also contributed 1,000,000 of dollars to the COVID-nineteen relief efforts to support the community as we previously reported. Let's move on to our development update where we continue to make progress with our initiatives, particularly in our home base of Macau. In fact, on March 1, 2021, we announced that our Cotai Phase 3A tower will be named Raffles at Galaxy Macau.
We look forward to welcoming Accor's legendary Raffles brand and an exclusive state of the art 450 all suite tower to Macau in late 2021 or early 2022. We continue to move forward with GICC, our convention center and arena, as well as our Kucai Phase 4, which will be Macau's only next generation integrated resort. We will continue to provide updates on our target timelines for all of our projects as we move forward. We are also using this period some opportunity to perform additional maintenance and enhancements to our existing properties. Our Cotai development activities along with our property existing property initiatives also demonstrate our support of Macau during the pandemic by continuing to invest 1,000,000,000 of dollars into the economy, providing jobs and supporting local SMEs as well as our long term commitment to help Macau achieve its vision of becoming a world center of tourism and leisure.
In addition, we note that the central government is currently reviewing the strategic master plan of Henchun, which were revised by the Zhuhai and Macau governments. We're also expanding our focus to potentially include opportunities within a rapidly expanding Greater Bay Area. And finally, Japan, where we continue to pursue opportunities with our partner SPM of Monaco. We are also monitoring the impact of the pandemic in Japan, which has also caused highly publicized delays to their IR process and we'll continue to update you as the situation moves forward. Next up is an update on our balance sheet, which continues to remain strong, liquid and virtually unlevered.
Cash and liquid investments decreased from $46,000,000,000 at the end of December 2020 to $42,400,000,000 at March 31, 2021. Our net cash position declined from $36,800,000,000 to $33,600,000,000 as operations contributed to cash flow while we continue to invest in our development project including Cotai Phases 34 and experienced some working capital adjustments. Total debt decreased from $9,200,000,000 to $8,800,000,000 which primarily reflects $8,300,000,000 of borrowings associated with our treasury yield enhancement initiative. Our core non treasury yield enhancement borrowings remain virtually unchanged at $500,000,000 which includes 0 debt associated with our Macau operations. Moving on to our outlook where we continue to remain very optimistic that Macau's gradual, sustainable and managed recovery will continue.
As we noted earlier, Q1 finished with a strong March, which was the best month of the pandemic. This is followed by a solid April, which recorded the highest GTR since January 2020 and an encouraging Golden Week holiday in early May. If we continue to remain diligent in the fact that we contain the COVID outbreaks and execute vaccination programs, we are confident that our green shoots will continue to strengthen as the summer high season approaches and throughout the balance of 2021 beyond. We're also encouraged by the rebounding Chinese economy and are quite confident that the leisure and tourism sectors will continue to recover on the back of the overall economy. In the interim, we remain well capitalized to invest in our development initiatives including our game changing Cotai Phases 3 and 4 as the fundamentals of Macau and our operating businesses continue to improve and generate cash.
We also remain upbeat and very positive about the long term prospects for Macau and the Greater Bay Area where the underlying fundamentals continue to remain incredibly compelling. We would also like to extend our sincere appreciation to the Macau government for their outstanding performance as well as the community which has rallied under their leadership during the pandemic. We'd also like to thank all the GED team members again who have been extraordinarily supportive of the community and the company during this challenging period. And finally, you may also be interested in knowing that Galaxy Macau will be celebrating its 10th anniversary of its Phase 1 opening on this coming Saturday. Happy birthday, Galaxy Macau.
The best is yet to come. Operator, that concludes our opening remarks, and we're happy to field any questions.
Thank you. We will now begin our question and answer We will now take our first question from Billy Ng from Bank of America. Please go ahead.
Hi, good afternoon. Hi, Billy. Hi. Hi, Bob. Hi, Peter.
Hi, Roland. Hi, Mike. So I guess I have a couple of questions. The first question I want to direct to Mike and just want to get an update about Japan, given that we understand COVID probably has slow things down there. But can you give us an update what's the latest timeline and also what's the latest development in Japan right now?
You bet. Thank you for the question, Billy. Japan, like all countries, has experienced an impact on both business and personal life as a result of the pandemic. Japan has accordingly adjusted their programs and timelines. The national government has announced an extension of the submission lodgment dates for the prefectures and their casino consortium partners from October of 2021 to April 2022.
Given that submissions to the national government have been extended until 2022, there is still a period of time before any announcement from the national government could be expected. GEG with SBM of Monaco and our local partners remain interested in bringing our brand of IR to Japan and we continue to explore all options. And we will keep you posted as the process progresses. Again, thanks for the question, Billy. Thank you.
And back to Macau, Bob, would you mind to share a bit more color about April and Golden Week? We heard from your peers when they had the conference call kind of suggesting that like some of them are achieving almost 80% recovery in terms of their mass revenue during Golden Week. But on the other hand, junket VIP remain quite slow, is about 20%, 30% recovery. Do you see similar trend? And I guess more importantly, have you seen a dramatic slowdown after the Golden Week or numbers still kind of better than April run rate at the current level?
Great question, Billy. As far as like as I just mentioned, as far as the end of the quarter is concerned, March finished very strongly. It was our best revenue and visitation month since the pandemic. We haven't seen the April visitation yet, but it's the it was also our strongest GGR month. And as we transition there, we had the Chingling holiday, which was traditionally not a strong holiday for Macau, but certainly rebounded after that to go into Golden Week where we had very encouraging results.
I think everyone's seen the visitation numbers. But as far as our actual performance is concerned, we did probably about 50% of the GGR that we did in 2019. It was really driven by our premium mass business and where we did probably 60% to 70% of what we did in 2019. The encouraging thing about our mass business is that our rate of play was very high. It was upwards of 70% of what we did in 2019.
Hotel occupancy was in the mid to high 80s. What was more encouraging about that is the type of occupancy and the type of customers that we're attracting. That was very high casino mix, very high. And as far as VIP is concerned, it continues to be challenged. And the numbers you quoted are pretty directionally accurate as far as we're concerned.
They're doing about 20% to 30% of volume what they used to. But that's we're really not surprised by that. One of the things that I think has been understated is the performance of our retail business. If you look at our tenant sales over Golden Week or even in the Q1, let's talk about the Q1. We did upwards just a little north of 90% of what we did in Q4 2019 in terms of tenant sales and EBITDA contribution.
Fast forward to Golden Week and we did approximately 80% more, more than we did in 2019. And we did it with 15% less tenants. So as we continue to reconfigure our mall and it's the type of customers, it's all premium retail that is doing extraordinarily well. You may know that we had our AGM this afternoon and in between meetings, but I just in the call, I just walked around the property a little bit and 4 or 5 of our major outlets have lines to get in. And it's a Thursday afternoon.
So that really bodes well for the recovery and the gradual recoveries we've been saying. And it is definitely managed. So the prognosis moving forward, post Golden Leaf, we expect a little post holiday roll and we've seen that. And we expect that the summer should be pretty strong. As you look at the overall economy and China continues to do well, we're and we're well positioned for that.
And I think as and of course the primary focus is always public health and safety. And if we could remain vigilant, there's no reason to think that the recovery will continue. It's just going to be a gradual recovery and we've been very consistent in our views of the market over the last 6 to 9 months. So overall, I think we had an encouraging golden week. It's certainly encouraging going into the high summer season.
And we look forward to reporting on our progress as we move forward.
Thanks. That's very clear. I'm sorry, just one quick follow-up, because like you mentioned about summer when you had a strong Golden Week. I think like one of your peers talked about like they are also optimistic about May June. Do you share that optimism?
Or do you think we will still see the normal slowdown seasonality slowdown between especially in June or in the second half of May?
We're cautiously optimistic. No, this is usually after the holiday, you get the post holiday lull. The question is, is the demand during a recovery strong enough to offset the traditional lull. And we'll watch that very closely. And hotel occupancy has dropped off as expected.
It hasn't dropped off as much as we thought it would, but so we're reasonably encouraged by that. But we just need more time. And we're not managing this week to week or month to month. We've been very focused on working with the government and really timing our the introduction of new products with the recovery of the overall market. And as fast as we all wanted to happen, we're very disciplined in the approach in our approach to running the business in this recovery.
And but again, we're definitely focused on public health and safety.
Thanks. It's very helpful. Thank you.
We will now take our next question from DS Kim from JPMorgan. Please go ahead.
Good afternoon, Bios.
Hey, Bob. Hey, everyone. Happy birthday to Galaxy Merkel and good afternoon. Thank you for taking my question. Firstly, can I ask you about a new project I read from the press release that Raffles is now scheduled to open in late 2021 or early 2022?
So it seems like kind of slightly delayed. And may I check what's causing this modest delay? And how about ANDAs and GI CC? Is it going to open before or after the raffles?
Thanks for the question, Diaz. As we as you rightly picked up in our press release and in our opening remarks that we continue to make progress on all our progress including CoTide Pages 34. Literally the day after our Board meeting in February, we announced the collaboration with the core, a very exciting project where we're going to introduce the legendary Raffles brand to Macau and calling it Baffles of Galaxy Macau. The 450 suite exclusive all suite tower is really going to redefine hospitality here in Macau, we believe, and attract the type of customer that we think will continue to call on Macao for visitation. Now as far as the opening is concerned, we just wanted to hedge our bets here a little bit, seeing how the market ultimately recovers and really try to align with the market recovery.
So whether it's the latter part of this year or early part of next year, we just want to align as much as we can with the market recovery and a month or 2 either way isn't going to make that much difference. As far as the GICC is concerned, we're looking at and studying the recovery of the mice business and we expect to open that around the same time as well. If not, maybe a little later than that. But again, we want to see recovery in the MICE business. And we're from a cost structure standpoint, that's a very it will have a minimal impact on overhead going forward.
And of course, we're very happy about opening the Andaz and welcoming Andaz to Macau as well in their 700 grams. So it's again, we want the recovery to ramp up as fast as we can, but we want again, we're focused on public health and safety. This is definitely a marathon, not a sprint and you have a longer term view of the world.
Thank you. That's really helpful. May I follow-up on that? Like when you say we want to watch the market recovery, do you have any like benchmark in terms of, I don't know, like occupants of the Gallatin Macau existing property, do you want it to go to 70%, 80%? Or is it more about the opening further reopening of the borders and the visa and whatnot?
Or is it just about like GGR pace? Any threshold level that you keep in mind? And I have one final follow-up. Thank you.
Well, it's been an interesting trend as far as visitation is concerned. In the Q1, visitation was down, but revenue was up. So it's the and then we've had a couple and you can see that with January February, where growth really abated after a very strong December, only the recovery in March. And it's really driven by policy. And of course, the policy is designed to protect the public.
And we're again, we are all in this together with the government and we just want to make sure we're doing things the right way in a sustainable way. But we've been consistent all along that we believe it will be a gradual managed recovery. And if we continue to on our current trajectory that the 4th quarter should be pretty solid.
Thank you. And this is slightly a related question, but we heard that CICJ government has been asking operators to extend the definition of gaming area from previously just the gaming floor to now gaming floor plus support area plus some common areas and whatnot. Is that true? And if so, does it cause any design change or plan for Phase 3 and 4? And yes, please.
Sure. We get lots of requests and we work closely with the regulators. We just want to make sure that we're all cooperating and we are on these things. So there's a whole list of things that we talk to the regulators on a virtually on a daily basis. But it's all in the spirit of moving the industry forward and we're certainly very supportive of what they want to do.
Thank you. Final question. We couldn't help but notice that you're mentioning an event and being the earnings release. And I'm just wondering, I think it's too early to say anything, but if you have any color, could you share your thoughts on potential impact on our business? I guess, VIP is definitely negative, but how about premium mass and grain mass and the visitation, any long term pictures that you envision with eBM and B?
And that's all. Thank you so much again.
Well, it's been highly publicized in mainland China that they've been trialing the e rMB. And the Macau government has come out and said that they're very supportive of that. And of course, we are too. So we're very encouraged to learn more as the Macau government learns more and supportive of all these initiatives. And we're all about the long term sustainability in Macau and whatever it takes to do that, we're going to be very supportive of.
Thank you, sir. Have a great day. Thank you.
We will now take our next question from Agnes Chan from UBS. Please go ahead.
Hi, Agnes.
Hi, everyone. Can I ask a question about OpEx? You managed to keep it up
or what
I just for the quarter. I'm wondering if at what level do you need to start increasing OpEx? Obviously, Q2 is tracking excellent Q1 in terms of visitors or GGR. What kind of OpEx should we OpEx increase should we be expecting? Secondly, on raffles, how should we think about the incremental OpEx we need?
And then lastly, we read that there's a voluntary exit program that you're implementing. I guess what kind of permanent cost savings do you envisage with the business in 2019 as a result of the program? Thanks.
As far as OpEx is concerned, as you know that with our supportive of the Macau government and supporting local that we have a ways to go until we hit the constraint where we have to add a lot more incremental labor. So I would expect that our OpEx rates for the next quarter or so remain pretty stable. And of course, our big challenge is converting temporary savings to permanent. And then at some point, once the GGR hits a certain point, then you'll see a tremendous amount of flow through because the just because we won't be adding a lot of labor and the flow through will be very strong. So it's the said another way, we have a kind of a high fixed cost base.
And but having said that, one of the areas that we've been pretty successful in our cost containment programs is reducing our labor costs. We're upwards of 15% to 20% year on year. So it's the challenge there is really using this as an opportunity to improve your productivity, do more with less. I think Francis, our Vice Chairman, has been championing that along with our operations team to really try and really increase productivity. And I think we're being able to see that and by maintaining a very stable OpEx on a gross basis, but what you don't see underneath there is certainly a change in the mix.
So even on the controllable expenses like utilities that we expect that to increase as a, its seasonality and as business increase. So with our OpEx at some point it will increase, but hopefully it will be very again maybe you're focusing on the cost, but we're return driven that the flow through that we get on that will be incrementally higher. And when we and we're quite confident that we are currently generating a lot of operating leverage through our cost structure. Because you can see that with our net revenue mix shifting and bringing up some of our personnel costs to market. So the real challenge there is to really try to convert as much temporary savings to permanent.
As far as raffles is concerned, and again, we're very excited about that. It is a new power to Galaxy Macao. It's not a separate integrated resort. So we won't be adding a lot more folks to the team to support that given that we have an existing labor pool that will transfer some of our existing labor to support that, if you will. So the incremental OpEx on that is going to be as much as people think.
So what we think that will do is generate very profitable incremental revenue to the bottom line. So on the back of that as far as our lifestyle change programs, as you mentioned there. But again, these programs are 100% voluntary. Remember, our primary stakeholders in the Cal government and again, as we promote economic development and in general and including for locals. What we're trying to do is provide not only new lifestyle packages, but opportunities to shift into different career opportunities in non gaming or wherever they want to do.
And that's really what we're here to do is really to promote economic development across the board, including local and providing new career development opportunities. And as the business changes, we're trying to again optimize our labor and cost structure to the trend in the business such that we're all delivering shareholder value here. So some of that's permanent, but it's at the end of the day, we're more focused on really satisfying what we're really here for is to help Macau achieve its objective of being a world center of tourism leisure and to promote local economic development, including true locals.
Great. Thanks. Hopefully, the Hong Kong border will open up in time for us to see the vessels.
I would welcome the opportunity to show you around.
As there are no further questions at this time, I would like to turn the call back to your speakers for any additional or closing remarks.
Well, thank you everyone for joining us for our Q1 results update call. We look forward to updating you on our Q2 results sometime in the month of August. Until then, stay safe and healthy and we'll talk to you then. Thank you very much.
Thank you. This is the end of the GEG's conference call. Thank you for joining us today. You may now disconnect.