Good afternoon. My name is Kristen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Las Vegas Sands Corporation Q3 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
I would now like to turn the call over to our host, Mr. Daniel Briggs, Vice President of Investor Relations. Please go ahead.
Thanks very much. Before I turn the call over to Mr. Adelson, let me remind you that today's conference call will contain forward looking statements that we are making under the Safe Harbor provisions of federal securities laws. The company's actual results could differ materially from results in those forward looking statements. Please see today's press release under the caption Forward Looking Statements for a discussion that may affect our results.
In addition, we may discuss adjusted net income, adjusted diluted EPS and adjusted property EBITDA, which are non GAAP measures. A definition and a reconciliation of each of these measures to the most comparable GAAP financial measures are included in the press release. Please note that this presentation is being recorded. With that, let me please introduce our Chairman, Mr. Sheldon Zvi.
Thanks, Dan. Ladies and gentlemen, I'm very excited to report that Las Vegas Sands blew out the Q3 of 2010 with record EBITDA of $645,000,000 on net revenue of 1,900,000,000 dollars Our EBITDA results are the highest in our industry since late 2006 when Las Vegas was at the very peak of its profitability. These results are part of a powerful and continuing trend, which can be explained by our company's long standing strategic direction in combination with prudent new management and the team that Mike Levin and I have assembled and continue to build around us. Some of you may recall that at our annual shareholders meeting in June, I suggested the company might be able to reach $3,000,000,000 in EBITDA in 2011. Well, it turns out I might have been wrong.
Looking at our results from the 1st 25 days of October, our annualized run rate is now substantially in excess of $3,000,000,000 It's good to be wrong in that direction. So with that important clarification out of the way, let me take a few minutes to discuss highlights of this quarter's historic performance and some of the trends we're seeing moving into the end of October. Adjusted EBITDA reached a record $645,000,000 for the quarter. Our EBITDA climbed by more than 73% from the beginning of June to the end of the September. The trend continues into October, where we are on pace to grow an additional 31% from September to October.
Net revenue reached a record $1,900,000,000 in the quarter. From June to September, net revenue increased more than 8%.
Good afternoon. My name is Kristen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Las Vegas Sands Corporation Q3 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Thank you. I would now like to turn the call over to your host, Mr. Daniel Briggs, Vice President of Investor Relations. Please go ahead.
Thanks very much. Before I turn the call over to Mr. Adelson, let me remind you that today's conference call will contain forward looking statements that we are making under the Safe Harbor provisions of federal securities laws. The company's actual results could differ materially from anticipated results in those forward looking statements. Please see today's press release under the caption Forward Looking Statements for a discussion that may affect our results.
In addition, we may discuss adjusted net income, adjusted diluted EPS and adjusted property EBITDA, which are non GAAP measures. A definition and a reconciliation of each of these measures to the most comparable GAAP financial measures are included in the press release. Please note that this presentation is being recorded. With that, let me please introduce our Chairman, Mr. Sheldon Zvi.
Thanks, Dan. Ladies and gentlemen, I'm very excited to report that Las Vegas Sands blew out the Q3 of 2010 with record EBITDA of $645,000,000 on net revenue of 1,900,000,000 dollars Our EBITDA results are the highest in our industry since late 2006, when Las Vegas was at the very peak of its profitability. These results are part of a powerful and continuing trend, which can be explained by our company's long standing strategic direction in combination with prudent new management and the team that Mike Levin and I have assembled and continue to build around us. Some of you may recall that at our Annual Shareholders Meeting in June, I suggested the company might be able to reach $3,000,000,000 in EBITDA in 2011. Well, it turns out I might have been wrong.
Looking at our results from the 1st 25 days of October, our annualized run rate is now substantially in excess of $3,000,000,000 It's good to be wrong in that direction. So with that important clarification out of the way, let me take a few minutes to discuss highlights of this quarter's historic performance and some of the trends we're seeing moving into the end of October. Adjusted EBITDA reached a record $645,000,000 for the quarter. Our EBITDA climbed by more than 73% from the beginning of June to the end of the September. The trend continues into October, where we are on pace to grow an additional 31% from September to October.
Net revenue reached a record $1,900,000,000 in the quarter. From June to September, net revenue increased more than 8%. And from September through October, we are projecting an increase of 12%. EBITDA margin also reached a record 33.8 percent, up nearly 1,000 basis points from the 23.9% in the quarter last year. Adjusted diluted EPS reached $0.34 up over 1100%, that's 11 times from $0.03 in last year's 3rd quarter and is the highest third quarter EPS in the company's history.
Let's turn to Singapore, where Marina Bay Sands in its first full quarter of operations, generated a whopping $245,000,000 in EBITDA and an outstanding EBITDA margin of just a 10% under 50% at 49.7% for the quarter. Both are records for any property in our company's history. This is in spite of the fact that low hold on rolling play of 2.6 5% negatively impacted our revenue by approximately $20,000,000 These results are particularly impressive considering we are still in a very early stages in Singapore after opening the doors just 6 short months ago. Let me share with you some of the exciting trends we're experiencing in Marina Bay Sands. These figures are based on a 4 week average comparison.
Gross gaming revenue has increased to 126% since May, reaching $8,400,000 per day in October. That's an annualized run rate of $3,100,000,000 dollars Rolling volumes have increased 182 percent since May to reach $116,300,000 per day in October. At that rate, we will roll $42,000,000,000 annually approximately. Gross gaming revenue from our mass tables and slots increased 49% since May to reach $3,200,000 per day in October and an annual run rate of $1,200,000,000 Non rolling drop increased 21% since May to $9,600,000 per day in October. That's an annual run rate of $3,500,000,000 dollars Slot handle increased 165 percent to reach $18,300,000 per day in October.
That is 6.7 $1,000,000,000 annually. The slot win per unit per day increased 43% since May to reach $5.17 per unit per day so far in October. These results reflect the addition of electronic cable games, which came in August September. The annual run rate for gross slot win is approximately $350,000,000 Let me now provide some quick color on Macau. I'll address the issue of EBITDA versus gross revenue in a minute.
But let me first point out that our EBITDA margin in Macao reached a record 31.3%, up 3 10 basis points from the 28.2% in the same quarter last year. I believe September through October, we are projecting an increase of 12%. EBITDA margin also reached a record 33.8 percent, up nearly 1,000 basis points from the 23.9 percent in the quarter last year. Adjusted diluted EPS reached $0.34 up over 1100%, that's 11 times from $0.03 in last year's 3rd quarter. And is the highest third quarter EPS in the company's history.
Let's turn to Singapore, where Marina Bay Sands in its first full quarter of operations generated a whopping $245,000,000 in EBITDA and an outstanding EBITDA margin of just a tad under 50% at 49.7% for the quarter. Both are records for any property in our company's history. This is in spite of the fact that low hold on rolling play of 2.6 5% negatively impacted our revenue by approximately $20,000,000 These results are particularly impressive considering we are still in a very early stages in Singapore after opening the doors just 6 short months ago. Let me share with you some of the exciting trends we're experiencing in Marina Bay Sands. These figures are based on a 4 week average comparison.
Gross gaming revenue has increased to 126% since May, reaching $8,400,000 per day in October. That's an annualized run rate of $3,100,000,000 dollars Rolling volumes have increased 182 percent since May to reach $116,300,000 per day in October. At that rate, we will roll $42,000,000,000 annually approximately. Gross gaming revenue from our mass tables and slots increased 49% since May to reach $3,200,000 per day in October and an annual run rate of $1,200,000,000 Non rolling drop increased 21% since May to $9,600,000 per day in October. That's an annual run rate of $3,500,000,000 Slot handle increased 165 percent to reach $18,300,000 per day in October.
That is $6,700,000,000 annually. The slot win per unit per day increased 43% since May to reach $5.17 per unit per day so far in October. These results reflect the addition of electronic cable games, which came in August September. The annual run rate for gross slot win is approximately $350,000,000 Let me now provide some quick color on Macao. I'll address the issue of EBITDA versus gross revenue in a minute.
But let me first point out that our EBITDA margin in Macau reached a record 31.3%, up 3 10 basis points from the 28.2% in the same quarter last year. I believe that's a result of having an integrated resort where you have other departments that are contributing to a lot of the fixed and to a lot of the fixed and, of course, the variable expenses. Additionally, you all know the Golden Week holiday took place earlier this month. There was a strong Golden Week for Sands China as we set 2 daily records for EBITDA and with a full weekend still ahead of us. And despite the prior week's typhoon warning, we're on pace to have a record month in October overall.
We're certainly enjoying tailwinds of both Singapore and Macau at the moment. Our progress in both the Las Vegas and Bethlehem Sands shouldn't be discounted either. We're optimistic about trends in Las Vegas, including momentum from our recently announced marketing alliance with InterContinental Hotel Group. And in Bethlehem, where table games and the completion of our hotel next spring should continue to produce increased growth, revenue and EBITDA. Simply put, our business overall has never been healthier.
We're growing at a significant rate while generating more cash flow than ever before. As the widely read Macau publication recently said on separate occasions, and I quote, LVS will one day soon be remembered for the quarter in which it separated from the pack and became the one. It's now the kind of stock you would want to put in your children's trust fund simply because Adelson has pulled away, thanks to his huge bets in Asia. The properties he already has are going to provide fantastic cash flow in the coming years for investors. Close quotes.
Not our words, but we couldn't agree more. The fundamentals of this business and our basic business model have not changed and were always viable. Our strong results reflect the successful execution of the integrated resort development strategy that we have aggressively pursued since we founded the company. That is the key to our growth story, the solidity of our assets. We can't possibly know how these trends will continue to develop, but we can give you a real time look at what we're seeing right now.
As a starting point for our Q and A discussion, let me share my thoughts on 3 additional points. First, with respect to the granting of credit in Singapore. We have more than 10 years experience granting credit to Asian customers in both Las Vegas and Macau. We've been very judicious about granting credit, notwithstanding the ramp up we've been experiencing. We are managing this very tightly and monitor it on a daily, if not an hourly basis.
We have been measured and prudent about granting credit. 2nd, our strong belief is that the appropriate measure of our financial performance is EBITDA, not market share of gross revenue. For instance, in Macau, SJM has given out tens of sublicenses. And according to rumors, MGM, Galaxy and Melco have decided to follow. That's a result of having an integrated resort where you have other departments that are contributing to a lot of the fixed and to a lot of the fixed and of course, the variable expenses.
Additionally, you all know the Golden Week holiday took place earlier this month. It was a strong Golden Week for Sands China as we set 2 daily records for EBITDA and with a full weekend still ahead of us. And despite the prior week's typhoon warning, we're on pace to have a record month in October overall. We're certainly enjoying tailwinds of both Singapore and Macau at the moment. Our progress in both the Las Vegas and Bethlehem Sands shouldn't be discounted either.
We're optimistic about trends in Las Vegas, including momentum from our recently announced marketing alliance with InterContinental Hotel Group. And in Bethlehem, where table games and the completion of our hotel next spring should continue to produce increased growth, revenue and EBITDA. Simply put, our business overall has never been healthier. We're growing at a significant rate while generating more cash flow than ever before. As a widely read Macau publication recently said on separate occasions, and I quote, LVS will one day soon be remembered for the quarter in which it separated from the pack separated from the pack and became the one.
It's now the kind of stock you would want to put in your children's trust fund simply because Adelson has pulled away, thanks to his huge bets in Asia. The properties he already has are going to provide fantastic cash flow in the coming years for investors, close growth. Not our words, but we couldn't agree more. The fundamentals of this business and our basic business model have not changed and were always viable. Our strong results reflect the successful execution of the integrated resort development strategy that we have aggressively pursued since we founded the company.
That is the key to our growth story, the solidity of our assets. We can't possibly know how these trends will continue to develop, but we can give you a real time look at what we're seeing right now. As a starting point for our Q and A discussion, let me share my thoughts on 3 additional points. First, with respect to the granting of credit in Singapore. We have more than 10 years experience granting credit to Asian customers in both Las Vegas and Macau.
We've been very judicious about granting credit, notwithstanding the ramp up we've been experiencing. We are managing this very tightly and monitor it on a daily, if not an hourly basis. We have been measured and prudent about granting credit. 2nd, a strong belief is that the appropriate measure of our financial performance is EBITDA, not market share of gross revenue. For instance, in Macau, SJM has given out tens of sublicenses.
And according to rumors, MGM, Galaxy and Melco have decided to follow Charted Waters. And the amount we don't see any let up in the growth, but the higher the Pisa Club or the high end gaming, the larger the slug of revenue from that segment, the higher the percentage will be. The other day, we pulled in 71% of Casino Departmental Profit. So the more of that, it's tough to say, but I can't see it going much more than 60%. We'd have to have a very high, very consistent high end of the market return every single day to get beyond 60%.
Okay, great. And just getting back to my other question as a follow-up. So it grew 20% from the end of May to October. What was what's the basis for that?
No, no, no, no, no, no. Much more. What is Dan? What's the figure?
From Marine?
I'm sorry, but somebody came along and took my pages here. I can't refer back to the beginning.
We've got a very strong start to October. We are holding a little heavy. We've got a very, very strong start to October. So if you look at the months in the quarter, July, August September EBITDA by property, it goes up every month from June to July, from our back right now. But we're really enjoying the wind at our back right now.
But we're really enjoying the wind at our back the golden week. So we're really enjoying the wind at our back right now, but the number is much, much higher than the number we had in September. On a percentage basis, based on what's happening right now, it's up 40%, approximately 40% from September to October.
EBITDA margin? EBITDA. EBITDA.
EBITDA. And so you won't tell us what the September EBITDA was? I mean, it's obviously higher than
Yes. I think you got plenty of color, Felicia.
Okay. And then just are the rebates still at 1.2 to 1.3?
Yes.
Okay. Great. Final question on 4 Seasons Macau, EBITDA margins were also a record. You obviously held well in the mass, but I was just wondering what a run rate was there?
I don't think we have that carved out. The run rate? And annual run rate of EBITDA No, I just
you had a record EBITDA margin in at the Four Seasons, but you held well. Should we look at this as we model forward? Or is this an anomaly?
I don't think it's an anomaly. I think it's because we had a very we had a much higher percentage of high end gaming of high end win. But I see the Four Seasons supplies at the Four Seasons not equaling, but starting to approach within a striking range the numbers we're experiencing at Sands Macau.
That's right. Okay.
That's picking up. And we expected to pick up more. We anticipate doing some property improvements and adding a couple of amenities. We'll soon. And I believe Galaxy and ELCO are also doing so.
Under these arrangements, the operator may actually receive and that these are the most recent offers. The operator may actually receive as little as 3% of gross revenue, but they use 100% of the gross revenue to determine their market share. I personally think is an over exaggeration on the issue of gross revenue for market share. When all you're getting is 3% out of it, but you're counting the entire 100% as part of your market share. What's more important, 3% of revenue before expenses or EBITDA of more than 30%.
I think that the answer is obvious. Anybody who has read the Dummy's Guide to Doing Business knows that what really counts is the cash you're able to put in the bank. So I hope that will put an end to the market share quotations the way it's been done. While our market share of gross gaming revenues in Macau has remained approximately 20%, our share of EBITDA in the marketplace is significantly higher. We estimate that we are currently generating between 35% 40% of the total EBITDA in the market.
Now that is how we define market share leadership in Macau. One final thought, sometimes if we hold a little more, but we are right where we should be and so will the averages over time. So with that, Mike, Rob and Ken are also here to answer your questions. So let's go to Q and A.
And your first question is from the line of Felicia Hendrix with Barclays Capital. Hi, good afternoon.
So great quarter, Sheldon. At the beginning, you ran through a lot of impressive numbers for October for me kind of fast. Everybody else can't speak up at this moment. So if I miss something, I apologize. But in those numbers and you were just talking about how important EBITDA was, I was just wondering if you can give us an idea of what EBITDA was trending in October at Marina Bay Sands?
The trend of EBITDA? Well Well, I got to tell you, we don't have that do we have that here as a percentage?
No, not as a percentage. So EBITDA in the quarter was about $80,000,000 a month. So I was just wondering how it's turning out in October.
Well, I did quote I did say what somebody what's the member
there? It's over 20%. It's beyond 20%.
From the beginning of May from the end of May to the beginning of October. Okay.
Thank you. You just missed that. Sorry, I was kind of fast. And then so the margins at the property, very impressive 50%. You definitely got there faster than we expected.
Where do margins go from here?
That's a good question. We're sailing in Marina Bay Sands. Singapore is sailing
in. Great. Okay. Thanks a lot.
You're welcome, Felicia.
Your next question is from Janet Boucher with Sanford Bernstein.
Thank you. On the topic of Singapore, could you give us a little preview of what you see coming in the next quarter relative to the moving parts? You've had a lot of moving parts as new parts of the resort open like with retail ramping up, with changing the electronic games or adding the increasing your occupancy. Could you talk a little bit about where you think the occupancy can go if you have more changes to the game mix and how the retail might ramp?
Basically, this is Mike, Janet. How are you? Our occupancy has been built pretty favorably. Our tour operator business is up to close to 600 rooms a night. Our MICE business is building.
We expect the occupancy to go significantly higher towards the end of the year. On the retail, we're still not completely open. All the retail with the possible exception of Louis Vuitton will be open by the end of the year. And it's starting to ramp not as well as we would have thought in the early going because the construction is going on, but it contributor in 2011 that we think significantly. Our room rate is holding and going and actually heading north, it's going up.
So that's working. I think all the signs our call center, all the signs of business beyond the casino situation are starting to move forward now are pretty rapidly. And I think you'll see some very significant contributions to that. The theaters open the end of the year and the museum will open the end of the year. So we're pretty much done with everything there except the Light and Water Show, which will probably open in February.
And now we just have celebrity chefs open the end of this month. The rooftop restaurant opens the end of this month. And the only significant delay in anything is the health club and the spa and that will take place sometime in the early part of 2011. So all of these income generating areas will pretty much be done by the time we head into 2011 and we'll have and some of them will have already ramped. So we expect a bigger contribution in 2011 from the rest of the property.
That's great. Thanks. Could you also give us a
little update on lots 56 in Macau on things like you've been able
to resolve all the prior contracts from when you shut down and restarted and how is the labor situation coming along? What sorts of expenses are you incurring as you're as an additive expense now that the work is not going quite at the pace you'd like? And maybe a little bit about when you expect Galaxy to open and the impact on the whole market, not necessarily The Venetian, but maybe the Peninsula
as well?
The latest commentary on Galaxy is June. What we're hearing, we have no definitive word out about that. As far as we're concerned, we're still on our target. Our budget has remained the same. Yes, there'll be a couple of months delay.
We're still looking at the end of the last quarter of 2011 to open a Phase 1. However, in the next 30 days, we should know pretty well whether we
can make that particular Chartered Waters. And the amount we don't see any let up in the growth, But the higher the Pisa Club or the high end gaming, the larger the slug of revenue from that segment, the higher the percentage will be. The other day, we pulled in 71% of casino departmental profit. So the more of that, it's tough to say, but I can't see it going much more than 60%. We'd have to have a very high, very consistent high end of the market return every single day to get beyond 60%.
Okay, great. And just getting back to my other question as a follow-up. So it grew 20% from the end of May to October. What's the basis?
No, no, no, no, no, no. Much more. What is Dan? What's the figure?
From the year. I'm sorry
that somebody came along and took my pages here. I can't refer back to the beginning.
We've got a very strong start to October. We are holding a little heavy. We've got a very, very strong start to October. So if you look at the months in the quarter, July, August September EBITDA by property, It goes up every month from June to July, from July to August, from August September and from September to October. Again, October had a golden week in it.
It's also got heavier hold even after the golden week. So we're really enjoying the wind at our back right now, but the number is much, much higher than the number we had in September. On a percentage basis based on what's happening right now, it's up 40%, approximately 40% from September to October.
EBITDA margin? EBITDA. EBITDA.
EBITDA. And so you won't tell us what the September EBITDA is was? I mean, it's obviously higher than
Yes. I think you got plenty of color, Felicia.
Okay. And then just are the rebates still at 1.2 to 1.3?
Yes.
Okay, great. Final question on 4 Seasons Macau, EBITDA margins were also a record. You obviously held well in the mass, but I was just wondering what a run rate was there?
I don't think we have that carved out. The run rate and annual run rate of EBITDA
No, I just you had a record EBITDA margin in at the Four Seasons, but you held well. Should we look at this as we model forward? Or is this an anomaly?
I don't think it's an anomaly. I think it's because we had a very we had a much higher percentage of high end gaming of high end win. But I see the 4 seasons the Plaza of the 4 seasons not equaling, but starting to approach within a striking range the numbers we're experiencing at Sands Macquariell.
That's right. Okay.
That's picking up. And we expected to pick up more. We anticipate doing some property improvements and adding a couple of amenities.
Singapore, as you look at your customers today, do you have a rough breakdown of the customer mix between locals and foreign markets in which maybe foreign markets you could target more heavily going forward?
Well, I tell you, that foreign market is a moving target. I'll tell you that I watch that every single day, but I only have access to the top 20, what we call the hit sheet, the top 10 winners, top 10 losers. And the average number of countries that are represented in those 20 customers are 8 to 9 different countries. We get countries from all over the Pacific, from Laos and Cambodia and Myanmar. Let me get back to the beginning and say that our primary markets are Singapore, Malaysia and Indonesia.
We are building up a steady stream of business from Korea, from Japan and outside of the area, Hong Kong is our biggest contributor. China is, let me say, equally as strong. So we got a lot of business from China, but we're very cautious about granting credit only to people that we know. So it's just a whole property of countries that are represented. I've ordered a percentage of total business, a breakdown by country.
So we'll see what kind of some sort of an analysis. But I got to tell you, as far as the top 10 winners or losers, it comes from a wide variety and I personally am curious about it. I watch this every single day. And I can look at it and sometimes we have as little as 4 people from Singapore, sometimes as many as 12 or 14 out of the 20. One day last week, I saw midweek, 24 countries represented.
But it's going out. We get from Bangladesh, we get from India, from Thailand, from the Indo Chinese countries, Vietnam, We get from Philippines, New Zealand, Australia, some from couple from the USA. But we're going to do analysis of that. We'll probably publish that. But it is I personally see it as a very promising sign because when you penetrate the level of the haves as opposed to that nots in a place like Bangladesh, where all haves know each other and people say they enjoyed their stay and their trip, we're going to get a lot more people from, say, Bangladesh.
And so we'll have a steady solid stream of business from each of those countries and there's an awful lot of them. Them.
Okay. Thank you very much. That's very helpful. And one follow-up if I may and perhaps a question for Mike. As you look at operating expenses in Marina Bay Sands, would you say you're pretty much fully staffed at this point without a lot of incremental labor coming on?
We actually have been understaffed, Mark, from the original target. Our original target was about 8,400 people. We ran below that for the 1st number of months just in terms of on boarding people. We couldn't find enough of them. So our pay our present payroll levels will probably increase closer to that 8,000 400 level and then we have additional employees coming on with the theaters and the retail stores and the museum, etcetera, all of which will come according to plan.
So we don't expect that there will be any enormity in the payroll increases compared to what we expected from the beginning, but you'll have some slight increases to what we've been running now. And we watch that very carefully and continue to watch that very carefully. We also get requests from the Casino Regulatory Commission for certain audits and things like that that keep coming in that require additional people and we're working we do that as well. But I don't think you'll see any enormous surprise in terms of payroll costs.
Great. Thank you very much.
Your next question is from Joe Houdek with Wells Fargo Advisors.
Thank you for taking my call. Great quarter, not to be redundant,
Your next question is from David Katz with Jefferies.
David? Hi, sorry. I wanted to ask about Singapore, if I may. Noticing that the occupancy in the hotel is still where I guess we should consider at the formative stages. How should we think about a fuller or a higher occupancy and how that translates into casino revenue once you get there?
In the context that what we've seen so far appears to be clearly stronger than what we had and my guess is stronger than what many people had been forecasting so far?
David, I think you'll see that in the growth in the mass market play. The numbers that we talked about before on the per day actualities for the mass market, we expect that those numbers will increase as the participation in the hotel increases. Eventually, we'll get a tracking for the out of town or the foreign visitors from the hotel and what they're doing if they get carded. In other words, if they get monitored in the casino. But it's we haven't done that yet.
But that's your metric that you watch because there's only so much mass market that can come from the Singapore environment itself. And so as the hotel fills gets more interesting business from MICE, etcetera, things like we have a big Indian promotion going on in January to open that market more viably for us. I think that's the measure that you'll see slot play and mass drop will be the ones.
And if I can ask one more. Thank you. On Las Vegas, one of the things I observe is a potential, I believe, expansion of McCarran at some point out in the future. And I admit to not knowing heck of a lot about how those expansions get filled up with air capacity. And looking at that as a potential driver of some recovery in Las Vegas, what can you help us with in terms of how that rolls and what you might know about an expansion at the airport, increased capacity at the airport and just thinking about a Las Vegas recovery longer term?
Well, the airport is expanding with an additional runway, but it doesn't really do us much good because unless you get more lift into Las Vegas, U. S. Air and Southwest and whatever have cut back some of their lift into Vegas, which has caused something like 800,000 less passengers this year coming into the airport. That drop is really because no seats are available. Most of the planes that come in here have very high load factors and they're very profitable for the airlines, but they sort of left us out in the cold.
There are a couple of things that are happening that I see. Korean Air is coming in here now. There's a couple of other foreign carriers that have come in, BA and Virgin and what have you, that are dropping some people in here. But at the end of the day, to have a significant recovery for Vegas in terms of the totality of the market, we need more lift in here because the drive traffic is pretty stable as well. And California does siphon off a little bit of that drive track with their own entertainment and casino facilities.
So it's lift is single most important thing in terms of that. McCarran can handle more traffic. It's just a question of getting more planes in.
Okay. Thank you very much.
And you didn't mention Adelson there.
We're in the charter business.
We've been in that business before.
And your next question is from the line of Joe Greff with JPMorgan.
Hello, everyone.
Hey, Joe. Hello, Joe.
At Marina Bay Sands, do you have any more space to add more slot or table game capacity? And do you feel that your capacity constrained at all right now?
We do have capacity. We can find more room, but we do have capacity. We're ready to do something. There's a possibility of some additional GFA to be connected to the hotel, but I really can't say much about that now. If we're going to expand, right now with what we have, we're doing an analysis of the and we do have some space to put that.
I think we're okay in the mass market, and I think we have enough capacity. But I think in the high end as it grows, it's already close to it's pushing 60% of the total gaming income. It's from like 57% to 60% of the gaming income and that keeps improving, keeps increasing. So I think that what we're going to focus on first is more private gaming. So when private gaming room won best can equal all the best that are on the table in the mass gaming floor for that minute.
So there's a lot of upside potential at the high end.
Great. Okay. Thanks a lot.
You're welcome, Felicia.
Your next question is from Janet Boucher with Sanford Bernstein.
Thank you. On the topic of Singapore, could you give us a little preview of what you see coming in the next quarter relative to the moving parts? You've had a lot of moving parts as new parts of the resort open like with retail ramping up, with changing the electronic games or adding the electronic games and increasing your occupancy. Could you talk a little bit about where you think the occupancy can go if you have more changes to the game mix and how the retail might ramp?
Basically, this is Mike, Janet. How are you? Our occupancy has been built pretty favorably. Our tour operator business is up to close to 600 rooms a night. Our MICE business is building.
We expect the occupancy to go significantly higher towards the end of the year. On the retail, we're still not completely open. All the retail with the possible exception of Louis Vuitton will be open by the end of the year. And it's starting to ramp not as well as we would have thought in the early going because the construction is going on, but it will basically be finished. So that will be a contributor in 2011 that we think significantly.
Our room rate is holding and going and actually heading north, it's going up. So that's working. I think all the signs our call center, all the signs of business beyond the casino situation are starting to move forward now pretty rapidly. And I think you'll see some very significant contributions to that. The theaters open the end of the year and the museum will open at the end of the year.
So we're pretty much done with everything there except the Light and Water Show, which will go which will probably open in February. And now we just have celebrity chefs open the end of this month. The rooftop restaurant opens the end of this month. And the only significant delay in anything is the Health Club and the spa and that will take place sometime in the early part of 2011. So all of these income generating areas will pretty much be done by the time we head into 2011 and we'll have and some of them will have already ramped.
So we expect a bigger contribution in 2011 from the rest of the property.
That's great. Thanks. Could you also give us
a little update on lots 56 in Macau on things like you've
been able to resolve all the prior contracts from when you shut down and restarted and how's the labor situation coming along? What sorts of expenses are you incurring as you're as an additive expense now that the work is not going quite at the pace you'd like? And maybe a little bit about when you expect Galaxy to open and the impact on the whole market, not necessarily The Venetian, but maybe the Peninsula as well?
The latest commentary on Galaxy is June. What we're hearing, we have no definitive word out about that. As far as we're concerned, we're still on our target. Our budget has remained the same. Yes, there'll be a couple of months delay.
We're still looking at the end of the last quarter of 2011 to open a Phase 1. However, in the next 30 days, we should know pretty well whether we can make that particular we're going
to focus on making sure we have enough private gaming hubs.
Thank you. And I was hoping you can maybe give us some sort of status update on commercial gaming in Japan. I believe a few weeks ago there were some delegates from the government visiting in Las Vegas. And then I have a follow-up question.
The status of the Japan, well, as I mentioned before, there is an interparty gambling study group put together. They it appears to me and we've been told there is a draft of legislation. We've contributed to that. We've commented on that and it's moving forward. They say that it should come through by the end of the 6 month session starting, I think, in January or February coming up that within 6 months, the legislation and all the companion legislation, they have to modify other laws such as an anti gaming law to make it legal to allow gaming.
So there are a number of companion measures that have to be done. They say that should be done by the end of September sorry, by the end of June. And if it's done by the end of June, they're talking about going into July going into the next session of the legislature will be the first half of twenty twelve which will have already been put over to the transferred to the prefectures, and the prefectures will set up their own procedures. And selection of operators should be made sometime. It could happen sooner, but they're talking more conservatively about first half of twenty twelve.
Thank you. Sheldon, you started out this call by talking about how in the 1st 25 days of October, you're already run rating at your old $3,000,000,000 20.11 EBITDA target.
Yes. Can you imagine that, Joe? I was wrong. Well,
let me give you a chance to correct yourself and establish a new target. What is that new target now?
What's the new listen, I got myself into so much trouble. I blurbed it out during the shareholders meeting and I got into so much trouble, the attorney said, what you do that for, Blah, blah, blah. And Mike carried on a lot of 1 on ones by the end of the day. And they said, that's all they asked. What about the $1,000,000,000 in Singapore and the $3,000,000,000 And Rob is telling me I have to step up to the plane and admit I was wrong.
Come on, call for
So that was useful. And I had to admit that I was wrong and that I was much too conservative. And that's similar that's not my reputation, so I had to correct it. So I certainly didn't want to lose my reputation, we just had to do more than what I expected. Great.
Excellent. Thanks, everyone.
Thanks, Joe.
And your next question is from Robin Farley with UBS.
Thanks. I wonder if you could give us some color around receivables
and that as
a percent of specifically casino receivables in both Singapore and Macau?
Yes, sure. It's Ken. I think we as Sheldon mentioned in the prepared remarks, we've been very careful with regard to the extension of credit in Singapore. And as with the rest of our operations, when we establish reserves against receivable balances, we go account by account and work with all the marketing people, the collection people and the finance people to determine the appropriate balances. So as a just overall statement, I think we're very conservatively stated relative to our receivable balances.
And if you look at East Macau, we've got a reserve or allowance for collection of about 42% against the gross casino accounts receivable in total. And if you take a look at that after kind of the immediate collections that come right after the end of the quarter, it's almost 48%. In Singapore, obviously, we're just getting started with regard to kind of the extension of credit and balances. We've got about a couple of $100,000,000 of receivables outstanding and we've got about 12% reserve against that and no significant issues to really report. So we've gone through the vast majority of the accounts and feel that they're all adequately stated with the modest amount of reserves that we have.
And actually, interestingly enough, we've had some kind of long outstanding balances that we're starting to see collections come in on those in the Q4 on accounts that hadn't paid for some time. And so we're doing actually better than what we expected.
And just to clarify, did you see 42% reserved in Macao, but 12% in Singapore? I just want to make sure I got those numbers right.
Yes. No, that's correct. And in Singapore, it's about 12% against the gross receivables the casino receivable outstanding.
Obviously, that casino balance, Robin, is much fresher and there's nothing old, so to speak, Right.
I would love to say, sure. I understand. Great. And then last question is just, do you have any thoughts on the timing of junket operators getting approved in Singapore and how and I don't know whether how important that is to you or not, but just your thoughts on that and timing of that?
Robin, what was that word, the training of junket reps? Government
approval in Singapore.
Well, my position hasn't changed. We will seriously consider doing business with junket reps, but I'm still of the opinion that either they are not going to fully apply or that they're not going to be if they fully apply, only the ones with a I would think that only the ones with no track record would pass. And if they did pass, they won't have enough business to really add a lot of value to the junket rep mainstream of customers coming in. We keep finding little things that happen. 1 guy will send in a lot of money for the benefit of several other people, And we cut that off as soon as we see that.
But we're not going to take any steps whatsoever that can be directly, indirectly, remotely or overtly through junket reps because it's disallowed. We are erring on the side of following the casino regulatory authority rules. We're not sure that our competitor is doing this. There was I read an article yesterday about it seems to be the best the worst kept secret that Genting is doing business with Chunket Reps. Now they've been doing business with Chunket Reps for decades.
And I'm not sure that they know they have any experience with the credit markets. And they certainly want to they find it a lot easier to deal directly with the Czechoslovakia. But as I said before, and I'll say it again, I don't believe they're going to provide the information that the government will require. And if they do, they will either not be the kind of junket reps that are the Macau style junket reps that provide a collective credit. They'll just be referring for limited commission or cap on this commission.
So I don't think the junket reps are going to be a major factor. They want very much to be there. And if they're going to be there, we'll seriously consider doing business with them. But so far, we're doing quite well without it. Great.
That's great. Thank you very much.
Your next question is from Larry Klaskin with Jeff
Delaney. Congratulations Sheldon. Great results.
Thank you. A couple
of quick questions. 1, 4 Season apartment sales, any update on that or the status of when you might get that money in?
I don't want to sound like a broken record, but we are hopeful that we can imminently receive approval.
All right.
2nd is forward booking. If you read the newspapers, you read the clippings. We have a clipping service. If you read that and you believe it, we're about to get it.
I hope that's the case that you could bring in as much as what $1,000,000,000 with all the apartments being sold?
At the number we're looking at, it could be as high as $1,400,000,000
Okay. Rob, as far as convention booking for Vegas goes, I know Vegas is kind of the boring area at this point, but how is it looking for 2011? And are you still booking over $200 a night and what you're seeing?
Is there a group cycle, Larry?
Yes, for groups, forward book.
Yes. Groups are strong. The demand trends are good for the group segment. Unfortunately, the ADRs are lagging. We're probably in the 180, 190 range, 11.
We're not getting to 200 plus sites. So it's not happening. Demand is there. Unfortunately, a lot of competition in that segment, every segment in Las Vegas. So we expect that we're in our numbers as far as our percentage of our segmentation, but I don't think rates will be they will not reach $200, no.
And as an indication, we are straddling $200,000,000 for this month.
Here we are in the 20 7th October.
We're straddling 1 of the 2 properties is 201, 1 is 199, so we're straddling an average of $200 Are you guys still The InterContinental, Larry, the InterContinental deal with 102,000,000 customers, they've got thousands of sales people out in the field. And the biggest venue that they're being asked for is Las Vegas with no property here to fill in. So we've signed a deal with them. We just announced it a couple of days ago. I think it's difficult to add a lot of numbers to it.
But I am quite convinced and so is it Mike that this will be the difference between lower occupancy and full occupancy. Well, that's great. I think they don't go after no hotel company goes after the big groups we do. That's true. They don't chase 5000 or 10000 person or 15000 person groups.
We can almost handle that in house without leaving the building when other properties need a whole city full of hotels to accommodate that. So Intercontinental is going to be a big push up and trust, and I think it's going to have a positive effect on me.
All right. Are you guys still feeling better about Las Vegas in 2011?
Well, I think we have mixed feelings.
Yes. I can't get too emotional about what I said. It's still a struggle. And I think when group segment raises still south of $200 and there's lots of metropolitan pulp and nothing, the numbers are numbers. They haven't been all that compelling, have they?
And I think it's a slow move back to a better place, but I wouldn't expect huge numbers of A in this space.
I know this sounds contradictory considering the reputation of my relationship with Steve Wynn. But I'm hoping that Steve Wynn, who's great at creating a mystique about an opening, I hope he opens up a new property. That will give Las Vegas the push.
All right. And then the last question, currencies, I know China currency chance of moving, Singapore has been pulling around currency. What does that mean to you guys and what are you hoping for?
Well, I would say that everything we read, we're helped right now by the weaker dollar and the stronger Singapore dollar. And as far as the China currency is concerned, we're also helped there as well. So I don't think anybody really knows. You can read every day. You're more into it than we are in terms of currency management.
But right now, we're in a very favorable situation with the money that comes in, in Singapore dollars and money in the Chinese currency. So I don't expect any negative surprises in there. It should be all positive for us in 2011.
Right. Great guys. Great earnings. Thanks.
And your next question is from Rachel Rosman with SIG.
Thank you, Tom.
Hi, Rachel.
How are you? Good. I think you guys were talking a bit about the Las Vegas environment. Can you talk a little bit about the promotional environment on the casino side? And whether or not you expect to see or how you would characterize the change in the market that you would expect to see from the opening of Cosmopolitan And then maybe any changes in your marketing or promotional strategy around that as well?
Well, it's a very intense promotional market in Las Vegas for the last 24 months due to the downturn cash demand segment. More people are giving away more things to casino customers by order table and that continues as we speak today. In addition, obviously, in the cash segment, very competitive, as you can tell the OTA, I think you read the offers you're receiving personally. So I think it's no surprise that Las Vegas is competitive on the cash rate side and due to lack of demand that makes it more competitive on the comp rate side and additional offers. We've cut back.
We continue to rethink our offers and how aggressive we want to be in spot and field marketing. The town is still aggressive. I don't know how Cosmo, I have no idea that will play out, but it can't be helpful obviously, with more capacity in our difficult market can't be a positive of the market. How big and negative, I just don't know. But I think that you're going to see in 2011 a continued promotional landscape in the casino segment because the cash side has been holding up strong.
So more people turn to spot and tail marketing as way to fill rooms. We try to cut back and we try to play to our peer group, which we think is Wynn and Bellagio and the better hotel casinos than we also have on Allstate products. Look, it's competitive by any definition, a lot more so than it was in the 4th 2,008.
And I don't know how that
gets any better with additional capacity, it's going to get worse in life.
On the gaming side, is it getting more promotional or more promotional chips being offered or is it just predominantly on the room rate side?
No, I think it's on the gaming side as well because of lack of demand in the cash segments. People are looking to fill the rooms up, right. So they're going to look to the gaming side and drop the requirements for complementary rooms and discounted rooms and promotional, be it giveaways, be it tournaments, etcetera. There's a lot of promotions out there at all segments on the casino side as an alternative to the weak cash market. So I think as anything, it's gotten worse.
And this time was a difficult summer promotions and the competition is fierce.
So as we think about modeling next year and gaming revenues, would the pace of promotions have an impact on what we should think as the theoretical hold and would it be lower than it has been historically because of the increased promotional environment? I
don't think it holds impactfully the way. The amount of on the table game side, it's not a hold issue nor slot machines as far as promotional giveaways. We're going to cut back on offers and be more judicious in our thinking and hope that we can grow more business on the group and the cash segments. We're hoping intercontinental deals. We're hoping better OTA approach and we'll also be strong group business that offset some of the promotional side.
Michel alluded to the earlier in the call, he alluded to difficulties of just chasing market share. And I think that's part of the problem. As you chase market share, there's the margin slip and this adds more competitive pressure. So this property will increase our gaming offers and keep our revenues there. On the table game side, honestly, it's driven by primarily by Asian business anyway.
Our high end business gets more important every day to us as a mix percentage mix on the table game side. On the slot side, we're going to reduce our offer somewhat and be more judicious and hope to fill more rooms on the cash side.
Perfect.
I'd like to add a little bit just to emphasize what Rob said. We are I personally am averse to this kind of promotion. And I think that this is the time that we can convert that into other paying customers rather than giving too many of these too giveaway packages. I think it diminishes our brand and I don't think it does much for us except put people in rooms. I remember Steve Wynn, our friend said that he decided to try to fill up his rooms.
So he said, but every time people who stayed in his room, they went down to the bars and to the restaurants and they got sticker shock. So they went over to other places where they had previously been the lower end place, the budget places and bought their food and did their playing over there. So I unusually so agree with him. And I think it doesn't really do us that much good. I've cut it down at 15% and I'm now probably today or tomorrow going to cut it down to a maximum of 10%.
And there's got to be certain high limit. There's got to be certain higher threshold for anybody to qualify.
And your next question is from the line of Cameron McKnight with Buckingham Research.
Good afternoon. Thanks. Sheldon, on Japan, do you have any sense of what the market structure that could be on the table may look like?
10? The market structure? In Japan, what the market structure might look like.
In what respect?
In terms of number of concessionaires, whether a partner would be required tax rate?
There's a 2 right now, they're talking about they were talking about 3, but now they're focusing on 2, Tokyo and Osaka. And we believe that we've got a leg up because number 1, I know that everybody was talking about another competitor of us had $1,200,000 in free cash. I'd like to say we have $3,200,000,000 in cash and access for up to 6. So we could do almost anything, buy any company, go develop any properties. We are considered the leading contender because of the integrated resort model in both Macau and Singapore in that part of the world.
And we're very, very excited about Japan. I keep going there every few weeks and meeting with the decision makers. And we're also focusing on Korea. I might say that while we're talking right now, one of our development people has just finished a few days in Korea and he's flying to a gaming investment meeting in Japan, in Tokyo. So it's we're very optimistic.
They have Pachinko parlors there, but they don't want to recognize that those are really casinos. And they have other forms of gaming like a boat racing, horse racing, I believe football betting or soccer betting and lotteries. So it's not as though they're unfamiliar with wagering. They're quite familiar with wagering. They still have about 12,000 or 13,000 pachinko pellets.
And most of those are what we would call slot pellets.
Okay, great. Thanks.
And your next question is from John Oh with Elza.
Hi. Alvin, you have an additional 6 months of data points in Singapore. Could you share with us what's your renewed expectations on the market size? And also, I guess, for argument's sake as well, what is your view on your revenue share going forward? I know your focus is on EBITDA, but just for argument's sake, what do you think where do you think you see?
Market share in terms of gross revenue or money we put in the bank?
Gross revenue.
It's tough to say, but I think our market share will be at least equal. We are focusing on the high end of the market, I believe more so than what Genting is. Genting is doing
a very good job at
the mass end, by the way. But they're just not experienced in granting credit. And they really want junket reps and they're sponsoring a number of them. As I said earlier, it's difficult to say, I don't want to put my foot in my mouth and get into trouble about the future. It is true that I'm seeing the upside potential for us for more than $3,000,000,000 dollars and that was only in $11,000,000,000 So when we get to $12,000,000 I see that with a major contribution from Singapore, We could be hitting 2 big in 12 in Singapore.
So it's very difficult to say. As I said earlier, we're sailing in uncharted waters. I personally believe that we have little baskets of the whole cornucopia of prospective players coming from many, many different countries. And we're not going to be affected like somebody mentioned currency effect before. They're dealing in so many currencies that I don't think if China really loosens up their currency or tightens up their currency that they allow it to float.
I don't think it's going to have that much meaning. It will have a big meaning in Macau. And of course, we're all in favor of that. But I don't think it's going to have much of meaning in Singapore because the business comes from too many countries.
Okay. And my other question was on your rebates and commissions. I noticed that for the Q3, it worked out to be about 1.3%. Have we seen any trends at least in October and what again what are your expectations going forward on that? Do you see that going up?
No. No. We hope so. We want to try to get it down. That includes the comps and a lot of those comps have to be spent with us.
So it we get part of it back. It's 1 10th of 1% comps. But I don't think it's an average of 1.3%. I think it's somewhat substantially less than that. Frankly, I haven't Rob, have you focused on that?
He's correct. He's correct? Yes. It's 13. 13.
Yes.
We'll focus on that.
Just for the high end. Okay. We'll cover it.
We're offsetting market pressure to answer your question on any growth in that. So that seems to be the around Genting or up the strong group raising commission.
No, no. We're not we don't anticipate a commission war between us and Kempe.
Okay.
And if we do, we don't intend to lose. All
right. And Mike, just my final question just on the mass market. Could you give us some color on the average daily foot traffic if you have that number? And also roughly what is the percentage of local Singapore as your business either from a foot percentage or even from a revenue percentage, if you can just break that down for us?
Well, the percentage of Singaporeans, so visiting the stands about 38%.
38% and we're averaging about 22,000 to 24,000 people a day. Am I correct to Dan? Dan put some bar charts in front of me and took my attention away. But my recollection, we're under 25 well, here it is, most recent moving 4 week period is 25,000 people.
Okay. What about the percentage of revenue coming from the local market?
Probably 38%.
The percentage of revenue by person, we don't have at this time between Singaporean and non Singaporean mass piece. That may be something that we can get in the future. But today, we don't have that.
It's interesting. We're getting 2 thirds of the attendance that are non Singaporean. So they're coming from somewhere. I would suspect that we're getting there are 36,000 or 38,000 rooms hotel rooms and all pretty good hotels and there are no fluff houses that I know of in Singapore. They're all pretty good, a lot of brand international brand names.
They and some of them have multiple hotels. I think that we get a lot of those people that come over by cab or any other way from these other properties because almost 2 thirds of the attendants are coming foreign. And we're not bringing in a lot of the foreign from Malaysia. Now they could be coming to us, but we still don't have a lot of the we have some buses, but not that many up and running. So I think we're getting a lot and we will be getting more and more turn traffic.
In January, I believe, we have the Z Oscar Awards, Oscar equivalent awards from India. January 14. January 14. And if we have that, I mean, it's really when we had the IAFA, the Indian International IIFA, whatever, The equivalent, another equivalent, they have 3 or 4 Oscar type award programs. Z is one of them.
We're getting Zee. We'll get tremendous publicity all over India. I think that will give us a big boost from India.
Okay. And I guess just a final one. Thinking ahead, how should I be thinking about what you're going to be doing with the cash that you'll be generating out of Singapore? It seems like at the rate that EBITDA is chopping up, it's going to be very good. Will you be looking to speed up the debt repayment?
Or would you be looking at potentially, say, a special dividend at some point back to the parent company? Could you share with us maybe looking forward, what would you do?
We'll do one from each column. We'll look to pay off our debt. Bear in mind that our retail is ramping up. And as that ramps up, we'll be able to if and when it ramps to the point, I'd say when really, it ramps to the point we expect it to, we could sell that and get enough get more money than what we need to pay off all the financing. So as far as I'm concerned in my own mind, we're all but paid off.
It's all over but the shouting about having the capacity to pay it off. And at $1,000,000,000 plus in EBITDA, there's a lot of cash flow that could pay off in just a very short period of time, dollars 3,500,000,000 By the way, we always talk in U. S. Dollars. We're not talking in local currency.
Okay. Thank you very much.
You're welcome.
Your next question is from the line of Chris Woronka with Deutsche Bank.
Hey, good afternoon, guys. Just a quick one. I don't think anyone asked about the margins of Venetian in Macau. And is there any kind of notional limit there or target you have? You set another record this quarter.
Just kind of thinking going forward, what are some of the expense issues and where can that go with similar levels of gaming growth? Thanks.
That's a good question. As I said earlier, the higher the listen, we've resigned ourselves to dealing with the junket reps. We have good relationship with them. I've had lunch with several of them. It's okay.
They're doing a good job in Macau and that's where we're at. But the problem that we have is that that SJM now is rumored that MGM is going to do it. They're going to start leasing out just to get the high end the top line market share. They're going to give out 3% of gross income for the sublicenses. That's amazing, just amazing.
And people are talking about, whether it's conjectureally or factually or whatever, they're talking about gross income. What the heck does gross income mean when all you're taking is 3% out of the gross income? We I don't know how far we could get. Bear in mind, they're still talking about the possibility of the government lowering the tax rate in Macau. And as Singapore gets goes up, I could say there is business coming a lot of business coming from Hong Kong and China.
They're not the dominant countries. Malaysia and Indonesia are the dominant countries in Singapore. But as Singapore does more and more business and somebody suggests it's all over the clippings that it is projected now by 2012 that we will pass the Las Vegas Strip in terms of gross income in terms of revenue.
Singapore, as you look at your customers today, do you have a rough breakdown of the customer mix between locals and foreign markets in which maybe foreign markets you could target more heavily going forward?
Well, I tell you, that foreign market is a moving target. I'll tell you that I watch that every single day, but I only have access to the top 20, what we call the hit sheet, the top 10 winners, top 10 losers. And the average number of countries that are represented in those 20 customers are 8 to 9 different countries. We get countries from all over the Pacific, from Laos and Cambodia and Myanmar. Let me get back to the beginning and say that our primary markets are Singapore, Malaysia and Indonesia.
We are building up a steady stream of business from Korea, from Japan and outside of the area, Hong Kong is our biggest contributor. China is, let me say, equally as strong. So we got a lot of business from China, but we're very cautious about granting credit only to people that we know. So it's just a whole property of countries that are represented. I've ordered a percentage of total business, a breakdown by country.
So we'll see what kind of some sort of an analysis. But I got to tell you, as far as the top 10 winners or losers, it comes from a wide variety and I personally am curious about it. I watch this every single day. And I can look at it and sometimes we have as little as 4 people from Singapore, sometimes as many as 12 or 14 out of the 20. One day last week, I saw midweek, 24 countries represented.
But it's going out. We get from Bangladesh, we get from India, from Thailand, from the Indo Chinese countries, Vietnam, We get from Philippines, New Zealand, Australia, some from couple from the USA. But we're going to do analysis of that. We'll probably publish that. But it is I personally see it as a very promising sign because when you penetrate the level of the haves as opposed to that not in a place like Bangladesh, where all haves know each other and people say they enjoyed their stay and their trip.
We're going to get a lot more people from, say, Bangladesh. And so we'll have a steady solid stream of business from each of those countries and there's an awful lot of them.
Okay. Thank you very much. That's very helpful. And one follow-up if I may and perhaps a question for Mike. As you look at operating expenses in Marina Bay Sands, would you say you're pretty much fully staffed at this point without a lot of incremental labor coming on?
We actually have been understaffed, Mark, from the original target. Our original target was about 8,400 people. We ran below that for the 1st number of months just in terms of onboarding people.
In Macau, because of the tax rate, I don't know how much higher we can get. But I mean, just taking seat in the pants estimate, I don't think we can surpass 40%, 38% or 40%. Do you, Rob? No. Mike, do you think so?
I don't think so. I mean, it's we have to really, really, really, although we've set several records in October, Golden Week. Golden Week, our moving average is about where it should be. Some months will have a higher number, sometimes a higher hold number, some months a lower hold number, but a moving average is where it should be. So I don't know where we're going to go on EBITDA margin.
Like I said, we're doing the best we can. We're trying to reduce expenses, not only number of employees, we're trying to reduce outside expenses. We're just about to hire a new general counsel over there extraordinarily, so we could keep some of our Hong Kong legal expenses down. We're taking every step we can to get our cost in line. Lined.
Okay, great. Thanks.
Your next question is from David Bain with Stern AG.
Great. Thank you. On Singapore, can you give us a sense as to what percentage of room nights in 11 and 12 maybe MICE? And if you could also maybe an idea of weekday occupancy versus weekend at MBS?
We'll be in the high 90s or mid to high 90s on weekends in MBS, right? We're running those occupancies now. Hopefully, midweek occupancy would get into the 80s, at least in 11 better than that perhaps in 12 because of MICE ramp up. I don't have the MICE room night situation for 11 and 12 in front of me at the moment. But our expectation is that we should be building up to roughly 300,000 room nights a year on MICE business.
Okay.
As we get ramped up probably 12, we'll hit that, probably will be lower than that in 11. The forward bookings are we're really starting to really get the credibility now. And so that would be if you split the building up into various segments, you can tour business should be in the 700s, MICE business in the 1,000 And then you've got 400 or 500 casino business and the rest is transient. I mean, that's basically an overall look at it. And that's our target to get to an occupancy that runs in the 90s.
12% will be a very interesting year because I think 12% is where the retail business will really start to move dramatically because the subway system will open that runs right into the retail area. We're working on some other transportation mechanisms now to get people in there to drive that up as well. So I think by the time at 12, we should be in a situation where we're getting the maximum out of the total facility, not counting the casino, of course, which will continue to grow.
Okay. And then just 2 more. 1 on the metrics in October given very strong for Singapore obviously. I know there's no official Golden Week in Singapore, but did you see an unusual increase in VIP volume made from Mainland China? And has there been any fall off since the holiday ended?
Well, we did get significantly more play in the Golden Week period. I can't tell you for sure whether it was from mainland China, but it was a better play. But October has been very strong all the way through. Not quite as strong as those 2 or 3 days. Those 2 or 3 days, which are the same days in Macau, were sort of off the chart in terms of role as well as mass, but we've had very steady play all the way through October.
And then just last one on we saw kind of the visitation volume and percentage year over year in Macau, it dipped in September. I know the revenue was good, so the quality of customer has been good. But I'm just trying to figure that out. I mean, I know Moon Festival fell into September versus last year it didn't. Maybe that's a family holiday.
I know it's back to school season. But is there anything that you guys have seen or something to look out for going forward in visitation?
I saw that number yesterday about the September drop in visitation. If it dropped, we didn't really feel it. I mean, we had a very good September. And I don't remember what last September really was about. I think oftentimes there is a drop before Golden Week.
People don't come in. They wait for the Golden Week period to come
in, which
is in October obviously. But looked at it, it was a strange number to me. I hadn't heard anything from our people over there nor had we discussed it here because frankly the business was so good, we didn't really pay much attention to that.
Right. Okay. And I'm sure just looking at where you guys were in terms of room rates, October visitation looks like it goes back to normal form in a way?
So far.
Okay. All right. Thanks guys.
We still have 5 days to go.
Okay. Thank you.
I just want to add on the I think you were right on Singapore not having more of an official Chinese New Year, but we did get an increase in business over that period and we did get a number of customers from China, but not at the same percentage of Macau. However, it was very good. I mean, we have no complaints about it.
And your next question is from Dennis Forrest with KeyBanc.
Good afternoon. How are you guys doing? I wanted to ask Ken for capitalized interest in the quarter and what it's going to look like going forward?
Yes. Call me on that. I can give you the specifics on that. I don't have that in front of me, but I can walk you through that.
Okay. Thanks a lot Ken. And then next same thing on depreciation. I noticed that the Marina Bay Sands depreciation in the quarter was about $45,000,000 That was well below what I thought it would be given the size of the project. Is that a fair number going forward?
And or is there
going to be some adjustments by the end of the year?
No. I mean, that should be reflective of a full quarter of depreciation. And I would think as the continued construction spend takes place and we've got probably another $250,000,000 to spend through the end of this year and about $600,000,000 of kind of retainage payments that will go through next year, you'll see that number creep up based upon the total capitalized cost.
Okay. But it's not going to go up hugely from here. That's pretty much hit on the first, what was it, dollars 5,000,000,000 of investment?
Well, a little bit less than that, but yes.
Okay. We can't appreciate close to $1,000,000 in land, a billion. Right.
Yes.
At the Marina
If we have a flood, we could lose part of it.
At the Marina Bay, what were the number of rolling tables and non rolling tables? If you could break those down.
In Singapore? Yes, rolling table is in the normal. We got about 110 versus over 500. So it's about onesix of the total total funds.
Okay. And then
Sheldon, can you clarify at the beginning you were talking very fast about how strong October was at the Marina Bay Sands. EBITDA growth rate or EBITDA in dollars is running what right now?
EBITDA, we're at just about 50%. On March, EBITDA margin. Growth from September, June, until I think I said what, 21% from September of April.
The numbers that Mr. Allison read were that gross gaming revenue at Marina Bay Sands was up 126% since May reaching $8,400,000 per day in October and that's an annualized rate of 3,100,000,000
dollars Okay. $8,300,000,000 per day.
$8,400,000,000 per day, dollars 3,100,000,000 annualized.
Okay. And then I got the role and the mass win to handle. On Las Vegas,
Rob said that the room rate next year is going to be in the 180, 190 range. Is that up from this year? What does
it look like? Well, you said on the group side.
Yes. The group right, what does the group side look this year in terms of rate?
We're about flat, give or take. There's not a lot of movement either way. There's not much movement in the whole group segment in the last 12 months, no moving in the 12 months.
So somewhere around $180,000,000 for 'nine, 'ten and 'ten and 'eleven?
I can't speak 'nine, but 'ten, 'eleven will be 180 and 198, yes. Okay.
Not overall, not overall. Yes. Just a good sense.
Okay. And also, Rob, on the Q2 call, you mentioned that retail
sales, I
think the Canal Shops in June were up 56% above June of 2009. Can you give us an idea of how that business was in the Q3?
I think you're confused because I didn't reference that because we don't own the mall.
And that's I think he's referring to Macau.
This is something that Mike actually said on the last call, we were talking about June being up in Macau. In Macau. In Macau. In Macau, the Grand Canal
Are you Macau guys? Are you here?
Yes. No, Macau. Oh, Macau.
Yes. We components in Macau are up. In fact, we're basically pretty close to signing an increase in our retail space from DSS for in the Four Seasons Mall for another, I think it's 15,000 feet, 20,000 feet.
50,000.
50,000 feet, yes. And because sales are very brisk, they've up they're up considerably in Macao. We did change some of our rental percentages and rental situations during the drop in Macao a year or 2 ago, but now it's starting to come back pretty strongly for us.
Okay. In the third quarter, just quarter over quarter basis, the annualized sales per square foot are up about 25%.
Q3 year over year?
Yes.
Phenomenal. And then what about the direct VIP business in Macau? What percentage of your role is from direct play?
It's about a quarter, 3rd. What is it, Bob? It's about a quarter.
Around the same as last quarter.
Okay. Yes, that which is about 25%.
But we're not this is a process that a former CEO did, that's Steve Jacobs. We not in agreement with that. We believe that the Dunkin' reps own the market in Macau. It diminishes our relationship or the value of our relationship with the junket reps. So we are not proactively looking for direct business.
And we still don't know how much it cost us in credit defaults, etcetera, etcetera. Clearly, there's a lot more Chinese business in Macau from China, from Mainland China than there is in Singapore. So it's more precarious for us to issue credit to China and unlimited amount of credit to China. So I think we're going to keep we're hoping to keep the direct business where it is. I think it's somewhere between I've been following it about 25% to 30%.
And we're going to try to keep it even at that point.
Okay. And then last question. The wind percentage in Las Vegas was a pretty similar between The Venetian and The Plaza?
I can't answer that question. Cumulatively, you see numbers were $17,100,000 and cost was $19,000,000 I probably give you a number. We don't present them together. There's nothing unified and obviously if you look at the volume play in Las Vegas with the recipient of lot of help from our casinos in Asia. Unfortunately, we played in Lockheed about 4.5 points against norm.
So cost is up $19,000,000 It's a matter of what's either way, it was stable, they're playing it into the nation philosophy, we treat them equally.
Okay. Thanks a lot.
Sure. And Dennis, the capitalized interest number is around $32,000,000 for this quarter.
Okay. And is it going up, Ken?
It will go up. Couldn't find enough of them. So our pay our present payroll levels will probably increase closer to that 8,400 level and then we have additional employees coming on with the theaters and the retail stores and the museum, etcetera, all of which will come according to plan. So we don't expect that there will be any enormity in the payroll increases compared to what we expected from the beginning, but you'll have some slight increases to what we've been running now. And we watch that very carefully and continue to watch that very carefully.
We also get requests from the Casino Regulatory Commission for certain audits and things like that, that keep coming in that require additional people. And we're working. We do that as well. But I don't think you'll see any enormous surprise in terms of payroll costs.
Great. Thank you very much.
Your next question is from Joe Houdek with Wells Fargo Advisors.
Thank you for taking my call. Great quarter, not to be redundant, but actually my questions have already been answered. Thank you.
Thanks, Joe.
Your next question is from David Katz with Jefferies.
David? Hi, sorry. I wanted to ask about Singapore, if I may. Noticing that the occupancy in the hotel is still what I guess we should consider at the formative stages. How should we think about a fuller or a higher occupancy and how that translates into casino revenue once you get there?
In the context that what we've seen so far appears to be clearly stronger than what we had and my guess is stronger than what many people had been forecasting so far?
David, I think you'll see that in the growth in the mass market play. The numbers that we talked about before on the per day actualities for the mass market, we expect that those numbers will increase as the participation in the hotel increases. Eventually, we'll get a tracking for the out of town or the foreign visitors from the hotel and what they're doing if they get carded. In other words, if they get monitored in the casino. But it's we haven't done that yet.
But that's your metric that you watch because there's only so much mass market that can come from the Singapore environment itself. And so as the hotel fills and gets more interesting business from MICE, etcetera, things like we have a big Indian promotion going on in January to open that market more viably for us. I think that's the measure that you'll see slot play and mass drop will be the ones.
And if I can ask one more. Thank you. On Las Vegas, one of the things I observe is a potential, I believe, expansion of McCarran at some point out in the future. And I admit to not knowing heck of a lot about how those expansions get filled up with air capacity. And looking at that as a potential driver of some recovery in Las
Vegas Because of the construction of Macau.
Yes. It will go up probably right through the Q4 of next year?
Correct.
Great. Thanks so much.
At this time, I would like to turn the floor back over to Mr. Mike Levin, President of Las Vegas Sands.
Thank you, operator, and thanks to all of you again for your questions and your interest today. Just a couple of quick comments from me before I turn it back to Sheldon for final thoughts. First, I want to mention that the focus on our cost control and efficiency that we emphasized over the last 2 years continues in the future. You can be certain we will continue to watch our costs as we go forward, even as we turn increasingly towards revenue growth in all of our outlets. Secondly, I want all to know that we have been working very hard over the last 2 years to broaden and deepen the management team and to build the right management infrastructure that will allow the company to make prudent management decisions and to achieve even greater levels of performance in the years ahead.
We want to prepare ourselves to repeat our current successes in additional emerging gaming jurisdictions. Now let me turn it over to Sheldon for final thoughts.
Thanks, Mike. We just completed another outstanding quarter, generating record revenues and EBITDA in Macau, an outstanding 1st full quarter of operations for Marina Bay Sands in Singapore and record revenues and EBITDA for the company of Google. From my perspective, our operations are in outstanding shape and we have clearly, as the Macau publication stated, separated ourselves from the pack. We have never in the history of our company been better positioned to deliver strong growth in the future. We've also significantly reduced our debt levels and our balance sheet has over $3,000,000,000 of cash.
I think it's $3,200,000,000 providing significant financial flexibility and enabling us to continue our industry leading growth strategy. We will have up to $6,000,000,000 if we included our unused revolvers, I believe. Am I correct on that, Ken?
Just a hair under that, but yes.
Hair under $6,000,000,000 but who's counting? We could be more than thrilled about our business today and about our strong positioning to the future with the quality of the assets that we have that have seen a bump in seen a thrust upward and particularly the uncovering of the new of an untouched market in Southeast Asia for Singapore. I want to thank all of you for joining us. We sincerely appreciate your interest and the support of our shareholders. That's the end of our call.
Thank you very much. Goodbye.
Thank you. This does conclude.
What can you help us with in terms of how that rolls and what you might know about an expansion at the airport, increased capacity at the airport and just thinking about a Las Vegas recovery longer term?
Well, the airport is expanding with an additional runway, but it doesn't really do us much good because unless you get more lift into Las Vegas, U. S. Air and Southwest and whatever have cut back some of their lift into Vegas, which has caused I believe something like 800,000 less passengers this year coming into the airport. Those that drop is really because no seats are available. Most of the planes that come in here have very high load factors and they're very profitable for the airlines, but they sort of left us out in the cold.
There are a couple of things that are happening that I see. Korean Air is coming in here now. There's a couple of other foreign carriers that have come in, BA and Virgin and what have you that are dropping some people in here. But at the end of the day, to have a significant recovery for Vegas in terms of the totality of the market, We need more lift in here because the drive traffic is pretty stable as well. And California does siphon a little bit of that drive track with their own entertainment and casino facilities.
So it's lift is the single most important thing in terms of that. McCarran can handle more traffic. It's just a question of getting more planes in.
Okay. Thank you very much.
And you didn't mention Adelson there.
In the charter business. We've been
in that business before.
And your next question is from the line of Joe Greff with JPMorgan.
Hello, everyone.
Hey, Joe. Hello, Joe.
At Arena Bay Sands, you have any more space to add more slot or table game capacity? Do you feel that your capacity constrained at all right now?
We do have capacity. We can find more room, but we do have capacity. We're ready to do something. There's a possibility of some additional GFA to be connected to the hotel, but I really can't say much about that now. If we're going to expand, right now with what we have, we're doing an analysis of the availability of the number of private gaming rooms.
So we're looking ahead and we do have some space to put that. I think we're okay in the mass market and I think we have enough capacity. But I think in the high end as it grows, it's already close to it's pushing 60% of total gaming income. It's from like 57% to 60% of the gaming income and that keeps improving, keeps increasing. So I think that what we're going to focus on first is more private gaming.
So when private gaming room, 1 bet can equal all the bets that are on the table in the mass gaming floor for that minute. So there's a lot of upside potential at the high end. We're going to focus on making sure we have enough private gaming news.
Thank you. And I was hoping you can maybe give us some sort of status update on commercial gaming in Japan. I believe a few weeks ago there were some delegates from the government visiting in Las Vegas. And then I have a follow-up question.
The status of the Japan, well, as I mentioned before, there is an interparty gambling study group put together. They it appears to me and we've been told there is a draft of legislation. We've contributed to that. We've commented on that and it's moving forward. They say that it should come through by the end of the 6 month session starting, I think, in January or February coming up that within 6 months, the legislation and all the companion legislation, they have to modify other laws such as an anti gaming law to make it legal to allow gaming.
So there are a number of companion measures that have to be done. They say that should be done by the end of September I'm sorry, by the end of June. And if it's done by the end of June, they're talking about going into July going into the next session of the legislature will be the first half of twenty twelve, which will have already been put over to the transferred to the prefectures and the prefectures will set up their own procedures. And selection of operators should be made sometime. It could happen sooner, but they're talking more conservatively about first half of twenty twelve.
Thank you. Sheldon, you started out this call by talking about how in the 1st 25 days of October, your run rating at your old $3,000,000,000 $2011,000,000 EBITDA target.
Yes. Can you imagine that, Joe? I was wrong. Well, let me
give you a chance to correct yourself and establish a new target. What is that new target now?
What's the new thing? Listen, I got myself into so much trouble. I blurbed it out during the shareholders meeting and I got into so much trouble. The attorney said, what do you do that for? Blah, blah, blah.
And Mike carried on a lot of 1 on ones by the end of the day. And they said, that's all they ask. What about the $1,000,000,000 in Singapore and the $3,000,000,000 And Rob is telling me I have to step up to the plane and admit I was wrong.
Come on, call it.
So that was his line. I had to admit that I was wrong and that I was much too conservative. And that's similar that's not my reputation, so I had to correct it. So I certainly didn't want to lose my reputation, So we just had to do more than what I expected. Great.
Excellent. Thanks, everyone. Thanks, Joe.
And your next question is from Robin Farley with UBS.
Thanks. I wonder if you could give us some color around receivables and that as percent of specifically casino receivables in both Singapore and Macau?
Yes, sure. It's Ken. I think we as Sheldon mentioned in the prepared remarks, we've been very careful with regard to the extension of credit in Singapore. And as with the rest of our operations, when we establish reserves against receivable balances, we go account by account and work with marketing people, the collection people and the finance people to determine the appropriate balances. So as a just overall statement, I think we're very conservatively stated relative to our receivable balances.
And if you look at East Macau, we've got a reserve or allowance for collection of about 42% against the gross casino accounts receivable in total. And if you take a look at that after kind of the immediate collections that come right after the end of the quarter, it's almost 48%. In Singapore, obviously, we're just getting started with regard to kind of the extension of credit and balances. We've got about a couple of $100,000,000 of receivables outstanding and we've got about 12% reserve against that and no significant issues to really report. So we've gone through the vast majority of the accounts and feel that they're all adequately stated with the modest amount of reserves that we have.
And actually, interestingly enough, we've had some kind of long outstanding balances that we're starting to see collections come in on those in the Q4 on accounts that hadn't paid for some time. And so we're doing actually better than what we expected.
And just to clarify, did you see 42% reserves in Macao, but 12 percent in Singapore? I just want to make sure I got those numbers right.
Yes. No, that's correct. And in Singapore, it's about 12% against the gross receivables, and casino receivable outstanding.
Obviously, that casino balance, Robin, is much pressure and there's nothing old, so to speak, Right. I would
love to say,
sure. Sure.
I understand. Great. And then last question is just, do you have any thoughts on the timing of junket operators getting approved in Singapore and how and I don't know whether how important that is to you or not, but just your thoughts on that and timing of that?
Robin, what was that word, the training of
Government approval in
Singapore. Well, my position hasn't changed. We will seriously consider doing business with junket reps, but I'm still of the opinion that either they are not going to fully apply or that they're not going to be if they fully apply, only the ones with a I would think that only the ones with no track record would pass. And if they did pass, they won't have enough business to really add a lot of value to the junket rep mainstream of customers coming in. We keep finding little things that happen.
1 guy will send in a lot of money for the benefit of several other people, and we cut that off as soon as we see that. But we're not going to take any steps whatsoever that can be directly, indirectly, remotely or overtly through junket reps because it's disallowed. We are erring on the side of following the casino regulatory authority rules. We're not sure that our competitor is doing this. There was I read an article yesterday about it seems to be the best the worst kept secret that Genting is doing business with junket reps.
Now they've been doing business with junket reps for decades. And I'm not sure that they know they have any experience with the credit markets. And they certainly want to they find it a lot easier to deal directly with junkovits. But as I said before, and I'll say it again, I don't believe they're going to provide the information that the government will require. And if they do, they will either not be the kind of junket reps that are the Macau style junket reps that provide a collective credit.
They'll just be referring for limited commission or cap on this commission. So I don't think the junket reps are going to be a major factor. They want very much to be there. And if they're going to be there, we'll seriously consider doing business with them. But so far, we're doing quite well without them.
Great. That's great. Thank you very much.
Your next question is from Larry Klaskin with Jeff
Delaney. Congratulations Sheldon. Great results.
Thank you. A couple of quick questions. 1, 4 Seasons apartment sales, any update on that or the status of when you might get that money in?
I don't want to sound like a broken record, but we are hopeful that we can imminently receive approval.
All right. 2nd is forward booking
If you read the newspapers, you read the clippings, we have a clipping service. If you read that and you believe it, we're about to get it.
I hope that's the case that you could bring in as much as what $1,000,000,000 with all the apartments being sold?
At the number we're looking at, it could be as
high as 1,400,000,000 dollars Okay. Rob, as far as convention bookings for Vegas goes, I know Vegas is kind of the boring area at this point, but how is it looking for 2011? And are you still booking over $200 a night and what you're seeing?
Is it a group cycle, Larry?
Yes, for groups, forward book.
Yes. Groups are strong. The demand trends are good for the group segment. Unfortunately, the ADRs are lagging. We're probably in the 180, 190 range, 11.
We're not getting these to 200 bucks, so it's not happening. Demand is there. Unfortunately, a lot of competition in that segment, every segment in Las Vegas. So we expect that we'll hit our numbers as far as the percentage of our segmentation, but I don't think rates will be they will not lose $200, no.
As an indication, we are straddling $200,000,000 for this month.
Here we are in the
22, in October, we're straddlers. 1 of the 2 properties is 201, 1 is 199. So we're straddling an average of 200. Are you guys The Intercontinental, Larry, the Intercontinental deal with 102,000,000 customers, they've got thousands of salespeople out in the field. And the biggest venue that they're being asked for is Las Vegas with no property here to fill in.
So we've signed a deal with them. We just announced it a couple of days ago. I think it's difficult to add a lot of numbers to it. But I am quite convinced and so is it Mike that this will be the difference between lower occupancy and full occupancy. Well, that's great.
So I think they don't go after no hotel company goes after the big groups we do. That's true. They don't chase 5000 or 10000 person or 15000 person groups. We can almost handle that in house without leaving the building when other properties need a whole city full of hotels to accommodate that. So Intercontinental is going to be a big push upwards for us, and I think it's going to have a positive effect on me.
All right. You guys still feeling better about Las Vegas in 2011?
Well, I think we have mixed feelings.
Yes, let's not get too emotional about Las Vegas. It's still a struggle. And I think when group segment raises those out of $200 and there's lots of big tons of pulp opening up and the numbers are numbers. They haven't been all that compelling. It's a slow move back to a better place, but I wouldn't expect huge numbers of anyone in this city.
I know this sounds contradictory considering the reputation of my relationship with Steve Wynn. But I'm hoping that Steve Wynn, who's great at creating a mystique about an opening, I hope he opens up a new property. That will give Las Vegas a push.
All right. And then the last question, currencies, I know China currency chance of moving Singapore has been pulling around currency. What does that mean to you guys and what are you hoping for?
I would say that everything we read, we're helped right now by the weaker dollar and the stronger Singapore dollar. And as far as the China currency is concerned, we're also helped there as well. So I don't think anybody really knows. You can read every day. You're more into it than we are in terms of currency management.
But right now, we're in a very favorable situation with the money that comes in, in Singapore dollars and the money in the Chinese currency. So I don't expect any negative surprises in there. It should be all positive for us in 11.
Right. Great guys. Great earnings. Thanks.
And your next question is from Rachel Rosman with SIG.
Thank you, Todd. Hi, Rachel.
How are you? Good. I think you guys were talking a bit about the Las Vegas environment. Can you talk a little bit about the promotional environment on the casino side? And whether or not you expect to see or how you would characterize the change in the market that you would expect to see from the opening of Cosmopolitan And then maybe any changes in your marketing or promotional strategy around that as well?
Thank you.
Well, it was a very intense promotional market in Las Vegas for the last 24 months due to the downturn cash demand segment. More people are giving away more things to casino customers by our table and that continues as we speak today. In addition, obviously, in the cash segment, very competitive, as you can tell, the OTA is I think you read the offers you're receiving personal. So I think it's no surprise that Las Vegas is competitive on the cash rate side and due to lack of demand that makes it more competitive on the comp rate side and additional offers. We've cut back.
We continue to rethink our offers and how aggressive
we want to be in
spot and deal marketing. The town is still aggressive. I don't know how Cosmo, I have no idea how that will play out, but it can't be helpful obviously with more capacity in our difficult market can't be a positive of market. How big is negative? I just don't know.
But I think that you're going to see in 2011 a continued promotional landscape in the casino segment because the cash side has been holding up strong. So more people turn to spot and tail marketing as way to fill rooms. We try to cut back and we try to play to our peer group, which we think is Wynn and Bellagio and the better hotel casinos than we also have an All Suite product. Look, it's competitive by anyone's definition, a lot more certain than it was in the 4th 2008. And I don't know how that gets any better with additional capacity, it's going to get worse in licensing.
On the gaming side, is it getting more promotional or more promotional chips being offered or is it just predominantly on the room rate side?
I think
it's on the gaming side as well because of lack of demand in the cash segment. People are looking to tell the rooms up, right. So they're going to look to the gaming side and drop the requirements for complementary rooms and discounted rooms and promotional, be it giveaways, be it tournaments, etcetera. There's a lot of promotions out there at all segments on the casino side as an alternative to weak cash market. So I think at any time it's gotten worse.
And this time it was a difficult time with promotions and the competition is fierce.
So as we think about modeling next year and gaming revenues, would the pace of promotions have an impact on what we should think as the theoretical hold? And would it be lower than it had been historically because of the increased promotional environment?
I don't think it holds impactfully, the way. The amount of on the table game side, it's not a hold issue nor slot machines as far as promotional giveaways. We're going to cut back on offers and be more judicious in our thinking and hope that we can grow more business on the group and the cash segments. We're hoping intercontinental deals. We're hoping better OTA approach and we'll also be strong group business that offset some of the promotional side.
Michel alluded to the earlier in the call, you alluded to difficulties of just chasing market share. And I think that's part of the problem. As you chase market share, the margins slip and this adds more competitive pressure. So in this property, we're hoping to reduce our gaming offices and keep our revenues there. On the table game side, honestly, it's driven by primarily by Asian business anyway.
Our high end business gets more important every day to us as a mix percentage mix on the table game side. On the slot side, we're going to reduce our offer somewhat and be more judicious and move to fill more rooms on the cash side.
Perfect.
I'd like to add a little bit just to emphasize what Rob said. We are I personally am averse to this kind of promotion. And I think that this is the time that we can convert that into other paying customers rather than giving too many of these 2 giveaway packages. I think it diminishes our brand and I don't think it does much for us except put people in rooms. I remember Steve Wynn, our friend said that he decided to try to fill up his rooms.
So he said, but every time people who stayed in his room, they went down to the bars and to the restaurants and they got sticker shock. So they went over to other places where they had previously been the lower end place, the budget places and bought their food and did their playing over there. So I unusually so agree with him. And I think it doesn't really do us that much good. I've cut it down at 15%, and I'm now probably today or tomorrow going to cut it down to a maximum of 10%.
And there's got to be certain high limit. There's got to be certain higher thresholds for anybody to qualify.
And your next question is from the line of Cameron McKnight with Buckingham Research.
Sheldon, on Japan, do you have any sense of what the market structure that could be on the table may look like?
10? The market structure? In Japan, what what the market structure might look like.
In what respect?
In terms of number of concessionaires, whether a partner would be required
tax rate? There's a 2 right now, they're talking about they were talking about 3, but now they're focusing on 2, Tokyo and Osaka. And we believe that we've got a leg up because number 1, I know that everybody was talking about another competitor of us had $1,200,000 in free cash. I'd like to say we have $3,200,000,000 dollars in cash and access for up to $6,000,000,000 So we could do almost anything, buy any company, go develop any properties. We are considered the leading contender because of the integrated resort model of both Macau and Singapore in that part of the world.
And we're very, very excited about Japan. I keep going there every few weeks and meeting with the decision makers. And we're also focusing on Korea. I might say that while we're talking right now, one of our development people has just finished a few days in Korea and he's flying to a gaming investment meeting in Japan, in Tokyo. So it's we're very optimistic.
They have Pachinko parlors there, but they don't want to recognize that those are really casinos. And they have other forms of gaming like a boat racing, horse racing, I believe football betting, or soccer betting and lotteries. So it's not as though they're unfamiliar with wagering. They're quite familiar with wagering. They still have about 12,000 or 13,000 pachinko pellets.
And most of those are what we would call slop pillars.
Okay, great. Thanks.
And your next question is from John Oh with Elfa.
Hi. I know that you have an additional 6 months of data points in Singapore, could you share with us what's your renewed expectations on the market size? And also, I guess, for argument's sake as well, what is your view on your revenue share going forward? I know your focus is on EBITDA, but just for argument's sake, what do you think where do you think you see?
Mark, it's here in terms of gross revenue or money we could put in the
Gross revenue.
It's tough to say that I think our market share will be at least equal. We are focusing on the high end of the market, I believe more so than what Genting is. Genting is doing a very good job at the mass end, by the way. But they're just not experienced in granting credit. And they really want junket reps and they're sponsoring a number of them.
As I said earlier, it's difficult to say, I don't want to put my foot in my mouth and get into trouble about the future. It is true that I'm seeing the upside potential for us for more than $3,000,000,000 and that was only in $11,000,000 So when we get to $12,000,000 I see that with a major contribution from Singapore, We could be hitting 2 big in 12 in Singapore. So it's very difficult to say. As I said earlier, we're sailing in uncharted waters. I personally believe that we have little baskets of the whole cornucopia of prospective players coming from many, many different countries.
And we're not going to be affected like somebody mentioned currency effect before. They're dealing in so many currencies that I don't think if China really loosens up their currency or tightens up their currency that they allow it to float. I don't think it's going to have that much meaning. It will have a big meaning in Macau. And of course, we're all in favor of that.
But I don't think it's going to have much meaning in Singapore because the business comes from too many countries.
Okay. And my other question was on your rebates and commissions. I noticed that for Q3 it worked out to be about 1.3%. Have we seen any trends at least in October and what again what are your expectations going forward on that? Do you see that going up?
No. No. We hope so. We want to try to get it down. That includes the comps and a lot of those comps have to be spent with us.
So it we get part of it back. It's oneten of 1% comps. But I don't think it's an average of 1.3%. I think it's somewhat substantially less than that. Frankly, I haven't Rob, have you focused on that?
He's correct. He's correct? Yes. It's 13. 13.
Yes. We're focused. Just for the high end. Okay.
We're not seeing market pressure to answer your question on any growth in that. So that seems to be the we're not getting the strong group raising commission.
No, no. We're not we don't anticipate a commission war between us and camping.
Okay.
And if we do, we don't intend to lose.
All right. And Mike, just my final question just on the mass market. Could you give us some color on the average daily foot traffic if you have that number? And also roughly what is the percentage of local Singapore as your business either from a foot traffic percentage or even from a revenue percentage, if you can just break that down for us?
Well, the percentage of Singaporeans of the day you can stand is about 38%.
38% and we're averaging about 22,000 to 24,000 people a day. Am I correct to that? Dan put some bar charts in front of me and took my attention away. But my recollection, we're under 25 well, here it is, most recent moving 4 week period is 25,000 people.
Okay. What about the percentage of revenue coming from the local market?
38%.
The percentage of revenue by person, we don't have at this time between Singaporean and non Singaporean in the MAP piece. That may be something we can get in the future, but today we don't have any.
It's interesting. We're getting 2 thirds of the attendants that are not Singaporean. So they're coming from somewhere. I would suspect that we're getting there are 36,000 or 38,000 rooms hotel rooms and they're all pretty good hotels in there are no flop houses that know of in Singapore. They're all pretty good, a lot of brand international brand names.
They and some of them have multiple hotels. I think that we get a lot of those people that come over by cab or any other way from these other properties because almost 2 thirds of the attendants are coming foreign. And we're not bringing in a lot of the foreign from Malaysia. Now they could be coming to us, but we still don't have a lot of the we have some buses, but not that many up and running. So I think we're getting a lot and we will be getting more and more turn and travel.
In January, I believe, we have the Z, Oscar Awards, Oscar Equivalent Awards from India. January 14. And if we have that, I mean, it's really when we had the IAFA, the Indian International IIFA, whatever, the equivalent another equivalent, they have 3 or 4 Oscar type award programs. Z is one of them. We're getting Z.
We'll get tremendous publicity all over India. I think that'll give us a big boost from India.
Okay. And I guess just a final one. Thinking ahead, how should I be thinking about what you're going to be doing with the cash that you'll be generating out of Singapore? It seems like at the rate that EBITDA is chalking up, it's going to be very good. Will you be looking to speed up the debt repayment?
Or would you be looking at potentially, say, a special dividend at some point back to the parent company? Could you share with us maybe looking forward, what would you do?
We'll do one from each column. We'll look to pay off our debt. Bear in mind that our retail is ramping up. And as that ramps up, we'll be able to if and when it ramps to the point, I'd say when really, it ramps to the point we expect it to, we could sell that and get enough get more money than what we need to pay off all the financing. So as far as I'm concerned in my own mind, we're all but paid off.
It's all over but the shouting about having the capacity to pay it off. And at $1,000,000,000 plus in EBITDA, there's a lot of cash flow that could pay off in just a very short period of time, dollars 3,500,000,000 By the way, we always talk in U. S. Dollars. We're not talking in local currency.
Okay. Thank you very much.
You're welcome.
Your next question is from the line of Chris Woronka with Deutsche Bank.
Hey, good afternoon, guys. Just a quick one. I don't think anyone asked about the margins of Venetian in Macau. And is there any kind of notional limit there or target you have? You set another record this quarter.
Just kind of thinking going forward, what are some of the expense issues and where can that go with similar levels of gaming growth? Thanks.
That's a good question. As I said earlier, the higher the listen, we've resigned ourselves to dealing with the junket reps. We have good relationship with them. I've had lunch with several of them. It's okay.
They're doing a good job in Macau and that's where we're at. But the problem that we have is that that SJM now is rumored that MGM is going to do it. They're start leasing out just to get the high end, the top line market share. They're going to give out 3% of gross income for the sublicenses. That's amazing, just amazing.
And people are talking about whether conceptually or factually or whatever, they're talking about gross income. What the heck does gross income mean when all you're taking is 3% out of the gross income? We I don't know how far we could get. Bear in mind, they're still talking about the possibility of the government lowering the tax rate in Macau. And as Singapore gets goes up, I could say there is business coming a lot of business coming from Hong Kong and China.
They're not the dominant countries. Malaysia and Indonesia are the dominant countries in Singapore. But as Singapore does more and more business and somebody suggests it's all over the clippings that it is projected now by 2012 that we will pass the Las Vegas Strip in terms of gross income, in terms of revenue. So in Macau, because of the tax rate, I don't know how much higher we can get. But I mean, just take a seat of the pants estimate, I don't think we can surpass 40%, 38% or 40%.
Do you, Rob? Mike, do you think so? No. I don't think so. I mean, it's we have to really, really, really, I mean, although we've set several records in October, Golden Week.
Golden Week, our moving average is about where it should be. Some months will have a higher number, sometimes a higher hold number, some months a lower hold number, but a moving average is where it should be. So I don't know where we're going to go on EBITDA margin. Like I said, we're doing the best we can. We're trying to reduce expenses, not only number of employees, we're trying to reduce outside expenses.
We're just about to hire a new general counsel over there extraordinarily, so we could keep some of our Hong Kong legal expenses down. We're taking every step we can to get our cost in line.
Line. Okay, great. Thanks.
Your next question is from David Bain with Stern AG.
Great. Thank you. On Singapore, can you give us a sense as to what percentage of room nights in 11 and 12 maybe MICE? And if you could also maybe an idea of weekday occupancy versus weekend at MBS? Weekend at MBS?
We'll be in the high 90s or mid to high 90s on weekends in MBS, right? We're running those occupancies now. Hopefully, midweek occupancy would get into the 80s, at least in 11, better than that perhaps in 12 because of MICE ramp up. I don't have the MICE room night situation for 11 and 12 in front of me at the moment. But our expectation is that we should be building up to roughly 300,000 room nights a year on MICE business.
Okay. As we get ramped up, probably 12,000,000 will hit that, probably will be lower than that in 11,000,000. The forward bookings are we're really starting to really get the credibility now. And so that would be if you split the building up into various segments, you can tour business should be in the 700s, MICE business in the 1,000 and then you got 400 or 500 casino business and the rest is transient. I mean that's basically an overall look at it and that's our target to get to an occupancy that runs in the 90s.
12% will be a very interesting year because I think 12% is where business will really start to move dramatically because the subway system will open that runs right into the retail area. We're working on some other transportation mechanisms now to get people in there to drive that up as well. So I think by the time it's 12, we should be in a situation where we're getting the maximum out of the total facility, not counting the casino, of course, which will continue to grow.
Okay. And then just 2 more. 1 on the metrics in October given very strong for Singapore obviously. I know there's no official Golden Week in Singapore, but did you see an unusual increase in VIP volume made from Mainland China? And has there been any fall off since the hold
ended? Well, we did get significantly more play in the Golden Week period. I can't tell you for sure whether it was from Mainland China, but it was a better play. But October has been very strong all the way through. Not quite as strong as those 2 or 3 days.
Those 2 or 3 days to the same days in Macau was sort of off the chart in terms of role as well as mass. But we've had very steady play all the way through October.
And then just last one on we saw kind of the visitation volume and percentage year over year in Macao, it dipped in September. I know the revenue was good, so the quality of customer has been good. But I'm just trying to figure that out. I mean, I know Moon Festival fell into September versus last year it didn't. Maybe that's a family holiday.
I know it's back to school season. But is there anything that you guys have seen or something to look out for going forward in visitation?
I saw that number yesterday about dropped, we didn't really feel it. I mean, we had a very good September and I don't remember what last September really was about. I think oftentimes there is a drop before Golden Week. People don't come in. They wait for the Golden Week period to come in, which is in October obviously.
But I looked at it, it was a strange number to me. I hadn't heard anything from our people over there nor had we discussed it here because frankly the business was so good. We didn't really pay much attention to that.
Right. Okay. And then I'm sure just looking at where you guys were in terms of room rates, October visitation looks like it goes back to normal form in a way?
So far.
Okay.
All right. Thanks, guys.
We still have 5 days to go.
Okay. Thank you.
I just want to add on the I think you were right on Singapore not having more of an official Chinese New Year, but we did get an increase in business over that period and we did get a number of customers from China, but not at the same percentage of Macau. However, it was very good. I mean, we have no complaints about it.
And your next question is from Dennis Forrest with KeyBanc.
Good afternoon. How are you guys doing? How are you doing? How are you doing? I wanted to ask Ken for capitalized interest in the quarter and what it's going to look like going forward?
Yes. Call me on that. I can give you the specifics on that. I don't have that in front of me, but I can walk you through that.
Okay. Thanks a lot, Ken. And then next same thing on depreciation. I noticed that the Marina Bay Sands depreciation in the quarter was about $45,000,000 That was well below what I thought it would be given the size of the project. Is that a fair number going forward?
And
or is there going to be some adjustments by the end of the year?
No. I mean, that should be reflective of a full quarter of depreciation. And I would think as the continued construction spend takes place and we've got probably another $250,000,000 to spend through the end of this year and about $600,000,000 of kind of retainage payments that will go through next year, you'll see that number creep up based upon the total capitalized cost.
Okay. But it's not going to go up hugely from here. That's pretty much hit on the first, what was it, dollars 5,000,000,000 of investment?
Well, a little bit less than that, but yes. Okay.
We can't depreciate close to $1,000,000 in land, a $1,000,000,000 close to $1,000,000 Right.
Yes. At
the Marina Bay If we have a flood, we could lose part of it. Just kidding.
At the Marina Bay, what were the number of rolling tables and non rolling tables? If you could break those down.
Wait, same for? Yes, rolling table is a normal. We got about 110 versus over 500. So it's about 1 sixth of the total in total.
Okay. And then
Sheldon, can you clarify at the beginning you were talking very fast about how strong October was at the Marina Bay Sands. EBITDA growth rate or EBITDA in dollars is running what right now?
EBITDA, we're at just about 50%. 21% from September, April.
The numbers that Mr. Allison read were that gross gaming revenue at Marina Bay Sands was up 126% since May reaching $8,400,000 per day in October and that's an annualized rate of 3,100,000,000
dollars Okay. $8,300,000,000 per day.
$8,400,000,000 per day, dollars 3,100,000,000 annualized.
Okay. And then I got the role and the mass win to handle. On Las Vegas,
Rob said that the room rate next year is going to be in the 180, 190 range. Is that up from this year? What does it look like?
Well, you said on the group side.
Yes. The group side. What does the group side look this year in terms of rate?
We're about flat give or take. There's not a lot of movement either way. There's not much movement in the whole group segment last 12 months, no moving in the 12 months.
So somewhere around $180,000,000 for 'nine, 'ten and 'ten and 'eleven?
I can't speak 'nine, but in 'ten, 'eleven, it will be the 1.80 and 198 just.
Okay. Not overall, not overall. Just a good sense.
Okay. And also, Rob, on the second quarter call, you mentioned that retail sales, I think the Canal Shops in June were up 56% above June of 2009. Can you give us an idea of how that business was in the Q3?
I think you're confused because I didn't reference that because we
don't own the mall. That's I think he's referring to Macau.
This is something that Mike actually said on the last call. We were talking about June being up in Macau. In Macau. In Macau. In Macau, the Grand Canal
Are you in Macau, guys? Are you here?
Yes. No, Macau. Oh, Macau.
Yes. We think volumes and Macau are up. In fact, we're basically pretty close to signing an increase in our retail space from DSS for in the Four Seasons Mall for another, I think it's 15,000, 20,000 feet. 50,000. 50,000 feet, yes.
And because sales are very brisk, they're up now it's starting to come back pretty strongly for us.
Okay. In the Q3, just quarter over quarter basis, the annualized sales per square foot are up about 25%.
Q3 year over year?
Yes.
Phenomenal. And then what about the direct VIP business in Macau? What percentage of your role is from direct play?
It's about a quarter. What is it, Bob? It's about a quarter.
Around the same as last quarter.
Okay. Yes, that which is about 25%.
But we're not this is a process that a former CEO did, that's Steve Jacobs. We are not in agreement with that. We believe that the junket reps own the market in Macau. It diminishes our relationship or the value of our relationship with the junket reps. So we are not proactively looking for direct business.
And we still don't know how much it cost us in credit defaults, etcetera, etcetera. Clearly, there's a lot more Chinese business in Macau from China, from Mainland China than there is in Singapore. So it's more precarious for us to issue credit to China and unlimited amount of credit to China. So I think we're going to keep we're hoping to keep the direct business where it is. I think it's somewhere between I've been following it, Rob, about 25% to 30%.
We're going to try to keep it even at that point.
Okay. And then last question, the wind percentage in Las Vegas was a pretty similar between The Venetian and The Plaza?
I can't answer that question. Cumulatively, you see numbers were 17.1 and cost was $3,000,000 I probably
We don't present them together.
We present them unified. And obviously, if you look at volume play in Las Vegas, we're the recipient of a lot of help from our casinos in Asia. Unfortunately, we played in Lockheed about 4 point 5 points against norm. So cost is up $19,000,000 It didn't matter to us either way, it was stable, they're playing Indonesian floss, we treat them equally.
Okay. Thanks a lot.
Sure. And Dennis, the capitalized interest number is around $32,000,000 for this quarter.
Okay. And is it going up, Ken?
It will go up some because of the construction of Macau.
Yes. So it will go up probably right through the Q4 of next year?
Correct.
Great. Thanks so much.
At this time, I would like to turn the floor back over to Mr. Mike Levin, President of Las Vegas Sands.
Thank you, operator, and thanks to all of you again for your questions and your interest today. Just a couple of quick comments from me before I turn it back to Sheldon for final thoughts. First, I want to mention that the focus on our cost control and efficiency that we emphasized over the last 2 years continues in the future. You can be certain we will continue to watch our costs as we go forward, even as we turn attention increasingly towards revenue growth in all of our outlets. Secondly, I want all to know that we have been working very over the last 2 years to broaden and deepen the management team and to build the right management infrastructure that will allow the company to make prudent management decisions and to achieve even greater levels of performance in the years ahead.
We want to prepare ourselves to repeat our current successes in additional emerging gaming jurisdictions. Now let me turn it over to Sheldon for final thoughts.
Thanks, Mike. We just completed another outstanding quarter, generating record revenues and EBITDA in Macau, an outstanding 1st full quarter of operations for Marina Bay Sands in Singapore and record revenues and EBITDA for the company of Google. From my perspective, our operations are in outstanding shape and we have clearly, as the Macau publication stated, separated ourselves from the pack. We have never in the history of our company been better positioned to deliver strong growth in the future. We've also significantly reduced our debt levels and our balance sheet has over $3,000,000,000 of cash.
I think it's $3,200,000,000 providing significant financial flexibility and enabling us to continue our industry leading growth strategy. We will have up to $6,000,000,000 if we included our unused revolvers, I believe. Am I correct on that, Ken?
Just a hair under that, but yes.
Hair under $6,000,000,000 but who's counting? We could be more enthused about our business today and about our strong positioning to the future with the quality of the assets that we have that have seen a bump in seen a thrust upward and particularly the uncovering of the new of an untouched market in Southeast Asia for Singapore. I want to thank all of you for joining us. We sincerely appreciate your interest and the support of our shareholders. That's the end of our call.
Thank you very much. Goodbye.