Good afternoon. My name is Sarah, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Las Vegas Sands Second Quarter 2017 earnings conference call. All lines have been placed on mute to prevent any background noise. I will now turn the call over to Mr. Daniel Briggs. You may begin.
Sarah, thank you for joining us on the call today. Joining me on the call today are Sheldon Adelson, our Chairman and Chief Executive Officer, Rob Goldstein, our President and Chief Operating Officer, and Patrick Dumont, our Executive Vice President and Chief Financial Officer. Before I turn the call over to Mr. Adelson, please let me remind you that today's conference call will contain forward-looking statements that we are making under the safe harbor provision of federal securities laws. The company's actual results could differ materially from the anticipated results in those forward-looking statements. In addition, we may discuss non-GAAP measures. A definition and a reconciliation of each of these measures to the most comparable GAAP financial measures is included in the press release. We also want to point out that we have posted supplementary earnings slides on our investor relations website.
We may refer to those slides during the Q&A portion of the call. Finally, for those who would like to participate in the Q&A session, we ask that you limit yourself to one question and one follow-up question so we might allow everyone with interest to participate. Please note that this presentation is being recorded. With that, let me please turn the call over to our Chairman, Sheldon Adelson.
Thank you, Dan. Good afternoon, everyone, and thank you for joining us today. This was a great quarter, and I'm very pleased with our results. Company-wide adjusted EBITDA was $1.21 billion, an increase of 26% over the prior year. Adjusted earnings per diluted share increased by 38% over the prior year to $0.73 per share. During the quarter, both our Macau and Singapore operations performed exceptionally well. Sands China grew its EBITDA by 23% year-on-year, driven by strong mass gaming revenue growth. Marina Bay Sands achieved its second-best quarterly EBITDA since opening, with year-on-year growth at 38%. I remain as confident as I ever been in our company's prospects. The Macau market is growing, and its growth rate has been accelerating for four consecutive quarters.
At the same time, the significant new supply that has been added on Cotai since 2015 amounted to over 8,000 hotel rooms and over $13 billion US of additional invested capital, has successfully been absorbed by the market. Our Macao operation is experiencing strong growth in mass gaming and non-gaming segments, and we have successfully established a new landmark must-see destination resort in The Parisian Macao. Our Macao mass gaming table revenue growth rate further accelerated from 18% in the first quarter to 23% in the second quarter. In its third full quarter of operations, The Parisian Macao achieved a quarterly EBITDA of $106 million. Our strategy was to create a critical mass of interconnected resorts on Cotai.
With the completion of The Parisian, we have almost 13,000 hotel rooms and four interconnected resorts, over 840 stores across four shopping malls, 2.5 million sq ft of meeting and exhibition space, and four performance and event venues, including our Venetian Cotai Arena, which can be utilized either for our MICE business or for major entertainment events. This critical mass of product and amenities allow us to cater to virtually every type of visitor. Business and leisure visitors to Macao will be able to enjoy all of this and more under one roof at one destination. Our retail mall portfolio across Asia continues to thrive, which demonstrates the success of our strategy to develop destination retail as a differentiation component in the critical mass of offerings in each of the integrated resorts in our global portfolio.
Both Macao and Singapore delivered double-digit retail sales growth for the second quarter. Our annualized operating profit is now well in excess of half a billion US dollars. Both malls are poised for further enhancements with the tenant mix. Because of our industry-leading investments in MICE-based integrated resorts in both Macao and Singapore, we are unique in the absolute scale of our cash flow, as well as our dominant share of the industry's cash flow. Scale, diversity, and critical mass allow us to outperform our competitors. Let me give you some additional highlights of our results in Macao for the quarter. Quarter two adjusted property EBITDA for our Macao operations was $600 million US, an increase of 23% compared to the prior year. Total net revenues increased by 23%, driven by growth in mass gaming and non-gaming segments.
We maintained a strong EBITDA margin of 32.7% as we benefited from revenue growth and ongoing cost efficiencies. Despite the significant increase in Macao's gaming and hotel capacity compared with the prior year quarter, our mass table gaming revenue grew by 23% year-over-year, and our non-gaming revenues grew by 22% year-over-year. We experienced broad-based growth across both premium mass and mass segments. Increased patronage and length of stay with hotel accommodation, increased spend at our shopping malls and entertainment events. Our premium mass business performed exceptionally well, with growth of nearly 40% over the prior year. During the quarter, hotel occupancy across our portfolio increased by eight percentage points compared to the prior year to 86%, with occupied room nights growing by 35% compared to the prior year. The Parisian Macao grew its EBITDA by 29% sequentially to $106 million, with solid sequential growth in both gaming and non-gaming revenues.
Not only has Parisian been successful as a standalone property, The Parisian also benefits our entire Cotai portfolio. The Plaza Four Seasons property, in particular, has experienced an uplift in visitation and business volumes since The Parisian opened and the bridge between Four Seasons and The Parisian was completed. Every gaming segment at The Plaza experienced strong revenue growth during the quarter, and Four Seasons retail sales grew by 7% over the prior year, despite the increase in the supply of luxury retail in Macau. This year marks the 10th anniversary of The Venetian Macao. When it opened in August 2007, The Venetian stood alone on Cotai. Its opening marked the first step in my vision to create the Cotai Strip. I was absolutely committed then, and I remain as deeply committed today to continuing to support Macau's economic diversification and its transformation into Asia's leading business and leisure tourism destination.
Non-gaming industries such as retail, MICE, and entertainment are now well-established in Macau and will continue to flourish and grow. Meanwhile, The Venetian Macao has become the most visited integrated resort in Asia, if not in the world. The addition of The Parisian to our Cotai Strip development takes our critical mass and diversity of offering to another level. I believe this is the only mixed-phase integrated resort complex of this scale in the world. We remain fully committed to playing the pioneering role in Macau's transformation into Asia's leading business and leisure tourism destination. In summary, we regard it as a privilege to contribute to Macau's success in realizing its objectives of diversifying its economy, supporting the growth of local businesses, and providing meaningful career development opportunities for citizens, including through our Sands Academy, and reaching its full potential as Asia's leading business and leisure tourism destination.
We have steadfast confidence in both our and Macau's future success. Now, moving on to Marina Bay Sands in Singapore. We delivered an excellent quarter at Marina Bay Sands, with EBITDA of $492 million. Our second highest quarterly EBITDA since opening. The quarter was marked by particularly strong performance in the VIP gaming segment, where rolling volumes increased by 29% over the prior year, as well as our retail mall businesses, where tenant sales grew by 11% over the prior year. Normalized EBITDA margin increased by more than six percentage points, reaching 55% for the second quarter, supported by solid revenue growth and cost control. At the same time, Marina Bay Sands continues to serve as the most important reference site for emerging jurisdictions that are considering large-scale integrated resort developments.
Our pioneering track record, development experience, and financial strength puts us in the pole position to take advantage of new development opportunities on the rise. Now let's move on to my favorite subject, the return of capital to shareholders. Yay, dividends, and yay, buybacks. As you may recall, the Las Vegas Sands board of directors last year approved an increase in our recurring dividend program for the 2017 calendar year to $2.92 for the year or $0.73 per quarter. We remain committed to maintaining our recurring dividend programs at both Las Vegas Sands and Sands China, and we remain committed to increasing those recurring dividends in the future as our cash flows grow. At the same time, we will remain opportunistic in returning excess capital via our share repurchase programs. We repurchased $75 million of stock during the quarter.
We look forward to continuing to utilize the stock buyback program to return excess capital to shareholders and to enhance long-term shareholder returns in the future. Our performance demonstrates the resilience and consistency in our cash generation, which reflects both the strength of our business model and the geographic diversity of our cash flows. Our debt-to-EBITDA leverage ratio remains low at 2.2 times on a gross basis and 1.7 times on a net basis. My view of our leverage levels is that we are comfortable with the debt-to-EBITDA ratio of between two times and three times on a gross basis before any additional debt related to development opportunities in new markets. As our EBITDA and cash flows grow, our leverage will naturally decline over time.
Our industry-leading cash flows, geographic diversity, and balance sheet strength enable us to continue our recurring dividend and stock repurchase programs while retaining ample financial flexibility to reinvest in our existing properties and pursue new development opportunities. In conclusion, our cash flow generation continues to be strong and predictable. The resurgence of growth in the Macau market has continued during the quarter. The structural advantage from our scale, critical mass, and product diversity was evident in our strong financial results. We look to the future with confidence. We have a strong organic growth outlook. We are in a great position to continue reinvesting in our existing assets and to pursue new development opportunities. We have both the intent and the financial strength to continue to return excess capital to shareholders. Thank you for joining us on the call today, and now we'll take questions.
At this time, if you would like to ask a question, press star and then the number one on your telephone keypad. Your first question comes from the line of Steven Grambling from Goldman Sachs. Your line is open.
Thank you.
Mr. Grambling from Goldman Sachs, your line is now open.
Operator, let's move on.
Thank you. Your next question comes from Thomas Allen from Morgan Stanley. Your line is open.
Hey, good afternoon. Last quarter, I think there was some debate around whether you wanted to target the VIP market in Macau, given the strength that we were seeing. Can you just give us updated thoughts post this quarter? Thank you.
VIP market, you're referencing junkets, Thomas? Or [inaudible ], when you say VIP, let's define that.
Yeah, I think that there was debate around junkets. Exactly.
Okay.
Debate around how much you want to target the junkets, given the strength there when you've historically been more of a mass market company.
Well, obviously, we're mass-driven. That's our calling card in the past and I think in the future. That wouldn't preclude, though, us from participating in the junket segment. Actually, we're redoing all of our rooms, and I think we're making a concerted effort to keep pushing hard in the junket segment. Obviously, the margins in that segment are nominal compared to the mass segment, but we certainly want to be a junket house and have junket participation for the direct profitability and also the other benefits to the premium mass segment. Let's have no confusion. We want to be in the junket business for sure in Macau.
Okay. Helpful. Then, you highlighted the significant increase in occupancy in Macau. How are you thinking about allocating rooms now to kind of drive the highest returns? Thanks.
It's never really changed for us historically. We allocate rooms based on profitability, be it junket, be it premium mass, be it mass, or just cash customers. We ran 86% occupancy across the portfolio. We're very pleased by that. I think the difference between us and most people, I think it reflects our ability to sell 13,000 sleeping rooms and yet still take care of the casino customers. I think one thing you should think about with us is we've successfully enhanced our business model and marketing initiatives to adapt to the continued evolution of the Chinese consumer, mobile, social media, e-commerce. We successfully leveraged social media, product placement, and our diverse non-gaming offerings to build an industry-leading online mobile social media presence in China. In the region alone, we have 3.6 billion digital impressions.
The Venetian and Parisian are two top, the most searched Macau properties on both Baidu and Weibo. On WeChat, we've got more followers than any other Macau companies combined, all the companies combined. Again, we believe very much in selling hotel rooms because they have a large platform of 13,000 sleeping rooms. Profitability is guided by each segment, be it casino, be it cash sales, be it junket. We're open-minded at all those segments, but our key is to keep our rooms busy, occupied, and producing lots of EBITDA.
All right. Thank you.
Your next question comes from the line of Joe Greff from J.P. Morgan. Your line is open.
Good afternoon, everybody.
Hi, Joe.
Question for you guys. Obviously, the VIP business was rip-roaring at Marina Bay Sands. What drove that? Is it a different marketing approach? Is it credit? Is it macro-driven? How concentrated or how broad-based was the rolling chip strength that you saw?
Sure. Well, let's be clear. We obviously had a stellar quarter, which was driven by the rolling segment. We had stronger volumes and above-average hold percentage, which helped MBS to, I think it was our second-best quarter in the history of the property since we opened. The non-rolling-
Seven years ago.
Yeah. Long time ago. The non-rolling table and slot ETG volumes were stable, although they didn't grow, a little bit disappointing. The lodging component was softer than usual because the Singapore lodging market is softer. I think this quarter reflects the many opportunities of profit we have to drive our business at MBS. Even taking out x the large hold percentage, we delivered about $385 million of normalized EBITDA, which sets up the potential for a huge year this year at MBS. There's nothing new there in terms of marketing strategies. What we are doing is reducing commissions in the rolling segment to enhance our profitability, enhance our margins. We successfully keep pushing back on the commissions and testing the waters to see how far we can go. You'll see that enhanced profitability in the rolling segment this quarter. We played lucky. Let's be clear.
We had a lot of luck this quarter, probably about $100 million of increased hold. Having said that, we're very pleased that in a quarter where the usual drivers were absent, we didn't see the big lodging component, we didn't see the big component coming out of the non-rolling slot ETG segment. We still delivered great results, and it was all about the very high end and playing a bit lucky. I would, again, look at the commission structure and how it's changing. I think we run about 65/35 in terms of the composite market EBITDA in Singapore. We're very proud of the results there, albeit our traditional drivers were a little absent this quarter.
Great. Thank you. Just kind of a big picture on Macau for Rob, for anybody on the call. How do you think about future investment or reinvestment in your properties, particularly when you think about your peninsula presence and you think about Sands Cotai Central, what type of retheming or rebranding opportunities do you have to increase market share? How are you thinking about those things now?
Right. It's a good question, Joe. First of all, we are the market leader in Macau, EBITDA leader. We once hit $3 billion of EBITDA there a few years ago. Our goal is to return to that place again. We will absolutely invest aggressively in all aspects of Macau, be it SCC, be it The Parisian. The Parisian had a nice quarter. We think we can do better. It's based on mass volume, and I think it's based on a terrific job by the team there in the digital platform. We're very pleased with our mass performance at The Parisian, but we believe there's a lot more profitability. It has extraordinary curbside appeal. It has extraordinary connectivity, the Four Seasons. It's a very glamorous property inside the building, the casino. What it lacks is a better room product to address the premium mass.
We're spending addressing now. You'll see some of that product come on board in early 2018, and by the end of 2018, be completed. I think once that's done, The Parisian's going to be a very, very strong competitor and do much better than the 106 this quarter. We're very proud of the product. We made some changes there, which most people do if they open a property. We recognize the enormous appeal to premium mass, and we think we can do a lot better with The Parisian. We're very pleased, as Sheldon referenced, the growth of the Four Seasons. That seems to be benefiting both from a retail and gaming perspective from the connectivity to The Parisian and The Venetian. We are reinvesting in The Venetian right now.
We actually had 500 rooms out of order this quarter, which took our room count down considerably, about 20%, which impacted The Venetian's results. We're going to spend aggressively in Macau. We are big believers. We're grateful to be there. It's a magnificent market. We are the leader in EBITDA, have been for years. The biggest investor in the market, and that won't change. We're going to drive more revenue, and as this mass gaming story evolves, we plan to be a very, very big participant in growing EBITDA.
Your next question comes from the line of Felicia Hendrix from Barclays. Your line is open.
Hi, thanks, and good afternoon. On the mass side, if we take the mass win estimate that's in the deck on slide 13, the $4.15 billion, that in the end, you kind of do a market share calculation based on your mass win. It appears you maintained market share in the quarter, and last quarter, you grew share a little bit on the mass side. I would just think given your success with Parisian and everything you're doing that your mass share would be growing a bit faster. Just wondering how to think about that. Then also in the deck, you highlighted that there was a sequential base mass decline in the quarter. I'm wondering if that's something that we need to discuss or if that's just seasonal.
Dan, you want to take that?
Sure. Felicia, I think the most important thing on the question is on page 15, which is it grew 22.6% across base and premium mass. Base mass grew 11% in a quarter that doesn't have as much visitation as, say, the first and the third quarter. It's a very nice result for us. Then premium mass, as Sheldon mentioned in his comments, grew nearly 40% for us, 39.3%. That's what matters. That's what counts. We're growing very, very quickly. We don't have precise information on all the other operators' growth. We'll wait to see what they do. You saw the results yesterday. We've got very nice market share in mass, and our expectation is that we can grow our market share in mass over time because of all the things Rob just mentioned. We're very, very pleased with the results.
It could very well be that the growth rate in Macau for the whole market is slightly less or slightly more than we've estimated. We'll find that out in the next couple of weeks. We know that the growth in the market is very strong at, say, 18%. We're growing at 22.6%. We're very proud of that and looking forward to continuing to move in that direction. With respect to sequential on FCL base mass, what I'd say is this is a seasonal business with visitors coming in the first and the third quarters, probably more so than the second and the fourth. As we continue to evolve, I think we'll see good stuff coming. I'll point to another slide in the deck, which is on page 12.
If you look at mainland Chinese visits, that's up 16% year-over-year in the second quarter 2017 compared to 2016. If you look at spend per visitor, that number is up 13%, and this is just mass tables and slots for the visitors coming into the market. We see a very nice opportunity to continue to grow. We expect that base mass business across Macau overall to grow at probably Chinese GDP plus. If that's the case and we're participating, we've got a very, very nice growth opportunity in the future.
Thanks. That's helpful. Just as a follow-up, can you guys just address the flow-through in the quarter in Macau? It looks like it's increased a tad since last quarter.
I think our margins have been consistent given our cost reduction programs. I think the team over there has done a very nice job taking costs out of the business as the business scaled down in prior quarters. Now that we're experiencing growth, we anticipate to see heightened flow-through. From a labor standpoint, we've actually been pretty good. I think some of our cost expansion here has been related to increased marketing to capture some of the market growth. We're going to continue to invest in marketing as the business continues to grow because we think that's helpful for the long term. As a practical matter, we should start seeing some operating leverage as revenue continues to grow in the market. First quarter has Chinese New Year in it.
I think as you look for the business over the long term, you should see us control our labor costs, control some of our fixed costs, and then look over time to increase our marketing spend as we invest in our business, invest in our customers, and look to grow revenue and expand margins.
Great. Thanks so much.
Your next question comes from the line of Shaun Kelley from Bank of America. Your line is open.
Hi, good afternoon. Rob, just wondering if you could give us a high-level view on how you'd characterize the promotional or competitive environment right now in Macao. We should be getting close to lapping some of the new supply additions from last year, including your own. Any changes or tweaks to the landscape there, or is everything fairly steady?
I think things are pretty steady there, Shaun. I think we, unless I'm confused a little bit by our growth in the mass, Felicia's comments about base mass and premium mass indicates to me we have healthy growth in both those segments and we have healthy margins, frankly, at 33% or so, I'd take it any time. As far as the competitive environment, I think it's obviously a very competitive operating environment. From our perspective, it revolves around the base premium mass segments. We've not seen unreasonable competitive pressure. I think it's actually very reasonable. We did see some, obviously, price cutting on the hotel side a few quarters ago, and even that's bouncing back. ADRs are improving. I think the market there is rather rational and reasonable and measured, and I think it will continue.
As long as we keep seeing these double-digit increases in revenue, people aren't chasing the customers, I think that environment remains very reasonable working. We're very happy with the environment.
Maybe just a quick follow-up. I think I caught earlier, maybe in the prepared remarks, that normalized EBITDA margins in Singapore were 55% this quarter. I'm not sure if I inserted the word normalized. Is that a number, like a solid number, or how should we interpret that?
Yeah.
Yeah.
It's a solid number.
It's as solid as a rock number.
How do you say 55% unsolid like?
You don't.
I don't know.
Yeah, as we addressed, Singapore had an unusual quarter because we did have large volumes relative to the past year or so in the rolling. Obviously, when you hold well, that skews things a bit. I think if you step back, even with the rather soft lodging market and a softer non-rolling table segment in the market, we did pretty well. Margins held up pretty well. Again, I think the power of MBS is evident this quarter by the fact that we had less traditional drivers, yet we had the high end emerge, and we held lucky. I think margins like that are reasonable, and you can believe in the long term.
Shaun, this is Sheldon. You got to remember that there's no reason for it to reduce the traffic and reduce the productivity at Marina Bay Sands. It is arguably the most beautiful building in the world.
If you want to have an argument, I'll engage in it. Oh, I said argue. It is the most visited. It's one of, if not the most visited hotel in the world. There's nobody that goes to Singapore that doesn't see the hotel, that doesn't want to go up to its SkyPark and look out over Singapore. It's just so attractive and so magnetic to people who come to Singapore. I don't see any reason why the Marina Bay Sands been open for seven years, and we've done good, and we continue to increase. Our mall is considered one of, if not the most beautiful mall in the world. While all the other malls are going down in Sin, we're going up.
There's no reason for it to go down, particularly when people who come to Singapore, everybody who goes to Singapore goes to see the Marina Bay Sands.
Shaun, I think one other thing to note is the margin that you're seeing there is based on the operating leverage of the business. If Marina Bay Sands continues to develop a better mass business over time, if we continue to have the VIP growth that we're seeing, eventually we'll continue to scale, and you'll see some margin expansion in that business.
I could tell you I'm involved in development and expansion, I could tell you I was in Brazil recently, and people had gone from Brazil to Singapore to see the Marina Bay Sands, just for that purpose. Everybody in Japan knows what the MBS is. Most everybody from Japan that has any interest in the potential Japanese integrated resort, everything they do is copying Marina Bay Sands.
To reference, there's one more thing about Marina Bay Sands and about how we think about that asset, and obviously, we're very proud of it. It's the reference point for an exemplary IR anywhere you go in the world, be it Asia, South America, or the U.S. On page 24 of the deck, I think one of the reasons why is we've invested aggressively in world-class entertainment. If you look at that list of acts from Rolling Stones to Michael Bublé, Elton John, Aerosmith, Diana Ross, et cetera, Asian acts, all kinds of top-tier K-pop and J-pop, sports, boxing, theatrical. It's a pretty impressive place. We are the touchpoint in that part of the world for entertainment in Singapore.
Coupled with the news Sheldon referenced, as we travel to new jurisdictions, we're very proud of the fact it seems to be the place that everybody talks about as what they want to have in their backyard. Be it entertainment, be it MICE, be it retail, we reinvest heavily and want to keep this superb asset looking like it looks and leading the way.
Thank you, everyone.
Your next question comes from the line of Robin Farley from UBS. Your line is open.
Thanks. I just want to ask a little bit about return to shareholders based on your opening comments. It looks like you did less share repo in Q2 than you did in Q1. I don't know if you could give any color on how you think about that.
Sure. I think as we said previously, the return of capital cornerstone is really our dividend. That's really what our Chairman and our board focuses on in terms of long-term sustainable growth, and that's really the focus of our return on capital program. We use share repurchases to modulate return of capital to our shareholders. We feel we have some excess cash, and we feel like providing some additional return to our shareholders, shrinking our share count, we'll go out and repurchase shares. In this particular quarter, we chose to purchase $75 million. In the future, we hope to do more, that's what we did this quarter.
That was just a function of literally like liquidity in the quarter or just thinking about that versus Q1?
I think it's really just a view on the outlook. I think we tend to think about our cash flow growth, tend to think about the liquidity that we have, to think about a whole host of factors that kind of go into the mix, and we make repurchases based on our long-term view. Across the year, we'll look at it more in that concept than we will particular quarter to quarter. I think the way we kind of look at it is going back across a year and saying, what was our total return of capital? How were our shareholders treated? That's the context that we really consider it in.
Okay. That's great. Thanks. Just one other very minor question, but are you still actively looking to maybe dispose of non-core assets? Just wondering what your current thinking is on that.
I think that's something that we always are opportunistic about. I think our Chairman has set up a very effective model where we reduce our cost of entry by ultimately selling down assets that are considered non-core, either in total or in part. It's something that we'll always continue to consider to enhance shareholder returns. At this time, we don't have anything to report specifically, although the Chairman has said all along that this is part of his core and fundamental strategy for the business, and that's something we hope to follow over time because it does create an unbelievable return environment.
Okay. Thank you.
Your next question comes from the line of Harry Curtis from Nomura Instinet. Your line is open.
Hey, good afternoon, everybody. Just a couple of quick clarifications. Following up on Joe's question in Macau, can you walk through the projects or the property improvements that you're planning and give some general price tag on what you're planning to do this year and next in Macau?
Harry, it's Patrick, nice to hear from you. I think if you turn to page 35 in our earnings presentation, you kind of see that we provide a forecast for our CapEx expectations for the entire portfolio. There's some details there regarding maintenance CapEx, some investments that we plan to do in existing properties, things that are specific to the Parisian, and then some other. I think the key thing to note is that the $500 million maintenance that we intend to spend, although we haven't spent it in years past, as our property portfolio needs room refresh, needs high limit space changes, needs junket room adjustment. We intend to spend that money. I think we have a very motivated team in order to grow the business. I think we're working hard to identify areas of investment, areas of change that could be helpful.
I think we're actively pursuing that in Macau, in Marina Bay Sands, here in Las Vegas, and in Sands Bethlehem. I think that the key thing here is, I don't know that we can call out a specific list of projects because they are numerous. What I would like to highlight is we have a history of investing in our properties, of making the changes necessary to support earnings and cash flow growth, and we've had the spending history that shows that we do it. If you look at these next 3 years, you'll see that there's a significant commitment made to both capital expenditures to provide growth as well as capital expenditures to make sure our assets are kept to where they need to be to continue to boost the cash flow that allows a return on capital to happen.
I'll turn it over to Rob or to the Chairman to see if they have any additional remarks. I just want to highlight page 35 lays out the amount of expenditures that we've spent historically, the way we've deployed capital, and the way that capital intends to be spent in the future on a general basis. I don't know if there's any specific projects that we'd like to highlight now, but I'll turn it over to Rob.
Harry, a few things just to think about. We referenced The Parisian. We're in the midst of converting into some suite product over there. It'll come online in Chinese New Year and throughout the year. Otherwise, The Parisian, we're adding a restaurant or two in the gaming floor. We just finished redoing all the rooms and suites in the Four Seasons. We're making changes to all of our junket rooms, rehabbing 100% of the junket areas. Obviously, adding all the new smoking rooms like our competitors for 2019 finish date. The Venetian, right now, we're rehabbing another 500 rooms on top of the 500 we did last year. We're rehabbing the entire casino floor. We constantly are adding restaurants. Right now, about 11 restaurants in Macau are being changed out for new product or rehab.
I can't stress enough how much we recognize we're in highly competitive markets with very, very good competitors. I was in Macau last month, and you walk through the new products and even the older ones, and they're very, very good. We're aggressively spending money all over Macau. MBS room rehab across the board, a casino update refresh, and we just finished a new slot room there. There's no place we aren't spending money, and it goes throughout, be it nightclubs, be it restaurants, be it casino floor. We're aggressive reinvestors. We love the products we own. We're going to be spending money throughout this year and next to rehab a lot of places. No lack of capital expenditures.
Oh, that's very helpful. My follow-up question relates to Marina Bay Sands. A couple of curiosities. In your press release, it shows that mall revenues were flat year-over-year at $40 million, yet I think it was reported that last year that it was about $64 million. Was there some kind of an accounting change year-over-year? I might have missed it.
I don't know that.
Harry, I'm not sure what we're referring to. Give us a chance to get back to you.
Okay. That's fine.
We're showing occupancy at 97%, rents are about $1,480 a foot. It looks to me like the operating profit is about $35.1 million for the quarter.
If you turn to page 26 on our earnings deck, we have the Asia retail mall portfolio with operating profit and operating margin as well as mall revenue. Maybe you could direct your question to that section, to that page, and maybe we can answer it.
This was just specific.
On page nine in the release, we've got mall revenue at $40 million in 2017 and $40 million in 2016?
Correct.
You're saying a year ago, we had $60 million in the mall revenue?
That's what we show, but we've known to be wrong.
Let's chase it down together.
Okay.
We've not, Harry, this is Rob. We've not had any significant changes. Marina Bay Sands, it's pretty flat year-on-year.
Could have been.
We'll get some detail on that, but I don't believe we had a $60 million quarter last year.
No.
Yeah.
Could it be that he's thinking about growth versus?
No, because the hotel runs about 90% margin.
Yeah.
I don't think so. We'll come back. We'll come back to you, Harry, directly.
Yeah, Harry, what you see both on page 26 and page nine of the press release is accurate. I'm not sure what you're referring to, but if you have any questions, please follow up with Dan.
I will. Just staying in Marina Bay Sands for the last question is, on the rolling chip volume, in the first quarter, I just want to make sure I've got these right. It was $8.9 billion in the first quarter and $8.7 billion in the second quarter. It's sequentially pretty stable. Is that a fair statement?
Yeah. If you look back a year ago, it was $6.7 billion a year ago in Q2 of 2016, so a nice growth year-on-year, but Q-on-Q, it's flat. Obviously, Chinese New Year fell in Q1, so it's a nice stable run rate of $35 million-$36 million. Yep.
Yeah. That was where I was going is, do you think that we're in a more stable environment now? Because historically, that rolling chip volume's been quite volatile.
Yeah, I think it's been stable the last year or two. As you know, it's fallen off terrifically from the early days when there was belief we could do $50 million or $60 million. I think currently running in the $35 million-plus range, I think that's realistic. As you know, and I think it bears repeating, that this is a highly concentrated segment, that a couple dozen players can make the difference in a quarter. We feel like we're running at a more stable rate the last three quarters, we're in the 8.2, 8.9, 8.7 range. Bear in mind, a year ago, we dropped down to 6.7, so a big increase year-over-year. This market, especially in Singapore, is just like Las Vegas, 10, 20 people can make a difference. I would caution you always to keep in mind it's volatile and concentrated.
Got you. That's very helpful again. Thank you.
Sure.
Thanks.
Your next question comes from the line of Steven Grambling from Goldman Sachs. Your line is open.
Oh, he's get back in.
Hey, can you hear me now? Sorry about that earlier, and thanks for getting me back in.
Sure.
Yes. We're glad you're back.
Thank you. Sticking with Singapore, can you provide any update on the thoughts around monetizing the retail real estate there, and provide any color into how that may play into your capital allocation strategy going forward?
Right now, still very early on, nothing really to report on the process. Although I will tell you that I think as we said previously, that the Chairman's strategy all along when he developed these large-scale integrated resorts that are high-mass and have a lot of critical mass, that a part of that critical mass will be non-core components. Those non-core components are integral to the resort, but also have monetization capabilities. We'll look to, in the future, monetize those assets as pricing allows and as the Chairman feels comfortable in order to enhance our shareholder returns. While we have nothing to report specifically at this time, we're optimistic, we're hopeful for the future. We realize the value of the mall that's sitting there, as the Chairman said earlier. It's a great property. It's the most iconic mall in the world.
It's probably the most valuable mall in the world on a per square foot basis, and we're looking forward to the opportunity at some point in the future. Hopefully, we'll get that chance.
Thanks. On the slide 30, you put down principal areas of future development interest, and if we maybe look at South Korea and Japan specifically, can you provide any updates there? What are some of the key factors that would make you maybe more or less interested in either one of those areas?
We've always been sure in both those locations, and I think that's no surprise to anybody. We're cautious. I think in Korea at this point, there's nothing really to talk about. We have been actively involved in trying to make ourselves known in Japan. We've been there several times, quite a bit, and we're hoping that process goes well, and hoping we'll be considered for a license at some point. We're very bullish on Japan and very much hopeful that the process completes sometime later this year. We all stay tuned and see what happens. We're hopeful.
Rob keeps going to Japan because he found a great pizza parlor.
Right.
It's true.
It's true. If you want a great pizza place in Tokyo, email me.
I guess the other follow-up you have South Korea.
Pardon me?
He wants South Korea, your thoughts on South Korea.
There's been nothing. They recently had an impeachment, and the lady was indicted, the former lady president. They put a new president in, but there's no indication whether he's interested or not. I think that from having gone to South Korea many times, I think what will move that along will be the implementation bill in Japan that we hope will pass before the end of the year. It's possible it could be delayed. I think that once they pass that. Remember, they have 17 casinos there, and only one allows Korean nationals, and it's about 3 hours drive away from the biggest city, from Seoul. I think they've got bigger problems now with North Korea than looking at integrated resorts to attract more tourists. We don't know. There's nothing new about integrated resorts being restructured in South Korea.
The most likely, I've heard that Bangkok in Thailand is reconsidering IRs. It's very gratifying to know that everybody who talks about IRs in Japan is referring to one thing or more about Marina Bay Sands. It is an absolute must-reference site. It certainly puts us in the number 1 position to be the top candidate for a win. We don't know. There are different opinions as to whether or not Abe's loss of so many seats in the Diet, the Japanese parliament. We don't know whether or not that hurts the move, Patrick and Rob were just there last week. They say that it doesn't seem to have any effect, and they're still moving along, and they hope to get, I don't know why, they're going to pass the bill for gaming addiction first.
I don't know what that has to do with anything, but they say they're going to pass that first, and we're hopeful that it'll pass the forthcoming month in August.
Fair enough.
Thank you.
Thank you. I'll shoot Rob an email on that sushi pizza.
No sushi, just pizza. Great pizza.
I ate pizza in Italy, the home of the pizza.
Your next question comes from the line of Carlo Santarelli from Deutsche Bank. Your line is open.
Hey, everyone. Thanks for taking my question. Just quickly, obviously not a material piece of your business, but if you guys could comment a little bit on what you're seeing in Las Vegas right now and how you're assessing current trends.
I think, Carlo, you know that this quarter was disappointing in terms of the lodging component, which is more and more important in Las Vegas. George Markantonis, who runs the building, tells me that this summer looks better to him. Group business is picking up considerably, and he thinks the second half of the year will do well. He thinks the FIT business picks up and the group business will be strong. We're hoping for more there. Obviously, we didn't have as good a quarter as hoped for after a stellar first quarter. George Markantonis says the summer looks good. Group business is accelerating and the FIT business as well is accelerating. Let's hope for the best in Las Vegas.
Great. Thanks, Rob. If I just could go back to one point you made, I just want to make sure I heard it right. You talked a little bit about MBS and what you're doing on the VIP side. Did I hear you correct in saying, obviously no junkets in the market, so every relationship is direct. Your rebates or commissions to your VIP customers, you've been pulling back on them a little bit. Even on normalized hold going forward, your margin profile within VIP should be improved?
Exactly correct. We continue to cut back commissions, our second bite of the apple, and you've identified it perfectly. Yes.
Is there any kind of, in terms of departmental margin improvement that you would expect to see from that?
Yes.
No, sorry. That you could quantify, I meant. I apologize.
No, I don't want to quantify it, but I think you'll see improved margins and improved profitability in that segment. We think we have a showcase property that people want to come to, and we are the market leader there by, I guess by 65-35, and we believe that we can perhaps reduce commissions and get better margin. That's the thought process. I don't want to quantify what that'll mean, but it will be improved margins, improved profitability at MBS.
Great. Thanks so much.
Sure.
This concludes today's conference call. Thank you for your participation. You may now disconnect.