Welcome to the Las Vegas Sands 4th Quarter 2016 Earnings Conference Call. I will now turn the call over to Mr. Daniel Briggs.
Thank you. Joining me on the call today is Sheldon Adelson, our Chairman and Chief Executive Officer Rob Weinstein, 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 provisions of federal securities laws. The 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 reconciliation of each of these measures to the most comparable GAAP financial measures is included in the press release. We also want to inform you that we have posted supplementary earnings slides on our Investor Relations website for your use. We may refer to those slides during the Q and A portion of the call. Finally, for those who would like to participate in the Q and A session, we ask that you please 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 introduce our Chairman, Sheldon Adelson.
Thank you, Dan. Good afternoon, everyone, and thank you for joining us today. I'm pleased we continued to execute our strategic objectives during the quarter and delivered another strong set of financial results with company wide adjusted EBITDA reaching 1 point $12,000,000,000 an increase of 6% over the prior year. Fully diluted earnings per share increased by 8% over the prior year to 0 point 6 our Macao operations achieved strong mass gaming revenue growth and delivered $610,000,000 of adjusted property EBITDA, including a solid first full quarter EBITDA and $95,000,000 at Parisian Macau. In Singapore, Marina Bay Sands continues to deliver steady cash flow supported by its mass gaming and non gaming segments.
The resilience and consistency in cash generation reflect both the strength of our business model and the geographic diversity of our cash flows which in turn underpins our balance sheet strength. Accordingly, we can and will continue to return excess cash to shareholders while maintaining our ability to invest in new development opportunities. We're excited by the recent legislative breakthrough in Japan to permit casino gaming within integrated resorts. We believe our pioneering track record of creating the MICE based integrated resort, Our development experience and our financial strength put us in the pole position to take advantage of an opportunity in Japan and other new development opportunities in Horizon. As I look back at 2016, the year began with still declining market revenues in Macau and the prospect of increased supply and competition.
Despite these challenging conditions, we successfully opened another truly landmark must see destination resort in the Parisian Macau. The Parisian not only helped us drive double digit revenue growth in quarter 4, but also greatly enhanced the critical mass benefits of our interconnected properties on the Cotai Strip. As evidenced by our visitations growing 23% year over year in the 4th quarter. As you may recall, I had first indicated back in January last year that we were seeing signs of stabilization in mass gaming revenues in Macau. And in June, our mass gaming revenues saw positive year on year growth for the first time in 2 years.
This encouraging trend continued into the second half of the year as our mass table revenues grew by 6% year over year in quarter 3 and further accelerated to growth of 16% in quarter 4 driven by the 1st full quarter of the pricing. Our marketing efforts continue to pay dividends. Our Parisian Macau social media program has now exceeded 2,000,000,000 impressions. This awareness has translated into strong property visitation. Based on our customer surveys at the various points of entry in Macau since Parisian opened, The most visited casino rezone in Macau remains The Venetian, but in 2nd place was The Parisian.
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 4 interconnected resorts. Over 840 stores across 4 shopping malls, 2,000,000 square feet of meeting and exhibition space and 4 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 allows us to cater to virtually any type of visitor. Business and leisure visitors to Macau will be able to enjoy all of this and more under one roof at one destination.
Because of our industry leading investments in MICEPACE Integrated Resource in both Macau 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. This unique ability to generate consistent and industry leading cash flow in turn underpins our balance sheet strength. That balance sheet strength at 1.8 times net debt to EBITDA at the end of the 4th quarter allows us to stay fully committed to our development plans while continuing to return excess capital to shareholders. Again, this is unique in our industry.
Now let me give you some additional highlights of our results in Macau for the quarter. For quarter 4, adjusted EBITDA for Macau operations was US610 $1,000,000 an increase of 5% against the prior year. Overall net revenues increased by 12% driven by growth in mass gaming and non gaming segments. There were some items that benefited prior year's Q4 and impact the year on year profit comparison, which Rob and Patrick will explain later. Our cost efficiency programs have continued to track well.
We achieved more than our stated goal of $60,000,000 of incremental cost savings in 2016 and have realized more than 3.10 $1,000,000 of annual cost savings since quarter 1 of 2015. Despite the significant increase in gaming and hotel capacity compared with the prior year quarter in the Macau market, our mass table gaming revenues grew by 16% year over year within which premium mass segment grew by 20%. We experienced broad based growth across both premium mass and mass segments underpinned by our ability to drive increased patronage with hotel accommodations, shopping malls and entertainment events. One item to note for the Q4. We held towards the low end of our expected hold range in mass tables.
We estimate low hold in mass tables particularly at the Parisian impacted our EBITDA negatively by between $15,000,000 20,000,000 dollars During the quarter, hotel occupancy across our portfolio increased by almost 4 percentage points against the prior year to 89%. Despite significant growth in both our own inventory and the inventory in the Macao market. This again highlights our advantage during peak periods with the higher hotel occupancy feeding positively into our gaming and retail revenues. In a market where peak periods, the weekends and holidays matter more than ever before and where mass market customers who generate the lion's share of future revenue and profit growth. Our capacity advantage was further strengthened by the addition of the Parisian.
The Parisian Macau generated US95 $1,000,000 in adjusted EBITDA its first full quarter of operations. Mass cable and slot revenue per day at Parisian was $2,200,000 despite low non rolling hold while hotel occupancy was 91%. The addition of the Parisian to our Cotai Strip development really takes our critical mass and diversity of offering to another level. This is the only MICE based integrated resort complex of this scale in the world. The completion of the bridge between the Four Seasons and the Peruvian November has further increased the synergies in traffic and patronage between our properties.
With foot traffic of approximately 14,000 per day in the month of December, It is also worth noting that despite the recent increase in the supply of luxury retail in Macao, our retail sales at the Four Seasons retail mall grew by 6% in Q4. In summary, we regard it as a privilege to contribute to Macau's success in realizing its objectives that diversifying its economy, supporting the growth of local businesses, providing meaningful career development opportunities for its citizens including through our Santa Catalina and reaching its full potential as Asia's leading business and leading 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 a solid quarter at Marina Bay Sands with EBITDA of $366,000,000 Our mass win per day was in line with the prior year.
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. Now let's move on to my favorite subject, the return of capital to shareholders, yay dividends. The Las Vegas Sands Board of Directors last year improved an increase in our recurring dividend program for the 2017 calendar year to US2.92 dollars for the year or US0.73 dollars per quarter. We remain committed to maintaining our recurring dividend programs at both Las Vegas Sands and Sands China. Recurring dividends are the cornerstone of our return of capital policy and we remain committed to increasing those recurring dividends in the future as our cash flows grow.
Our industry leading cash flows, geographic diversity and balance sheet strength enable us to continue our recurring dividend programs, while retaining ample financial flexibility to invest for future growth and pursue new development opportunities. We achieved many important strategic objectives in 2016. My original vision for the Cotard strip in Macau was further realized with the completion of the Parisian. The new property enjoyed a strong operating a strong opening against the backdrop of increased competition and has rapidly become a new landmark destination in Macau. The structural advantage from our unmatched critical mass and diversity of offerings was evident in our strong financial results during the quarter and the year both in Macau and globally.
All this enables us to look ahead to the future with confidence. We have a strong organic growth outlook. We are in a great position to pursue new development opportunities and we have both the intent and the financial flexibility to continue to return excess capital to shareholders. That concludes my prepared remarks and I want to thank you for joining us on the call today. Now let's take questions.
Your first question is from Shaun Kelley from Bank of America.
Hi, good afternoon, everybody. I just wanted to maybe start with just the revenue picture in Macau. Obviously, it feels like on a year on year basis, things have improved quite meaningfully. But as we start to look at sequential the sequential movement between Q4 and Q3, it feels like you didn't pick up a lot of market share when we compare your overall revenues to the market. So I was kind of curious, as Parisian is ramping, do you think there's more opportunity on the revenue line?
And how do you feel about sort of your steady state or your current market share?
Sean, it's Rob. How are you doing? Are you referencing all the portfolio just the Parisians? Is your question about the Parisians future or the whole portfolio?
It's really the whole portfolio, Rob. I mean, if I click back to the envelope, it looks like we're looking like share was probably in the low 23% range and it was actually slightly higher in Q3 than it was in Q4 when you had a full quarter of the provision?
Right. So let's put in the Cowen context. Q2 of this 2016, we did less than $500,000,000 in EBITDA and yet in Q3 and Q4 cumulatively, we did 1,240,000,000 dollars of EBITDA. We successfully absorbed the Wynn opening and the Parisian opening. Of course, the Parisian did over $115,000,000 of EBITDA for Q4 plus the 17 days open in Q3.
So inside of 6 months, our run rate has improved to roughly based on Q3 and Q4 to about a $2,500,000,000 annual EBITDA run rate. The big difference between 3 and 4, Q3 and 4 from my perspective is the whole percentage and the mass table side. We are it's staggering these numbers, but we're throwing off $5,000,000,000 this quarter of table drop. So if you adjust the 1.3 percent miss Q on Q, we were up 1.3 in Q3 or Q4. It's about $60 some 1,000,000 of top line revenue.
I know it's not statistically important, but because in the long run when you're dropping $20,000,000,000 we'll get to the right number. But we held less in Q4 than Q3. Adjusted, we have seen that number pop by about $60,000,000 $63,000,000 Again, we're absorbing a lot of additional capacity. We have a lot of belief that the Parisian is going to get stronger and stronger. We're going to we have held incredibly poorly there.
And unfortunately, Sheldon referenced in his opening remarks, we actually held about 18% on a volume that was about $900,000,000 that's disappointing. The region should have added another $15,000,000 $20,000,000 to its numbers, it didn't. That also holds true at the SEC did less than did about 19 and same with the Plaza. So we had a little bit of bad luck, we're just at the lower end of the range, which adversely impacted the top line. On a go forward basis, we couldn't be more bullish.
We think we have the right assets. We think we have the in a market that's clearly about scale and capacity. We have the lodging, the retail and gaming capacity to service the demand. And that's especially true we believe on high volume weekends, holidays like the one we're going to have next week. This is the future Macao and we are at the epicenter of that future and that growth.
And we're very, very much a believer in double digit mass revenue on the table side will translate very well in the future for us. And we're a big believer in Macao. We've come a long way in the last 6 months from I think was a very not scary, but concerning time in Q2, we feel a place of strength here in January. So a lot of confidence in the future and a lot of confidence in the revenue growth.
And Rob, maybe just as a quick follow-up. I mean, did the promotional environment or do you think the competitive landscape pick up a little bit in Q4 as kind of people are starting to try and stabilize with what's going on in the market? Did it feel differently than it felt for the 1st few weeks after the Parisian opening?
There's always going to be a market that's look experienced this massive junket drop of 70% and it's just recurring to a little healthiness. There is going to be some occasional signs of promotion. But again, in a mass market, it is difficult to overspend unless you're just being silly about it. I mean, can you provide a few more few meals or a few rooms? Yes.
A lot different than a high roller environment where the comp excesses can be excessive. So do I think there's some a few things here and there? Yes. But do I see in our portfolio or in others indications of massive overincenting or promotion? I do not.
And I think the market remains pretty disciplined. We all recognize that in the end, you've got to deliver margin and you can only give value so much against the mass market. I don't think that's the problem. I just think we need to see sustainable mass table growth and an acceptable range of the whole percentage to get us to a 6.50 or 6.75 number in the future. I don't think we're that far off in fact.
Thank you very much.
The next question is from Jill Greff from JPMorgan.
Good afternoon, everybody. Rob, just a question on the Parisian ramp throughout the 4th quarter. Would you say adjusted for the high VIP hold and adjusted for the low win and premium mass, would you characterize the properties ramp as pretty consistent or accelerating throughout the quarter? Or was it more even or did it decelerate through the quarter? And if with the latter, what to what would you attribute that?
Well, Joe, I think first you have to recognize, I'll reiterate what I said earlier that is that when you drop $900,000,000 you kind of say to yourself you lost $25,000,000 $30,000,000 right there. And that's not a pie in the sky number. Our historical holds in the 21, 22 range. So I right away say, okay, give yourself a $25,000,000 to $30,000,000 kick there in a positive direction. The VIP hold was a little high, but it doesn't really mean that much at the end of the day, it's high.
But the truth is that that segment isn't the key segment. It's dwarfed by the importance of the contribution from the mass. It's much more important. So I think that it was a steady ramp. I think the Parisian has a couple of things to think about.
The bridge opened up in late November, early December. That's been a positive towards the ramp. That's adding more body count inside there. Secondly, I mentioned the whole percentage, which is you can't refute the fact that we should pick up 3 points there over the course of the year and we will. 3, I think the Parisian is going to keep ramping because as Sheldon referenced, 2,000,000,000 people have now gone online and had a look at the Parisian somehow, somewhere.
That's a staggering number from anyone's perspective. Lastly, I think we're somewhat surprised at the strength of the premium mass demand for Parisian. We position it more as a mass property. We're rethinking the room mix. We're adding some more suite product.
It won't kick in until late in 'seventeen. But my point is, we're just so pleased with the results thus far. It's a $400 plus 1,000,000 run rate, hits you to a lot better once it beats a few more customers. We had some people played lucky and good for them. One particular customer just she wins every day and she's doing very well and she affected the numbers.
But as we get the Suite product right, as those impressions keep building, as that bridge keeps maturing, the ramp will continue. I didn't see a real change in numbers, it's pretty steady throughout. The freeze is an unqualified winner. Any plan you get $100,000,000 roughly the open like we did in the Q1 and some change, that's an impressive start. But there's better days there for the Parisian.
And lastly, I think the connectivity between Four Seasons, Venetian and someday we'll get the other bridge across the SCC, that's going to make that racetrack again give us a very, very exciting set of assets all integrated, working together, 13,000 sleeping rooms, 800 stores. The freezer has got some great legs ahead of it.
Thank you, Rob. And Sheldon, I was hoping maybe you can give us updated thoughts on any progress you might be making with monetizing or partly monetizing the retail mall at Singapore. I know you're some months away before you have permission to do that, but are you pre marketing that? Are you still seeing levels of third party interest
if you can give us some sort of update? Thank you.
We are in preparation with our bankers to prepare that property to sell. We can't sell it until March or April of this year 2017. It isn't going to take that long. The interest we have is that it is the highest trophy mall there is in the world. So we anticipate almost an unprecedented price to sell 49% of it.
And we're preparing, but we can't sell it till March anyway. So we want to give enough time to the prospective buyers to do their due diligence. And from what we are told by a lot of people, it is the best trophy mall there is in the world. So we expect to receive a very hefty, very significant price for the 49% we're willing to sell.
Great. Thank you, Sheldon.
The next question is from Harry Curtis from Instinet.
Hi, guys. Just a quick follow-up in Macau. You've walked through a little bit of the impact of bad luck. But according to press release in Macau, you did play Lucky overall by about $44,000,000 So you must have held reasonably well elsewhere. And can you give us a little bit more color on that?
I think most of us haven't really had time to go through the details of the press release.
Yes, sure, Harry. It's Rob. Put in perspective, our business 10% of our business less than 10% emanates from the junkets segment that we referenced in the luck factor. So it may have thrown off a few more. I'm looking at right now on the whole portfolio.
The profit segment coming out of junkets is roughly 9% of what it is out of mass tables. We have not historically normalized mass tables, perhaps we have to rethink that. To put it in perspective for you, if we drop $20,000,000,000 this year, which we think will do more than that, and you think of a range of 2022, two points could be $400,000,000 at the margins, probably a couple $100,000,000 EBITDA. So obviously very impactful. In the past, the markets always looked at normalization of the high roller, the junket business, when in fact in this market today for especially our portfolio, not all that relevant.
So while you're absolutely correct, we play lucky for a few $1,000,000 the truth is we the junket business just isn't that impactful relative to the mass business and the mass business in this was $60,000,000 $70,000,000 depending on what number you use, but you use 2%, 3%. So it kind of negates it and adds some more volume. I'm not pretending that we didn't play a luck in the junk, we did. But again, on a historical basis, that's been the focus when in fact, the focus has to shift at some point to the huge amount of money we're doing. I think at the end of volatility in this mass segment is always been trumped by the in the end it works out just fine because the volumes are staggering, it will overcome the volatility.
But quarter by quarter, my point is, a miss like this, we could have easily had a $50,000,000 increase here, dollars 60,000,000 increase we held a point more. You wouldn't notice it, it wouldn't appear statistically important, but it's a fact and something we need to consider in the future. I think the junket thing should be first minimized based on the overall contribution to EBITDA mix.
I guess where I'm still a little bit confused. So when you guys report $566,000,000 of hold adjusted property EBITDA, is that only adjusting the junket piece and not the mass
piece? Correct. You're absolutely right, which it seems like we're out of sync with what's happening today because you're absolutely correct. Harry, we don't adjust the whole percentage on the mass, just on the junket and that those numbers reflect that. It does take the Parisian.
The Parisian held a bit lucky in the junket, but it was dwarfed by the $25,000,000 $30,000,000 it could have gotten off the mass tables. So our normalization may be a little bit inaccurate in terms of what's happening in the market today. We may be alone because no one does as much mass business as we do, due to the amount of tables, hotel rooms, etcetera. But nowhere I can think of is a $20,000,000,000 of table drop, mass table in any jurisdiction. So again, to my point earlier, couple of 3 points either way, $400,000,000 it's impactful.
Okay. That's interesting. And then, Sheldon, if you could take a minute and describe what you believe will be process from here in Japan and your thoughts on timing and possible potential ownership interest there?
Potential ownership interest?
Right.
Partners. We've had somebody in Japan this past week, who just came back yesterday for the beginning of the week. And the feeling about partners is not very strong. They say that it's likely not likely to be in the law. The law is being formulated by I think the Interparty Committee that was formed before the first law passed.
They have 1 year to submit an implementation law that will determine the who, what, why, when, where and how of how they're going to integrate how they're going to establish the integrated resource with casino build. So I don't have much more to offer than what you see in the press. It's starting, I'm going over there in about 3 weeks to give a talk at an event there in the 3rd week in February. And I'm optimistic that look they're basing this on our Singapore property. Prime Minister Abe has visited the property.
He was very impressed with it. And so I think it's going to be modeled after our property, the Marina Bay Sands in Singapore. So I'm optimistic and people tell us we're in the pole position in terms of getting the concessions. So some people say it could be the new build that has to be done within a year could be less than a year, it could be the whole year. So I really don't have anything new to add to that other than what you've read in the press.
All right. Thanks very much.
The next question is from Robin Farley from UBS.
Great. Yes, I wonder if you could give a little bit of color. There have been some comments that where permits for your management team in Macau that are not Macau residents aren't going to be renewed. I wonder if you talk a little bit about how that was that expected by you and would that affect anything that's in place now?
Rob, I'm not sure you're referencing. I'm a little taken aback. What have you read that we didn't read? Permits are
nothing It was a comment that there is a goal to target a certain percent
of Macau
management to be but and originally this was a 2020 goal, but the comment in the papers in the last day was that they maybe like to see that this year instead of 2020?
I said, well, I didn't I'm not comfortable referencing what you're saying, but I think the truth is our team, we're probably already there. If we're not there already, I'd be surprised because I was there last month and I think most of our people at the management level is not the people I deal with every day, the 100 or so people in the management side are all holders of the proper identification. So I don't think we have
an issue with it all you referenced. I need to get this. I read it last night in the clippings. They are proposing that by 2020, I think it is.
I bet where there is.
At some point in the future, there will be 85% of the senior management should be Macanese.
And Well, it was a 2020 suggestion that they might want to see this year was what the media was suggesting. Yes, I think we'd be very
confident that they can look at it right now for us.
We're already in the lowest.
Our team are looking at the table there and we've already I think we're there. I don't think we have any issues because we've been doing this last 2 years. We're big believers in that approach and support the government's agenda. We'd like to have all Mackinac people in Luca Carlos. So I don't think we have an issue today, but by 2020, I'm sure we'll have an issue.
So I don't think it's relevant to us.
Okay, great. Thank you.
The next question is from Felicia Hendrix from Barclays.
Hi, good afternoon. So Rob, just regarding some performance in Macau, I just wanted to revisit this. For Sands, Cotai Central and Venetian in the quarter, just kind of looking at the numbers that you reported, might say that the Parisian was cannibalizing these properties. So we talked a lot about hold, so maybe it makes that noisy or maybe it's because the connector is not up yet. But I was just wondering if I could hear your take on that.
Thanks.
Yes, it's interesting. I think beginning with well, let's start with the fact that the new properties and obviously Galaxy Studio City Wind Palace, you're talking about 4,500 hotel rooms and 600 new gaming tables in the last year and a half. So obviously, we're looking at a huge increase in capacity, both lodging and gaming. Then you had the Parisian and of course the SCC, the St. Regis with another 3,400 rooms and another 125 tables now.
So huge increase. As it relates to Venetian, I haven't just been there. I don't know how much more we can do with Venetian. It continues to be a $1,000,000,000 plus property. I don't feel it's being cannibalized.
I think it's actually I'll tell you one thing we are experiencing at The Venetian is, The Parisian is a great looking property that people gravitate to. The sleeping rooms have not been as well received by some of the better customers who then move towards The Venetian in Four Seasons. And I think if anything, The Venetian had a pretty good quarter. It held fine. It had no issues with luck.
It had plenty of business across the board. I don't know if we can see The Venetian being if it runs at 1:1 or so, I'm pretty happy with that performance. We're redoing some rooms there and making the floor fresher and newer. We keep making sure that place stays at the number one position Macao. But as far as appeal and people want to go there, it just continues to amaze me how powerful it is after a decade of operation.
The SEC is a different story. SEC, I think, is the polar opposite of the Parisian, meaning that the SEC, it did have a very tough quarter in terms of hold. It held on the mass $19,100,000,000 on a base of $1,400,000,000 So that didn't help but clearly left behind significant dollars there based on 2% or 3% move, it could have been $20,000,000 $30,000,000 more. Having said that, I think the weakness in SEC might come from the fact Parisian so damn attractive that the mass customer just gravitates to Parisian. It's a fact of life.
On the flip side, the customer wants to sleep in a better facility might go back to the SEC, FTC's the Parisian or the Venetian. It doesn't have the connectivity. If anybody would tell me that one property gets sort of bit at the point of the FCC, I think The Parisian has been helping The Venetian and helping the Four Seasons Plaza property. I think we've got some we want to rethink and we've got some things happening, which we can't talk about in this call at SEC that will help its attractivity, both as there's a new attraction coming in there, in the future, as well as the bridge will come along. But the side of the street with the Parisian
Which bridge you take on?
The one that takes SEC to 4 seats.
Yes, that's a common thought about the bridge, right? It is the bridge to Hong Kong Zhuhai Macau Bridge.
Right. No, I meant the bridge, I'm sorry. Sheldon's The pedestrian overpass. Pit. Our connectivity bridge from the SEC to the 4 season that will help the SEC.
To the Parisian. Right, the Parisian. So I think in the end, the side of the street with the Parisian and the Venetian and the Four Seasons feels very good, not cannibalized. If anybody is vulnerable a bit, it could be the SEC. Most of our high end business stays there because the room product, it doesn't have the mass business we'd like to get over there.
And it's a disappointing quarter from my perspective, down $50,000,000 from Q3 and no way to hide that, disappointing margin. A little bit of whole percentage probably could have popped over 31%. But you're right, if anybody was affected, it may have been the mass customer who now finds his or her way to the Parisian.
Okay. That's really helpful. I have a question on margins, but just before we move to that, have you just remind us when that bridge, the connector opens?
The bridge won't open end of 2017. Yes, we have so many different things happening. There's a couple of other things happening at SEC, but the connector bridge was approved by the Board. It's in developed mode now. So Q4, Dan, Q4 2017?
We're talking about the pedestrian bridge, Felicia, not the Hong Kong Air Force. Yes, not
it's essentially a raised air conditioned sidewalk connecting the what we refer to as parcel 6, which is the Sheridan, the 4,000, 2 towers at 2,000 rooms each, 2,000 keys that connects to the Parisian. It will be the connection, it gives us a complete racetrack type connection. It's unprecedented anywhere in the world that there are 13,000 rooms connected without having to leave the building. You don't have to go outside to connect all those rooms of different price points. And all that retail 800 plus, 840 or 50 retail shops and the entertainment and the gaming and the restaurants.
So there's no place in the world like this. Once we get that bridge open, we've got to promote the heck out of it so that people will understand that it's a once in a lifetime kind of experience.
Rob, just not Robert, Felicia, I just we need government approval on that bridge. We don't expect it to be an issue, but we are waiting government approval before construction begins.
Okay. Thank you. Just moving on from that now. Just, I wanted to ask about the Parisian and the margins there, EBITDA margins and where you might expect margins to stabilize for the property or maybe looking at it another way, which property should be should the Parisian be most similar to in terms of OpEx per day?
That's a good question. The Venetian? Yes. Well, Shaul would say to Venetian, I would agree with him. I think the Parisian, by the way, let's be clear, a couple of things to think about.
So brand new property, just getting its sea legs. I mean we're spending more on advertising and more on promotion to get that thing off the ground. We're very proud of the money we're spending. We believe it will yield large term dividends. But short term, we're spending money there to make sure that property gets significant awareness.
We think we've been vindicated so far because this performance is pretty good for a starting property. 2, I mentioned earlier, we were thrilled about the premium mass demand, but all these customers don't want to stay the current we don't have enough accommodations for them. So we're going to accelerate some room growth and there's a larger room for some of these better premium mass who now would stay at SCC or Wynn or Galaxy or somewhere. 3, I think your margins should resemble The Venetian down the road with one exception. It will never have the retail portfolio.
We have a The Venetian, obviously, but I don't think it's acceptable to be a 27, 7, 28. To Harry's comment a couple of calls back, we on the junket side at the Parisian, we did play lucky at 4.2%. But the contribution is not that terrific from the junket side. The fact is that the Parisian looked like the Venetian, it would have picked up $20,000,000 actually $33,000,000 more in mass table win. The Parisian is going to be a machine of mass table play.
It just is. And as that margin will move, as that EBITDA will move, as that whole percentage drifts to a more normalized range. If this thing had picked up 3 or 4 points, it could have had $125,000,000 quarter, but it didn't. It just didn't play that lucky. We had a couple very exceptional beasts of bad luck, which is fine that will even out in time.
But once we get that thing fully ramped, I don't know if we'll ever get the retail contribution because again, the Venetian retail is much larger and much more impactful. But I think we and we'll never get the room rate I think The Venetian gets. But I do think on the gaming side, we should be able to achieve margins that resemble The Venetian and it should hold this weight. And I think the Paris has some great days ahead of it. Once we get the rooms right, get the bridge fully operational, pull out some of the advertising and opening costs.
This is a brand new building. It's just it's an infant and infants take a little more care and a little money to get them there. Denisha is an old girl. She's been around 10 years. She's made $10,000,000,000 She's not quite an infant.
And so when we get this thing in place, we have a wonderful racetrack of properties, as Sheldon has talked about it before, it's all integrated, it's powerful stuff. I think the Parisian is going to perform very, very well and you'll be pleased in the future with how it shows up in the margin line.
Thanks for that. It's very helpful. Appreciate it.
Good talking to you.
The next question is from Carlo Santarelli from Deutsche Bank.
Everyone, thanks and good afternoon. Sheldon, you talked a little bit about the potential for a 49% stake sale of the Singapore Mall. Any sense of kind of how you're thinking about proceeds from that in terms of repatriation of the cash and maybe what intentions would you would have with it should you were you to
be successful in that sale?
Well, not should we be successful on the sale, we will be successful. We haven't decided what we're going to do. We're waiting to see. There are more noises coming out of Korea now that Japan is talking about legalizing casino gaming. There are more noises coming out of Korea.
I'm not saying that it's going to prospect right now as Japan has shown itself, but it could happen. Korea could happen. So before we decide what we're going to do with the money, we want to see what the development opportunities are. We can always get money to build to develop properties. We have a very good relationship with the banks.
We just rewrote one of our bank loans for 25 basis points less and we didn't give them any more. We just thought we should have 25 basis points less. Our CFO came up with the ID, called the banks and they just dropped the rate. So I asked him why he didn't ask for 50 bps. 100.
And maybe even 100. But it's when I think back to the time when I was actually poor and it took everything I had to borrow $10,000 from a bank and when I look at MoneyNow, I look at all the banks we have in our portfolio and I see they're all willing to go to the max. We can get a number of banks each that will give us 400,000,000 dollars each. So we can get plenty of money, but we haven't decided what we're going to do with it yet.
Understood. Great. And then Rob, if I could, obviously, the hold issue or I should say the margin issue has been kind of talked about quite a bit on the call. One of the questions that I kind of have is, as you think about the promotional environment, it looks like your promos as a percentage mass gaming revenue in the period were up about 90 bps year over year. I'm assuming a lot of that relates to kind of the Parisian coming online, etcetera.
But could you maybe talk a little bit about what you're seeing in terms of promotional activity on the mass and what maybe some of the competitive response has been?
Yes, I was there last time.
By the way, I'm sorry, I just want to finish my answer to your question before. We're looking at potentially $3,000,000,000 to $3,500,000,000 On the sale. On the sale of 49%. That alone tells you it will be the most expensive mall ever sold in the world.
And Sheldon, when you say we're looking at, is that kind of where indications of interest have been or is that kind of what you're targeting as what you want for
the sale? And maybe they're 1 of the same.
I really would like to see started with a 4 handle. Okay. But I think that's unrealistic. I'm pretty sure that we'll end up in that range.
Okay.
That's what people are talking about. And as a matter of fact, I'm like Donald Trump. I think I've been a good negotiator. I might want to do a little better job than what the market wants to do for us.
Understood.
And then Rob, sorry,
if you could just I don't know if
you need me
to repeat, I'm happy to, but
Yes. No, Karl, I got it. No need. So your question is interesting. Having been doing this for too many years, I was in the Cal last month looking at that very issue with our team and visiting properties.
And one of the great things about our business is, the high roller business is always fraught with overspending and overpromotion and overincenting. It's just nature of the beast because when people lose that kind of money, the salespeople and management tend to gravitate and spend too much. It's just been a part of my world for 35 years. In Macau, that beast has gone away because it's become a mass premium mass market. There's not as much to give away, free rooms or the free bus ride, a comped meal.
I wish we can give away more rooms because when we give away a room, we make a lot more money and we sell a room. Unless you look at more aggressive comping of rooms and dropping theoretical rates as over comp, I don't. So if you're getting $1,000 a night and you drop it to 700 that's still a very good investment in your gaming floor and use your of your lodging capacity. I don't see it. I know people want to hear that there's over incenting and over promotional activities in Macao.
I just don't see it. I think we deal with some very, very smart people over there. They're patiently waiting. Are there more buses going to the ferry terminal and more people give out free flyers? Yes.
Are there more some maybe free rooms maybe, but I don't think overincenting is an issue. And to your comment about our margin, I think that margin gets cured very quickly when you normalize or you simply give yourself a higher end of the range. I don't want to make it sound like we underheld by some dramatic number, it wasn't. But the point is on $20,000,000,000 $20,000,000,000 think about that number, a few points means a lot of money. And so we can look very smart next quarter, we hold 22% instead of 19%, all of a sudden the margin will go up by 4% or 5%.
So I think that's the bigger issue. And so on a quarter by quarter basis, we examine these figures, look at margins with a very strong look. I think that will move depending on a little bit luck on whole percentage. I don't think it's going to be an issue of over incenting. I mean that over promoting, I mean that's true for our competitors as well as us.
I don't see McAllen market out of control.
And sorry, Rob. So do you think like the statistical hold percentage on the mass side in Macau is kind of 22% the midpoint of where you think that number should be theoretically?
Carlo, I don't have a good answer. I'll tell you what I said. We think it's in the range of 20% to 22%. And I think it'd be crazy to try to pin down an exact number. I think a range is more acceptable because there's always issues of false drop, there's issues of there's things you can't always take into account.
But I think in the range of 2022 is a reasonable range. But my point is, even though it may not be statistically important, you think about 19.2% versus 22.2%, 3 points on $1,000,000,000 on $10,000,000,000 on $100,000,000,000 the movement is significant. It could make these results skew dramatically in our favor or as this quarter, we look a little weak on the margin at 32.9 versus 36.5. But last quarter, we held 22.4% and we held this quarter 21.1%, 1.3% on $5,000,000,000 it causes some margin erosion. And so my point is not that we're looking to control it or give an exact number, but be aware that something is going to get more and more important.
We built something in Macao. What we put together is unique in 13,000 rooms and all those different hotels and all those retail and all that gaming ability. This weekend, I mean, the numbers are going to be off the chart huge. And so we could hold lucky and have an incredible weekend. We're missed by 5, 6 points and not.
It's not something we can control, not something I want to spend more time on, but it's a fact of our world that you can't ignore that massive number. It's much more important than a few points on the junket side.
Understood. Thanks, Rob.
Yes. Thank you.
We have reached the allotted time for the call and have time for one last question. The last question is from David Katz from Telsey Advisory Group.
Hi, good evening all. So two questions or one and one follow-up as for the rules. What we've observed and heard about and read about over the past 3 to 6 months are a couple of things, some increasing comfort on the part of junkets and VIP players with returning to Macau and second, some changes in the Chinese economy and commodity prices that have, I think, by all accounts, increased performance in our expectations over the past few months from where they would have been 3 to 6 months ago. That, I think, appears somewhat momentary, but I'd like your views and context around that and how sustainable you think the GGR trends that we've been seeing and hearing are, say, throughout the next couple of quarters or the remainder of the year and whatever context you can discuss it, please?
David, it's Rob. I think we're dead flat year on year on the junket volume. We're at 10.89 versus 10.0905. So I don't see us experience where I think we do experience it gratefully and thankfully is in the premium mass side and the mass market. That's where I think we're seeing the impact and the increase in play.
And the reason I'm grateful is it's much higher margin business and it's I believe much more sustainable than the junket model. I would be not being honest with you, if I told you I understand commodity prices impact that business or not. I do sense in China, I do sense in our business in Macao, a return to a little more confidence by the customer. Our sales people tell us that. We see more belief in what's happening in China, more comfort.
But for me to make a macro statement that's going to be across the economy, I can't do that. I can only tell we here in our sample size to keep in mind only 1% or 2% of all China business Macao. Our sample size though tells us that our premium mass customers feel better. They're spending more. The volumes indicate that and that's the bread and butter of Macau, not the junket business.
So we believe that's sustainable. Our model will be vindicated and will be the, I think, the big participant in the growth of those numbers in 2017 beyond. That's my take on that.
The clippings from Macau say that Apollo Martin Chen, the new head of the DRCJ or DCLJ, whatever it is, It's a Portuguese it's an acronym for the Portuguese name of what we call the Gaming Control Board. He said that there is only going to be about 120 or just a couple more junket license is given out. When I think of how many there were in 2014 before the drop back in the business. There were 250, 270 junkets licensed. Now there's only going to be 120.
So there's a big difference and when you're talking VIP versus mass and premium mass, you're talking like a when is the VIP house, wear a mask in a junk in a premium mask house. We do have some of the VIP market, But to us, it's not as important. It's only a single digit percentage of our total EBITDA.
Understood. And if I can just follow that up and ask about capital allocation. Your position on dividends has always been clear. But as we look forward, if you could talk about CapEx that you may be thinking about for the future share repurchases and how you're thinking about that as well as your well understood dividend policy that would help, please?
Sure. Hi, it's Patrick. How are you?
Very well. Thanks. How are you? Good. So if you look
on Page 32 of the earnings presentation that we posted to the website, you can see that there's a tail off in our CapEx as our development projects complete over the next 2 years. So the key thing is that as we continue to grow EBITDA and grow cash flow from the operating assets that we have, we'll also have a reduced CapEx burden that will hopefully even out to be approximately $500,000,000 of maintenance CapEx per year. So our cash flow profile will change materially from where we are today assuming that we're able to achieve this. So the key thing here is, while we've said is that dividend is the cornerstone of our return of capital policy and you can see the Board and the Chairman's commitment to increasing the dividend over time as our cash flows grow, will also be an opportunity for us to return cash through share repurchases as these cash flows materialize. The other thing is hopefully we'll have in Korea or another new growth high growth jurisdiction, we'll be able to deploy this capital and get a very high investment return.
So we feel like we have the financial flexibility with our balance sheet to be able to return capital in the near term. As our CapEx tails off, we'll be able to increase that return on capital. And hopefully, we'll have an opportunity in new jurisdictions to really grow shareholder returns by investing in new MySpace integrated resorts. That's kind of the blueprint. It's what the Board talks about every meeting.
And hopefully as time progresses, we'll have an opportunity to make those investments and grow and create shareholder value.
Appreciate it. Thanks very much and thanks for taking my questions.
You're welcome.
This concludes today's conference call.