Welcome to the Las Vegas Sands fourth 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, Robert 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 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&A portion of the call.
Finally, for those who would like to participate in the Q&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 $1.12 billion, an increase of 6% over the prior year. Fully diluted earnings per share increased by 8% over the prior year to $0.64 per share. During the quarter, our Macao operations achieved strong mass gaming revenue growth and delivered $610 million of adjusted property EBITDA, including a solid first full quarter EBITDA at $95 million at The Parisian Macao. 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 the horizon. As I look back at 2016, the year began with still declining market revenues in Macao 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 Macao.
The Parisian not only helped us drive double-digit revenue growth in quarter four, 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 fourth 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 Macao, and in June, our mass gaming revenues saw positive year-on-year growth for the first time in two 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 three, and further accelerated to growth of 16% in quarter four, driven by the first full quarter of The Parisian. Our marketing efforts continue to pay dividends. Our Parisian Macao social media program has now exceeded 2 billion impressions.
This awareness has translated into strong property visitation. Based on our customer surveys at the various points of entry in Macao since Parisian opened, the most visited casino resort in Macao remains The Venetian, but in second 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 in four interconnected resorts, over 840 stores across four shopping malls, 2 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 allows 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.
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. 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 fourth 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 Macao for the quarter. For quarter four, adjusted EBITDA for our Macao operations was $610 million, 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 fourth quarter and impact the year-over-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 million of incremental cost savings in 2016, and have realized more than $310 million of annual cost savings since quarter one 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, excuse me, increased patronage with hotel accommodations, shopping malls, and entertainment events.
One item to note for the fourth quarter, 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 million and $20 million. During the quarter, hotel occupancy across our portfolios increased by almost four percentage points against the prior year to 89%, despite significant growth in both our own inventory and the inventory in the Macau market. This, again, highlights our advantage during peak periods with a 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 will 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 Macao generated $95 million in adjusted EBITDA in its first full quarter of operations. Mass table and slot revenue per day at The Parisian was $2.2 million, 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 mass-based integrated resort complex of this scale in the world. The completion of the bridge between The Four Seasons and The Parisian in 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 Macau, our retail sales at The Four Seasons retail mall grew by 6% in quarter four.
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, providing meaningful career development opportunities for its 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 a solid quarter at Marina Bay Sands with EBITDA of $366 million. 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 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. 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 Cotai Strip in Macau was further realized with the completion of The Parisian.
The new property enjoyed a strong opening against a 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're 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.
At this time, I'd like to inform everyone, in order to ask a question, press star one on your telephone keypad. To withdraw your question, press the pound key. We will pause for a few moments to compile the Q&A roster. 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. As we start to look at 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. I was kind of curious, as Parisian's 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?
Shaun, it's Rob. How you doing? Are you referencing all the portfolio or just The Parisian? Is your question about The Parisian's future or the whole portfolio?
It's really the whole portfolio, Rob. If I quick back of 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 Parisian.
Right. Let's put Macau in context. Q2 of 2016, we did less than $500 million in EBITDA, yet in Q3 and Q4 cumulatively, we did $1.240 billion of EBITDA. We successfully absorbed the Wynn Palace opening and The Parisian opening. Of course, The Parisian did over $115 million of EBITDA for Q4 plus the 17 days it opened in Q3. Inside of six months, our run rate has improved to roughly based on Q3 and Q4 to about a $2.5 billion annual EBITDA run rate. The big difference between Q3 and Q4 from my perspective is the hold percentage on the mass table side. It's staggering, these numbers, but we're talking about $5 billion this quarter of table drop. If you adjust the 1.3% miss Qo Q, we were up 1.3% in Q3 or Q4. It's about $60-some million of top-line revenue.
I know it's not statistically important, because in the long run, when you're dropping $20 billion, we'll get to the right number. We held less in Q4 than Q3. Adjusted, we're seeing that number pop by about $60 million-$63 million. 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 have held incredibly poorly there. Unfortunately, Sheldon referenced in his opening remarks, we actually held about 18% on a volume that was about $900 million. That's disappointing. The Parisian should have added another $15 million-$20 million to its numbers. It didn't. That also holds true at the SCC, did about 19%, and the same with The Plaza. 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. In a market that's clearly about scale and capacity, we have the lodging, the retail, and gaming capacity to service the demand. That's especially true, we believe, on high volume weekends and holidays like the one we're going to have next week. This is the future of Macau, and we are at the epicenter of that future and that growth. We're 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 Macau. We've come a long way in the last six months from I think it was a very, not scary, but concerning time in Q2. We feel a place of strength here in January.
A lot of confidence in the future and a lot of confidence in the revenue growth.
Rob, maybe just as a quick follow-up, 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 first few weeks after the Parisian opening?
There's always going to be in a market that's experienced this massive junket drop, what, 70%, and it's just recurring to a little healthiness. There is going to be some occasional signs of promotion. Again, in a mass market, it is difficult to overspend unless you're just being silly about it. Can you provide a few more meals or a few rooms? Yeah. A lot different than a high roller environment where the comp excesses can be excessive. Do I think there's a few things here and there? Yes. Do I see in our portfolio or in others, indications of massive over-incenting, over-promotion? I do not. 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 650 or 675 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 Grethe from J.P. Morgan.
Good afternoon, everybody. Rob, just a question on the Parisian ramp throughout the fourth quarter. Would you say, adjusted for the high VIP hold and adjusted for the low win and premium mass, would you characterize the property's ramp as pretty consistent or accelerating throughout the quarter, or was it more even, or did it decelerate through the quarter? If it was the latter, to what would you attribute that?
I think first you have to recognize, I'll reiterate what I said earlier, that is that when you drop $900 million and hold only 18%, you kind of say to yourself, you lost $25, $30 million right there, and that's not a pie in the sky number. Our historical hold is in the 21, 22 range. I right away say, okay, give yourself a $25 to $30 million 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 segment isn't the key segment. It's dwarfed by the importance of the contribution from the mass. It's much more important. I think that it was a steady ramp. I think the Parisian has a couple 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 you can't refute the fact that we should pick up three points there over the course of a year, and we will. Three, I think the Parisian's going to keep ramping because as Sheldon Adelson referenced, 2 billion people have now gone online and looked at the Parisian somehow, some way. 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 positioned it more as a mass property. We're rethinking the room mix. We're adding some more suite product. It won't kick in till late in 2017. But my point is, we're just so pleased with the results thus far. It's a $400-plus million run rate.
It should do a lot better once it beats a few more customers. We had some people play lucky and good for them. One particular customer, 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 was pretty steady throughout. The Parisian is an unqualified winner. Any plan to get $100 million roughly at the open like we did the first quarter and some change, that's an impressive start, but there's better days ahead for the Parisian. I think the connectivity between Four Seasons, Venetian, and someday we'll get the other bridge across the way to SCC.
That's going to make that racetrack, again, give us a very exciting set of assets, all integrated, working together, 13,000 sleeping rooms, 800 stores. The Parisian's got some great legs ahead of it.
Thank you, Rob. 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 soliciting levels of third-party interest, if you can give us some sort of update? Thank you.
We're 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. We anticipate almost an unprecedented price to sell 49% of it. We're preparing, but we can't sell it till March anyway. We want to give enough time to the prospective buyers to do their due diligence. From what we're told by a lot of people, it is the best trophy mall there is in the world. 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, according to the press release, in Macau, you did play lucky overall by about $44 million. You must have held reasonably well elsewhere. 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.
Yeah, sure, Harry. It's Rob. Put in perspective, our business, less than 10% emanates from the junket segment that we reference in the luck factor. It may have thrown off a few more. I'm looking at it 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 ought to rethink that.
To put it in perspective for you, if we drop $20 billion this year, which we think we'll do more than that, and you think of a range of 2022, two points could be $400 million. At the margins, probably a couple hundred million dollars EBITDA. Obviously, very impactful. In the past, the market's always looked at normalization of the high roller, the junket business, when in fact, in this market today, for especially our portfolio, it's not all that relevant. While you're absolutely correct, we play lucky for a few million dollars, the truth is the junket business just isn't that impactful relative to the mass business. The mass business, the miss was $60, $70 million. Depends on what number you use, whether you use 2%, 3%. It kind of negates it and adds some more volume.
I'm not pretending that we didn't play lucky in the junket. We did. 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 in the end, the volatility in this mass segment is always going to be trumped in the end, it works out just fine because the volume is so staggering, it'll overcome the volatility. Quarter by quarter, my point is, a miss like this, we could have easily had a $50 million increase here, $60 million increase, had 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 perhaps minimalized based on the overall contribution to the EBITDA mix.
I guess where I'm still a little bit confused. When you guys report 566 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 those numbers reflect that. I think The Parisian held a bit lucky in the junket, but it was dwarfed by the $25 million, $30 million it could've gotten off the mass tables.
Okay.
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, hotels, et cetera. Nowhere I can think of is there $20 billion of table drop, mass table in any jurisdiction.
Okay.
Again, to my point earlier, couple, three points either way, $400 million, it's impactful.
Okay, that's interesting. Sheldon, if you could take a minute and describe what you believe will be the process from here in Japan and your thoughts on timing and your possible potential ownership interest there.
Potential ownership interest?
Right.
Partners. We had somebody in Japan this past week who just came back yesterday or the beginning of the week. The feeling about the partners is not very strong. They say that it's 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 one year to submit an implementation law that will determine the who, what, why, when, where, and how of how they're going to establish the integrated resort with casino bill. 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 three weeks to give a talk at an event there in the third week in February. 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. I think it's going to be modeled after our property, the Marina Bay Sands in Singapore. I'm optimistic, and people tell us we're in the pole position in terms of getting the concessions. Some people say it could be the new bill that has to be done within a year, could be less than a year. It could be the whole year. 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. Yeah, I wonder if you could give a little bit of color. There have been some comments that work permits for your management team in Macao that are not Macao residents aren't going to be renewed. I wonder if you could talk a little bit about how that Was that expected by you, and would that affect anything that's in place now?
Robin, I'm not sure what you're referencing. I'm a little taken aback. What have you read that we didn't read? Permits are nothing new.
Oh, it was a comment that there's a goal to target a certain % of Macao management to be.
85.
That originally this was a 2020 goal, the comment in the papers in the last day was that they'd maybe like to see that this year instead of 2020.
I'm not comfortable referencing what you're saying, 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, I think most of our people at the management level, the people I deal with every day, the 100 or so people in the management side are all holders of the proper identification. I don't think we have an issue with it all you're referencing.
I read it last night in the clippings.
Yeah.
They're proposing that by 2020.
About where they're today
At some point in the future, there'll be 85% of the senior management should be Macanese.
Well, it was a 2020 suggestion that they might want to see this year was what the media was suggesting.
Yeah, I think we'd be very confident. You'd have to look at it right now, as far as I'm concerned.
We're already in the low-
Our team, I look on the table there, I think we're there. I don't think we have any issues because we've been doing this the last two years. We're big believers in that approach and support the government's agenda. We'd like to have all Macanese people in blue card holders , I don't think we have an issue today, but by 2020, I'm sure we'll have an issue. I don't think it's relevant to us.
Okay, great. Thank you.
Okay.
The next question is from Felicia Hendrix from Barclays.
Hi, good afternoon. 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. We talked a lot about holds, so maybe it makes that noisy, or maybe it's because the connector's not up yet. I was just wondering if I could hear your take on that. Thanks.
It's interesting. I think beginning with, let's start with the fact that the new properties, obviously, you know Galaxy, Studio City, Wynn Palace, you're talking about 4,500 hotel rooms and 600 new gaming tables in the last year and a half. Obviously, we're looking at a huge increase in capacity, both lodging and gaming. You add The Parisian, and of course, the SCC, the St. Regis, with another 3,400 rooms, another 125 tables now. Huge increases. As it relates to Venetian, having just been there, I don't know how much more we can do with the Venetian. It continues to be a billion-plus dollar 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 Four Seasons. 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 in Macau. As far as appeal and people wanting to go there, it just continues to amaze me how powerful it is after a decade of operation. The SCC is a different story.
SCC, I think, is the polar opposite of The Parisian, meaning that the SCC, it did have a very tough quarter in terms of hold. It held on the mass 19.1 on a base of $1.4 billion. That didn't help. It clearly left behind significant dollars there. Based on a 2% or 3% move, it could have been $20 million, $30 million more. Having said that, I think the weakness in SCC might come from the fact The Parisian's so damn attractive that the mass customer just gravitates to The Parisian. It's a fact of life. On the flip side, the customer who wants to sleep in a better facility might go back to the SCC after he sees The Parisian or the Venetian. It doesn't have the connectivity. If anybody would tell me that if one property gets sort of bit, I'd have to point to the SCC.
I think The Parisian has been helping The Venetian and helping the Four Seasons Plaza property. I think we want to rethink, and we've got some things happening, which we can't talk about in this call, at SCC 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. The side of the street with The Parisian-
Which bridge are you talking about?
The one that takes SCC to Four Seasons.
Yeah, that's the common thought about the bridge, right? Is the bridge, the Hong Kong-Zhuhai-Macau Bridge.
Right. No, I meant the bridge. I'm sorry. Sheldon's correct.
The pedestrian overpass.
Yeah, our connectivity bridge from the SCC to the Four Seasons that'll help the SCC.
To the Parisian.
Right, the Parisian. 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's vulnerable a bit, it could be the SCC. Most of our high-end business stays there because of the room product. It doesn't have the mass business we'd like to get over there. It had a disappointing quarter from my perspective, down $50 million from Q3. No way to hide that disappointing margin. A little bit of hold percentage probably could have popped it over 31%. 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, just before we move to that, just remind us when that bridge, the connector, opens.
The bridge won't open-
End of the year
end of 2017? Yeah, we have so many different things happening. There's a couple other things happening at SCC, but the connector bridge was approved by the board. It's in development mode now. Q4, Dan? Q4 2017?
We're talking about the pedestrian bridge, Felicia.
Yes.
Not the one from Hong Kong Airport.
No, not that.
End of the year.
It's essentially a raised air-conditioned sidewalk connecting the, what we refer to as parcel six, which is the Sheraton, two towers at 2,000 rooms each, 2,000 keys, that connects to The Parisian. 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. 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.
Felicia, we need government approval on that bridge. We don't expect it to be an issue, but we are awaiting government approval before construction begins.
Okay, thank you. Just moving on from that now. 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 The Parisian be most similar to in terms of OpEx per day?
That is a good question.
The Venetian.
Yeah. Well, Sheldon would say The Venetian, I would agree with him. I think The Parisian, by the way, let us be clear, a couple things to think about. Brand new property, just getting its sea legs. We are spending more on advertising and more on promotion to get that thing off the ground. We are very proud of the money we are spending. We believe it will yield long-term dividends, but short-term, we are spending money there to make sure that property gets significant awareness. We think we have been vindicated so far because its performance is pretty good for a starting property. Two, I mentioned earlier, we are thrilled about the premium mass demand, but a lot of these customers do not want to stay in the current we do not have enough accommodations for them.
We are going to accelerate some room growth, and there is larger rooms for some of these better premium mass who now would stay at SCC or Wynn or Galaxy or somewhere. Three, I think your margins should resemble The Venetian down the road, with one exception. It will never have the retail portfolio we have at The Venetian, obviously, but I do not think it is acceptable to be at 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, had The Parisian looked like The Venetian, it would have picked up actually $33 million more in mass table win. The Parisian is going to be a machine of mass table play. It just is.
As that margin will move, as that EBITDA will move, as that hold percentage drifts to a more normalized range. If this thing had picked up three or four points, it could have had a $125 million 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'll even out in time. 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. We'll never get the room rate I think The Venetian gets. I do think from the gaming side, we should be able to achieve margins that resemble The Venetian, and it should hold its weight.
I think The Parisian 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 an infant, and infants take a little more care and a little more money to get them there. The Venetian is an old girl. She's been around 10 years. She's made $10 billion. She's not quite an infant. 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 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 you would have with it, were you to be successful in that sale?
Well, not should we be successful on the sale, we will be successful on the sale. 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 got a prospect right now as Japan has shown itself, but it could happen. Korea could happen. Before we decide what we're going to do with the money, we'll 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 idea, he called the banks, and they just dropped the rate. I asked him why he didn't ask for 50 basis.
100.
Maybe even 100. 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. When I look at money now, 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 million each. We can get plenty of money, but we haven't decided what we're going to do with it yet.
Understood, great. Then Rob, if I could, obviously, the hold issue, or I should say the margin issue, has been talked about quite a bit on the call. One of the questions that I have is, as you think about the promotional environment, it looks like your promos as a percentage of mass gaming revenue in the period were up about 90 basis points year-over-year. I'm assuming a lot of that relates to The Parisian coming online, et cetera. 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?
Yeah, I was there.
I'm sorry, I just want to finish.
No, sure.
My answer to your question before. We're looking at potentially $3 billion-$3.5 billion after the.
On the sale.
On the sale.
Yeah.
Of 49%. That alone tells you it will be the most expensive mall ever sold in the world.
Sheldon, when you say we are looking at, is that where indications of interest have been, or is that what you are targeting as what you want for the sale? Maybe they are one and the same.
No, I really would like to see started with a four handle.
Okay.
However, I think that's unrealistic. I'm pretty sure that we'll end up in that range.
Okay.
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 American wants to do for us.
Understood. Rob, sorry, if you could just I don't know, if you need me to repeat, I'm happy to.
Yeah, no, Carlo, I got it. No need. Your question is interesting. Having been doing this for too many years, I was in Macau 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 over-incenting. It's just the 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 premium mass market. There's not as much to give away. Free rooms, what, a free bus ride, a comped meal.
I wish we could give away more rooms because when we give away a room, we make a lot more money when we sell a room. Unless you look at more aggressive comping of rooms and dropping theoretical rates as an over comp. I don't. 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 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 Macau. I just don't see it. I think we deal with some very smart people over there. They're patiently waiting. Are there more buses going to the ferry terminal? Are there more people giving out free flyers? Yeah. Are there more maybe free rooms? Maybe. I don't think over-incenting is the issue.
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. The point is, on $20 billion, think about that number. A few points means a lot of money. 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%. I think that's the bigger issue. On a quarter-by-quarter basis, when you examine these figures and look at margins with a very strong look, I think that'll move depending on a little bit of luck on the whole percentage.
I don't think there's going to be an issue of over-incenting or overpromoting, I mean that's true for our competitors as well as us. I don't see Macau as a market out of control.
Sorry, Rob, do you think 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?
You know, Carlo, I don't have a good answer. I'll tell you why. 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. I think in the range of 20, 22 is a reasonable range. My point is, even though it may not be statistically important, when you think about 19.2% versus 22.2%, three points on a $1 billion, on $10 billion, on $100 billion, the movement is significant. It could make these results skew dramatically in our favor. Whereas this quarter, we look a little weak on the margin at 32.9% versus 36.5%. Last quarter, we held 22.4%, and we held this quarter 21.1%.
1.3% on $5 billion, it causes some margin erosion. My point is not that we're looking to control it or give an exact number, but be aware that something's going more and more important. We built something in Macau. 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. We could hold lucky and have an incredible weekend or miss by five, six 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.
Yep. 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.
Hi, David.
Two questions, or one and one follow-up, as per the rules. What we've observed and heard about and read about over the past three to six months are a couple of things. Some increasing comfort on the part of junkets and VIP players with returning to Macao. 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've been three to six 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 in whatever context you can discuss it, please.
Well, David, it's Rob. I think we're dead flat year-on-year on the junket volume. We're at 10.89 versus 10.905. 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. 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 Macau, a return to a little more confidence by the customer. Our salespeople tell us that. We see more belief in what's happening in China, more comfort.
For me to make a macro statement that's going to be across the economy, I can't do that. I can only tell you we here in our sample size to keep in mind, only 1% or 2% of all China business in Macau. 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. We believe if that's sustainable, our model will be vindicated and will be, I think, a big participant in the growth of those numbers in 2017 and beyond. That's my take on that. The clippings from Macau say that Paulo Martins Chan , the new head of the DICJ or DICJ, whatever it is. It's a Portuguese acronym. 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 licenses 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. There's a big difference in when you're talking VIP versus the mass and premium mass. You're talking like a Wynn is a VIP house. We're a mass and a junket and a premium mass 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. 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. 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 two years. 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 million of maintenance CapEx per year. Our cash flow profile will change materially from where we are today, assuming that we're able to achieve this.
The key thing here is, while we've said is that dividend is a cornerstone of our return on capital policy, and you can see the board and the Chairman's commitment to increasing the dividend over time as our cash flows grow, it'll 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 an opportunity in Japan or an opportunity in Korea or another new growth, high-growth jurisdiction, we'll be able to deploy this capital and get a very high investment return. 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 of capital, and hopefully, we'll have an opportunity in new jurisdictions to really grow shareholder returns by investing in new MICE-based integrated resorts. That's kind of the blueprint. That's what the board talks about every meeting. 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.