Earnings Call: Q3 2015

Oct 21, 2015

Good afternoon. My name is Sylvia. I will be your conference operator today. At this time, I would like to welcome everyone to the Las Vegas Sands 2015 third quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Dan Briggs, you may begin your conference. Thank you, Sylvia. 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 the federal securities laws. The company's actual results could differ materially from the anticipated results in those forward-looking statements. Please see today's press release under the caption forward-looking statements for a discussion of risks that may affect our results. A definition and a reconciliation of each of these measures to the most comparable GAAP financial measures are included in the press release. Please note that this presentation is being recorded. 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. With that, let me please introduce our Chairman, Sheldon Adelson. Thank you, Dan. Good afternoon, everyone. Thank you for joining us today. I'm pleased we continued to execute our strategic objectives during the quarter. Despite the continuing challenges in Macao market, we delivered a strong set of financial results with company-wide whole normalized adjusted property EBITDA reaching $1.09 billion, an increase of 7% over the prior quarter. At the same time, we continued to return excess capital to shareholders. It has always been clear to me that our unique, MICE-based, integrated resort business model positively differentiates us from our competitors in terms of both financial performance and economic contribution to our host jurisdictions. In Macao, our whole normalized EBITDA was up quarter-on-quarter, with continued sequential improvement in our operating margin. In Singapore, Marina Bay Sands delivered yet another record quarter in mass gaming win per day when measured in SGD as well as a 20% sequential increase in rolling volumes. On a constant currency basis, Marina Bay Sands' whole normalized EBITDA was up 22.4%. At the heart of our company's success is having the right strategy at the outset. We had the courage of our convictions to build early and aggressively. We developed critical mass through scale and diversification. We offer product and amenities that are best positioned to capture long-term tourism and consumption growth in Asia. We're unique in the scale and diversity of our portfolio. We are focused on the most stable and profitable segment, the mass market. We're clearly differentiated by the strength of our cash flow and balance sheet. We're then further distinguished versus the competition by our track record as well as the pioneer of the MICE-based integrated resort business model. That balance sheet strength at only 1.6 times net debt to EBITDA allows us to stay fully committed to our development plans as well as our commitments to returning capital to shareholders. Again, this is unique in our industry. Our retail mall portfolio, which features the industry's broadest and deepest set of retail offerings in both Macao and Singapore, is also unique. I'm pleased to highlight that our retail mall revenues have held up well in today's retail market, which is softer, in particular at the higher end. Also, we have the ability to monetize our retail mall portfolio in the future. In Macao, our share of EBITDA in the six-operator market has continued to increase to around 36% in the first six months of 2015, up from 34% in 2014. In fact, in quarter two, our EBITDA share climbed to 39%. In Singapore, our share of EBITDA of the duopoly market has increased to 65% in the first six months of 2015, up from 59% in 2014. That's notwithstanding the fact that projections of the Singapore market have been premature and exaggerated. Our operations represent a substantial portion of the EBITDA generated in all of Asia for the industry. This is truly unprecedented. Now let me take you through some of the operating highlights of our results in Macao for the quarter. For quarter three on a whole normalized basis, Sands China EBITDA was $537 million, up 1% over the prior quarter. While we consider EBITDA share the most important metric reflecting market performance, we also held the number one spot in revenue share in the quarter with 23.6% of the Macau market's gaming revenue. In the mass segment, we do see signs of stabilization. We continued to benefit from the scale of our hotel room inventory, the diversity of our product offering, and the attraction of The Venetian as Macau's must-see destination. I want to remind you, because we haven't talked about this before, that the casino at The Venetian Macao is less than 4% of the total amount of space in The Venetian Macao. We sometimes get asked whether our capacity advantage is diminished, given the recent market revenue decline. I believe the opposite is the case. 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 the revenue and future profit growth. Our capacity advantage will in fact be further amplified. I believe The Venetian Macao, which is a must-see attraction for everybody coming to Macau, will be matched by The Parisian because it's got a geographical theme that people really want to see. Look at our market share revenue in the peak revenue periods. 26.5% in May with the Labor Day holidays, 25.3% in August, the peak summer month, and in October, around 25% again for National Day Golden Week. Our hotel occupancy in the July and August summer months was 89%, five percentage points higher than that of the whole Macau market. In VIP gaming, despite the continued weakening of the junket segment during the quarter, our premium direct business yet again delivered a solid quarter. Our premium direct rolling volumes were up 1% quarter-over-quarter versus the 17% decline in the overall market junket segment. With respect to cost efficiencies, we are well on track to achieving more than $200 million of savings in 2015. Whole normalized EBITDA margin in Macau improved sequentially to over 33%, primarily reflecting cost efficiencies. I'm pleased that since Q1, we have been able to sustain higher levels of market share while controlling costs and increasing labor productivity. Rob can elaborate further at the discussion later. With the completion of The St. Regis and The Parisian, we will have almost 13,000 hotel rooms in four interconnected resorts. Over 840 retail stores across four shopping malls, with the potential to add several hundred more stores in future development phases, subject to government approval. 2 million sq ft of meeting and exhibition space and four performance and event venues, including our The Venetian Cotai Arena, which can be utilized either for our MICE business or major entertainment events. We remain fully committed to playing the pioneering role in Macau's transformation into Asia's leading business convention and leisure tourism destination. We have steadfast confidence in our future success. Our track record in being transformative pioneers in MICE, retail, and entertainment speak for itself. Now moving on to Marina Bay Sands in Singapore. We delivered another strong quarter at Marina Bay Sands, which despite the impact of the stronger U.S. dollar, generated whole normalized EBITDA of $411 million, up 12% from the year-ago quarter. As I mentioned earlier, on a constant currency basis, our whole normalized EBITDA increased over 22%. Both rolling and non-rolling segments performed well. Mass win per day was $4.8 million. When adjusted for the currency effect, our mass win per day was up by 8%. That strong performance was principally driven by the successful execution of our strategy to bring premium mass customers from throughout Asia to Singapore. As a result, we delivered another all-time quarterly record in mass win per day in Singapore dollars. In the rolling segment, we enjoyed the best rolling volumes in any quarter since Q1 2014. On a constant currency basis, rolling volumes were up 36% year-on-year and up 20% quarter-on-quarter. In addition, we have maintained a prudent accounts receivable reserve ratio during the quarter. Our company remains committed to leading the industry in compliance. Now on to my favorite subject, the return of capital to shareholders. I'm extremely pleased to announce that the Las Vegas Sands Board of Directors has approved an increase in our recurring dividend program for the 2016 calendar year. The 2016 calendar Las Vegas Sands dividend will be $2.88 for the year, or $0.72 per quarter. This represents a 10.8% increase over the $2.60 dividend we're paying in 2015. We remain committed to the maintenance of our recurring dividend programs at both Las Vegas Sands and Sands China. 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 these recurring dividend programs while retaining financial resources to invest for future growth and pursue new development opportunities. Yay, dividends, and yay, buybacks. We brought back $80 million of stock in the most recent quarter. We have approximately $1.6 billion USD remaining under our current stock buyback authorization. We look forward to continuing to utilize the stock buyback program to return excess capital to shareholders and to enhance long-term shareholder returns. I would also like to take the opportunity to welcome Mr. Wilfred Wong, who will join us on November 1st as President and Chief Operating Officer of Sands China Limited. Wilfred brings a distinguished track record in both the public and private sectors to Sands China. We are pleased to be able to continue 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, and reaching its full potential as Asia's leading business and leisure tourism destination. Finally, let me share that I'm extremely pleased about the depth and strength of our management team, not only at Sands China, but in Singapore, Las Vegas, and at Bethlehem, Pennsylvania. The strength of our team is clearly reflected in our ability to stay disciplined and continue executing our strategy in challenging markets. I want to thank you again for joining us on the call today. Let's engage in Q&A. At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Joe Greff. Your line is open. Good afternoon, everybody. Hi, Sheldon. Hi, Rob. Hi, Joe. I will start with a question on Singapore. I thought Macau was just down the middle of the fairway. Singapore, I thought that's where the biggest positive variance was relative to our expectations and forecasts, both on the mass side and also on the VIP side. You talked about it a little bit, Sheldon, but Rob, maybe you can drill down a little bit what factors are driving, at least relative to our expectations, the better performance there. What are you doing differently or better in the past? Different sourcing geographically. That would be helpful to understand. Thank you. Sure, Joe. The MBS story remains outstanding. I think the quarter reflects our dedication to all our business segments. The lodging piece held up very well, both ADR and occupancy. The retail piece actually grew year-over-year, which is exciting in these difficult times out of China. Our gaming business remains exemplary. I would caution you again, the VIP get a lot of attention, but again, it's highly concentrated. We did a very good quarter relative to the last six quarters. The real star of the show, I think, in Singapore remains our non-rolling table slot ETG performance, 63% margins, $4.8 million a day. To your point of regionalization, I think we benefit by being in a place that has Malaysia, Indonesia, Korea, Japan as neighborhoods. We're very pleased with the team over there. Couldn't be more pleased, in fact. I see our growth getting better and better. Our magic number is still $5 million a day, haven't hit it yet. Currency adjusted, we're there, actually. Despite the foreign exchange headwinds, despite the problems in China, we have an annualized run rate of about $1 billion, 150 coming out of slots and ETGs. It's a great business. It's not credit dependent. It's not China dependent. As Sheldon referenced, we dominate in that market in terms of ETG, EBITDA split, which is very encouraged by the business. We see the trends getting more solid for us. A lot of skepticism around Singapore, but it's not China dependent. It's not high roller dependent. It's very sustainable, and we're very proud of the results, and the team over there has really executed where we want to be. Very pleased with it and hope we can keep that momentum going into the fourth quarter. I think the discouragement or the pessimism about Singapore is based upon how our competitor in Singapore is doing. Can you imagine we're doing double the amount of business? It's 2 to 1 that they're doing. We own 65% of the market. I attribute that to not only our location, quality of the product Is that Genting has never operated in a competitive market. We have never operated in anything but a competitive market. We understand how to compete a lot stronger than our competitor knows how to compete. I think the fact that they're not doing as good as we are, we're doing twice as good as they are. You want to hold us in tandem with what they're doing, and I think that's why I wanted to emphasize the word differentiated from the rest of the market in Asia. I do think, Joe, that building is exemplary. Where it's at physically, how it looks architecturally, the food and beverage, the retail, it's pretty iconic. We're just very proud of it, and I think it's going to continue to do very well in the future. All good signs coming out of Singapore. Great, thank you. For my follow-up question, again, not Macau related, but looking over the Las Vegas Strip, good RevPAR growth performance in the three Q. Yeah. What segments drove that, and how sustainable are mid to high single-digit RevPAR gains going forward? That's really it for me. Thank you. We're proud to say it's our best quarter in Las Vegas since the difficulties of 2007. Eight is a real strong quarter from any perspective. The star here is the lodging piece. We did 222 in ADR, 96%. It's a record quarter for us on a normalized basis at plus $100 million in EBITDA. The gaming piece held up pretty well. Again, the star here is going to be the lodging segment, which is getting stronger. We see support from all the group segment, FIT. Very encouraged by Las Vegas right now because of our lodging business. Gaming continues to be very competitive. Slots did okay, nothing spectacular. Our table drops are affected somewhat by the downturn in the international play. Overall, our drop is $600-plus million, a strong third quarter. Just very encouraged by what we see in Las Vegas from our perspective. It's not been, the last couple of years, as strong for us. We're seeing a return to a better time. I think the group business has been exemplary in helping drive some of that compression of rate. Very excited about RevPAR and overall lodging trends for our properties here in Las Vegas. Thank you. Your next question comes from the line of Felicia Hendrix from Barclays. Your line is open. Hi, good afternoon. Thanks. Rob, in the prepared remarks, Sheldon put you on the spot and said that you might talk about your continued ability to cut costs. I was wondering if you could do that and just how we should think about the ability for you guys to continue offsetting the negative operating leverage as the operating environment continues to stay challenging. Well, obviously, we've proven we can operate in what is a very difficult environment in Macau right now. The VIP erosion and the continuing softness in the mass. We're down year to date about $170 million year-over-year. Our goal is to get to $230 million-$240 million annualized. The cuts come from everywhere. It comes from about 30% derives from payroll, about 25% from gaming reinvestment OpEx, about 25% from non-gaming OpEx, about 20% from marketing entertainment. I think we can operate, Felicia, in this environment. We've proven we can do it, this year has been difficult, as you well know, and it continues to be harsh in Macau. We can operate and keep doing this, and we're confident there's more to be done there. As you know, at some point, you cut into muscle and not just fat, and that's my concern, is how much further we can go. The 900-pound gorilla in the room is the return to growth in the mass market. Our buildings are built for the mass market. They're large room capacity, large gaming capacity, large retail capacity. They're built for mass markets. We're built for today's Macau market. Frankly, we're not as strong high-end. We've never been as strong. What Sheldon always prophesized, unfortunately, came true. There'll be a downturn at some point in every market. We build better rooms, better retail, diversified product. I'm hoping as the mass market gets stronger, the cost-cutting will be minimized. If 2016 continues like it appears to be going, we're prepared to play in that arena. We are cost-cutting across the board. It's not always easy for the team there. I think they've done a very good job of doing it. It can continue, and we can go deeper and harder. Again, it's derived from all parts of our business. It doesn't rely on any one segment. Unfortunately, that's where we're at. We still think we can make a lot of money in Macau. It'd be a lot more fun and exciting if we could see a return to some growth in the mass and premium mass segments. That's our Macau situation for today. That's good. Also a good segue into my next question, my follow-up question, which is on. Sure the mass customer. Just looking at the statistics, obviously, the base mass win per table continues to decline. It's at a slower rate. Sheldon mentioned that it's stabilizing. Rob, as we think about the competition that's coming online and the continued pressures that the customer is seeing from the market, from the government, where do you see the base mass statistics settling out? Can you describe the type of base mass customer that you're seeing today versus a year ago? Obviously, their spend per visit to the casino continues to decline, but is it their entire budget down, or are they just spending less in the casino but increasing their spend on non-gaming activities? Again, where do you see the base mass statistics settling out, and what does the customer's budget look like? I think you have to be careful when you say base mass. It's very confusing. We all know the junket piece, where that's at. That's pretty simplistic. We can see that very black and white. Mass is more confusing because I believe the base mass business hasn't really changed that much. What has changed is the premium mass when you put that together and that equation becomes base and premium mixed together, the falloff in that customer, Felicia, has been in the premium mass. My opinion, the base mass customer is holding up pretty well. I think you're seeing some stabilization there. Where you're not seeing growth, you're not seeing return, is more premium mass mixed in there. Think of it this way. You walk into a high-end store in New York City or Las Vegas, you walk into a high-end retail where you don't necessarily see a lot of customers there, but you see three or four a day that might make a huge purchase. That's what happened in Macau. You lost a lot of these premium mass customers that were quasi-junket, quasi-direct play, and that customer base has eroded. Until that customer is back, I think you're going to see a very slow return to a year ago. I think the pure base mass customer loses $1,000 or $500 a day. If you go to Macau, it looks very busy over there. They're alive and well, especially weekends and holidays. I think the real softness here is a derivative of the junket play somewhat. It's that same person affected by economy, anti-corruption, liquidity, UnionPay, smoking. I think it's the same story to extent. Again, we need to see that segment return for Macau to improve and get brighter and happier over there. You need to see a return to more premium mass customers. I believe our base business is actually pretty good. Our rooms look pretty good. Our gaming business is holding up okay, but we're not getting that 5% or 10% of the population that drove extraordinary amounts of gaming win. That GGR, until it comes back, I think Macau will continue to be difficult. I don't think it's base mass. I think it's premium mass when you mix them together. Maybe we could talk about this offline because I know my time is done here. In your chart, you showed base mass since the second quarter of 2014 is down 18%. Right. It's continued to decline sequentially. I was kind of referring to that market really specifically. I understand. Again, I think it's hard to be totally honest with you. I think for any of us, it's difficult to identify, not to disagree with our charts because Dan made them, so they must be perfect. The truth is, it is hard. It is difficult to really differentiate at times, and any operator in Macau can tell you this. It's very difficult to differentiate base mass, premium mass, what table. I'm not convinced that those charts don't reflect still a heavy smattering of premium mass mixed in with base. I think from experience, anybody who's over there will tell you that it's so misleading because it's hard to identify exactly. They don't hold up a sign, say, "I'm premium mass, I'm base mass." You're doing it based on our sample, our indications. I'm not convinced that our base mass business is down 18%. I think our premium mass business may be down more. That's where the softness is and continues to be. I'm happy to take you offline and talk about it, but it's my firm conviction that you can't get every number right in a market that big in terms of when you segment these markets, it's difficult. Junkets are easy. They're all in the same room. They're all playing in the same place. Mass is much more difficult to really understand the segmentation. We do know for a fact that there are premium mass players that play in the geographic area that we're identifying here as. Yeah They absolutely are in there, and they contribute a piece of this, so this is illustrative only. Our mass drop was up. Our mass drop actually grew. I think what I rely on more than. Sequentially. Sequentially, yeah. Not year-over-year, but sequentially. I also rely on the people that work for us in the meeting pit who talk every morning. You listen to the dialogue, and it seems to me more and more, we're seeing a lot of bodies, a lot of business in those buildings. We're not seeing the better quality customers. That's what drives table win per unit. It drives higher minimum bets. It drives the entire GGR. That's where I think the weakness really is. Our drop is, I think we're doing okay in the base mass, but we're suffering on the premium mass side. Your next question comes from the line of Aaron Fischer from CLSA. Your line is open. Hi, good afternoon, everyone. Thanks for taking my question. Well done on raising the dividend to $2.88. My question is, I'm just trying to understand the implicit assumptions within what you guys are thinking as to what do you need to actually make maybe next year and in 2017. What are the hurdle rates of EBITDA that you think are crucial for you to generate in Macau and also in Singapore for you to be able to sustain that dividend? Also the kind of thought process behind how do you think or what your expectations are for the Parisian in order for us to kind of understand what kind of free cash flow could actually come out of Macau and also for Singapore in order for you to sustain a $2.88 dividend. Aaron, let me start off then turn it over to some of the other guys. Big picture, we don't give forward guidance, our perspective and the confidence that we have in our cash flow and our ability to continue to grow cash flow in Singapore, Las Vegas, Bethlehem, and over time in Macau is strong, we wouldn't have raised the dividend. If you look out to 2016 next year, we're expecting that it could potentially be a tough year. I think you got three new properties opening, we're confident that when you go out two, three, four years, Macau will be a growth market again. There's a big under-penetrated market in Mainland China that the Parisian is designed to appeal to. Together with the Parisian, we think we're going to have a very, very strong capability to generate increased amounts of cash over time. The increase in the dividend is reflective of that confidence that we have in the future. Aaron, it's Rob. I think to Dan's point, we have a lot of confidence in the Parisian market. We have a lot of confidence in Singapore and Las Vegas and Bethlehem to perform next year to levels hopefully exceeding to this year's levels. The big question mark obviously remains Macau. No one's confused about that, and it's virtually impossible for us to tell you how to think about Macau. It's so unknown to any of us. It is a big question mark for any operator today, and it will continue to be. We don't want to forecast what we think we're going to do. We feel very confident about the Parisian's performance, but it won't get open until best case end of the year, Q4, so it won't be a huge contributor. Not necessarily end of the year. Well, Q4. The end of Q3, end of Q4. I think it's hard. Getting to Q4. Yeah. It's hard for us to sit here and tell you what we think that number will be. We feel great about three of our places. Macau remains the question mark, and obviously for us to take that guess today would be a mistake. Okay, great. If I can follow up on a remark that you guys made, signs of stabilization in mass. I think to follow up on what you said earlier, Rob, about the base mass, which is something that you think is quite flat, and I think the impact has been largely on premium. What are your thoughts about the VIP market as it stands? Have we seen some signs of bottoming, or do you think that this is still a market that has very little visibility as it stands? Thank you. I think the numbers speak for themselves, and the VIP market is where it's at. It's not a pleasant place. I don't know what the catalyst would be to see VIP return. I do think there's hope for the premium mass to get better, and that's where my hope resides. I think VIP, the junket models, has such turbulence, both yesterday and tomorrow, that it's hard for me to see how that gets better. I do think the premium mass customer can resurrect, and we believe the base mass is stabilizing. I still think the weakness is in the premium mass. We think that the junket market is the one that's getting hurt the most. Our premium direct business is improving, and we're getting some of those people that have not gone through the junkets or that may have been going through the junkets before, and we build a relationship with them, and we think the credit is good. We're very strict on issuing credit. From our standpoint, we never went into the junket market as big as some of the other guys did because it wasn't our fundamental business model. Our fundamental business model is MICE, and that didn't rely upon the VIP market. When we first opened The Venetian in Las Vegas, it took us a couple of years to start increasing the amount of the maximum bet that we would take. We started off with $30,000 as the maximum bet. When we opened the Sands Macao, we started off with about the same thing. We didn't go after the junket market. It happened through our growth. In Singapore, we're not allowed to deal with Macau-style junket reps with third parties. Everything we do there is premium direct. It's still going on, and we're still having VIP players coming in that look at the result. Two-thirds of the market belongs to us, and 1/3 belongs to our, we have a single competitor there. The mass market is what we were built for, even though today in Singapore, we'll take as much as $1 million a bet, $1 million a hand. We're the only casino in the world who will take that. I don't know. We're setting the pace for other people perhaps to do the same thing. We've basically built for the mass market, and that's why we have so many hotel rooms, so much gaming capacity. We built it for that market, and now we're achieving the results, and the mass market is now the low-hanging fruit for us. Your next que-. Is that okay, John? Thank you. Thank you. Your next question comes from the line of Shaun Kelley of Bank of America. Your line is open. Hi, good afternoon, everyone. Thanks for taking my question. I just wanted to maybe speak about Macau on a higher level. We've seen a lot of policy announcements in the market over the course of September, in particular. I was just sort of curious to get your thoughts on sort of the latest views as it relates to some of those, whether it be kind of the mixed tea leaves of junket regulation and UnionPay withdrawal limits versus the announcement from the liaison's office about potentially doing some things to help out the gaming industry. Sort of how are you guys feeling about the policy environment in Macau right now, and how incrementally supportive do you think the government is likely to get from here? Well, we have always been respectful of the Macau government's desire. When we first got in, as part of our presentation to them, we said we were going to bring in national and international brands, which we've done. We brought in InterContinental. We brought in the Conrad, we brought in Sheraton, we brought in Four Seasons. We keep our commitment. If you talk to anybody in Macau, the current government, the former government, you ask which company, which of the concessionaires or sub-concessionaires out there has followed the direction that the government has outlined, the answer's going to come up, either LVS, and then we changed our name to Sands China in Macau. We have a belief that our gaming license in Macau is a privilege and not a right. We do everything we can to develop and direct our properties toward the goal that the government wants, the diversification of tourism. Look it, we've got 10.6 million sq ft in one property, one 3,000-room property, The Venetian in Macau, and we've got 13.5 million sq ft-14 million sq ft of Sands Cotai Central. You don't need that for a casino. The idea is to put in, we are the pioneers of integrated resort business model. That's what the Macau government wants, that's what we offer to the government, and we will continue to do that. Obviously, we can always hope for things to be better, but we don't have control over that, and we've got to respect we're in China, let the Chinese decide what they want to do with the concessionaires. Again, it's our privilege, it's not our right. Do everything we can to justify getting the blessings from the Macau government. It's their government, it's their right, we'll do whatever they ask us to do. Shaun, we believe firmly the governments want to see Macau prosper and succeed. We are very fortunate to be there. I think Sheldon's history in Macau speaks for itself. 11 years ago, he opened the first, the modern era casino in the Peninsula, the Sands. It's made a lot of money for this company. It's opened doors up for all kinds of people, make lots of money in the Peninsula. He then, three years later, spent, at that time, a record-breaking $2.7 billion- 2.4. $2.4. $300 million, I forgot about that. The $2.7 is the Parisian. $2.4 at The Venetian, it opened up the doors to Cotai. At the time, no one believed Cotai was viable. Today, for the first time, if you looked at numbers, Cotai exceeds Peninsula as a GGR. The point we're making is we're lucky to be there. We've done very well there. We've been good partners with the government, we believe strongly in the future of Macau. We're fortunate. We open a new building up next year, and we hope for a lot of success. I think you look at the actions of the company, the success of the company, the properties of Sheldon, you look at a $13 billion capital spend, that tells you how we feel about Macau. Perfect. Thank you guys both for the color. I guess, sort of the follow-up, same theme would be, we're starting to get more questions from investors about, the concession renewal process. As we move into late 2015, from I think what we last heard from the government, they were going to be in sort of an evaluation phase. I was just curious, do you know if that dialogue is ongoing and/or where things sit today as it relates to that? Any update or thoughts on when we might hear something more on that? To the best of my knowledge, I read the clippings from both here and our SEL, PR, and government relations department. I haven't heard a word. Haven't read a word, haven't heard a word about the midterm evaluations in Macau. As far as we know, if it's happening, they're not publicizing it. If it's not yet happening, they'll be getting to it. It'll happen when it happens. Our worrying about it doesn't advance it any further. They'll do what they want to do when they want to do it. Perfect. Thank you. Our concession expires in 2022. That's still seven years away. Perfect. Thank you very much. Your next question comes from the line of Thomas Allen from Morgan Stanley. Your line is open. Hey, how are you? Studio City is opening in Macau in five days. Just wanted to hear your latest thoughts on how you expect the property to impact the market overall. Are either you doing anything differently to benefit from the new opening, or are you seeing others doing anything surprising? Thank you. We're not doing anything different at all. We run our business as we have in the past, Thomas, we're hoping that Melco and Galaxy just keep bringing business to Macau. We're hoping for their success, obviously. We are all in this together. We need to see Melco do well. We're rooting for them. We're big fans of what they've done in the past. We're big fans of Galaxy's new building. We think it's excellent. We're cheerleaders here. We're rooting for these guys to make lots of money and bring business to Cotai. We are happy to see Cotai continue to evolve and be the deep footprint in Macau. We're happy to see GGR crossover, now that Cotai exceeds the Peninsula, we're just looking for more and more success for all of us because let's face it, this is a rising tide will carry all the boats. For a great opening and great looking building for them. Competitively, I think that a Parisian-themed building. We just topped off the Eiffel Tower. It's going to be a fantastic attraction. Fantastic. I think this is what the market wants. Look, why is The Venetian a must-see property? Because it's something they can't see anywhere else. I saw a design yesterday of the Studio City, and they have an eight-shaped Ferris wheel. We couldn't figure out, neither could our development department, figure out if the top half of the circle connects to the bottom half. I don't know. He's looking for a free ticket. Well, I'd be happy to pay for it, they didn't have change of $1 billion. Just as a follow-up, just a clarification around Singapore. Rob, I've heard you say a few times now, that you think people misunderstand that the property is not Chinese customer dependent, and you really draw a lot of your customers from across Asia. Should we take that to imply that you're seeing declines in Chinese play, and then strength in other regions or in maybe local business or Yeah. Yeah. Good question. Well, let's segment it because it's a complicated question. Beginning on the high end, we are seeing declines visitation on the very high-end customer for the gaming segment. The rolling customer out of China has diminished for a number of Lack of demand, also, we're watching our credit issuance there. Just like Las Vegas has been adversely impacted by the issues in China, we're off in the very high end. However, what we have seen in Singapore, to your point, is regionalization. On the rolling business, again, I always caution, as you know, it's concentrated. There's not 2 million customers there, so it's heavily concentrated. We've seen great success out of the region, and that being Indonesia, Malaysia, some Chinese, some PRs, some people living in Singapore who are Chinese nationals or have a permanent residency. Yeah, China's not growing in Singapore for us, probably in decline in the high end. The more important part of our business there is not Chinese dependent. That's the non-rolling slot ETG segment, which has never been Chinese dependent. It's mostly people in the region. Again, it's Indonesian, Malaysian, Korean, Japanese, and that's been the pleasant surprise. We've maintained and grown that segment, and it's never been dependent on Chinese visitation. I'm also pleased our retail sales in the luxury segment in Singapore are actually up year-on-year again, despite the downturn in the Cotai's retail environment. Clearly, we're in a different place in Singapore. The region at this point has not been as impacted by China as it has been Macau. Depending on where you look, our retail business is improving, even the luxury, even the very high-end high-street stores doing better, single-digit year-on-year increases. Our rolling business is okay. It's acceptable. Again, the real strength of that building, which people just can't seem to accept, is we're not China dependent on the slot ETG non-rolling. That is the powerhouse. That's the SGD 1 billion, SGD 2 billion that drives that building to these kind of numbers. I don't think that's China dependent at all. We do get some Chinese play, but again, the regional aspect of that customer segment is very strong and growing. The exciting part for our team over there is we keep finding more 20,000, 30,000, 40,000 gaming customers out of those neighboring countries. I guess you'd say we're not China independent. We like Chinese business. It's been good to us in the past, right now it's not the driver of Singapore. Helpful. Thank you. Okay, thanks. Your next question comes from the line of Carlo Santarelli of Deutsche Bank. Your line is open. Hi, thank you, operator, and good afternoon, everyone. Sheldon, as you think about your Macau collection of assets today, and obviously Parisian coming on in a year or so. When you think about the new supply that is coming to the market and having had a lot of experience dealing with new supply and the way competitive dynamics change, do you guys feel some of the work you're doing today on the cost side will mitigate some of that? Furthermore, are you seeing any evidence or getting the sense that folks will have to be more promotional as some of the new capacity comes online? We're always going to have to be competitive and be sensitive to whatever new capacity. I believe that the new competition will have to be, in order for us to be cannibalized, it would have to be a better thematic posture than what we have. We still believe, first of all, we're putting up pedestrian bridges that will connect all our properties, will truly be the Cotai Strip, where we'll be able to get 13,000 hotel rooms without walking outside. We'll hit five or six casinos, depends how you count the casinos in Sands Cotai Central, without leaving the building. There are and there will be, in the pedestrian bridges going across the strip, moving sidewalks. We have like 30,000 people a day crossing in both directions, and that's quite a traffic feeder. I think that The Parisian, with its unique theme, will be highly competitive. I think we'll have the third must-see property in Macau, The Venetian, Sands Cotai Central, and The Parisian, which will be major attractions. I think from a competitive standpoint, I don't think the other properties, although, as Rob said, we're rooting for them, for all of them to be successful. I think that Studio City will be a little more competitive because it's a different look, and people want to experience a different look. We happen to think that the geographic positioning, combined with our fundamental basic MICE business model, will be very successful. We're looking at over 3,000 units, and there isn't one of the other five properties that are building as many as 2,000 keys. We're building approximately two keys for every key a competitor is building, and we think that the uniqueness of our geographic theme, particularly, I tell you, we just topped off the Eiffel Tower, and I got to tell you, look at that and you'll see a very, very attractive thing. People, when we first opened Singapore and the SkyPark, the MBS was built adjacent to the Singapore Ferris wheel, the Singapore Flyer. As soon as we opened, and we had a separate set of elevators, and we charged SGD 20 for people to go up there, it killed the Singapore Flyer. They went into bankruptcy because people would rather do more than just take a Ferris wheel ride. They want to have an experience at the top, and I think the Eiffel Tower is going to give that to them. It isn't just that there is competition out there, it's the quality of the competition. How competitive is it, and how does it meet the needs and the aspirations of the mass market? I think that, look, forget about the issue of market share, although we're happy to be at the top end of the market share. I can't deposit market share in the bank. I can only deposit EBITDA. Nobody has even approached us in the last 11 years since we opened in terms of EBITDA. That's what really counts. I could put EBITDA in the bank, and we could be highly competitive regardless of how many properties they open. If you don't ever open a property that is sensitive to the needs and to the aspirations of the customer, you could build 10 competitive places, and we're still going to do well. Understood. Thank you. We have time for one more question. Your last question comes from the line of Robin Farley of UBS. Your line is open. Okay, great. Thanks. I wonder if you could give a little bit of color around, there's a big occupancy decline of The Venetian Macao, and I don't know if that was intentional to lower occupancy to eliminate some cost. I'm thinking it was not, but how should we think of the decline in RevPAR and rate and occupancy both given the hotel supply coming into the market over the next few months? Robin, it's Robert. Unfortunately, it wasn't planned that way. There was no grand scheme to knock occupancy and rate down. It just fell. As you well know, that market is adding rooms quickly, both from actual bricks and sticks being built, as well as the junket transition. As people stop giving away rooms to junkets, there's more and more rooms in the market. Mid-80s is acceptable, but we have work to do at The Venetian. We also have some CapEx plans for some of the room product. No, it's not planned. It wasn't to save cost. It's simply we did not have the demand we want to have planned to fix in the future. The Venetian is still the only billion-dollar property left, I think, in Macau, from what I can tell based on the run rate for this quarter. I hope that's changed in the future, be more people getting billion-dollar run rates out of properties. The Venetian had a weak quarter in terms of occupancy rate, had a good gaming quarter. We had 89%. No, this was 84, I think. 84. 89. I think it was in the mid-80s. No, not here. In Macau. Okay, good. The point is, Robin, it wasn't planned. That's not how we want to do. We want that rate to go back up when our occupancies go back up. We are trying to keep our rate higher than other people in town. There's a lot of split between rate and capacity, and I think the junket, the transition from giveaway rooms, comp rooms with junkets down to cash rooms is an issue for today and tomorrow. I do think Cotai will get stronger. We're excited to see. We're going to go over and see the new Melco product next week or two. We're excited to see what Steve Wynn does in the spring. I do think that demand for Cotai is going to continue to grow and grow. We're still the biggest footprint in Cotai. I think it's going to be very competitive, very positive in the end for the Cotai area. No, that wasn't planned. We need to improve our numbers, both the rate and from an occupancy perspective, and that's the truth. Maybe just as a follow-up to that, I know that the market, there's not a lot of forward visibility in terms of room bookings. Right. Just from what you do see past October 27th, next week, is your early read on sort of those first two weeks after that it's helping occupancy with your property or not necessarily yet? I don't have any insight at this point. It's too early to tell. I think it's, again, I'm a big believer that this Cotai area, when you get Mr. Wynn there and you get Lawrence Ho and these guys building these multi-billion dollar properties, you're going to see a lift for all of us. I really believe that. I believe it may come at the expense of the peninsula. I think the must-see products will reside on Cotai. I think it's positive. Sheldon's comments about Parisian, I couldn't agree more. Parisian will be a must-see, iconic theme building, which I think Macau responds well to. We're very pleased to be on Cotai with great buildings. Does Melco help us short term? I don't know. Does it help us long term? I believe it does. I believe it helps all of us. We have to win this thing together. We need to see GGRs grow. We need to see visitation grow. We need to see premium mass grow. Our company is different than others in a lot of ways. The one thing we do have that's differentiable and continues is scalability. We have a lot more rooms, a lot more retail, more gaming opportunities. We need more visitation. We need better customers. I think the more that Cotai area grows, the more it benefits this company. Again, we're believers in Macau long term. The visitation, the penetration out of mainland to Macau remains sub 2%. The infrastructural improvements keep coming. We believe the government's sincere, and they're pleased to see Macau succeed. Whether it's this week or next week, we're thinking long term, big picture, that Cotai does very well. Again, as the biggest player in Cotai by many rooms and many gaming opportunities, we're going to be the biggest beneficiaries. That's it. Okay, great. Thank you. Thanks. Thank you. Okay. Sylvia? The Chief Editor. This concludes today's conference call. You may now disconnect.