| Quarter | Q2 FY24 |
|---|---|
| Call date | 2024-07-23 |
| Results reported | 2024-07-24 |
| Length | 50 minutes |
| Speakers | Daniel Briggs, SVP, Investor Relations; Rob Goldstein, Chairman & CEO; Patrick Dumont, Chairman & CEO |
Results, guidance and Q&A analysis for this call
Matthew (Operator)
Good day, ladies and gentlemen, and welcome to the Sands Second Quarter 2024 Earnings Call. At this time, all participants have been placed on a listen only mode, but we will open the floor for your questions and comments following the presentation. It is now my pleasure to turn the floor over to Mr. Daniel Briggs, Senior Vice President of Investor Relations at Sands. Sir, the floor is yours.
Daniel Briggs (SVP, Investor Relations)
Thank you, Matthew. Joining me call today are Rob Goldstein, Patrick DuMont, Doctor Wilford Wong and Grant Chung. Today's conference call will contain forward-looking statements. We'll be making those statements for the Safe Harbor provision of federal securities laws. The company's actual results made materially from the results reflected in those forward-looking statements. In addition, we'll discuss non GAAP measures. Reconciliations to the most comparable GAAP measures are included in our press release. We've also posted an earnings presentation on our website. We will refer to that presentation during the call. Finally, for the Q&A, we ask those with interest to please put one question and one follow up so we might allow everyone within the opportunity to participate. The presentation is being recorded. I'll now turn the call over to Rob.
Rob Goldstein (Chairman & CEO)
Thanks, Dan, and thanks for joining us today. Macau market continues to grow. Total Dean revenues for the market grew 24% in the second quarter of 2024 when compared to the second quarter of 2023. In addition, masking revenue grew 29% compared to one year ago. We remain confident the future growth in Macau market. I believe Macau market gross gain revenue will exceed $30 billion next year and continue to grow year after year. Our business strategy is predicated on investing in high quality assets and also have scale. Macau is and always has been a deeply competitive market. Our strategic approach has enabled us to compete very effectively. We have designed our capital investment programs to ensure that we will continue to be the market leader in the years ahead. Our approach allows us to grow fast from the long term and large share of EBITDA and generate industry leading returns of invested capital turn to our results in the cow, we deliver solid EBITDA to the quarter despite material disruption that belong there. SCO continues to leave the market in gaming and non gaming revenue and in market share of EBITDA we will continue we will capture a high value, high margin tourism over the long term. We have a unique competitive position in terms of scale, quality and diversity of product offerings. Upon completion of the second phase of the Londoner and our Kota Arena, our product advantage will be more pronounced than ever. Another strong quarter in Singapore despite ongoing disruption from construction. The financial results and rear based standards reflect the positive impact of our capital investment program and the growth of high value tours. The growing appeal of Singapore as a destination is enhanced by the robust entertainment and lifestyle event calendar. As we complete the balance of our investment programs, there will be considerable runway for growth. Thanks for joining our call. I'll turn it to Patrick down, then we'll go to Q&A. Patrick.
Patrick Dumont (Chairman & CEO)
Thanks, Rob. Macau EBITDA was 561 million. If we had held as expected in our rolling program, our EBITDA would have been higher by 4 million. When adjusted for lower than lower than expected hold in the rolling segment. Our EBITDA margin for the Macau portfolio properties would have been 32.1% or down 80 basis points when compared to the second quarter of 2023. Context here is important. Our margins at London were directly impacted by the disruption of the London or Grand renovation. We closed the casino at 1500 keys out during the quarter. Margin at the Venetian was 38.2% and we expect margin improvement as the Venetian Cotai Arena comes back online later this year and as visitation to the market and growth and unrated play in the market both increase in the future. Margin at the Plaza and Four Seasons was 40%. We are now deep into our London or Grand renovation program. We plan the completion of the first tower by year end 2024 and of the second tower by May of 2025. The London or Grand Casino has been closed since May and is scheduled to reopen in December. As these products come online between the end of 2024 and the first half of 2025, our competitive position will be stronger than ever. We expect meaningful EBITDA growth and margin expansion in the future. Now turning to Singapore. MBS EBITDA came in at 512 million. Our strong results reflect the impact of high quality investments in market leading product and growth in high value tourism. Had we held as expected in our rolling play segment, EBITDA would have been $64 million low. Had we held as expected in our Rolling place segment, MBS margin would have been a 48% or 220 basis points higher than the second quarter of 2023. While we have substantially completed the original 1 billion refurbishment program and that at MBS, we are still in the initial stages of realizing the benefits of these new products. Tower Gaming at Marina Bay Sands will be offered for the first time at the property in the third quarter of 2024. The next phase of our capital investment program at Marina Bay Sands is scheduled to be completed during the second quarter of 25. This will further support growth in 2025 and beyond. Turning to our program and return capital to state to shareholders, we repurchased 400 million in LVS stock during the quarter. We also paid our reoccurring quarterly dividend. We look forward to continuing to utilize the company's capital return program to increase returns to shareholders in the future. Thanks again for joining the call today. Now let's take some questions.
Matthew (Operator)
Thank you. Ladies and gentlemen, the floor is now open for questions. If you'd like to enter the queue to ask a question, please press *1 on your telephone keypad. Now, if listening on speakerphone today, please pick up your handset to provide optimum sound quality. Also, we ask each participant to limit yourself to one question and one follow up question. Please hold a moment while we pull up for questions.
Matthew (Operator)
Your first question is coming from Joe Graph from JP Morgan. Your line is live.
Daniel Briggs (SVP, Investor Relations)
Good afternoon guys. Like to start off on, on Singapore if we could. I was hoping can you give us a sense of maybe how players and visitors for you know geographically how they're performing? I guess more specifically, are you seeing any kind of slow down from mainland Chinese visitation or mainland Chinese spend into MBS? And was there any, you know, more material trend change towards, you know, the end of the two? Q You know versus maybe what you've seen over the last couple of quarters as that's been sort of a a growing segment?
Rob Goldstein (Chairman & CEO)
Joe, you know, we as you know in the past calls we have a diverse customer base in Singapore. They've got more of the region and so the China is part of that, but we're all over the place, Vietnam, Japan, Korea, Indonesia, Malaysia. So I, I don't think we saw much different in the past year except we obviously the seasonality is, is in play in, in Q2. But our business, Singapore, the only thing I would say really is impacted is we keep self inflicting wounds by finishing our building and it's, it's near the end finally after it feels like a long time. But despite seasonality, despite the, the difficulties of construction Tower 3 tower gaming, we continue to move forward towards 500 + 1,000,000 dollar quarters and diversity of of visitors is very clear to me with the, the, the where they're coming from, they're coming everywhere. We've not seen a slowdown in China. We just simply see the same business in the last couple of quarters, which is solid, but it's also solved from over the so Singapore keeps moving forward. I think you'll see a real important transition probably at the early part of the Q2 when the building is really full bore complete and tower games intact. All the suites are intact. We're really playing the game with one hand behind our back right now, still delivering 2 plus billion dollar run rate. So feeling very good about prospect the same. We're probably the most, not probably is the most, the largest earning EBITDA building in the history of gaming. So and it continues to get stronger. We think it's a, we said before, we think that our goal is $2.5 billion out of Singapore. And I think it's you'll see it happen in, in the only coming years.
Daniel Briggs (SVP, Investor Relations)
Great. And then people have not really asked me a question about Macau, Macau self-sufficient or speaks for itself. But Rob, Patrick, maybe give us an update on on any development opportunities, you know, specifically Thailand and I'm not sure there's much to add to what's going on in New York.
Patrick Dumont (Chairman & CEO)
So First off, I think the great news is we're very ready to develop new grounded developments in new jurisdictions. We're very excited about it. Rob, the team, I spent a lot of time looking at opportunities for our company to expand and grow in new jurisdictions. As you know, we were spending a lot of time in New York. We were spending a lot of time in Texas. We've been looking at Thailand. I think Thailand is a very interesting opportunity. The market there is is very strong for different types of tourism. And I think depending on the way it's set up and the opportunity that's there in terms of structure could be very interesting for us. You know, we love the market as a place to source customers. We think the tourism quality there is quite high. If you go and visit, you'll have a great experience there and we'd love to be part of it. So if Thailand becomes available, we'd be very interested. But I think it's early days yet. I think we've been spending time there along with the rest of our industry looking to see if we could be helpful to that process and we're waiting and seeing what happens.
Matthew (Operator)
Thank you guys.
Rob Goldstein (Chairman & CEO)
Thank you. Thank you.
Matthew (Operator)
Your next question is coming from Stephen Grambling from Morgan Stanley. Your line is live.
Daniel Briggs (SVP, Investor Relations)
Hey, thanks. I appreciate the comments on the London or grand renovation impacting margins in Macau. But can you get back to 2019 levels in the current environment as that comes through and ramps up or do we need to see some change either in growth in the market or the competitive and promotional environment to get back there?
Patrick Dumont (Chairman & CEO)
So a, a couple of things and I, I think this is really important to note, Macau market has always been super competitive. From day one, it's been a very competitive market and we've been very effective in the way that we compete because we have an investment driven model. So if you go back pre pandemic, if you go back in 2010, it was a very competitive market. And in fact, I remember when the premium mass segment didn't exist and when it started. People, you know Rob can reference this as well, some other people in the room can as well. When there was no premium mass segment, it was really rolling volume and mass play. And the market has always evolved over time. But the one thing that's been consistent is that our company has driven success through investment and through leading and non gaming amenities and to be fair innovating on the gaming side as well. And so when you look at our performance, if you go to page 14 in the slide deck, you can kind of see what what happened in the quarter. So the Venetian Macau did 262 million of EBITDA in the quarter at a 38.2% margin and it's missing about half its volume of unrated play. So just with the arena out, which is also a very, very valuable amenity to drive premium mass performance. Look at the strength of the performance of the Venetian. Same thing is true in the Plaza. Look at what The Four Seasons did, 40% margin, $100 million. Just so when we look at the the Londoner, we basically took out an equivalent property like Melco or an equivalent property to win Palace. We took that capacity out of the market for ourselves to renovate it. So for us to put up you know $550 million in the quarter to in my mind this is a great result because we know that we have a limiter in place. We're missing one of a significant portion of what is ultimately going to be one of the best properties in Macau, if not the best property. And if you look at the success of the Londoner right now, if you, if you look at the, the wind per unit per day on the table side, the Londoner is the second best in our system. So you know, in Macau. So when you, when you think about that, the, the model has been proven, the investment has been validated. Now we're going to open up the better half hopefully by the end of the year in, in major Park, suddenly the limiters are going to come off. So in my mind, this is a, a very positive investment for us and we'll get to the margins. We're already doing it at other properties. It's just a functional renovation because we're carrying all the costs now associated with a shuttered casino and 1500 rooms. So the Londoner impact is really 1/2 of it's working. You see the performance, you see the slot win, you see the slot performance win per unit, you see the table win performance. You look at the the hotel performance and the and the non gaming amenity performance and then you look at the side that shut and you realize that's the better side. But we're carrying all the cost. The potential in the future is really there. We feel very strong about the potential for the margins to reach where we need to go. And just remember pre pandemic we were 3536% EBITDA margin on a whole normalized basis business in aggregate. So we're we'd like to believe we're in a good spot. You know, we're competing effectively, we have great assets, we're investing for the future. And when we're done, we're going to have the newest and best products in the market. So we feel feel very strongly about the path that we're on. It's just going to take a little bit of time to get there.
Rob Goldstein (Chairman & CEO)
The only structural chain, Steve, we need is get open, OK, the market's doing 30 plus billion next year. We're going to have the two most important assets in the market speaking to each other. I mean that's strategically going to have London and and Venetian of 7400 keys between them, the full power of the Cotai arena, all the amenities between those two. I think those buildings will be very, very intertwined and give us by far, you know, 2 billion plus dollar assets. Speaking to other if Parisian and Four Seasons and sans keep doing what they're doing, we will be at 3 plus billion dollars and and single get 2 plus billion. I believe that sometime near future we will have the highest EBITDA creationist company's history without Las Vegas. So I'm, I'm be confident that London will perform and outperform the expectations, but also the enhanced of the nation because the back and forth of those two buildings, they're very similar, you know, huge retail, huge suite capacity, entertainment, retail, F&B, they just they're, they, they're much bigger and better than anything else in that market for making money. And I think when those come online next year, you had these results today to another, you know, $150 million out of London, all of a sudden you're looking at, you know, 3 plus billion dollars of, of annualized EBITDA. That's how we give you the market and margins being what they are making EBITDA still the most important thing and we will get there. We will get there.
Daniel Briggs (SVP, Investor Relations)
So maybe as a quick follow up on capital allocation, you noted being consistent with capital return and it sounds like you're confident in a ramp from here in Macau and really growing and and MBS yet the stock is near, you know the lows during the pandemic. So what's the tolerance to be maybe not as consistent and actually actually being more aggressive with capital allocation or even rethinking about the the leverage profile at least in the near term?
Patrick Dumont (Chairman & CEO)
So I think, I think First off we have said this before, we see meaningful value in both equities. You know where these, where the stock is trading doesn't make any sense to us both on a historical basis and how we view the value of our company and how we look to invest and grow. So we're going to continue to repurchase stock and you saw we did the last couple quarters. We feel fairly strongly about the value of our business and we're going to continue to do it. Look, I think for us, we're very focused on being shareholder friendly. We were a very shareholder friendly company in the past. We're a shareholder friendly company today. We're going to change to do that. That's our goal. And I, I think that the nice thing is that as we complete the Londoner 2, things are going to happen. We're going to have less Cap X and more free cash flow and to be fair, a more productive asset base. And so hopefully we'll have the opportunity to use that cat flow to return it to shareholders. So we're going to look to do that and continue what we've been doing. But we agree with you if you think where the stock is today is not reflective of our long term value.
Rob Goldstein (Chairman & CEO)
And also if we do invest in new, new opportunities, that's not near future. So here that you know, New York, Texas piling the years ahead, you can find us. So lots of room to invest money if we please plan to. Thank you.
Matthew (Operator)
Thank you. Your next question is coming from Robin Farley from UBS. Your line is live. Great, thanks. 2 questions. One is, can you kind of share some thoughts?
Rob Goldstein (Chairman & CEO)
On there's a lot of concern about tariff impact on the Chinese economy next year and just to serve some ways to help us think about that broadly how you're thinking about you have a lot of.
Daniel Briggs (SVP, Investor Relations)
CapEx going, you know, being up and running in the market next year, which should certainly position you well, but just sort of thinking about broader impact there. Thanks.
Rob Goldstein (Chairman & CEO)
When you take tariff impacts on the Chinese, so the US, the new president, whoever he or she may be, I see, I don't think we want to talk about for two reasons when we don't know what's really going to happen nor do we know the impact. Obviously the Chinese economy speaks for itself. It's been it's been a struggle this year and I think it hopefully just gets better. We see more improvement and both this the big thing in our our business is the 2,000,000 plus visit tours were lacking quarter on quarter then we hurt us and that was just today. I don't think we should comment on politics. So what's happened? The tests don't know. But obviously our biggest miss for our company, which is built for scale and quality, we lose 8 million annualized visitors and puts us and everybody else so believe it. They are going to get into the political realm of who's going to do what to who and why. OK, fair enough. Thanks. And then the other question you already commented on.
Daniel Briggs (SVP, Investor Relations)
You know your interest in continuing share repurchase, looking at the rate that you did this quarter, you'd you'd be.
Matthew (Operator)
Mostly through your remaining authorization at the end of this quarter is that. When we think about like your appetite for continuing beyond that is that.
Daniel Briggs (SVP, Investor Relations)
If you could just sort of comment on that. Thanks.
Patrick Dumont (Chairman & CEO)
Yeah. I think if you look at our our prior practice, you can see that we've always been focused on return of capital both through share repurchases and dividends and that our Board has been very supportive of trying to create shareholder value through return of capital. So as our current authorization gets used up, we'll go back to the board and we'll have a discussion about how we want to allocate capital. But the Board has been very supportive of trying to enhance shareholder returns over time.
Rob Goldstein (Chairman & CEO)
Thank you. Thanks, Rob.
Matthew (Operator)
Thanks, Rob. Thank you. Your next question is coming from Carlos Santarelli from Deutsche Bank. Your line is live.
Daniel Briggs (SVP, Investor Relations)
Hi, everyone. Good evening, Good afternoon. Yeah, if you could. I mean, I, I know this is probably a difficult question, but if you think about, I hear you, I hear you. So my question.
Rob Goldstein (Chairman & CEO)
Was.
Daniel Briggs (SVP, Investor Relations)
Was maybe it's not as difficult as I, as I presented it to be. But when you guys think about the rooms that are out of service at Londoner and, and you know those customers and recapture in your existing portfolio, whether you're able to recapture them in Venetian, Parisian or elsewhere. What do you think is actually the delta in what you're missing from from those rooms being offline? IE how much of that, you know, shortfall that's being generated there relative to historical periods is actually elsewhere in the portfolio versus how much do you think is just exiting the system and maybe showing up at?
Patrick Dumont (Chairman & CEO)
Competitors.
Rob Goldstein (Chairman & CEO)
Right before I get this question, Mr. Chum, we woke up to view this call middle night in Cal. I wanted to also reference the fact that the disruption besides the carrying labor. Well, you've been in these buildings before when buildings running construction impacts both longer one and two. I want to be clear that the disruption isn't just limited to to our current, you know, longer and two longer one, which is a beautiful building also feels the painting Grant will you answer the? Question about the the rules in Delton. How you see that?
Matthew (Operator)
Yeah, thanks, Rob. I think first of all, yes, the performance definitely was impacted by the phase two renovation on the Sheraton side. But actually Despite that you reference the fact that we we obviously worked hard to shift the patronage to other properties in the portfolio and the team was actually incredibly successful at that. We we actually reached the record high in any quarter on non rolling drop as well as a record high in any quarter on the slot handle. So in terms of gaming volumes, I think we've managed to sustain the the volumes overall. However, within the mix, I think what you do lose is some of that base mass, which is where Pacifica Casino was primarily positioned. And also what you also can see in the in the numbers is the impact of the loss of the rooms impacting the cash hotel revenues. Because obviously when you have fewer rooms, we are yielding accordingly. And when you lose that cash revenues from the hotel side because you have reduced inventory and we need to shift the customers to other properties on the casino side, that clearly impacts not just EBITDA, but it's a high flow through segment business segments. So it obviously impacts the percentage margin as well.
Daniel Briggs (SVP, Investor Relations)
Great. Thank you. That's helpful. And if I could just one quick follow up, sorry. Go ahead, Rob.
Rob Goldstein (Chairman & CEO)
Yeah. Guys, do you have a dollar amount on the cash room sales lost in the quarter? I'm sorry, Ron, I was, I was asking if you can give us a number for the dollar amount we lost in cash room sales for the closure of London. It's.
Matthew (Operator)
If you look at the actual reduction in, in cash revenue for versus Q1, then you're probably looking at the range of around, you know, 1520 million impact. Although you can't, you, you can't simply add that back because you've also got to consider that's a net impact of shifting more rooms into, into some customer segments and then having fewer rooms to sell. So, so it's a, it's a, it's a net impact that that's probably not as high as that. But if you're looking at pure cash revenues, then then that's that's that's the range of impact.
Rob Goldstein (Chairman & CEO)
Oh, sorry, your second question is what?
Daniel Briggs (SVP, Investor Relations)
Yeah. The the second question was just more of a technical question. And and I get it, lot could go both ways. But this is the the fourth quarter, you know, in a row where hold in Singapore has been, the VIP side has been very strong. And I think when you look at the last four quarters, it's close to $30 billion of volume at at an almost 4.4% win percentage. It it feels a little bit more structural and I know in your add back map you guys are obviously dinging yourselves for a much lower hold structural. Is there any thought of perhaps changing you know what that that metric is, is as the normalized hold for that property going forward?
Rob Goldstein (Chairman & CEO)
It's a great question and one we still have time on. And I think what you should realize, I think you do realize is the world's changing in baccarat for two reasons. Smart tables is a better way of quantifying what the whole percentage should be. But also we've put games in the floor, you know, I'll call it prop bets or side bets that change the whole percentage in baccarat. And your comments spot on. We're debating how high we can take it. The team there feels it's understated. And you're right, we keep getting ourselves quarter to quarter and perhaps the near future we'll we'll address that because clearly something is happening here. But again, the smart cable opportunity which we're deep into now, coupled with the the game changes that Bakra has been a pretty state, pretty predictable game for many years. You know, player banker and Thai pair, it's changing dramatically there. A few months ago it was shocking to see how much money they bet on the profits, no different than the Super Bowl, You know, just bet the winning team, you bet every 3000 on the side bets, which drives the per way up. We believe that's in play in Singapore. We're not ready today, but we're coming close to the decision this year perhaps to address that very issue. Because you're right, the the team would argue something at play. It's not simply, you know, better fortunes, there's better mathematics that's being made and the ability to assess those mathematics through smart table, etcetera actually.
Patrick Dumont (Chairman & CEO)
Yeah, sure. It's the right question to ask. We've been following this for a while. Some of it depends on what Rob said or it depends on what Rob said, which is the additional wagers that are available on on the game mix that we have on the floor at the time. But it's also, you have to understand propensity. And so you have to observe empirically what people are going to do before you can make that decision. So you'd argue that our theoretical is higher than this, but we're going to continue to look at it and we'll make adjustments as necessary when we think the statistics warranted. But you're right, it, it is, it is a a very significant adjustment and one that we're going to continue to look at. But our game mix has changed the availability for as Rob calls and prop bets. But really highball bets are on the floor now in a very different way than they had been previously, both pre pandemic and even a year ago. And they're the patron uptake is very high. And so that is adjusting the way the mix on the floor is being exhibited through gaming win. And so we're going to continue to take a look at it and we'll make adjustments when we feel that it's appropriate. But it's a very good question ask. There's more there, everybody.
Daniel Briggs (SVP, Investor Relations)
Thank you. Thanks, Karl.
Rob Goldstein (Chairman & CEO)
Thanks Karl, as always.
Matthew (Operator)
Thank you. Your next question is coming from Sean Kelly from Bank of America. Your line is live.
Daniel Briggs (SVP, Investor Relations)
Hi, good afternoon everyone or Grant or the team. Just wanted to ask if you get can we get a little more color on just what you think is happening in sort of underlying visitation to the market? I think you capture it well on your slide 19, but you know we saw our noted a bigger sequential deceleration that we typically see in the second quarter. You know, and my question for you is twofold. Just one, you know what's driving that? Is it you know, is it macro, is it something you know you're seeing or hearing out there? And and I guess just as importantly, is it continuing at all in the Q3 or what's your expectation for this to, you know, this pattern to possibly continue? Thanks.
Rob Goldstein (Chairman & CEO)
Wilfred and Grant Wilfred want to take that one.
Matthew (Operator)
Yeah, Wilfred, thanks Sean for the questions. Yeah, I think you're right. That visitation recovery rate has actually reduced. So you know that's that's that's actually taking account seasonality. When you, when you compare the visitation recovery versus second quarter of 2019, we're about 79%, but we were as high as 90 percent, 85 to 90% in the past six months, in the past two quarters. So clearly that that there has been I think more than just a seasonal slowdown and that's particularly prominent in in the visitation outside of Guangdong. So that does impact, I think Rob referenced it earlier, it does impact, I think the base mass business especially that I'm ready to play. We, we, we don't, we, we don't know exactly why, but I, I think that is a clear feature of of this quarter and it does feed it into as we said the, the base mass segment.
Daniel Briggs (SVP, Investor Relations)
Thanks, Grant. And then just as a follow up, I think you also talked about, I mean, obviously I think you mentioned a number of times that the market is always competitive, always promotional. Could you just talk about, you know, sure, your own, you know, promotional, you know, allowance or, or cadence this quarter, was it a little higher? Did you need to reinvest a little bit more? You know, I think on our math that was that was possibly the case or is it all just mix? Just kind of how did you see it play out and kind of what do you how, how much you're reacting to versus how much are you kind of letting kind of letting go on market share just because it's not, you know, your game?
Patrick Dumont (Chairman & CEO)
Hey, one thing, I just want to say one thing and then I'll turn it over to Grant. So just note that the visitation is very important and you you referenced slide 19 and the fact that there is 2 million visitors missing that were here pre pandemic. We are geared for scale and that scale is very high margin for us because of the volumes. And so our mix looks different and our margins look different and our reinvestment looks different because of the shift of business between non rated and rated play. That's a very important thing. When you look at our our results and you consider what we're doing today, the mix of business has changed for us pre pandemic, post pandemic. So that's that's one thing. The other thing is, and I would also like to highlight that if you look at the margins of our overall operations, they're consistent with prior performance. And when that unrated play returns and the volumes return of premium mass play, their margins should improve. So yes, we look at reinvestment rates, but we also look at the total business. We like to understand how much money we're actually making on net. So when you look at the business overall, our margin performance and our competitive positioning is actually quite good given where things are. But I'll turn over to Grant for some additional detail.
Matthew (Operator)
Yeah, Thanks Patrick. Yeah, I, I think it's a mixture. Firstly the the business mix point that that Patrick reference and secondly, because we were closing Pacifica Casino and getting ready for that. Yes, there is you know for a period of time a high level of reinvestment as we prepare for that shift, which as I talked about earlier, we did so very successfully, especially into into the Parisian, but also the other properties. So, so those are the main factors affecting the the reinvestment and the overall margin mix. But I think even though there are fluctuations from quarter to quarter day-to-day, even in in terms of tactical, I think we're very clear on our strategy, which is that we will compete on the quality and the scale of our asset base. And of course at this point in time, we're Hanford because we we have a number of our key assets out. But when those assets come back online really from Q4 this year into 2025, we, we absolutely intend to, to be competing on that basis because at that point we not only have I think scale we always had, but but the sheer quality of product that we'll have at that point at scale, I think that will be the fundamental difference from what we had before and, and we intend to make full use of that in terms of competing for, for, for the market.
Daniel Briggs (SVP, Investor Relations)
Thank you, everyone. Thanks, John.
Matthew (Operator)
Thank you. Your next question is coming from Chad Baynon from Macquarie. Your line is live.
Patrick Dumont (Chairman & CEO)
Afternoon. Thanks for taking my question. On Singapore, which has been consistently strong for several quarters there, it appears that there's still some quarterly volatility. I think last quarter we talked about some big events in the in the first quarter that drove you know non gaming and obviously VIP play. As we think about the back half of the year, can you help us kind of square what seasonality should look like and if there are any big events that are booked on the calendar in Singapore that could drive additional non gaming or VIP business? Thanks. So a couple of things. So typically 2 Q is our is our through quarter in the year. And so you saw that in Singapore this quarter. As a practical matter, we were also out of keys because of the renovation in Tower 3. So across the back half of the year into Q1 of next year, all of that stuff is going to come back. So the limiters are going to come off. And so if you look at the tower gaming that we're adding, you look at the additional salons that are coming back online. So the renovated gaming errors are coming back. We're finally going to hit full stride in that building. So even though we put up this quarter and last quarter, which are I think the two highest of all time, we have more room to go. We're not operating with full capacity. And so right now when we look at Singapore, we see strength in the market. We've geared ourselves to focus on high value tourism, which is coming into Singapore at a very high level. We are the premier place to visit from an amenity standpoint, entertainment, food and beverage and we're benefiting from it. And our hospitality is now second to none, which we spent a lot of years working on and we're finally there. So we're going to start to see this asset continued growing out pace. In terms of the calendar up and coming, I can't point to anything other than Formula One that would be fitting the category you just laid out Formula what happens every year. It's a great event. It's something that's good for Singapore. Our patrons really enjoy it and we look forward to its success. But in terms of calendar, unless Grant has something in mind, I can't think of anything other than that right now that's worth mentioning.
Matthew (Operator)
Yeah, that's the main one. Yeah, OK, great.
Rob Goldstein (Chairman & CEO)
You left the right guys out. This market is so powerful and getting better by the day and Q2 is always weakest flow seasonality. But still what's happening in Singapore is almost unheard of in our industry. I mean everything is coming together, converging that thing and we're doing these numbers again with capacity constrained. When that goes away, the market will continue to thrive whether it's F1 or Taylor Swift or who's ever coming next. But just there's there's events are very additive, but that place is a market just becomes more and more desirable by the day you see by the visitation and their quality of visitation. So the entertainment will come by the our ability will speak for itself.
Patrick Dumont (Chairman & CEO)
OK, appreciate it. And then I'm going to ask you to put on your your economist hat again, not looking out to future years, but this year, obviously the triple R cut could you know, bring some more money back into consumers pockets in China. Just wondering in prior cycles how long that usually takes for it to trickle down. Obviously you know, you've seen a nice little improvement in in some of the July foot traffic. I don't think it would happen that fast. But is, is this something if, if it's kind of working in terms of some stimulus you could start to see it in, in the third or fourth quarter here just in terms of spend per play trends. Just wondering if if you could kind of opine on what we've seen in prior cycles. Thanks. So this is a, this is a fascinating question. One thing I'll tell you, this was the, the highest volumes we ever had in premium mass and slots in 1/4. So clearly like something positive is happening. I, I think if you said that the economy was, you know, frothy and doing incredibly well that we'd be doing better. I think that might be a fair statement if you could say that. But in terms of timing or specific economic actions, there are so many different things that can happen that may influence it. We have no idea. I mean, this isn't anything that we can comment on or have a view on other than that we're hopeful that there will be further economic growth and further beneficial economic activity around the greater Bay Area. And you know, hopefully we'll be the beneficiaries of that. But in terms of specific comments around timing or things of that nature, it's not something we can really do. Thanks, Patrick. Appreciate it.
Matthew (Operator)
Thanks, Chad. Thank you. Your next question is coming from Brandt Montour from Barclays. Your line is live.
Daniel Briggs (SVP, Investor Relations)
I just want to follow up maybe with Grant or anyone on Sean's question about visitation and maybe just, you know, thinking about, you know, what's going on there. You know, I know that we don't.
Patrick Dumont (Chairman & CEO)
Have a crystal ball for the future, but in the two Q, do you think macro was the biggest factor? Is there still infrastructure friction there with flights to the non Guangdong particularly or is there something else that you think is at play as well?
Matthew (Operator)
Yeah. Thanks Brad for the for the question. Yeah, I don't, I don't have specific reasons why we have a we have a slowdown in the recovery rate for for non Guangdong. I think what you can say is there is a segment bifurcation here where the premium segments are still doing incredibly well. And you can see I think it's on slide 18 on, on Dan's pack. Actually this is the highest spend per visitor arrival since the COVID recovery began of any quarter. So clearly at the, at the premium and the strength of spending is, is, is very high. But at the same time the I think the lower price points in terms of say the slot performance, it's also incredibly strong. So those two, those two factors drove record high volumes in our non rolling drop and slot handle. But in the middle especially the base mass tables, especially unrated that is highly correlated to to the strength of visitation and it just wasn't as strong this quarter even if you adjust for seasonality. So I think we can we can explain how the segments have performed, but we don't we we don't know exactly why the the visitation base isn't recovering as fast in the middle and in terms of that base mass presentation.
Patrick Dumont (Chairman & CEO)
Great.
Daniel Briggs (SVP, Investor Relations)
Thanks for that, Grant. And then on the disruption?
Patrick Dumont (Chairman & CEO)
You know, the renovation projects, you know, if we were to try and and gauge the level of disruption from these projects in the third quarter versus the second quarter, you know, when I know you lose the casino floor for a whole quarter versus 1/2 a quarter. Can you, can you, can you maybe give us some finer points on what else is going to be offline in the third quarter versus the second quarter room count etcetera? Yeah, it's good. Yeah, go ahead, Grant. Go ahead, Grant.
Matthew (Operator)
Go ahead please. Yeah, the yes, the disruption will will actually increase from a room perspective. So we're operating around 2500 keys at Sheraton in second quarter on average over the quarter and we expect to be down to about 1300 on average across the third quarter. Obviously a higher number of keys in the first half of the quarter and finishing up with fewer keys. And as you said, we will have a full quarter of Pacifica casino closure versus you know 6065% of the quarter in the second quarter. So yes, the disrupt, the disruption impact will actually increase during the third quarter.
Patrick Dumont (Chairman & CEO)
Perfect. Thanks, everyone. Thank you.
Matthew (Operator)
Your next question is coming from David Katz from Jefferies. Your line is live.
Patrick Dumont (Chairman & CEO)
Afternoon, everyone. Thanks for taking my question. I wanted to go back to the repurchases and just take a little bigger picture look, right, Just just thinking about the factors, obviously the stock and where it is is one of them. But we look at your capabilities that there are some, you know, maturities out there. You know, in the future, there's obviously the issue of the float, you know what the current run rate, you know, that shrinks the float and that's a consideration that some companies think about. If you could just sort of walk us through, you know, how you're thinking about those other issues, you know, in, in view of all of them, that would be helpful please. So, so all, all very good questions. All things we talk about all the time consider with the board and we think about frequently. I think the key thing for us is we always look to invest for growth. So when you think about capital allocation, our our primary conversation is how do we grow this business. We had a question earlier about new jurisdictions. We're looking at them. If you look at our Las Vegas sale, the fundamental driver of that was our ability to reallocate capital to faster growing markets and new growth opportunities. And I think our investments in Macau and Singapore will move out and that will ultimately allow us to grow those businesses, create additional cash flow, which ultimately will be used for either new growth or shareholder return. And so when I when you look at our balance sheet, we think being investment grade is incredibly important. We think it provides us with the strategic advantage. It reduces our cost of debt capital, which impacts our overall cost of capital and makes the financing of new projects more efficient and creates better returns for equity. And also to be fair, we think when we go to new jurisdictions, it puts us in a more competitive position because we have the financial capability to execute the project we're proposing. And so all of these things are very helpful for us as we look for our business when it comes to capital return. I think the idea of shrinking the share count of something we've talked about previously where we think there's a benefit to doing so, we think there is a positive gearing towards share repurchases. We've been very aggressive over the last couple quarters. We like to continue to shrink the share count over time. And to be fair, we're also a dividend pair. We think that's helpful to shareholder returns. As an S&P 500 member, we think it's good to have a dividend as well. So I, I think you know, we have the, we have the free cash flow to continue the return of capital. We're very happy about that given our investment opportunities. We have the balance sheet strength be able to develop a new, new jurisdictions. And so I think you're going to see a balance between growth and our ability to return capital over time. I think the nice thing is when we're done with the Londoner and we're done with some of the other with these major innovation projects in Singapore, given the growth that we're seeing, we'll have the ability hopefully to return more capital and we'll have the ability to increase our program and benefit shareholders. So you'll see us do that over time as our business continues to operate and grow. And so, you know, I think the idea of shrinking the Share Account, I think we're in a good position to do it. I think we have a lot of liquidity out there in the market. We have very strong ability to execute. So I think we're in good shape in terms of our program and the way that we approach it.
Daniel Briggs (SVP, Investor Relations)
Thank you. Appreciate it. Thanks, David.
Matthew (Operator)
Thank you. Your next question is coming from Dan Pulitzer from Wells Fargo. Your line is live.
Patrick Dumont (Chairman & CEO)
Hey, good morning, everyone or good afternoon, everyone. Thanks for taking my questions.
Daniel Briggs (SVP, Investor Relations)
The first one on Singapore, the ADR was very impressive. You know trends there seem overall pretty good despite subdued visitation. Can you talk about, are you starting to see the benefits of the the existing CapEx that you put into the ground so far? And you know, should we think about any disruption as it relates to Tower three that that you know leading up to the completion next year?
Rob Goldstein (Chairman & CEO)
Thank you. Yeah, the obviously the mind we put into the building dust bar has done very well. The results are, you know, we're getting the 2 billion plus star run rate. We're still under construction. There's more to go. Yeah, Tower 3 is disrupted because we don't have the the product from the room. Tower gaming isn't isn't there. I mean, we're doing very well there. But again I represent we have one hand tied behind our back and trying to get through it. So the the road ahead in single looks very positive to us. We think 500 million five, 5600 million 1/4 is in reach in the near future. And as you reference earlier, once the entire building is complete in you know, 25, I do see better members than ever on Singapore. It's a very, very rosy picture in Singapore. And yes, the cap actually employed there is paying off very well. And we, we think it's going to continue to get even stronger in time. And As for ADR, while it's relevant, it's our cash sales are not the drivers. The drivers as our as our casino business, especially our non going casino drop in the table side lock rupture, but it's a very positive fixture. The disruption is real for the balance of the year into Q1 and Q2. But once that burns off and we get tower game open in the full complement of suites, I think you'll see Singapore just continue to be stronger and stronger.
Daniel Briggs (SVP, Investor Relations)
Got it. Thanks. And then?
Patrick Dumont (Chairman & CEO)
As far as it relates to the Macau property portfolio, obviously there's a lot of CapEx.
Daniel Briggs (SVP, Investor Relations)
Going into London or?
Patrick Dumont (Chairman & CEO)
Is it is it relates to the other properties?
Daniel Briggs (SVP, Investor Relations)
There is there anything that we should be thinking about as you start to wrap up London or later this year or you know should we expect 2025 to be pretty much disruption free there?
Rob Goldstein (Chairman & CEO)
Yeah, good point where London will wrap up again in 25. We should, we should note that we are going to undergo there's a misunderstanding perhaps one call about what happens if the niche we are going to rehab some of the rooms in Venetian because we always do, but it's typical you won't see it in the numbers. The building will be you know hidden from the public view. By doing it 4x4 traditional way you approach these things in our industry. So we will undergo a renovation of the room product in at Venetian next year at the closure of London renovation Four Seasons pretty much is done and then we'll we'll sit and see what we want to do with things of Parisian and perhaps some sands, but nothing beyond anything about for the time being.
Matthew (Operator)
Got it. Thanks so much.
Rob Goldstein (Chairman & CEO)
Good.
Daniel Briggs (SVP, Investor Relations)
Thanks, Dan.
Matthew (Operator)
Thank you. Your next question is coming from Steve Wyzynski from Stifle. Your line is live.
Daniel Briggs (SVP, Investor Relations)
Yeah. Hey guys. Good afternoon. So Grant, you've been asked to you, you grant you've been asked, you know, question on on question on visitation twice now. I'm actually going to try to ask it a 1/3 time. So, you know, if if we look at slide 20, you know, it shows that the group visitation was I think we've done about 1.3 million visitors in, in May and June so far. And you know, so I want to ask more about kind of what's going on with the the group side and, and just trying to figure out, you know, maybe has it, you know, do you think Macau has essentially gotten, you know, maybe too expensive and is pricing certain groups, you know, out of the market? And I hope that kind of makes.
Matthew (Operator)
Sense, yeah, thanks for the question. I think the two groups is a, is a broader supply chain issue and, and the changing consumer habits, not not just applicable to the Macau market, but to all the key markets that, that were significant to group markets prior to COVID. I, I think the other, the other aspect that I, I, I should, should have mentioned and perhaps I, I, I could get Wilford to give his perspective as well, is actually during this. We we also have a series of significant announcements on policies that would boost visitation over time, even though in this current quarter the impact may not be be be prominent, you know ranging from individual visitor scheme expansion to to other types of visa relaxation. So, so I think we need to to bear that in mind that things are actually moving extremely positively on the policy side to support future growth and visitation. Wilfred, maybe you want to add to that. Sure. I I think.
Rob Goldstein (Chairman & CEO)
The, the government both at the Macau level and at the national level is monitoring the situation. And that's why you see the recent announcement that there's an additional 10 cities that people that qualify for IBS. And if you look at Macau, traditionally about 5560% of the visitors use the IBS scheme. And this time they added ten cities, which has close to 60 million population. So you're increasing that catchment area and I think the other measures such as a faster and nationwide application for business visa will also benefit Macau. So it will take time for these policies to be promulgated, fully promulgated and and known in these cities. So we're expecting some positive impact in the months to come.
Daniel Briggs (SVP, Investor Relations)
OK, great. Thanks, guys. That's all for me. Appreciate it.
Matthew (Operator)
Thank you. Ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time. And have a wonderful day. We thank you for your.
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