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Las Vegas Sands Corp
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Thank you. Joining me on the call today are Rob Goldstein, our President and Chief Operating Officer; and Patrick Dumont, Executive Vice President and Chief Financial Officer.
Before I turn the call over to Rob, please let me remind you that today's conference call will contain forward-looking statements that we are making under the Safe Harbor provision of federal securities laws. The company's actual results could differ materially from the anticipated results in those forward-looking statements.
In addition, we may discuss non-GAAP measures. A definition and a reconciliation of each of these measures to the most comparable GAAP financial measures is included in the press release. Please note that we have posted supplementary earnings slides on our Investor Relations website. We may refer to those slides during the Q&A portion of the call.
Finally, for those who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to one question and one follow-up question, so we might allow everyone an opportunity to participate. Please note that this presentation is being recorded.
With that, let me please turn the call over to Rob.
Thanks, Dan. Good afternoon, everyone, and thank you for joining us today. Sheldon is not joining us in the call today. He's a little bit under the weather. We met with him yesterday. He's taking some medications making him a bit drowsy, so we decided this morning take a rain check on this one. He looks forward to speaking with all of you on upcoming calls. He did, however, have a message for everyone. That's great quarter, yay buybacks and yay dividends.
Well, let's go to our financial results. We had a very good quarter. In Macao, our adjusted EBITDA was $786 million. We achieved record mass revenues. We increased our market share of revenue in our most important market.
Our growth in Macao is coming from every gaming and non-gaming segment. Margins in every segment in Macao are stable or growing during the quarter, with the exception of our rolling premium direct business where our low hold negatively impact our EBITDA. The strong top line growth in our rolling business of 34.6% over the quarter will positive contribute to our bottom line as hold normalized in that segment.
In 2018, our Macao operations delivered an adjusted property EBITDA of over US$3 billion, an 18% increase over 2017. Overall, Macao market showed strength in 2018, growing GGR by 14% year-on-year. Our Macao properties generated 17% growth in GGR over that same period. It is clear, the Macao market's evolving in Sheldon's vision more than a decade ago to create the critical mass of our hotel, retail, entertainment and MICE offerings, positions us perfectly for future growth.
The opening of the Hong Kong-Zhuhai-Macao bridge is a major milestone that will help Macao grow towards the MICE business in the years ahead, an Engineering feat of unprecedented scale and creates a direct connection between the Hong Kong airport, one of the largest and most important transportation hubs in all of Asia in Macao.
We couldn't be more excited about our plan $22 billion investment in our critical mass, hotel room, retail, entertainment offerings in Macao. We look forward to participating in the benefit and the growing infrastructure in Macao that will continue to increase leisure and business tourism visitation from China.
Looking ahead, we believe that there's no better market in the world than Macao with regard to continued deployment of our capital. Look forward to making additional investments in Macao as we contribute to Macao's diversification and evolution into Asia's leading leisure and business tourism destination.
Let's turn to Singapore, we enjoyed a very strong cash flow, however, VIP volumes and hold were lower this year. We still remain capacity constrained in Marina Bay Sands and hope that the opportunity in the future to make additional investments in Singapore as that's a very strong market, which simply runs our rooms and gaming capacity there.
Las Vegas also a good quarter led by strong convention exhibition business. Before to adding additional incremental entertainment offerings in Las Vegas and the positive impact of the MSG steer at the niche which is under construction as opposed to open in 2021.
Finally, we turn to the increase of capital to shareholders. We raised the annual dividend for the 2019 calendar year. We repurchased $430 million of stock during the quarter. We see meaningful long-term value in the LVS and SCL equity.
We thank you for joining us on the call and let's now take the questions Operator?
Yes sir.
Let's begin the Q&A session. Thanks so much.
Thank you. [Operator Instructions]
We do have a question from Mr. David Katz of Jefferies.
Okay. David.
Hi, afternoon. And it is a nice quarter. I wanted to just touch on Singapore if I may, which candidly came in a bit below what we were forecasting. If you could just talk about the different forces on the plus and minus side, I heard your commentary about it being capacity constrained. But just talk about the core a little bit and what's -- what went well and what's maybe challenging you or creating opportunities?
Sure. First let's begin by recognizing this is an iconic destination. This made off a lot of company for this company. We're really proud definition of an IR It's exemplary in every way. Its biggest challenge, David, by far, is its capacity constrained both from a lodging, from a gaming perspective. We just don't have enough slot machines, ETGs, rooms. We have demand. We don't have the supply.
We'd also look to see more entertainment in the region in Singapore to drive a more premium mass play. We have alluded to in the past and continue to reference the frustration and there's a money movement into Singapore is very difficult. Our rolling business there has been limited for a number of years now.
The growth that remains in primarily foreign tourism into the market for the premium mass segment. And again we just can't create more rooms right now and more gaming when we can. So, that's the frustration.
We played a little bit unlucky here in there in every quarter -- but the margins remain strong. The primary difficult market is capacity constrained. Very proud of the asset. Looking for the chance to invest more in Singapore and grow margin lodging and gaming perhaps in the future, but that's the long and short of it, I could -- I can't tell you how frustrating it is that it's such a wonderful asset that could grow, but right now is not able to.
Thank you. And my one follow-up is a Macao-related if I may. For sure we would all likely agree that the long-term outlook there for that market is quite positive. But just thinking about say the remainder of the year and what we would call -- we don't ask about a quarter, but we can ask about the recall of the medium-term. There are certainly a lot of inputs that we're trying to process whether those are macroeconomic or company-specific et cetera. Help us think through what the rest of the year looks like or what inputs we should be contemplating as we model for the rest of the year for LVS in Macao specifically?
I think you look – I think the best way to look forward in Macao is look backward. 2017 – actually let's just go back to 2016, we were hovering around $2.3 billion or $2.4 billion of EBITDA. I think Wynn was opening. We were opening Parisian as – the Studio City probably opened up, MGM was the horizon.
A lot of people thought Macao has seen it’s best days and we will be share givers and the market would just dissolve into its competition. We fast forward; we've now grown to $3 billion EBITDA a few years later. We've been share takers in virtually every segment, in fact in every segment.
It's a very simple market to understand. It's a mass – premium mass market driven by scale. The VIP segment will continue to be challenging I believe. The mass and premium mass will be the driver.
I was there last week walked all the gaming floors, drove the bridge back and forth to Hong Kong. It's an extraordinary place and it's an extraordinary market. It's just starting to touch its potential.
To think about this for a week or for a month or for this issue, that issue will probably drive me crazy, but if you think about it in the big picture, we grow our EBITDA back to almost the highest level ever despite its huge decline in VIP since 2014.
I think we've done there, which is build scale. We're building more rooms today. We'll were building more retail today. We're building more everything today. I believe that that market will continue to grow.
I think the best way to look at our enthusiasm and our focus is our activities. We’re underway with Londoner, the St. Regis, the Four Seasons. We're a strong, strong believers in Macao, and we're investing for long-term.
Yes, there's always -- it's a smoking issue today or a blip in the economy. There's always something to worry about. We get that. But look at this magnificent market in the last three years what's done. It's absorbed all kinds of capacity and still grown.
We're just very bullish and we are blinded by the extreme size of Macao in terms of the market today, but more important tomorrow. And look at the rest of the rim, look what the bridge has done, the bridge is a game changer. It's a magnificent achievement that accesses all China.
All the airports in China can now land in Hong Kong and get to Macao in a car. The boat is not necessary. If you want to take a boat you can. Even from Central Hong Kong it's almost as quick just to take a car to the new bridge. The new bridge is incredible chilling. It also opens up the rim.
So we're long-term thinkers. We're long-term believers. We don't think there's a market like it in the world anywhere as better place to deploy capital. We're fervent believers on license in 2000, whatever it is 2021, 2022.
So I think your best from my perspective, look at this the mass scale market that's room dependent. Those without rooms will have a difficult time growing their share. Mass demands rooms. Non-Guangdong visitation demand rooms. This is a very special place. It's very unique and we are delighted to be there and investing today. And so that's the best answer I can give you.
If you worry about this Tuesday or next Friday, you'll probably have some sleepless nights. If you think about long-term, you're going to sleep very well and be very well rewarded.
There's been a lot of commentary about the upcoming year. And I think one of the thing you should look at and we spend a lot of time on this in the earnings is that trying to display it different ways, the infrastructure of investment to Rob's point going into the area that allows for the bridge to be effective, it allows for tourists from deeper into Mainland China to actually access Macao and access the growing tourism and any infrastructure that's there is only improving And as you look -- we have Page 15 in the slide deck that shows the amount of growing visitation from China into Macao. And you'll notice that the rate of growth is accelerating.
And so, if you think about the upcoming year and the upcoming several years what you'll see is that the infrastructure improvements will allow tourists to take advantage of Macao and grow the mass business, right?
And growth is very solid high-margin mass business as they look to use the non-gaming amenities that are turbine designed a decade ago. And you think about that amazing press vision where he laid out a plan for this non-gaming amenity system that really creates this tourism drive and that really speaks directly to the mass business.
So if you look at the infrastructure improvement, again it's in the earnings deck and go through those slide we view the mass business as a very strong catalyst for growth for the company for this year for the years to come. And there's been indications of that in the past and we see a very bright future for that segment because of the infrastructure because of the nature of the business and because of the tourism desirability of the assets that we and others have built in Macao.
One of the ironies of the market for me is that, couple of years ago I was concerned too many rooms being built and today everybody wants more rooms desperately. And the fact is it runs incredible occupancy. Demand is there. Demand will keep growing.
Got it. Thank you for your answer.
Thank you.
Our next question comes from the line of Mr. Thomas Allen from Morgan Stanley.
Good after. Hi, how is it going? So just quick numbers question. You said in Macao your rolling direct business had low hold and that impacted to EBITDA, could you quantify that?
No. We're not going to address it specifically. I don't -- I think we've put out enough information about the business to throw a number out there. We just add to the quarter. I think from our standpoint and Rob will address this further. We have a different margin structure within the premium direct and chunk of businesses.
And sometimes based on the nature of the hold and the difference in hold between those two businesses, our normalization on an active basis doesn't need to happen, but it actually needs to happen on an individual basis. We had this happen a couple of quarters ago.
And so from a margin basis because of the nature of that structure it impacts the aggregate margins of the business. That being said, our mass margins are as strong as ever, right? And so I think when you look at the structure of the business, the cost structure of the business, the cost control that we put in place, our ability to get some operating leverage of business that will continue.
I think in this particular instance because of the adjustment methodology and the overall aggregate amount of rolling vine that we had you see some margin change because of that mix.
Tom as we held within normal range across rolling segment for the quarter for the company in the portfolio, but the mix was not in our favor. As you know we have a very strong rolling direct business which held under the expected range. And this segment is much more favorable in terms of margin to us. We did hold above the range for the rolling junket business, but conversely we have a much lower margin in that segment.
So in summary we definitely left some money in the table this quarter it -- significant dollars because we had hold within the range of the direct business. It's a shame, it was in the flip side, it would have been quite a quarter, but it wasn't.
The volumes are there. We keep taking share. We keep growing our rolling business. People for years -- we are ill-equipped to compete in that segment, we just keep growing share. It's really it's sad because we had a amazing quarter had we held up, it didn't.
But our focus can't be on the rolling and appoint it to a luck it has to be on the mass side and that's where you sell and grow and I think that's where the story resides for us. A quarter here, quarter there, a point of luck to point it to a luck is an insolence. It's long-term, it's about the right assets for the mass premium mass and the growth there is extraordinary.
So, that's a perfect segue into my next question. So page 14 on the base mass. That's the premium mass performance. Obviously looking at year-over-year, looks like base mass is outperforming premium mass, but then quarter-over-quarter you saw some weakness in premium mass in the third quarter and then that bounced back in the forth. Can you just talk about underlining trends for those two markets? Which one do you think is going to be stronger in the future? Thank you.
Well, it's a good question. I wish I knew the answer to that, but we'll tell you both are awfully good. We had very strong fourth quarter. We achieved record non-rolling drop in Wynn, 13% growth in premium mass Q-on-Q despite a lot of new competition
I was in New Morpheus last week, which is quite a property, impressive hotel. Macao by the way just gets to be more and more impressive if you go back to the world-class product. We're looking forward to showing you our new Four Seasons product, which is going to be pretty special.
We don’t know exactly what the market grew at in Q4 until all the operators have reported. But we can say, we outgrew the market in non-rolling tables in the first nine months of 2018. We outgrew the market in full year 2017.
So our outperformance in premium mass and mass is not about one quarter. Our outperformance has been achieved consistently, cumulatively for the past seven, eight quarters and we've achieved this despite having the biggest base of business and despite a very intense and very good quality of competition in Cotai.
We couldn't be happy about our position in the market, but we don't stand still. We intend to get better because the competition there is just too damn good and the market opportunity is just too damn big and that's why we look forward to executing completing on the Londoner, the St. Regis, the Four Seasons.
Our position has been simple for over a decade. We believe in the mass and premium mass. Our assets, our arena, our retail, lodging, our gaming is positioned to put us at the top of the heap and grow to $6 billion, $7 billion, $8 billion.
We believe mass is a $30 billion business. I'm not capable of telling you what the breakout is the premium versus base. We'll take it all and we have the assets to take it all.
And I think those who don't have rooms, those who talk about building rooms are going to struggle. Those who have rooms, especially great rooms like we're building are going to grow. And so I think this quarter, we have a few points below the growth maybe, but in the aggregate our numbers are pretty exemplary and we're delighted where we're heading.
Helpful. Thank you.
Thank you.
The next question comes from the line of Mr. Stephen Grambling from Goldman Sachs. Your line is now open sir.
Thanks. Good afternoon. I guess, as a follow-up to the first couple of questions on Macao. On slide 19 you highlighted additional investment in VIP in 2019 as you seek to grow fast in the market. I guess, how do you think about that segment longer term? And I get the math component, but just thinking about drivers there and how you want to position?
It's a more challenged market and it's obvious you can read all the information out there. There's been crackdowns recently. There's all kinds of issues on the VIP. But – and I think we're more confident of the sustainable growth of the premium mass, mass short term, but I wouldn't rule out VIP. This has proven me very resilient over the years. We've really – I've made mistake of counting out a couple of times, but I’ve been wrong. That market is going to bounce back.
Again the penetration in Mainland isn't complete yet. This airport, I mean having driven to the bridge last week and going to the airport, it's just going to change the game for Macao. So this fiscal asset to drive more high end not just from China, but throughout the Pacific Rim into Macao was there.
Macao is the world-class facility of Asia. There's just nothing like it. And honestly there's nothing – there will be no place like it. It's just too good, too far ahead of the competition.
And so I think whatever VIP business is in Asia will continue to mostly go to Macao. We will participate. We've dedicated ourselves to better rooms, better suites, better gaming operations, better relationships as evidence on our numbers. I would not be comfortable, however, if you're solely dedicated VIP or if you -- income comes from VIP. I think you need diversification in the premium mass-mass to take advantage of this great market.
We'll be there. We'll probably share takers in the near future again this quarter. We keep growing the VIP business, but I think it's more challenging in the short-term than the premium mass-mass. That's where the strength resides short-term and long-term. Again, I wouldn't count out VIPs. It's proven to be very resilient and again, market penetration both the non-Guangdong numbers indicate, there's a lot of potential out there in China and the Pacific Rim.
If you haven't been there recently, if you've been to the bridge, the full impact and the full potential of the bridge is unrealized once they open that thing up totally functionally to let it do all it can do. It's a pretty -- its very impressive piece of work.
Fair enough. And then maybe an unrelated follow-up turning to the U.S. I guess there's lots of the noise consolidation talk in the space, I guess, how do you think about M&A as part of your capital allocation framework versus reinvestment in Macao versus expansion in new markets?
So, it's interesting there's always a lot of speculation, particularly, in our industry about the opportunity for acquisition. I think if you look at the portfolio that Sheldon designed and built from the ground up, we believe we have the best assets in the business.
And for us, we think investing in those assets are the best way to create long-term shareholder returns. And we've demonstrated that over the years. When our Chairman has a vision, it's been proven that it creates tremendous value for shareholders. And so we've invested in the properties that we have billions of dollars of additional CapEx in order to keep them fresh, keep them relevant including the junket opportunity prior question.
And in our mind that's the best way for us to grow our business and enhance our return of capital as our cash flows grow. And for us, M&A is not really something that we would look to unless it was unbelievably compelling and we felt would simply augment the strategy and vision of the Chairman that we've set out on.
And so from our standpoint, if you look at our balance sheet what are the strengths there, look at the way we handle our return of capital, the way we handle shareholder returns, we're very much geared towards our dividend which is the cornerstone of our return to capital policy, very much geared towards share repurchase. We bought $403 million this quarter because we have liquidity and we were confident in our future ability to grow cash flows. And really we've got our $22 billion program in Macao.
So, when we look at those things and you look at the way we're allocating capital, I think we've made a pretty clear statement about how we feel about the business and about where we want opportunities to exist.
We've never really bought anybody and so I don't see that changing unless the Chairman has a different view about the opportunities that an M&A transaction may provide. But from our standpoint, we've been pretty clear about our strategy, about his strategy and that's how we intend to execute.
Awesome. Yay dividends, yay buyback.
Thank you. Next?
Your next question comes from the line of Mr. Anil Daswani from Citi. Sir, your line is now open.
Hi, good morning guys.
Good morning Anil.
Thank you. Just wanted to touch base on the premium mass standout performance that you guys had in the fourth quarter. How would you attribute that? Is that driven by the bridge? Is that driven by the new suite that product that you opened in the Parisian? Is that driven by higher spending?
And consequently, how do you think the further improvement in infrastructure with both the opening of the LRT as well as the pension extension of the high-speed rail? Are those drivers as significant as you guys have mentioned do you think the bridge is?
A couple of things there. First of all, the bridge at this point, we don't think is that impactful. It's more of – having driven last week, it's unfortunately underutilized. There's not a private car licenses to maximize what's going to be a vast potential.
It will be a driver in the future, it’s not today. It's more about busting a daytrip, still taking out the tables the driver. What's driving our premium mass business is better product.
We have a real mantra around here that I think better the aesthetic appeal of this company, we're getting there. We walked last week to our new Four Seasons suites, our new St. Regis, our new Londoner suites, all being under design and construction.
Look what happened to our Parisian property, it's just terrific. The returns on that investment, just can't do better. Those rooms we reconfigured, reconstructed have yielded terrific results. Parisian is now at a run rate of 130. Who knows where it goes to?
Our Venetian core suites, the premium mass are just delivering, which we had many more of them. It's a suite-driven quality product market. And it's not just about quality of product, it's about quantity. So it's great to have a small hotel just can't get enough. You need more. There's not an operator over there, not a one that would like to add more top-tier suites and we're building them and everyone wants them.
I think the evidence of more you'll see – the success in the Wynn is evidence that quality wins and scale wins as well. We have both the quality and quantity. We also have a hidden – everyone in Macao knows it about a hidden secret, but our arena, our Cotai Arena built back in, I don’t know 2007 with The Venetian, which people thought was pretty funny at the time is probably one biggest drivers of premium mass business in the market.
Last week we had a great Asian entertainer there, packed the city, packed our hotel. Our numbers on Saturday was an incredible numbers for a Saturday. And the fact is that that's a tremendous asset that people want to see the star entertainers be it U.S. stars or Asian stars. That is a 40-week a year events we have on Friday, Saturday, Sunday with top-tier stars, top-tier acts that people cover those tickets.
And whole town if you talk to other operators will tell you, what happens as we bring in these kinds of acts. It makes a whole different weekend, a whole different agenda. And you can see that our numbers are popped. So entertainment, suite product, quality suite product, quantity suite product.
By the way retail asset last week walk in the Four Seasons, I got knocked over by people trying to get to the stores. It's an amazing thing to watch. It's experiential. These young excellent people come from further away. They stay longer. They want better things in their life. They want entertainment. They want to stay in fancy rooms. They want to buy fancy clothes and they're having a hell of a time over there and we provide that experience.
That is the advantage we have and we have it both in terms of quality and quantity. And that is driving our business. Tomorrow that bridge will be a big driver for the entire market, but today that's what's driving it.
Thanks. And just one quick follow-up on Singapore. Do you guys feel that you're losing a touch of market share, or is it the market that you're seeing that's getting a touch weaker?
I don't know. I don't think – we're very comfortable with our performance over there. I just – I can't speak to – look at profitably more than market share will fix it and making money here.
If we can extend more credit or do more things to create more market share and profitability, I'd be in favor of that. We feel we're maintaining our market share and more importantly our margin profitability. Again our focus over there is trying to figure out how to get more capacity like Macao, wish we have built a couple of St. Regis or a couple of Four Seasons properties, because it had the demand in the foreign markets around Singapore, have outsized demand and an outsized MICE demand. I just need more rooms and more slots and more of everything to take advantage of it.
Thank you.
Thank you.
Our next question comes from the line of Mr. Joe Greff from JPMorgan.
Hey, good afternoon, guys. My first question on Macao relates to your mass customer behavior within the fourth quarter. Was there any or much of a difference in behavior say at the beginning of the quarter versus the end of the quarter? And where I'm kind of going with this is, maybe – am I being overly optimistic that maybe the average mass player visited more confidence throughout the quarter. And then I have a follow-up also related to Macao.
Joe, I can't give you color there. I don't see that in our numbers. I don't see a elevation or decline. I think it's pretty consistent. I wish I – I'm not sure I can give you a good answer than that. We don't see a whole lot of differentiation from October to December.
Okay. And then sticking with Macao. Since the smoking ban earlier this month on the VIP side, can you talk about what sort of impact you're seeing? You are the first guys to report, so you're the first guy to sort of talk about it. Thanks.
Right, right. We walked to there last week. We spent a long very productive week and we walked all the properties and hours over the properties and looked at everything. My belief is, the smoking issue is a small speed bump to this market. It's a speed bump that will disappear.
Areas that had smoking previously may suffer, because the smoking rooms now become the new predictor of where you're going to gamble. So example, if table A had smoking, but table B didn't, but has a smoking attached to it now, B will be larger than A's performance in the future.
But between all the smoking, what you're seeing in the market, we had -- most of us are open already and most of then acted very well already for smoking, plus the outdoor space which always having some buildings, I don't see this issue as being – if you're really worried about it, you shouldn't be. This is a short-term issue. It will resolve without material impact.
The smoking rooms, the outdoor space, the demand to gamble. I know everyone's worried about January, but we walked around Macao last week and if that’s reason for worry, it looks pretty good to me. Smoking will dissolve and disappear. I think those who take it seriously should move on and find something else to worry about. It's not going to be a long-term impediment.
Great. Thanks a lot.
Thanks, Joe.
Our next question comes from the line of Mr. Chad Beynon from Macquarie. Sir, your line is now open.
Hi. Thanks for taking my questions. First on, speaking with Macao, your retail segment, I guess both on Macao and Singapore, it appears that the sales per square foot increased in the fourth quarter. That's evidenced in one of your slides and then also in the slide that you talk about turnover rate.
And this is different than what we heard from some of the luxury retailers that have reported and highlighted some weakness in Macao, Hong Kong and Southeast Asia as well. So can you maybe just elaborate on this? And if this could potentially affect 2020 base rents or turnovers, just some more color on the strong performance. Thanks.
Well, you looking into slide, I'm not sure I miscalled that, business is booming. I walked through The Venetian last week and I don't know if we had a sale going on or something, but it's truly incredible to see the people there. My sales – want more these kind of numbers. We did 17.46 a foot. The Four Seasons is now back at 58 heading for 6,000. Honestly, I went to the Four Seasons though I didn't understand that the amount of people on a Tuesday afternoon, Wednesday, it's just extraordinary. I don't know what you're hearing, but we're awfully happy our retail numbers across Asia. And again, this decline bringing more declines. Extraordinary tenants want more space. Our retailers are extremely happy with our numbers.
Our team -- our retail team has done a hell of a job over there and I think it's clear showing ahead we see no decline. In fact if any strength goes to strength, maybe it's about again scale and you walk through Venetian and The Four Seasons, you have this incredible assortment of land of the tendencies that cumulatively give you the most amazing indoor shopping experience.
And the faces of the people there, young, affluent -- I made a comment to one of our team members, the Chinese consumer looks so sophisticated, so fashionable and frankly, so fluent and they're buying and they're buying with both hands and we couldn't be more pleased with our retail performance. I don't see any slowdown. I think it's going to keep booming. Chinese New Year's ahead, it's very positive and very exciting across our portfolio retail it gets better.
And keep in mind that's one of the reasons they stay with us, they eat with us; they go to our entertainment facility. We've got this ecosystem of shopping, eating, entertainment, gambling, it all looks in tandem. And when you see it on the ground last week, we were there for four or five days, it's pretty exciting to watch and it's not going to change my opinion. That success in our retail is here to stay.
Great. Thank you. And then my follow-up just when you're speaking with your junket partners and talking to them about how they're handling credit during this China slowdown and trade war situation, did you see anything more pronounced in the fourth quarter with maybe some of your junket partners pulling back on credit extension? And when the trade war is resolved, do you think that could be -- maybe a positive with some more credit coming into the market?
It's really tough for us to comment on global macro versus the activities of our junket partners week-to-week. It's very hard to make that connection and sort of add any commentary there.
What I would say is that we've been pretty consistent over the last year with the way we work with our junket partners in terms of prioritize extension -- that we have extended to them. What I will tell you is we've been investing in the segment. I think we've been reestablishing and strengthening the relationships that we have with our partners over many years. We've been investing in their spaces, investing in amenities and service those spaces and investing in the team members that help service them.
So, we feel like the segment is a powerful one. We think it's something that has a lot of opportunity. We've grown in the segment the last couple of quarters and I think from a credit standpoint, we've always been very prudent and been very measured and I think we'll continue to do. And I think we have a good dialogue and it's an active dialogue with them to get our ebbs and flows, but it's not something that we can look to a global macroeconomic effect and make any connection to. It's really sort of dealt with on the ground as we operate the business dealing with competitive forces.
Okay, appreciate it. Thank you very much.
Thank you.
Thanks Chad.
Next question comes from the line of Mr. Shaun Kelley from Bank of America Merrill Lynch.
Hi, good afternoon. Just wanted to kind of go back to the sort of mass customer segmentation and what you guys are seeing there. In one of the slides you guys kind of showed the -- a very modest decline in mass spend per visit and I think you noted a pretty big uptick in daytrip visitation. Can you just give us sort of your outlook for what kind of customer as you guys are seeing in the market? Is this sort of the new normal? Is this being driven by infrastructure and some of the changes there? Sort of what's driving it? You continue to see, obviously, very healthy visitation numbers into the market and is the sort of the new normal, or do you guys expect us to kind of balance out or change over time?
So Shaun, its Dan. If you look at page 15, I think and Rob has referenced this earlier. Guangdong province that first line, 10.5 million visitors from the adjacent province plus you've got visitors from Hong Kong. The bridge makes it easier for people to get over and back over time. It runs all night, not to worry about a boat.
At the bottom of it – of the chart you've got 14.7 million visitors from Guangdong. The issue that the market is going to have is without more hotel inventory. All the hotel rooms will be taken up by wealthier and wealthier people, which is great for premium mass, but it also causes a squeeze effectively where people can't find a room if they're just coming over.
So that makes a great market in the base mass It makes a great market in the premium mass. And for the future to get the $30 billion of mass revenue in Macao, more hotel inventory must be built. So the market will continue to evolve. The customer’s cell will evolve, but what's crystal clear is that without more hotel inventory, there won't be enough capacity for everyone who wants to come.
So that creates the opportunity for us on both sides of the chart of the previous chart on – the previous chart on page 14. They are both going to continue to get better and better over time. The growth is great in both places and we're very happy to have daytrip visitation. We're very happy to have premium mass visitation. We're happy when the Chinese people get wealthier.
There's no way that any of this won't continue as long as more hotel inventory gets added to the market. If no new hotel inventory ever gets to build, the market becomes more top-heavy, which would be unfortunate and it would limit growth. But we don't expect that to happen. We expect more hotel inventory to come in.
We love to grow more rooms today if we could in non-gaming hotel room. We would love to be investing more money in Macao. We've made that clear with the government. We are such staunch believers in the atrium where sleeping rooms for every segment, MICE, leisure, gaming, it's what Dan’s pointing is so evident when you're there in January and you can't get a sleeping room, it's clear everybody needs more sleeping rooms in that market.
Thank you very much. And just a quick follow-up, switching to Vegas. Any color you can provide on just sort of the cadence of how you guys are expecting RevPAR to play out as we're seeing through the balance of the year? Just – or what you're seeing on convention side and convention mix? It looks like 4Q is quite strong but we saw a bigger volatility in the market broadly in 2018 than what we're used to. So just sort of, kind of the health and maybe again cadence of what you're expecting to see there?
So we had a tremendous quarter. It was a great result from the room revenue side. We're very pleased with our operations there. Our revenue per occupied group room night's incredibly strong. And we see that continuing.
So far things have been very good. As you know we don't give RevPAR guidance, but we're very pleased with the progress that we've made in the Las Vegas market. Rob will probably talk a little bit about the room night, the group room night expectations, but it's a practical matter I think we're very pleased with the operations team here. They're doing a great job, growing different segments of the business, including our boat rock drop, which we're very pleased with.
But again it's highly volatile and some of the non-gaming business, which we believe we can invest in the future to grow. But from a standpoint of Vegas, it's been growing well and we're very pleased with the quarter and we think some of the tailwinds will be helpful for us coming up.
Team here is going to be very bullish in 2019 and group volumes and feel very strong about how the market is progressing. No fears for 2019, strong group market. We'd like to win a batting cage in the casino. Other than that our lodging and our -- if you walk around this town in January, the CES and the shot show which is happening it's pretty impressive place Las Vegas, especially in January. So we feel very good at our prospects in 2019 as well as the entire Las Vegas marketplace.
In terms of our Venetian Palazzo property, we've done a lot of reinvestments here. If you've getting you've seen some of the results. We're very happy to floor space that's been renovated. We've got a lot of new restaurants on offer. We've made significant investment in the rooms and other spaces that we feel that it will continue to make the property competitive to position us well for future growth in market.
And probably a lot warmer than New York too. Thanks a lot guys.
That’s a rumor, yes.
Our next question comes from the line of Ms. Felicia Hendrix from Barclays.
Hi there. Some of you also sound sick, so I hope everyone is well tuned.
We anyway sound that way.
Yes, so Rob look you talked a lot on this call about what you've been seeing in mass and VIP. But on this VIP side, you just -- you outperformed so significantly, I just wanted to continue to dissect that a bit. Just wondering on the VIP side, so given that outperformance were those unplanned for you, or do they surprise you as well? And I'm also wondering is the strength there that the driver for the decline in EBITDA margins in the quarter?
Well, I think we alluded to earlier the mix on the -- our rolling business both direct and junket was very strong. As you know our rolling business direct is very strong there. Our margins are much higher in that piece of the business. And we have played lucky in the wrong side of the equation. The junket played strong and the rolling direct played very weak and it cost us real dollars.
As far as our commitment that we've always been a believer that important component is not the driver, it's a small portion that roll profitability. But we enjoy the growth and we believe it's important to keep competitive and we've done a very good job creating a better aesthetic in the junket rooms and the rolling rooms. We've built these suites which we have plenty of.
The entertainment obviously is an unfair advantage. It drives amazing amounts of rolling business direct and junket. I think we just continue the course. We will be subject to the market's ups and downs as it relates to money flow and all the challenges the market face. We can't work around that.
So our base business, the premium mass, mass remains our -- the money part of our EBITDA the strong part. But we're happy to participate in junket growth. And now it's planned -- the team is very, very focused on trying to get more competitive with the right spaces, with the right junket arrangements and it's paying off.
And frankly, we have the advantages anyway of the entertainment, the suites all the good stuff we have, why not just deploy it further into that segment and add to our profitability. And so as part of our entire EBITDA ecosystem, it's helpful. It won't drive our business to 4 billion, that's where the mass -- premium mass comes in. But it was a planned strategy, it wasn't luck solely and this quarter was unlucky.
But it will bounce back and I think you'll see some very good news ahead in the future of 2019 for our rolling business.
Okay. And then just staying on that, I know you gained a lot of share on the VIP year-over-year, but quarter-over-quarter it looks like it's down about 100 basis points. So is there any way to tell this early in the game who you -- who might have taken some share? And again, I know the overall market VIP number that you put in the deck is that -- is a guest, but…
Yes. The problem, I think the world you can't – trees don't grow straight to the sky. There are some ups and downs and, yes, a little blip there, but overall there got to be performance the last couple of years. I look at the last two years, what staggers my imagination.
I sat with rooms of people who told me we would be under $2 billion of portfolio EBITDA in – by 2019. We would fall, we'll loose share and we'll be falling apart and the world comes to an end. And here we are sitting on $3 billion a year, 18% growth, material impact in all segments. And I just couldn't be more proud of our team and our focus. And we just keep growing in the right direction.
And for those of you who are in this for the long term, like we are, I think you'll be very, very well rewarded down the road of our performance. We are in the right place, right time, right assets and we'll take on all comers in terms of segmentation, junkets included, rolling direct. So very bullish. A blip by 100 basis points, I wouldn't get too excited about. Not material.
Thank you.
Yes.
Our next question comes from the line of Mr. Robin Farley from UBS.
Great. Thank you. Rob, you mentioned earlier in the call. You've been talking about growth and you said the Londoner is underway. I wonder if you could just give a little bit more specifics about the timing of…
Sure.
And potential disruption? It seems like it could be hard not to have it, and so just to manage expectations about it. Thanks.
Sure, sure. No, a very fair question. First of all, I want to make sure everybody understands. We developed about 70 million square feet at LVS over the years, between all our different properties. So I think we're – I read some notes, people are concerned about what's happening to Londoner.
Don't be concerned. It's going to be a magnificent success story that we'll be opening probably late 2020. It's underway already. It's a big challenge. We're taking a 1,200-room hotel and making into a 600 rooms all-suite hotel in The Londoner. There will be some disruption, Robin. And we'd be silly to say it wouldn't be.
But it's a weird process in that and we're making progress in design approvals. We're continuing labor. We're making progress on our quotas. The government support is there. And I think the truth is, we're going to have an interesting process here whereby we're running – still running a major casino there under the SCC umbrella, while we're developing Londoner, we still have Dragon’s Palace open the entire time.
We will open the St. Regis before The Londoner opens up. It will be a work in progress for the next 18 to 24 months. And there will be disruption. I'm not prepared to quantify, I just can't. We will not lose a table game or a slot machine in the portfolio. We have the ability to transfer assets in the SCC as well as on to other gaming floors if need be.
I think some of the people in our team are pretty astute. And I think we're able to move our assets around to make sure we maximize them. I'm pretty confident that the disruption is going to be not as bad as other people anticipate.
I'm also more confident that at the conclusion people who are kind of making these comments about, gee, how can you take away a property making $800 million? Well, when it makes a whole lot more than $800 million, perhaps long-term investors will recognize, there is no better way to invest our capital than the SCC transformation in Londoner.
Some have referenced earlier to Patrick about M&A. There is no M&A that compares to this transaction. The return on this invested capital will be breathtaking. And I think those who are questioning that should look back at the Parisian which has now past 20% return on invested capital. Look at The Venetian now steamrolling towards $1.4 billion $1.5 billion.
I think someone's got to pay a little attention to our past successes and give us some credit for Londoner. Yes, there'll be some disruption. We recognize that. Perhaps that EBITDA will transfer along those gaming assets to other properties in the portfolio and limit that disruption. But in the end, if you're a long-term thinker, you want to make money for long-term, this is a game changer for us. We're going to take a property that's been subpar and make it the equivalent to a Venetian-style property except on a twice as many sleeping rooms and fully-themed and fully-authentic London-style. And I think the result is going to justify the investment and the time and the effort. The disruption we'll have to wait and see how bad it gets. We're pretty confident that our team there is pretty astute. So, that's our take on Londoner.
No, I appreciate that. And just one clarification, it's not a question whether you'll get a return on investment; it's just literally trying to think about what expectations should be for this year. When do rooms start coming out of service? And kind of what percent of rooms will that be, like just to think about maybe that's when we'd see some impact?
So, post-Chinese New Year's will start -- by the way St. Regis will open up to support this share to the public to open that building up and sort of have access to the casino that way, but post-Chinese New Year, you start seeing. The Four Seasons is going to open up in the fall of 2020. Londoner comes out of -- The Londoner transformation -- from the current holiday [indiscernible] happening in March and April, the full transformation and it will be down for the 12, 14 months where it's going to take to transform it.
But the most of the property, again, the Conrad remains intact. The St. Regis Hotel remains intact. We are building a new St. Regis behind the current St. Regis that is under construction. Dragon's Palace remains intact until the end. So, again, if there's different dates, the one thing does come down, we complete close before the holiday in 1,200 keys post-Chinese New Year. We open them probably late in 2020, that's the biggest single thing.
Keep in mind too Rob that that -- those 1,300 hotel rooms like Holiday Inn are the least productive hotel rooms that we have in the entire portfolio. They are great for families. They're great for people who come over. The product they were creating is going to be even at much more productive, the same way that we saw at the Parisian taking smaller rooms out and creating larger suite. We expect to see the same kind of accretion.
So, we're not losing that much when we take those hotels out of service on the gaming side, in particular, and so there is a big benefit that we get and a small kind of degradation, but you get a big outsized benefit once you're completed.
What I don't know Rob is what's going to happen around the properties as we start tearing things down, the facade on the strip there that's going to be disruptive and all that. But we have alternative ways of accessing the building. So, we're going to wait and see how we run this thing, but a lot of confidence the team there is really skilled at wanting to transfer people. And, again, we have lot of the properties we can move the demand to. So, hopefully, we can limit disruption as we build this thing for the future.
Okay, great. Thank you very much.
Thank you.
Our last question comes from the line of Mr. Carlo Santarelli from Deutsche Bank.
Hey guys. Thank you. Rob just quickly on kind of better understanding the VIP strategy right now. In terms of where you're seeing the majority of the growth both on an absolute basis, obviously, revenue up significantly this period. Are you seeing it more through the junket channels or more through your direct channels?
If I recall -- and I'm not sure you're going to provide color on this, but if I recall, your direct mix maybe used to be closer to 30% several years ago. And is that roughly the same and where is the growth coming from?
You're right the first time, I'm not going to provide the breakout, but I appreciate the question. The answer is both; we're getting strong, premium and direct play and premium, rolling, direct and we're also getting strong junket. Our junket partners have been terrific. It's coming both ways. And I think that the point is we're number one in premium direct in the market and growing.
And the truth is that's a very simple equation is back the same old story assets. When you have the best entertainment in town, you have these magnificent shows they want to see, when you have these junket rooms that are getting better and better.
And more important, again there's a problem over there. There's just not enough sleeping rooms or quality of these high roller type customers be it direct or through junket. And as you know because you understand this well than anybody, the junket business has evolved where the customers dictate where they want to stay now.
The old days of the junkets being in command of where people gamble that's over. So the better products, the better properties, the better entertainment facilities, the better retail places attract the customers. So we're getting a lot of that business from both direct and from the junket partners.
And as you know they feed off each other and they complement the non-rolling piece as well. And again our ecosystem with retail, entertainment, too many suites for anybody else, I mean, we just have much more product than anybody else.
And as a result, we're going to keep growing that. The only downturn as you know is the frustration, the macro frustrations in the market as it relates to that segment and that we can overcome. But assuming the business is there, the economy is healthy and the customers are showing up, we're going to keep gaining outsized share of that segment. The same we're getting outside share of everything else.
I think the short-term views of Macao has always been a mistake, this is a market fueled by product, by quality and by scale and we had that in space. And I think as long as that holds up along with our stellar management team, we're going to continue to be a very strong force in Macao on the road to $4 billion.
Great, thank you. And then I just want to be mindful of the time, but in terms of your buyback activity in the quarter, could you just talk a little bit about the thinking that that went into, obviously, accelerating your pace of spend? Is that, hey, we find valuation attractive? We have, obviously, a very strong balance sheet, or kind of what was different in the 4Q with respect to your approach to the buyback relative to prior quarters in the year?
I think, yes, to your first two statements and I think we have raised liquidity earlier on in the year for the purposes of returning capital. And we felt very strongly that we have a growth of potential. We're investing $2.2 billion as Rob has been laying out in the Londoner as well as other high potential projects in Macao and the Four Seasons and St. Regis.
We see a lot of long-term value in the equity here. It's plain and simple, but Chairman sees a lot of long value in the company, believe that it will continue to return capital in meaningful way, and we have the liquidity we want to take advantage of.
And so that's the nature of the repurchase that you saw in this last quarter and we'll look to be aggressive again in the future, because we feel very strongly about our returns and the potential of the investments that we're making. So that's the result of that
To put it to simple, gave buybacks.
Gave buybacks.
Understood. Thank you, guys.
Thank you very much. Appreciate your time, Carlo.
Thanks very much, everyone.
Thank you all for participating. That ends today's conference call. You may now hang up.