拉斯維加斯金沙集團 (LVS) 2016 Q3 法說會逐字稿

Good afternoon, welcome to the Las Vegas Sands third-quarter 2016 earnings conference call.

I will now turn the call over to Mr. Daniel Briggs.

Thank you, joining me on the call today is Sheldon Adelson, our Chairman and Chief Executive Officer; Rob Goldstein, our President and Chief Operating Officer; and Patrick Dumont, our Executive Vice President and the Chief Financial Officer.

Before I turn the call over to Mr. Adelson, please let me remind you that today's conference call will contain forward-looking statements that we're making under the Safe Harbor provisions 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.

We also want to inform you that we have posted supplementary earnings slides on our investor relations website for your use.

We may refer to those slides during the Q&A portion of the call.

Finally for those who would like to participate in the Q&A session, we ask that you limit yourself, please, to one question and one follow-up question.

So we might allow everyone with interest to participate.

Please note that this presentation is being recorded.

With that, let me (inaudible) I am please to introduce Chairman, Sheldon Adelson.

Thank you, Dan.

Good afternoon, everyone and thank you for joining us today.

I'm pleased we continue to have execute our strategic objectives during the quarter and delivered the strong set of financial results.

With company-wide adjusted EBITDA reaching $1.140 billion, an increase of 9% over the prior year.

The quarter was distinguished by an outstanding result in Macao, where we achieved solid growth in mass gaming revenues, increased our EBITDA and profit margin and opened the Parisian Macao with a smashing success.

In Singapore, Marina Bay Sands continues to deliver steady cash flow of adjusted property EBITDA being in line with last year.

The resilience and consistency of cash generation reflects both the strength of our business model and the geographic diversity of our cash flows which, in turn, underpins our balance sheet strength.

Accordingly we can and will continue to return excess cash to shareholders while maintaining our ability to invest in new development opportunities.

As you may recall I first indicated back in January that we were seeing signs of stabilization in mass gaming revenues in Macao and in June our mass gaming revenues saw positive year on year growth for the first time in two years.

I am pleased to say that this encouraging trend continued in the third quarter.

Our mass table revenues grew by 6% year-over-year.

The first quarter positive growth since quarter three of 2014.

This growth rate accelerated to 15% in the month of September as we benefited from the strong opening of the Parisian Macao.

Nine years ago we opened the Venetian Macao which was the first step in realizing my vision for the Cotai Strip.

Critical mass of MICE-based integrated resorts that will contribute to the development of Macao as a world center for leisure and business tourism.

The opening of Parisian Macao not only significantly enhances our critical mass on the Cotai Strip, but adds another themed, iconic, must-see destination in Macao that will be complimented to the Venetian Macao.

While I never doubled the Parisian's destiny for success, it was nonetheless very gratifying to see the property open with such strong patronage across all its different facilities and amenities.

For the first 18 days of operations adjusted property EBITDA averaged $1.1 million per day and daily visitations to the Parisian exceeded 40,000.

We experienced no noticeable cannibalization at our existing properties after the opening of the Parisian.

And, if anything, we saw an increase in activity in the hotels on our Cotai Strip development including the casinos.

Our marketing efforts leading up to the property opening clearly paid dividends.

At ParisianMacao# our major Chinese social media channels, recently exceeded, listen to this, 1.2 billion views and impressions.

To the best of our knowledge this is unprecedented.

This awareness has translated into strong property visitation.

Based on our customer surveys at the various points of entry in Macao since the Parisian opening, the most visited casino resort in Macao remains the Venetian, but in second place was Parisian.

My strategic vision was to create a critical mass of interconnected resorts on Cotai.

With the completion of the Parisian, we have almost 13,000 hotel rooms and four interconnected resorts.

Over 840 stores across four shopping malls, two million square feet of meeting and exhibition space, and four performance and event venues.

Including our Venetian Cotai Arena, which can be utilized either for our MICE business, or for major entertainment events.

This critical mass of product and amenities allows us to cater to virtually every type of visitor.

Business and leisure visitors to Macao, will be able to enjoy all of this, and more, under one roof, at one destination, without ever leaving the buildings.

You never leave air conditioned space.

Because of our industry leading investments in MICE based integrated resorts in both Macao and Singapore, which places us in the pull position when it comes to emerging market opportunities.

We are unique in the absolute scale of our EBITDA and cash flow, as well as in our dominant share in the industry's EBITDAR and cash flow.

Scaled diversity and critical mass allow us to outperform our competitors.

Our ability to generate consistent and industry-leading cash flow, in turn, underpins our balance sheet strength.

That balance sheet strength had 2 times net debt-to-EBITDA at the end of the third quarter, allows us to stay fully committed to our development plans while continuing to return excess capital to shareholders.

Again, this is unique in our industry.

Let me give you some additional highlights of our results in Macao for the quarter.

For quarter three adjusted EBITDA for our Macao operations was $629 million, an increase of 15% against the prior year, and an increase of 29% against the prior quarter.

Growth was driven by strong mass gaming revenues, continued execution on cost efficiency programs, and higher hold in the premium direct segment.

All normalized EBITDA was $565 million, up 5% against the prior year and up 14% against the prior quarter.

Hold-normalized EBITDA margin in our Macao operations improved to 34.7%, an increase of 170 basis points against the prior year.

Primarily reflecting cost efficiencies and improved business mix.

Rob and Patrick can elaborate on this later.

We have realized more than $300 million of annual cost savings since quarter one of 2015 and we also achieved our annualized cost avoidance of $140 million by leveraging consisting resources for the opening of the Parisian.

Sustainability, including energy efficiency, is a strategic imperative for the company, and we are proud that the Parisian Macao is our most energy efficient property to date.

The Parisian Macao is targeting lead silver certification the new construction and would be the first integrated resort in Macao to achieve this distinction since the entirety of its operation.

Lead certification addresses sustainability measures, including energy and water efficiency, waste management and indoor air quality.

We are proud that our focus on sustainability will help us minimize the impact we have on the environment, while also providing a financial benefit in the future.

A mass table gaming revenue, in total, grew by 6% year-over-year while our premium mass segment grew by 15%.

A solid result given the significant increase in gaming and hotel capacity in the market.

We experienced broad based growth across premium mass and mass segments underpinned by our ability to drive increased patronage with hotel accommodation, shopping malls, and entertainment events.

During the quarter which included the peak summer season, hotel occupancy across our portfolio increased by almost 4 percentage points against the prior year and 90%, despite significant growth in both our own inventory and that of the markets.

This again highlights our advantage during peak periods with the higher hotel occupancy leading positively into our gaming and retail revenues.

In a market where peak periods, weekends and holidays, matter than ever before and where mass market customers will generate the lion's share of future revenue and profit build, our capacity advantage was further strengthened by the opening of the Parisian.

The Parisian Macao generated $19 million in adjusted EBITDA in its first 18 days of operation.

Mass table and slot revenue per day at the Parisian was $2.6 million, while hotel occupancy was 88%.

Not only has the Parisian been successful as a standalone property, I believe that the Parisian also benefits our entire Cotai portfolio.

Our overall Macao property visitations increased by 19% in September compared to the same month in the prior year.

The Plaza Four Seasons property in particular, has experienced an uplift in visitation and business volumes since the Parisian opened.

It is also worth noting that despite the recent increase in the supply of luxury retail in Macao, our retail sales at Four Seasons mall, grew by 7% in September.

The completion of the bridge between Four Seasons and the Parisian in late November, will further increase the synergies in traffic and patronage between our properties.

Last night I got a call from Wilfred Wong, President of Macao, confirming that we will open by the end of November.

We'll open that bridge, pedestrian bridge connecting the Parisian with lot two.

We remain fully committed to playing the pioneering role in Macao's transformation into Asia's leading business and leads the tourist destination.

Our track record in being transformative pioneers in MICE, retail and entertainment speak for itself.

In summary, we regard it as a privilege to contribute to Macao's success in realizing its objective or diversifying its economy.

Supporting the growth of local businesses, providing meaningful career development opportunities for its citizens, including through our Sands Academy, and reaching its full potential as Asia's leading business and leisure tourism destination.

Regarding Sands Academy, we were the first ones in Macao to include a career development center of this scale, of any scale, in our operations from the beginning.

Our first career development center was opened nine years ago on August 28, 2007, when we first opened the Venetian Macao.

We have been committed to the career growth of our team members since the beginning.

We have steadfast confidence of both our and Macao's future success.

Now, moving on to Marina Bay Sands in Singapore.

We delivered a solid quarter at Marina Bay Sands with EBITDA of $391 million.

[Old] normalized EBITDA was $368 million.

Our mass win per day was in line with prior year and grew 6% against the prior quarter in constant currency.

Electronic gaming revenue reached an all time quarterly record when measured in Singapore dollars.

The hotel continued its strong performance with occupancy of 98% and an ADR of $475, which was an all-time record for Marina Bay Sands and a 10% increase compared to the prior year quarter.

Our retail mall continued to outperform the Singapore market with tenant sales per square foot for the year ending September 30 of approximately $1,400.

Let's move on to my favorite subject.

Yay, dividends (laughter).

The return of capital to the shareholders.

Las Vegas Sands Board of Directors has approved $0.04 increase in our recurring dividend program for the 2017 calendar year, bringing our annual dividend to $2.92 or $0.73 per quarter.

We remain committed to maintaining our recurring dividend programs at both Las Vegas Sands and Sands China and we remain committed to increasing those recurring dividends in the future as our cash flows grow.

At the same time we will remain opportunistic in returning excess capital via share repurchase program.

Las Vegas Sands Board has authorized the amount remaining under the prize stock repurchase program for another two years.

While we chose not to repurchase any stock this quarter, we look forward to continuing to utilize this stock buy-back program to return excess capital to shareholders and to enhance long-time shareholder returns in the future.

Our industry-leading cash flows, geographic diversity, and balance sheet strength, enable us to continue these recurring dividends stock repurchase programs while retaining the financial strength to invest in for future growth and pursue new development opportunity.

This was another quarter in which we accomplished many important strategic objectives.

Our original vision for the Cotai Strip at Macao was further realized with the addition of the Parisian and the new property enjoyed a very strong opening.

The structural advantage created by our unmatched critical mass and diversity of offering was very clearly on display in our strong financial results during the quarter both in Macao and globally.

All of this enables us to look ahead to the future with confidence.

We have a strong organic growth outlook.

We're in a great position to pursue new development opportunities.

And we have both the intent and the financial strength to continue to return excess capital to shareholders.

Before we get to questions, I would also -- I would like to welcome Lawrence Jacobs, known as Lonny, our new General Counsel, to our company.

Lonny brings a wealth of experience and we look forward to his contributions in the years ahead.

Thank you for joining us on the call today and I will take some questions.

(Operator Instructions)

Shaun Kelley, Bank of America.

Hello, Shaun.

Congratulations on a strong quarter.

I was just wondering if you could maybe comment on, there is increasing press around the possibilities of potential legislation in Japan.

It's obviously been an area you have been focussed on for years.

Could you give us the latest update and what you're hearing on the ground there?

What we're hearing from various people is anywhere from 99% to 100% certainty the bill is going to come up this [diet] session.

But we have got to look at the bill.

The original bill, they may have changed it since, but the original bill called for a one-year period to determine the who, what, when, where, why and how of integrated resort with casino.

So we got to see what happens over the next year.

Are we there?

We are there.

We have people there.

We have a head of Asian global development, George Tanasijevich, there quite frequently.

I go not frequently, but not infrequently.

And I'm going again, I think, in a month or so.

Going in December.

We'll see what the bill says when it passes.

We are in touch with Osaka quite frequently, and I think that Osaka, from the scuttlebutt we hear, thinks that we're the best company to do that.

Of course, we got to consider what position that will put us in, vis-a-vis, Tokyo.

So we don't know whether or not they'll allow one foreign company to have two locations, or they might do more than two locations.

And, in any event, it's very optimistic, and I've always stated, based upon my many visits and conversations with people in Korea, that if Japan legalizes casino gaming for its population, that Korea will rapidly do the same thing.

We don't know that for sure, but that is speculation.

Great.

And maybe just a quick follow-up would be turning to the Parisian, which is obviously extremely strong in the first 18 days.

One of the big questions we've gotten from investors since our trip over there is how much of the growth is just euphoria around the opening.

So any color you could provide to us on how patterns or trends are continuing into October or here early in November would be great.

Unfortunately, we're not going to comment on current quarter but we'll be happy to update you in January how we did.

Thank you very much.

Joe Greff, JPMorgan.

Hello, everybody.

Two questions, one on Macao and one on Singapore.

On Macao can you talk about what the competitive response has been since the Parisian opened, both from newer properties and older existing ones?

And then on Singapore, mass win-per-day of $4.8 million in the 3Q showed some nice sequential growth.

Can you talk about what's driving that?

And is it seasonality or is it something more than just seasonality?

Thank you.

Joe, it is Rob.

I'll take Singapore first.

As you know, we had a weak quarter last quarter in that most critical segment, the non-rolling slot ETG segment.

We were disappointed, and we were honest about that three months ago.

We're very happy to see a return to what has been the status quo for a couple of years, that $4.8-plus million day at a 60%-plus margin.

We said more activity on the floor both foreign, mostly foreign activity.

We had more overnight stays from Indonesia and Malaysia driving that.

Really encouraging, because as we said time and time again, maybe ad nauseum, that that is the segment that drives MBS.

It was a great return for the quarter, solid performance, more foreign visitation, more use of the MBS room product, and I think the aberration of Q2 is behind us.

I feel very good about that.

A little bit of sigh of relief after weeks of Q2.

As for Macao, as Sheldon referenced in his opening remarks, we're just really encouraged by the must-see destination appeal of that property.

I would say to you that even more encouraging, Sheldon's comments said it very well, it is a destination resort that has got all kinds of traffic and all kinds of people flowing in everyday.

Perhaps the most encouraging thing to us, though, is the positive impact we're seeing at Four Seasons Venetian.

Sheldon referenced the retail uptick at the Four Seasons, but we're seeing also uptick in the retail mall, the room demand.

The Venetian had a very strong quarter.

We feel encouraged our strategy, critical mass, and running this 12,000 or 13,000 Cotai opening almost as one resort.

We almost see it as one integrated resort with 13,000 sleeping rooms, plenty of casino capacity, 13,000 restaurant seats, 800 retail stories.

And the ability to do pricing power diverse --

50.

50.

Don't cut us short.

I tried to cheat us by 50 stores.

I think the truth is that we're seeing renewed power there and energy into our buildings.

And it gives us unique pricing power, it gives us a way to offer the customers diversity.

If you want the Four Seasons versus the Holiday Inn.

All kinds of retail.

I think you've been to retail in the Parisian.

It's extraordinary because it's not the same stuff you see in the rest of Macao.

What makes it is so wonderful is it is diverse, it is different, more fashion-forward, and the theming is great.

And the curbside appeal of the Parisian theming is great.

But as well as we're doing at the Parisian, we're even more encouraged by the synergistic feel we're getting for the rest of the buildings.

As for the competition, I really can't say that they're much different.

I think a lot of people are happy to see the Parisian open because it creates more traffic in that critical Cotai corridor and it grabs more trial into Cotai.

So I think everyone is benefiting, honestly, from the Parisian traffic.

It has clearly been a very, very powerful opening, and we benefit mostly, as you know -- Sheldon's critical mass strategy is most in evidence when there is holidays, weekends, high volume periods, that's when we really drive some terrific numbers, and I think we're seeing that again and again with the Parisian.

Everybody is participating.

I think all the new properties got a little taste of the business coming to Cotai, coming to see the Parisian, but I think we're benefiting more than anybody.

I think we're benefiting because we have a 13,000 room IR there.

Very encouraged by both.

It's performance, it's impact, and we hope our competitors share our enthusiasm.

Something I would just like to add to that, if I may.

This is Joe, right?

Yes.

Everybody would reasonably think that if we opened another property on the Cotai Strip, that we would have some cannibalization of the other property.

The amazing thing is, that not only do we not have cannibalization, we have improvement in visitation and improvement in business in our other properties.

Look, this is the only property of its type in the world.

It is a behemoth single hotel, with 850 retail stores.

We put Macao on the retail map unquestionably.

We have 2 million square feet of Myspace.

We have actually six casinos, because lots five and six are two different casinos, although we call the whole thing as Sands Cotai Central One.

As soon as we opened the connection between the Parisian and the Four Seasons, we can safely and accurately say that you don't have to leave the building or an air conditioned space to go to any one of 13,000 hotel rooms.

None.

You don't have to leave air conditioned space.

What other property in the world has that?

There is no city in the world that has -- this is truly the Cotai Strip.

That's right, Joe.

What Sheldon just spoke about is in sync with that market today.

I mean, what is really happening is that mass market driven by lots of body count, lots of overnight stays, lots of demand for retail and restaurants and sleeping rooms.

I think we have the right product that's in sync with the market in Macao today.

It is reflected in these numbers, and as that market continues to ramp forward and ramp up, I think we'll be a very, very happy participant.

Appreciate the comments.

Thank you.

Thank you.

Harry Curtis, Nomura.

Hi, Sheldon, it is probably a question for you because I wanted to focus on the midweek group meeting and association business.

The midweek tends in Macao to be quite a bit softer than the weekend other than holidays, and so I just want to get your point of view on the opportunity to change the mix of group meeting and associations midweek and what might the revenue lift look like once you begin targeting that market more seriously?

Well, we have been targeting the market seriously, but there was a potpourri of different properties.

Now there will have 13,000 rooms to -- that you won't have to leave the building to access.

It's going to make quite a bit of difference.

That will be a real plus to attract various groups.

We just had a 20,000-person group when we were there.

It took up all our hotels in Macao.

So we are putting a pedestrian walkway between lot six, which is the southernmost end of Sands Cotai Central, and the Parisian.

That will be a very big and very productive pedestrian overpass.

Once you have the Cotai Strip and that many rooms and that many ballrooms, exhibition space ballrooms, and break-out meeting rooms, there is no place like it in the world.

So this ought to attract an awful lot of other people.

People could come to a city, go to -- excuse me -- a MICE event, and never have to leave the building.

They won't have to rent cars.

It will just take a bus or a taxi to one of the hotels, and then they can go anywhere.

Go ahead.

Can I jump in, Harry, just behind Sheldon.

It is Rob.

I just want to give you a little historical context.

Twenty-some years ago when we started here in Las Vegas, as you well know, there was no one to put hotel rooms to convention customers because we were seen as, how can I say it politely, we weren't seen in favor of midweek rooms.

In fact, people used to fight against COMDEX, and fight against conventions, and fight against groups.

Obviously, that's all changed today.

Any earnings call from any major Las Vegas company, that group segment that Sheldon pioneered has become the dominant reason why people can build hotel rooms here for midweek occupancy.

It took many, many years and a lot of people had to be turned around to the non-gaming potential.

I think the same thing is happening as you watch it evolve right now, the same philosophy is going to happen at Macao.

For the first time, you've got an abundance of rooms.

You don't have a plethora of VIP guests to fill those rooms, and I think our competitors as well as our 13,000 rooms are available for the first time.

And we have the group space that Sheldon built and that group space hasn't been fully utilized.

But now with demand midweek being what it is and with lots of sleeping rooms in Macao, I think you'll see the evolution of that non-gaming business, that hotel customer Sunday through Thursday becoming very important in the years to come.

The same way when we built the retail Sheldon referenced, people chuckled and said no one goes to shop in Macao.

Obviously they do.

That is going to happen.

That evolution of that meeting space that Sheldon authored in Las Vegas and how he did it in Macao, you know it's going to become important, it is just a question of time.

The junket demise and the VIP midweek difficulties will make that very appealing to everybody on the Cotai Strip to fill it with very good group business, that is both high rate paying and because they are tending to be more Asian, there is more opportunity for gambling opportunities at night.

I think that is a train that started to leave the station.

It has been slow coming but there hasn't been enough room product, or enough other companies who wanted to participate, just like it happened in Las Vegas, it is going to happen in Macao.

It is ahead of its time, it's not today, it is still down the road, but it is going to happen.

Thanks, Rob.

I just had one follow question on the dividend.

I wanted to shift gears here.

Because it's been -- the level of EBITDA in Macao to maintain the dividend has been targeted at about $2.5 billion annually and now it looks like given the success of Parisian, that is quite doable.

The question I have is, what is the simple math behind every -- if you exceed that $2.5 billion, say, by 5% or 10%, would you plan to take the dividend up by a like amount?

Go ahead.

Hey, Harry, it is Patrick, how are you?

I'm good, thank you.

I think it is an interesting question.

I think a lot of it would depend on the expectations of future cash flow growth from the year that you just described.

As we said before, there a very careful evaluation process that goes into the dividend planning.

So it would have to be taken in the context of the future growth of the Company, future growth of cash flows, and our view of sustainability of growth for the dividends.

Those are the thoughts that go into the dividend decision both at SCL and LVS.

The dividend is a cornerstone of our return of capital strategy, and it is very important for us to keep it going in a sustainable and in a growing way in the future.

So while we can't comment specifically on how we view the SCL dividend and increase in EBITDA, we really hope that it happens and we're looking forward to continued growth of Parisian and on the Cotai Strip in the future.

So we'll come back to you with more information as our EBITDA continues to grow.

Thanks, everyone.

Thank you.

Anil Daswani, Citigroup.

Okay.

Good morning, guys, and thanks for taking my call.

Couple of questions from me.

First of all, you guys did an amazing job with hotel occupancy.

Can you just highlight if there has been any change in the comparators that you provide for those properties?

Secondly, could you maybe comment a little bit on how the different segments are playing out, so premium mass, mass, et cetera.

Is there any focus of any particular property on any specific segment or are you just happy to grow them separately at each different property?

I'll take it.

It is Rob.

I think the second question I'll take first.

We're obviously happy to grow at every property, any property, the competition in Macao and Cotai is hard, strong.

Our growth, though, I think comes from our diversity in our pricing and frankly what makes us so unique as I referenced earlier was the ability to sleep the people in the Four Seasons or the St.

Regis as well as the Holiday Inn product.

It is a very diverse mix of rooms and we're not seeing a lot of change.

We're doing better in the premium mass, we like to see more base mass pickup.

We attribute that to, there is so much new product, new sleeping rooms, 600 table games in the last year.

So there is going to be some trial, even from our customers, this goes to the other properties out there are very, very good and they're worth seeing.

But we're not seeing a whole lot of difference in terms of the -- the properties remain constant.

Our strongest performer from a premium mass basis is our Sands Cotai Central.

That is the weakest performer from pure mass basis.

The Venetian is the juggernaut.

It does it all.

It's an amazing property.

it has everything you want it to have.

It's got incredible sleeping rooms, a large casino, a fabulous retail product.

It is tied to the Four Seasons physically and now it is tied to the Parisian.

Again, diversity of pricing, diversity of product, be it lodging, be it retail, be it gaming is where we excel and we really excel weekends and holidays.

As to comp ratios, we haven't changed much at all.

Let's be clear.

Sheldon referenced 1.1 billion impressions we got on our social media approach.

I think that bodes well.

We are in the hotel selling business for a long time.

A lot of people are new to it, in Cotai and Macao, because it has been a VIP-dominant market.

Our competitors are smart, they're going to get there very quickly and figure out how to sell more hotel rooms.

We have just been doing it for a lot longer.

We have more armor, we more bullets in the gun, because if you look at our convention ability, we're the only guys in town with that much group space to fill midweek.

The only people in town with a large-scale arena, we can put in these massive arena shows.

So we have an unfair competitive advantage when it comes to selling rooms.

We have been doing it longer.

We have more product, doing it better.

We're not a boutique company.

We are not a premium mass company only.

We do it all in the mass space.

We've not seen a change in our ratios as far as comp cash.

We have seen more competitive pressure, which we welcome, is good for Cotai.

We welcome more sleeping rooms on the Cotai Strip because we think in the end, we get the lion's share of that business.

And as that market continues to ramp we will be its biggest participant in the growth.

Thank you and congrats on a great set of results.

Thank you very much.

I just want to add on, we've always been the EBITDA leader in Macao.

We have never once been even second.

We've always been first.

Galaxy has done a very good job of getting into the market, but we're still twice as big as they are in EBITDA.

Same thing in Singapore.

They, I think (technical difficulty) just came out with earnings yesterday, did I hear it right, that we're double what they are?

We're about 74%.

We're 74% of the market.

There's got to be something we're doing right and our competitors are not doing.

And now that we've got this behemoth one-stop-shop for everything, unprecedented in the world, I think we're going to continue to have high hotel occupancy and continued increases in our gaming market.

Thank you.

Jon Oh, CLSA.

I'd like to refer to Sheldon's remarks earlier when you said that trends in September are pointing to mass growing at roughly 6% and premium mass at 15%.

As we look at visitation trends in the month of September, I believe the Macao tourist official number was up 0.5% and to see such a strong mass performance and premium mass performance despite visitation numbers not being anywhere close to that would suggest that spend per customer is a very strong indicator.

Would you be confident to say now that spend per customer as an indicator across all your properties in Macao is a positive indicator that it is now a growth segment again?

It is a growth segment.

Yes, I think, Jon, what Sheldon --

The market itself is growing (multiple speakers).

I'm not sure we understand the question, totally.

But what Sheldon referenced was 6% year-over-year growth in table game -- in mass, and 15% in premium segment.

We think the market numbers (technical difficulty) you see October's numbers as reported by the government and you see what is happening in the market, there is clearly a trend here.

We're getting better customers in the market, we're getting more spend in the market.

I can't say the correlation to more spend per customer.

I can be clear about that.

But I think what we are seeing --

We haven't done any surveys.

I think what we're seeing is just lots of visitation and we're seeing lots of growth and we're very encouraged by it.

I wouldn't be so bold as to say we can exactly correlate those two.

But clearly visitation is, it is what it is and revenues are growing.

I think somebody comment they grew well in October but had not been for a couple -- weather instances and lot of things happening, it may have been double digit.

We're looking for that double digit growth for the whole market.

And again, we're a big believer in the rising tide theory.

We would love to see Macao grow 12%, 15%.

We'd all make money.

We'd all grow together.

And that what we hope happens in October, November and beyond.

We're looking for solid growth, mass premium mass, and all participants.

Let's us all row in the same boat.

Okay.

Thank you.

And if I could follow up with -- and this is maybe just, I'm just seeking for a broader comment on the ramp up speed for the Parisian.

You guys have obtained roughly about $1 million EBITDA per day, within about roughly 18, 19 days of opening in the month.

That is impressive.

So what I think about and I'm sure everybody in this call today will be going back to their models and we're going to be thinking about what's the real earnings power of the Parisian given that this has kind of surprised us a little bit.

I'm just trying to think about how do we really size up the earnings potential of Parisian, given that it is roughly the same number of rooms in the Venetian but the Venetian is roughly earning about three times more in EBITDA per day right now based on the current run rate and at one point it was running at over $5 million a day.

Would you say that the Parisian has the tools to potentially do what the Venetian could do?

Any comments around that?

I think -- can it do what the Venetian -- look, the Venetian is so powerful.

Their visitation went up and the gaming business increased.

You're looking at what's becoming around here a behemoth hotel, a behemoth integrated resort.

And it is a big one, too.

And it is a big one.

We're sailing in unchartered waters.

I hope that the Parisian can equal what the Venetian has been doing.

But right now it's kind of indicated it's doing very well.

We're averaging 40,000 people a day.

Our restaurants are so full it is tough to get a seat, so we're adding on some.

We're taking out some straight retailers and adding some more restaurants.

It was really designed, the government wanted a three-star hotel, a lot of the rooms are designed as four-star.

But the Venetian is very unique.

Every room is a suite.

And so there is no star rating.

You could say it is a six-star hotel or five-star deluxe.

It is tough to compare any other hotel to the Venetian.

The quality and the critical mass of the Venetian, the size of the casino, the loyalty that it has and following from people who come from the mass market, I don't know.

I certainly would hope so.

But if not, if it doesn't equal the Venetian, it will -- should get a lot closer than the other properties are.

I think Sheldon's comments are excellent.

I think you have to be careful looking -- the Venetian has been operating for almost a decade.

It has got a immense loyalty.

It is so sticky, it is unbelievable.

The quality of the people in there, the size of retail, size of the food and beverage, the room product.

It's a very unique product.

And the answer is no, the Parisian can't get to Venetian numbers.

It can do very well.

It can ramp and grow.

But you're comparing apples and oranges.

It was built in a different time.

It was a lone wolf out there back in -- when we opened that thing.

It has got unique everything, from rooms to food and beverage.

We have too much -- we have a lot of great food and beverage.

We don't have that same scale in Parisian.

We don't have the room product we have in the Venetian.

It is unfair, but I do think the Parisian will keep ramping, keep growing, getting stronger by the day.

Also, one thing it has going for it is it's going for it is it's going to cross traffic very well with the Four Seasons and that should give the Parisian more lift.

It'll lift the Four Seasons as well.

Think of how we have all this unique room pricing cross-street SCC, we have the product at the Four Seasons, we have the Venetian, we have all of that great retail in the Four Seasons shops, which is getting stronger by the day.

It is going to help Parisian, but I think it is unrealistic to think that it is going to approach Venetian numbers.

Venetian is $1.2 billion.

You referenced $1.6 billion, $1.7 billion a the peak.

Hard for me to see it getting there.

Great property, great start.

But those are very big numbers.

That is the juggernaut of Macao.

Thanks for the commentary.

I really appreciate that.

Sure.

Thomas Allen, Morgan Stanley.

Hello, just following up on the last question.

Parisian had 28% margins in the quarter.

I don't think you reached that level at Sands Cotai Central until a year after the property opened.

Can you help us think about the trajectory of the margins from here?

Thank you.

Sure.

Let's be clear.

The reason for that, Thomas, as you know, they are very different products.

SCC is a very powerful room product, that is more dependent -- it opened at different time as well.

But it's dependent on premium mass customers.

That's the calling card for SCC.

It does very well, but it's a premium mass house.

It doesn't have esteemed walk-in free traffic, the Parisian's getting ridiculous walk- in traffic.

It is free business.

They walk in, they gamble, some sleep there, some don't.

But the margins are great because of that.

What it doesn't have yet is that premium mass customer that we get at the SCC.

The margins are going to be better I think for quite a while at the Parisian, because they're paying retail for the room, we're comping less people.

SCC is much more comp-driven.

And different time as well.

The interesting part is going to be how does it intersect with, when the Four Seasons bridge is completed, how much cross-over do we get on weekends, holidays, and that high-end Four Seasons customer?

And we get more premium mass to gravitate.

The race in Macao for the premium mass is a big one.

There is a lot of people out there with great products that are looking for that segment.

So can we grow that segment quickly at the Parisian?

That remains to be seen.

The SCC is our biggest premium mass customer, but that is our biggest comp house and it's softer in the margins as a result of that.

Parisian has just overwhelmed us with demand.

So we have to figure out how to take advantage of that demand and offer the customers the kinds of things they want to satisfy that segment.

But I think it's clear that the SCC got off in a different time and it was much more of a different product.

It didn't have any free traffic.

It doesn't have much to this day.

Different products, different margins.

Much less VIP.

Much less VIP, yes.

One thing to add is that if you look at the margin of the Parisian and you look at the margin of the overall property on a normalized basis, the Parisian is geared for growth.

So that as we continue to grow revenues there, and as we increase play volumes, and the very high margin mass and premium mass segments, you will see that margin will actually creep up closer to the margin of the consolidated property set as a whole.

So that the cost base is in and we should get good operating leverage as we continue to get increased play.

I don't think you can you look at the Parisian for what, 18 days, 17 days, and make a real bold statement about that property.

It's just so young.

I think you have to, next this full quarter we'll have a better look at what that property can do.

Helpful.

Thank you.

And just is my follow-up.

In your prepared remarks you talked about share repurchases.

You have been talking about them for -- about not doing them but the potential to do them in the future.

Parisian is opened, how are you thinking about them at this point?

I think we've always viewed the dividend as the cornerstone of our return capital policy.

It is very important to us, it's something we view as fundamental.

We always viewed as share repurchases as a way to return excess capital to shareholders in an efficient manner and opportunistic way.

As our cash flows grow, we'll will feel more confident about returning capital in terms of increasing dividends but also in terms of using the share repurchase authorization and actually buying back some stock.

So as our cash flows grow you should look to us to be more aggressive in the way we return capital to shareholders.

Helpful.

Thank you.

Felicia Hendrix, Barclays.

Hi, thanks for taking my question.

Just sticking on the topic of Parisian, I was wondering if you could help us understand a little bit more about the complexion of the Parisian customer, just in terms of, are they mostly base mass?

Are you seeing some mid to higher end mass, where they're coming from?

Incoming visitation relative to your other properties?

Any different or similar patterns than the typical Sands China customer?

Yes, definitely seeing more of a mass, base mass customer of the Parisian.

That is the dominant customer right now.

What we're trying to sort through is want to be more aggressive on the premium mass side and direct that over to Four Seasons, Venetian and SCC and can attract new customers, obviously.

The real goal will be to attract fresh customers to the building.

But the dominant segment right now at the Parisian certainly is a mass gaming customer, not a -- we have good junket play there for the few we have, actually, very solid junket play.

But our premium mass is not as exciting as our other properties.

It is mass driven at this point.

Okay.

Just to finish with that question, just in terms of like where they're coming from, are you seeing an incremental visitor from different regions or is it similar to what you're seeing from Guangdong, kind of the general complexion of the regular Sands China customer?

Well for those we have data on, it is coming from Guangdong from Mainland China.

There is a lot of unrated business in that building.

It's hard to tell everybody, since again, unrated, we don't have the data we would have on people sleep in the hotel where people have ratings in the casino.

Again, this is a brand new building that we're just gratified the run rate appears to be strong after the first, what, 17, 18 days.

We're very happy with it.

We're more happy to just be the awareness of the property.

The sheer foot traffic in that building is, at the opening night I went down to the casino floor and it was overwhelming, but it stayed that way the entire week.

We're gratified at the customer acceptance and again, I think it is hard -- we're going to get tougher and tougher in breaking numbers out because this integrated behemoth strategy Sheldon referenced with a basically a 13,000 room hotel, we're less and less able to differentiate, because I think we're going to use our pricing power, multitude of hotel room capacity, our multitude of gaming capacity, our retail diversity.

We're going to try real hard to price this thing according to the customer demand, move the customer demand around our portfolio and run this thing to maximize cost efficiencies but provide a great customer experience based on your budget and your demand.

So it may be just be that the Parisian is being wildly helpful to making that portfolio stronger.

We're encouraged.

Early returns are terrific.

It is a base mass hotel at this point.

It is not driven by premium mass and it is not driven by junket, although we have some good junket play in there.

Thanks.

And as my follow-up, can you help us understand, I know it is 18 days, and you said you had a lot of unrated play.

But in terms of the source of customers so far, in terms of what little data base there is so far, OTA, wholesale, versus new marketing?

The hotel side, again, I think Sheldon referenced it, We had terrific demand outside of our usual database from Mainland China.

The social media approach here was just terrific.

And the people who work for us there, did exemplary work.

Our team should be applauded for what was an incredible launch.

We're seeing a lot of new business.

It is not just database.

It's fresh customers coming in from Mainland China who want to see the product.

I think Sheldon referenced, number two behind the Venetian is places you want to see.

Let's be honest, that themed approach, that is the magic elixir that people want to see that Parisian-themed approach, the Eiffel Tower, that facade has great curbside appeal.

It is driving all kinds of awareness.

It is easy to understand it when you watch the videos, when you watch the social media stuff.

It is just easy to understand.

Just standing outside that building, no place ever had that many people outside taking selfies in the tower, in the facade of the building.

We're in new waters here with new customers that we like seeing.

I am not sure we're stealing share as much as creating new demand from China for the sleeping rooms.

The gaming, as I referenced, is still in its early days, but we got to decide how much we want to push into the premium business there because it is a mass powerhouse so far.

But again, 17 to 18 days we're reporting this quarter, hardly enough time to understand the power of the Parisian.

But we are thrilled with the acceptance of it.

We're thrilled with the walk traffic.

You've never seen walk traffic.

I've been going to Macao since the 1980s, never seen people walking back and forth in droves between the Four Seasons and the Parisian.

It is pretty staggering.

And again, our team, our marketing folks in Macao did some great work on the social media side.

Thanks.

I'm sure you and Sheldon have plenty of your own selfies in front of that property.

That is all I do all day.

(laughter) Pretty much that's all I do.

Thanks a lot.

We have time for one more question.

Carlo Santarelli, Deutsche Bank.

Hey, guys.

Thanks.

A lot of my questions have been asked, but the one thing we didn't talk much on the call was the VIP segment in Macao.

And clearly you see it in the DICJ numbers and we saw it in your numbers here today.

There seems to have been obviously a change in that customer in the 3Q.

Would you guys care to opine on maybe how you foresee the VIP segment going forward?

Have we hit a trough and maybe are starting to see the light at the end of the tunnel?

Or do you think there was more of a temporary kind of bounce?

I can only speak, Carlo, for our portfolio.

But I don't think it is temporary.

This is not obviously our portfolio material to our composite EBITDA.

It is rather unimportant at this point.

I don't know how it recovers in any meaningful way.

We are a mass driven house, premium mass driven house.

It's become to the point where we offer that opportunity for the customers who want it, because it is part of our diversity.

But I don't see how it gets much stronger with all that is happening in China, and all that's happening both from an economy's perspective and a compliance AML perspective.

I think that is a market that I don't-- I said a couple of years ago and people were very upset.

I said I thought it was going to be very, very tough sledding and it is a broken model and it remains broken as far as I can tell.

I can't speak for our competitors, but from the LVS SCL perspective, it is not a focal point.

We won't turn it away, but we have to focus where we make our money.

And we make our money on table games, mass and premium mass and slot machine ETGs.

We'll offer junkets and we'll wait for a better day.

But we don't see that day coming these next two quarters.

Thanks, Rob.

And if I may, just one quick follow-up, and an iteration of this was asked earlier.

When you think about your cash balances and your leverage position, how do you guys balance the thoughts of increasing dividends relative to buybacks, but in the context of the potential for a large-scale development, be it in Japan, or somewhere else at this stage?

Hey, Carlo, it is Patrick.

How are you?

Good.

You?

So it is a discussion that we have quite frequently.

And I think the way we think about it is if you look at the timing of cash flows required to fund the Parisian, there is actually a fairly long development cycle where cash comes out of the system probably over three to four years and there is a lot of visibility going to the development of these projects.

So given where we are in our dividend growth cycle and hopefully the trajectory of growth that we're seeing in Macao, we'll have some ability to do some planning work and hopefully what the chairman says holds true, we end up getting opportunities in either Japan or Korea or both.

So the timing of this should work favorably in the future depending on the dividend growth rate we choose and the requirements for funding these developments if they were to occur in the future.

It is something to work through but it is really a timing question.

I appreciate it, thank you.

Thanks very much.

There are no further questions at this time.

And this does conclude today's conference call.

You may now disconnect.

Thank you for your participation.