拉斯維加斯金沙集團 (LVS) 2018 Q4 法說會逐字稿

Good afternoon.

My name is Angelica, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Las Vegas Sands Fourth Quarter 2018 Earnings Conference Call.

(Operator Instructions) I will now turn the call over to Mr. Daniel Briggs.

Mr. Briggs, you may begin the conference.

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 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 he decided this morning to take a raincheck 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, now 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% in the quarter will positively contribute to our bottom line as hold normalized in that segment.

In 2018, our Macao operations delivered an adjusted property EBITDA of over USD 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 and 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 its 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 most -- one of the largest and most important transportation hubs in all of Asia and Macao.

We couldn't be more excited about our plan to $2.2 billion investment in the -- in our critical mass hotel room, retail entertainment offerings in Macao.

We look forward to participating to the benefit from the growing infrastructure in Macao that will continue to increase leisure and business tourism visitation from China.

Looking ahead, we believe there's just no better market in the world than Macao with regard to the 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 at Marina Bay Sands and hope to have 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 had a good quarter, led by strong convention exhibition business before the -- to adding additional incremental entertainment offerings in Las Vegas and the positive impact of the MSG Sphere at The Venetian, which is under construction and supposed 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 today on the call.

Let's now take the questions.

Operator?

Let's begin the Q&A session.

Thanks so much.

(Operator Instructions) We do have a question from Mr. David Katz of Jefferies.

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 quarter 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 that's made an awful lot of company for this company.

We're very proud of the -- it's definition of an IR.

It's exemplary in every way.

Its biggest challenge, David, by far is its capacity constraint both from a lodging, from a gaming perspective.

We just don't have enough slot machines, ETGs or rooms.

We have demand.

We don't have the supply.

We would also like to see more entertainment in the region, in Singapore to drive 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.

It's very difficult.

Our rolling business, that has been limited for a number of years now.

The growth that remains, 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 on the weekends.

So that's the frustration.

We played a little bit unlucky here and there and every quarter it oscillates, but the margins remain strong.

The primary difficulty in that market is capacity constraint.

Very proud of the asset, looking for the chance to invest more in Singapore and grow more 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, to have such a wonderful asset that could grow, but right now is not able to.

And my one follow-up is 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 -- we call 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.

Yes.

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 property opened up, MGM at the horizon.

A lot of people thought Macao had seen its best days and we will be share givers and the market would just dissolve in too much 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 that'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 you crazy, but if you think about it in the big picture, we grow our EBITDA back to almost the highest level ever despite a huge decline in VIP since 2014.

I think we've done there, which is build scale.

We're building more rooms today.

We're 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 the Londoner, the St.

Regis, the Four Seasons.

We're strong, strong believers in Macao, and we're investing for the long term.

Yes, there's always -- is there 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 the last 3 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 at what the bridge has done.

The bridge is a game changer.

Just a magnificent achievement that accesses all of China.

All the airports in China can now land in Hong Kong and get to Macao in a car.

The boat's not necessary.

If you want to take a boat, you can.

Even from Central Hong Kong, it's almost as quick just to take the car to the new bridge.

The new bridge is incredible at speeding.

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, a better place to deploy capital.

We're fervent believers on license in 2000 -- whatever it is, '20, '21, '22.

So I think you best, from our perspective, look at this as a mass scale market that's room dependent.

Those without rooms will have a difficult time growing their share.

Mass demands rooms, non-Guangdong visitation demands 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.

Yes, there's been a lot of commentary about the upcoming year.

And I think one thing you should look at, and we spend a lot of time on this in the earnings deck trying to display it in different ways.

Infrastructure 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 as 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 grow the very solid high-margin mass business as they look to use the non-gaming amenities that our Chairman designed a decade ago.

And you think about that amazing press vision where if you laid out a plan for this non-gaming amenity system that really creates this tourism driver, and that really speaks directly to the mass business.

So if you look at the infrastructure improvements, again, it's in the earnings deck, you can go through those slides, we view the mass business as a very strong catalyst for growth in the company for this year and for the years to come.

And there's been indication 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 a couple of years ago, everyone's concerned that too many rooms being built, and today, everybody wants more rooms desperately.

And the fact is it runs at incredible occupancy.

Demand is there.

Demands will keep growing.

Our next question comes from the line of Mr. Thomas Allen from Morgan Stanley.

So just a quick numbers question.

You said in Macao, your rolling direct business had low hold and that impacted 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.

It would just add to the clutter.

I think from our standpoint, and Rob will address this further, we have a different margin structure within the premium direct and junket businesses.

And sometimes based on the nature of the hold and the difference in hold between those 2 businesses, our normalization on an aggregate 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've put in place, our ability to get some operating leverage of the business, that will continue.

I think in this particular instance because of the adjustment methodology and the overall aggregate amount of rolling volume that we've had, you see some margin change because of that mix.

Tom, as we held within normal range across the 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's 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 on the table this quarter.

It -- significant to ours because we didn't hold within the range for the direct business.

It's a shame it wasn't to 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, thought we were ill-equipped to compete in that segment.

We just keep growing share.

It's really -- it's sad because it would have been an amazing quarter had we held up, it didn't.

But I think again, our focus can't be on the rolling and a point or 2 of luck, it has to be on the mass side, and that's where you sell it and grow, and I think that's where the story resides for us.

A quarter here, a quarter there, a point of luck a point or 2 of luck isn't an influence.

It's long term.

It's about the right assets for the mass, premium mass, and the growth there is extraordinary.

8 quarters...

So that's a perfect segue into my next question.

So Page 14 on the base mass versus 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 kind of underlying trends for those 2 markets?

Which one do you think is going to be stronger in the future?

Well, it's a good question.

I wish I knew the answer to that, but I will tell you both look awfully good.

We had a 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 the new Morpheus last week, which is quite a property, impressive hotel.

Macao, by the way, just gets to be more and more impressive and you go back to a world-class product.

We're looking forward to showing you our new Four Seasons product, which is going to be pretty special.

We won'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 9 months of '18.

We outgrew the market in the full year of '17.

So our outperformance in premium mass and mass is not about 1 quarter.

Our outperformance has been achieved consistently, cumulatively for the past 7 or 8 quarters.

We've achieved this despite having the biggest base of business and despite a very intense and very good quality of competition on Cotai.

We couldn't be happier about our position in the market, but we don't stand still.

We intend to get better because the competition is just too damn good, and the market opportunity is just too damn big, and that's why we look forward to executing and completing on the Londoner, the St.

Regis, the Four Seasons.

Our position's been simple for over a decade.

We believe in the mass and premium mass.

Our assets, our arena, our retail, lodging, our gaming, it 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 of 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.

The next question comes from the line of Mr. Stephen Grambling from Goldman Sachs.

I guess as a follow-up to the first couple of questions on Macao.

On Slide 19, you highlight 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.

Well, 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 to be very resilient over the years.

We've really -- I've made the mistake of counting it out a couple of times, that's been wrong.

That market is going to bounce back.

Again, the penetration in the 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 physical asset to drive more high end, not just from China, but throughout the Pacific Rim into Macao is there.

Macao is the world-class facility of Asia.

There's just nothing like it.

And honestly, there's nothing -- there will never be another place like it.

It's just too good, it's 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 and it's evidenced on our numbers.

I would not be comfortable, however, if you're solely dedicated to VIP or the majority of your 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 be 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 VIP.

It's proven to be very resilient.

And again, market penetration, what 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 or have driven through the bridge, the full impact and the full potential of the bridge is only realized once they open that thing up totally functionally to let it do all it can do.

It's pretty -- it's a 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 there, 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 piece] opportunity, your 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, look at the strengths there, look at the way we handle return of capital, the way we enhanced shareholder returns, we're very much geared towards our dividend, which is the cornerstone of our return to capital policy.

We're very much geared towards share repurchase.

We bought $430 million this quarter because we have the liquidity and we were confident in our future ability to grow cash flows.

And really, we've got our $2.2 billion program in Macao.

So when you look at those things, 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.

Your next question comes from the line of Mr. Anil Daswani from Citi.

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 at 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 Hengqin 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 a -- having driven there last week, it's unfortunately underutilized.

There's not a enough private car licenses to maximize what's going to be a vast potential.

It will be a driver in the future, but not today.

It's more about busing and day trips, still taking it off the tables as a driver.

What's driving our premium mass business is better product.

We have a real mantra around here by, I think, better the aesthetic appeal of this company.

We're getting -- 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 at 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's now at a run rate of [1 30].

Who knows where it goes to.

Our Venetian core suites for the premium mass are just delivering.

I wish 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 at Morpheus you'll see and the success in 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, not 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 that time, is probably one of the 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 afternoon was incredible numbers for a Saturday.

And the fact is that's a tremendous asset that people want to see these star entertainers, be it U.S. stars or Asian stars.

That is a 40-week a year advantage we have on Friday, Saturday, Sunday with top-tier stars, top-tier acts that people covet those tickets.

And the 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 have popped.

So entertainment, suite product, quality suite product, quantity suite product.

By the way, retail asset last week, walking the Four Seasons, I got knocked over by people trying to get into the stores.

It's an amazing thing to watch.

It's experiential.

These young, affluent 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.

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 -- I look at profitably more than market share.

We're fixated on 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 and profitability.

Again, our focus over there is trying to figure out how to get more capacity like Macao.

Wish we could build a couple of St.

Regis' or a couple of Four Seasons properties because it has the demand in the foreign markets and around Singapore have outsized demand, an outsized MICE demand.

I just need more rooms and more slots and more of everything to take advantage of it.

Our next question comes from the line of Mr. Joe Greff from JPMorgan.

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 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 an elevation or decline.

I think it's pretty consistent.

I wish I -- I'm not sure I can give you a good answer to that.

We don't see a whole lot of differentiation from October through 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've seen?

You're the first guys to report so you're the first guy to sort of talk about it.

Right, right.

We walked -- we were there last week, we spent a long -- a very productive week, and we walked up all the properties and hours on 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 for example, if table A had smoking, but table B didn't but has a smoking room attached to it now, B will be larger than A's performance in the future.

But between all the smoking we're; seeing in the market, we had -- most of ours are open already and most of the market were very well ready for smoking plus the outdoor space, which we all of us have in 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.

Our next question comes from the line of Mr. Chad Beynon from Macquarie.

First, on -- sticking with Macao.

Your retail segment, I guess, both in 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 rent.

And this is different than what we've heard from some of the luxury retailers that have reported and highlighted some weakness in Macao, Hong Kong and Southeast Asia as well.

So could 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.

Well, you're looking at the slide, I'm not sure how much color I can add except 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 -- what mall does 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 mall, 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 of our retail numbers across Asia.

And again, this is a decline bringing in more declines.

It's 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 sailing ahead we see no decline.

In fact, if any, strength goes to strength.

Maybe it's about, again, scale, and you walk through the Venetian and the Four Seasons, you have this incredible assortment of land -- of the tenancies 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 affluent.

And they're buying, and they're buying with both hands, and we couldn't be more pleased about 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 just 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 works in tandem.

And when you see it on the ground, like last week, we were there for 4 or 5 days, it's pretty exciting to watch, and it's not going to change in my opinion.

That success in our retail is here to stay.

Great.

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 credit extension in Asia and the credit 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 that service those spaces.

And the best thing 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 so.

And I think we have a good dialogue, and it's an active dialogue with them that gives our ebbs and flows, but it's not something that we can look to a global macro economic 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 [with our guys].

The next question comes from the line of Mr. Shaun Kelley from Bank of America Merrill Lynch.

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 day trip visitation.

Can you just give us sort of your outlook for what kind of customers 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?

Because we continue to see, obviously, very healthy visitation numbers into the market, and is this sort of a new norm?

Or do you guys expect us to kind of balance out or change over time?

So Shaun, it's 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, you don't have 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 to $30 billion of mass revenue in Macao, more hotel inventory must be built.

So the market will continue to evolve.

The customer sell 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 of the opportunity for us on both sides of the chart -- on the previous chart on Page 14.

They're 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 day trip 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 built, 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.

As long as -- we love to build more of this today, if we could, in non-gaming hotel rooms.

We would love to be investing more money in Macao.

We've made that clear with the government.

We are such staunch believers that we need more sleeping rooms for every segment, MICE, leisure, gaming.

It's -- what Dan's point 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.

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 think through the balance of the year?

Just -- or what you're seeing on the kind of convention side and convention mix?

It looks like 4Q is quite strong, but we saw a bigger volatility in the market broadly in '18 than 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 group room night expectations, but it's a practical matter.

I think we're very pleased with the operations team here.

They've done a great job growing different segments of the business, including our Baccarat drop, which we're very pleased with.

But again, it's highly volatile, and some of the non-Baccarat business, which we believe we can invest in the future to grow.

But from a standpoint of Vegas, it's been going 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 has is showing to be very bullish in '19 and group volumes and feel very strong about how the market's progressing.

No fears for '19, strong group market.

We'd like to win a [better] cage in the casino.

Other than that, we are lodging.

And our -- if you walk around this town in January, the CES and the SHOT Show, what's happening, it's pretty impressive place, Las Vegas, especially in January.

So we feel very good about our prospects in '19 as well as the entire Las Vegas marketplace.

And in terms of our Venetian Palazzo property, we've done a lot of reinvestments in the last couple of years.

If you've been here, you've seen some of the results.

We're very happy to open new 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 and position it well for future growth in market.

Our next question comes from the line of Ms. Felicia Hendrix from Barclays.

Yes, so Rob, look, you've 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 did they surprise you as well?

And I'm also wondering, is the strength there, that's 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.

And our margins are higher in that piece of the business.

And we've played lucky in the wrong side of the equation.

The junket's 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 an important component is not the driver.

It's a small portion of our overall profitability.

But we enjoyed the growth and we believe it's important to keep it competitive, and we've done a very good job creating a very 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 that 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 a planned -- the team up there has been 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 with 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 '19 for our rolling business.

Okay.

And then just staying on that, I know you gained a lot of share in 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 a guess, but...

Yes.

The problem I think the world you can't -- trees don't grow straight to the sky.

There's some ups and downs, and there's a little blip there.

But overall, it's got a big performance the last couple of years.

I look at the last 2 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 '19.

We would fall -- we lose share and we'd be falling apart and the world comes to an end.

And here we are sitting on a $3 billion year, 18% growth, material impact in all segments.

And I just couldn't be more proud of our team, 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.

Our next question comes from the line of Mr. Robin Farley from UBS.

Rob, you mentioned earlier in the call, you were 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 and potential disruption.

It seems like it could be hard not to have it and so just to sort of manage expectations about it.

Sure, sure.

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 of our different properties.

So I think we're -- I read some notes people are concerned about what's happened at Londoner.

Don't be concerned.

It's going to be a magnificent success story that will be opening probably late 2020.

It's underway already.

It's a big challenge.

We're taking a 1,200-room hotel and making it into a 600 rooms, all-suite hotel in The Londoner.

There will be some disruption, Rob, and it would be silly to say it wouldn't be.

But it's a weird process in that we're making progress in the dine approvals.

We're continuing labor.

We're making progress on our quotas.

The government support is there.

And I think the truth is that 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'll 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 for us, 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 best 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, 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 into Londoner.

Some have referenced or heard 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 were questioning that should look back at the Parisian, which is now past 20% return on invested capital.

Look at The Venetian, now seen rolling 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, 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.

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.

Suppose Chinese New Year's will start -- the 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's, you start seeing the Four Seasons is going to open up in the fall of 2020.

Londoner comes out of -- but Londoner, the transformation from -- first, from the current Holiday Inn, that's happening in March and April, the full transformation, and will be down for the 12 to 14 months, what it's going to take to transform it.

But 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, but that is under construction.

Dragon's Palace remains intact until the end.

So again, if there's different dates, the one date does come down, we completely close the Holiday Inn, 1,200 keys, post Chinese New Year's.

We will open them probably late in 2020.

That's the biggest single thing.

Keep in mind, too, Robin 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 suites.

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's a big benefit that we get and a small kind of degradation, but you get a big outsized benefit once you're complete.

What I don't know, Robin, 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 in the team there is really skill that 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.

Our last question comes from the line of Mr. Carlo Santarelli from Deutsche Bank.

Rob, just quickly on kind of better understanding the VIP strategy right now and 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 a breakout, but I appreciate the question.

The answer is both.

We're getting strong premium and direct play -- I mean, 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 #1 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, when 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 involved 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 from 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't overcome.

But assuming the business is there, the economy is healthy and the customers are showing up, we're going to keep getting outsized share of that segment.

The same we're getting outsized share of everything else.

I think the short-term views of Macao have always been a mistake, this is a market fueled by product, by quality and by scale, and we had that in spades.

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.

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 went into obviously accelerating your pace of spend?

Is that, hey, we find the 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 2 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 lot 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.

The Chairman sees a lot of long term value in the company, believe that it will continue to return capital in a meaningful way, and we have the liquidity and we want to take advantage of it.

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 new investments that we're making.

So that's a result of that.

To put it succinctly, yay buybacks.

Yay buybacks.

Thanks very much, everyone.

Thank you all for participating.

That ends today's conference call.

You may now hang up.