Las Vegas Sands Corp. (LVS) Earnings Call Transcript & Summary

Well, good morning, everybody. Thanks for joining us today. Those who don't know me, I'm Richard Clarke. I'm the Global Hotels and Leisure analyst here at Bernstein. I'm delighted to be joined for the 11:00 slot by Robert Goldstein, Chairman and CEO of Las Vegas Sands. Before we get started, a small amount of admin, if you've got any questions you'd like to ask by using the pigeonhole app, you should be able to get a link through your name merge and I'll try and wing those into the conversation as and when appropriate. So Robert, thanks for joining us today.

Thank you.

Maybe -- obviously, we hosted you here last year and maybe a good place to start would be just what's top of your mind for the -- as Chairman and CEO of LVS today? What are the key topics, and we'll delve into some of the details on those offers?

Not much has changed. We continue our business, both in Macao and Singapore, I guess, the huge growth in Singapore has been top of mind for us for quite a while, and Macao, the reemergence in Macao is the premier gaming market in the world, our position there. But I think right now, as we think about our businesses, the Singapore business is somewhat astounding. We've seen that market grow from basically a 10-year trajectory until 2019 is kind of flat, and all of a sudden, it's astounding the growth in Singapore. Based on the current numbers, you annualize Q1, running like $6.5 billion, $7 billion of GGR. So that market is taking off in a way which we are truly part of and when we continue to invest in Singapore. It's just an amazing growth trajectory from what had been in a market that we had about $1.5 billion, $1.6 billion. We had a $600 million quarter in Q1, which is pretty astounding for any building. But I think you also saw the strong results out of our competitor Genting. But Singapore's escalation is a market that could be someday as much as a $10 billion market, it's pretty astounding. It's happening quickly, and the underlying demand is astounding.

Great. And maybe we -- even though we're now in 2024, we probably need to bring up the COVID one of, maybe hopefully for 1 last year. Where are we in terms of sort of the visitation recovery into Macao and Singapore in terms of numbers? And what today in anything is holding back that recovery?

One is Singapore is pretty much back where it was. It's not quite 100%, but very candidly, it's the right visitor profile. What makes Singapore such a compelling place is the right people in terms of affluence, the right types of demand visitors are coming. So I think Singapore, again, the GGRs and the ADRs in the business in Singapore is [indiscernible] booming is 100% back in terms of pre-COVID, I don't believe this is probably 90s but what's more important in Singapore is the visitor profile is so outstanding. Macao continues to, I mean, the GGR escalation from a dead stop in 2023 and mere 18 months ago, zero COVID was in the roost. And very honestly, I didn't know where Macao would get to. In '23, it went from -- some people said $16 billion, $18 billion. I think we're all kind of gratified to see it approaching $30 billion. Hopefully, May's numbers coming on Macao will be strong. But to me, Macao is just simply a recovery story based on GGR. And I think the most recent government support for the IVS scheme is also hugely positive for LVS and the market. You probably have seen that kind of support from Macao and for the IVS. So I think you're going to see Macao continue to accelerate. Does it go to $30 billion or $32 billion this near term? I believe it does. Does it eventually reached $40 billion? I believe it does. It's a market that is going to continue to grow despite the economic issues that are prevalent today in China. Macao has proved to be very resilient, and the growth is there in all segments. Obviously, we'd like to see more recovery in the base mass. It would be strong for LVS, but also for the market to see more base mass business. The premium mass has led the recovery. That's evident from the numbers of the segmentation. But I think both these markets have come a long way from Singapore's run rate pass pre-COVID numbers as much as 30%, 40%, 50% higher GGR. So Singapore is in a complete success mode. And Macao, I think is on the heels of that. It's a question of how soon Macao. It's a story of not today it's a story of tomorrow how fast the escalation of GGRs can gets to. We recover back to 36 and beyond. But to me, Macao is a sure thing. It's not a question if this will recover. It's a question when.

So the variation you've seen between Singapore and Macao, do you get a sense that consumers are choosing or favoring going to Singapore over Macao? Or is it a different consumer?

No. It's not a question of Macao versus Singapore. These are the two dominant markets for what we do for as a gaming hotel business. In my opinion, Singapore, Macao are head and tails above the rest. They don't compete necessarily. They're very different audiences. Yet they do share our customers. But Singapore, our business there is misunderstood. It is essentially a very high-end customer. And so we -- what people don't realize that our business, we're shrinking key count because we believe the consumer wants a very high-end suite product, which we -- if you haven't seen our new product in Singapore, it's pretty [indiscernible] -- that's extraordinary. So we're building better suites, better combinations, by increasing our gaming tables by next year, we have 100 additional premium gaming tables on the floor in Singapore. So imagine these tables winning $20,000, $30,000 a day, and what the impact of in our business. Singapore is a much smaller market because you'll have the amount of hotel rooms. And obviously, it's just us and Genting in the gaming hotel space. So you can't compete. It's much more -- in Singapore, a much more premium mass-driven. And of course, there's never been junkets for so it's one big premium mass house. But you think about Singapore, it's a very affluent high-end visitor. Macao is much more massified. You have that new people coming. Hopefully, we'll get back to the pre-COVID number shortly, but it's millions and millions of people, it's a much larger market segmentation in Macao than Singapore.

May be dialing in on the -- you mentioned some of the kind of consumer issues in China. I mean, how much does that weigh on you if you look at your kind of customer profile? Are you seeing some of your asset customers into both Macao maybe and Singapore being squeezed by some of the consumer pressures we're hearing about in China?

I don't know the exact answer, obviously, in any macro economy when it's softer. And right now, China is going through some issues with real estate, et cetera. Clearly, it impacts consumers' mindset. It's in the U.S. that way, it's that way to the world. It's certainly not a positive. I'd love to see China recover and get back to a stronger position or beneficial to Macao and to Singapore. But like in every market, there's people of a social economic level it can handle the downside. You've seen that in these astounding numbers. I believe Macao and Singapore cumulatively will be about $45 billion to $50 billion of GGR by the end of this decade. They're both going to keep growing. Just Singapore is just on a huge trajectory. Macao more measured. But I think once the recovery happens in China, I believe it will, economically, and obviously, the business will increase in all segments in Macao. No one likes to see a soft economy in any place you're operating a business. And that's what's happened right now. China is going through a difficult time right now.

And so maybe the addition to that is to think about widening the international mix? Is there a way you can leverage a stronger dollar to get more U.S. travelers into these markets? Or are there other regional markets that could be attractive? Or are you still very dependent on that Chinese?

It's not Chinese, it's Asia-dependent, and China plays a part in that, but you're Asia-dependent, you're depending on Japan and Thailand, Korea, Indonesia, Malaysia as well as China. I don't think the U.S. ever play an important role in the business of what we do in Asia. I still think it's going to be dependent on the region. And the region overall is fine. There's just this [indiscernible] right now until China the economy reserve back. But no, I don't think we can ever assume will be a lot of gamblers or people coming to the U.S. to visit Macao or Singapore.

Fair enough. So maybe we sort of dial in on competition. I mean how intense are you finding the competition in your markets? I think in Singapore, you're really only competing with.

Yes, in gambling. Yes.

In Macao, there's a wider set. In market, maybe where you haven't seen a full recovery you're seeing that sort of competitive forces intensify? And how are you competing relative to your competition?

Well, micro competition is healthy, good competition. We welcome it. We encourage it. And we're very happy to see our competitors do well, especially with Genting's very strong Q1 results. But in Macao, it's a more competitive market by virtue of more licenses. But I think in the end, we're all competing for one thing, which is more gross gaming revenue, we will participate well when that happens. So I think competition is -- we have a different approach of IVS. We built the best buildings at the most scale. And I think when London opens up, it's a new day in Q1 of '25, once London opens up, I believe we'll have the #1 and #2 assets by far in that market. I believe both Londoner and [indiscernible] will see $1 billion plus EBITDA if not more. So I think competitively, we built very, very strong products that have diverse kicks into retail, entertainment, food and beverage, great margin. So in the end, product always wins, LVS bets on product, our product. We've invested heavily in Macao, heavily in Singapore and the results would be, I think we have growth in both markets. I believe both of our businesses can grow considerably. Macao, we believe, is going to go to $3 billion, and I mentioned $3.5 billion of EBITDA. And same thing in Singapore. There's no end to the growth in the next 5 years in both these markets. So we invest heavily, we invest properly with great assets and when we go see our products, go see the London or go see MBS, I think you realize why we'll be a dominant player in both markets we used to compete.

And you sort of answered this question just then, but maybe just to expand a bit further. So your sort of point of differentiation would be, you would say, the quality of the product. And by that, do you mean the accommodation product? Or is there [indiscernible] product?

No, no, it's not just -- Singapore a couple of weeks ago, I was astounded by what has the team has achieved there. The room product is beyond compare. I don't care what you -- what's the Paris, London, New York, maybe not New York. And you got great hotels everywhere. And I think if you look at what's happened in MBS, it's a kind of the room product itself. However, beyond the room product, the retail product, the food and beverage product, the entertainment offerings. I mean in Singapore and Macao, we work very hard to create a lifestyle experience. It's not just about coming to game. It's about creating a lifestyle people in part of our ecosystem. And it reflects well when you see how people gravitate the LVS product because you can sleep in our hotels, eat in our hotels, the retail product is extraordinary. The entertainment piece, the spa piece, it all works in tandem. It just isn't about a good room. Our rooms are best-in-class, but the rest of the product is compelling as well.

So maybe just talking about -- I mean, hotel analysts for a decade and thinking about the -- what's resonating today? And I guess kind of maybe the way you can tell me if this is too simplistic, I kind of sort of the 3 styles of accommodation you put in. You've kind of got the pure luxury, which you talked about in sort of Singapore. You've got maybe more esteemed hotels, maybe you disagree with that the [indiscernible] and Londoner type product?

I don't see there's no arguing that.

And there are sort of the branded products you've used in the past where you work with Four Seasons or [indiscernible] et cetera. What's resonating today? What do you see as the most compelling of those 3 and then what's been changing?

Well, they all have different value propositions. You referenced, I mean, MBS is -- if you think about MBS, it looks like the a pit of luxury at all levels. It's just -- it's not a brand, we brand it, when they say solid brand. But if you want that hotel, if you're in the lobby or if you're in the retail, if you're in the spa, if you're going to pool that on the top in the casino. These are products that they cost billions to build, they reflect it. But one hotel or one casino world can aspire to make $3.5 billion in a single year. No one. That's the hotel or they can do it. There's no place like MBS, and it plays a very high level. It doesn't play to a mass audience. It's one of the probably affluent segment. Our branded hotels, as you alluded to them, our branded hotels, there's no avoiding the appeal though under the Venetian in Macao has been proven. We built hotel in 2007, and the opening, somehow I don't knew his name, probably it's a huge white elephant. You'll ever pay debt back. So it built for $2.7 billion. I think it's made probably $20 billion in EBITDA since then, so probably a good investment. But it appealed to all a broad segment of the Chinese audience because the execution of the Venetian was top tier, albeit a theme hotel is somewhat people think is a lower level, that hotel has been extraordinary in terms of its appeal. And it's very -- you can call it, that's a yesterday story. But in fact, today, the news is still so by far the #1 hotel by earning power in Macao. The Londoner just simply takes that same branded theming type of things to a new level. Now that's out of vogue right now in Las Vegas. So we weren't building -- they're not building these type of hotels. But actually, the Londoner is so well done. I think when you come to go see it, you'll be shocked how much you'll like it and gravitate to its appeal. I'm very proud of those two hotels, very proud of the Four Seasons. But our Four Seasons is different than the Four Seasons you might see somewhere else. These are very, very expensive structures that we've developed heavily. And to make them, I think the Four Seasons in Macao, it is not the best Four Seasons in the world. But I'd like to see the between two product because it's extraordinary in every way. The room appointments, the quality of the hotel is the retail. So on all 3 different levels, our own branded MBS be it as you have theme hotels you call it, be it Londoner, Venetian, Parisian or be it a third person who's brought a the product like Four Seasons, we've taken the level up to a level that is unprecedented. I really shocked see the opening of Four Season. He made a very funny economy. So we go Four and the these other places like, but it's not sensible unless you're in a gaming hotel environment to do that. So I think if you visit the Four Seasons in Macao, you'll be taking it back is how good it is. It's not a typical Four Seasons.

What about the gaming itself? I mean is there any innovation happening within [indiscernible] and what's driving the incremental customer?

Well, the hot ticket today, the hot discussion evolves around the smart tables. We work with [ Angel Eye ] and others work with other people in that space. And there are terrifically advanced products that I think enable us to do a better job of policing the game for both the customer and our own benefit. It also helped us market better. They make us more aware turn table game into a sort of slot machine sort of way. It takes out the human element in terms of the customer [ increased ]. It makes it very mechanical, very efficient, and it works very well. The future of gambling, I think, is tied to smart tables. And there's all confusion, the smart tables somehow new things that they only do. They simply enable the operator to do better things with the marketing, with the game protection, with how they view the customer, enables a customer to have a better experience. But smart tables and I think revolutionize gaming, will be fully in the smart table business, both on the Macao and Singapore, that's our future. We believe in that. Very positive development for the industry.

Okay. And then can we mention the word AI then in that respect?

AI definitely has a role in that our idea. It all works in tandem. With our system, we're trying to incorporate all the elements to make it the most effective and I think that's happening today with Angel Eye. So we're very happy about the work is going.

And maybe I'll just include on the question regarding the audience here. We've seen in Vegas, obviously, not your market, but a deal with MGM and Marriott that are on to the MGM hotels, under Marriott sort of soft brands. And speaking to Marriott, they say they're cutting the online travel agent distribution quite heavily by doing that. Is this kind of deal of interest to you? Is the market very different? Are you very direct in your distribution?

We are, yes. It doesn't work for us in terms of we -- our hotel demand in Singapore doesn't necessitate that type of arrangement, and even Macao, we've moved into a direct reservation system. But keep in mind, when you have the kind of MGM in different places, Las Vegas, but I guess, any more fees and more levels. So our Macao offering, we run huge occupancies about third-party involvement. We did that for years. We're moving away to a different model.

Okay. And a few more so the other difference would be that your ratio of kind of non-accommodation revenue is quite a lot lower given by the [indiscernible]?

Our biggest problem in out jurisdiction is finding enough rooms to take care of the customers. Because [indiscernible] is huge. And I think for MGM, that works well. we did that years ago with as well in Las Vegas. But today, that doesn't fit larger.

Okay. Makes sense. In terms of sort of looking ahead for opportunities, I mean, are there opportunities to add more properties from Macao and Singapore or the there still white space.

We're in the midst of finalizing the deal with the government to add another property, and we can't talk about it because it's not finalized, but we certainly have plans to build a very special new building in Singapore because that's part of our growth trajectory. Our business is organic in both our markets be it Singapore and Macao. We believe our company can achieve $4.5 billion of EBITDA. Our goal is get to $6 billion in two of our jurisdiction, and I think that's very doable. So organic growth inside LVS is prevalent. Of course, we're looking at all the usual suspects here in New York, we're looking at Texas, looking at Thailand. But it's very hard for us to find the right opportunity to invest capital and get the kind of returns kind of environment one of the -- it's not easy to do. It sounds easy, but it's quite difficult.

Why? I mean what makes the talent Singapore that was so unique, why [indiscernible] market?

First of all, they're in Asia. This is a good thing. That's a market that's on historically gaining hotel capacity. Secondly, they're well-run market. Both those markets are adjudicated by government bodies do a good job saying for in Macao, a very clear regulatory environment there and the government involvement there. So that's hard to find. There's a lot of places in the industry, we wouldn't feel comfortable going to. In the U.S., it's more challenging because the U.S. has had huge gaming growth in the last 40 years. My start in this business was Nevada and New Jersey. Today, it's every corner, there's a casino hotel. So to invest the kind of capital we invest and be protected to get the returns we want. It's very difficult to see -- very few markets left in the U.S. that did that bill.

But you say there could be some?

Sure. I mean New York is a possibility. Texas is a possibility. But I guess, pretty finite that, in California, I don't think there's some possibility obviously flowed into an Indian run state as far as gaming. So I don't see us bringing in other places that it's too saturated from most jurisdictions. And honestly, tax rates are also make it very difficult to invest capital. So very few opportunities left for companies of our scale and size inside the U.S.

What about in Nevada? You have [indiscernible].

It's always a possibility. I mean obviously, it's a replacement operator for a year, successfully do well there. And we're always considered about Nevada at the right juncture. But I think our organic growth, our focus, our capital plan right now is to stay very focused on growing our businesses in Asia because they're so damn compelling. I mean, Singapore is just compelling to sell. And I think Macao people don't give a credit for. We think about 18 months ago, zero COVID, we had zero revenue. 18 months ago, there was no revenue, nonprofit, revenue in Macao. Here we are 18 months later, and people were say, or going to get back to $20 billion or 18. You read the analyst from a year ago, the big thought was kind of get to $18 billion. Here we are brush up against $30 billion. And there's no question if I'm goes the $35 billion, it goes to $40 billion. If you think beyond your nose big picture. Macao's going to be a huge market for years to come. And this idea of the junkets won away is simply long. Junkets or not there. But what is happening is the customers gravitate to different ecosystem, different channels of capital. And so the premium mass business is soaring in Asia. What hasn't happened for us in Macao is the [indiscernible] fully back of the base mass, which for a company at our scale and size is pivotal to our success, we want base mass and IVS scheme is very encouraging as it opens a door to more visitation for more base mass customers. The same way the relaxation of recent policy into Singapore was hugely powerful Singapore. And that's a powerful driver of business in Singapore that the Chinese government said this is not required. It's a very positive thing. And we hope that continues in Macao. But growth for us, we believe we've got a 20% growth right now on 2 existing markets, we're now building in the U.S. or some of the new in Asia. We think we go to $6 billion just in these 2 markets.

Okay. Fair enough. And then in Singapore you said you're thinking of adding a second property, it sounds like you can't say very much it. It something on the same scale as can be?

No, it won't be as many rooms. But it will be, I think, a very, very compelling product. We've been negotiating with the government for quite a while. We've got waylaid by COVID. And I think we'll announce something later this year once we get finalized the purview. And I think it will be quite a growth story for Singapore. And working in Singapore, the government made great decisions about how to build and how to develop. I think this product reflects their insight and also the underlying market demand in Singapore is so damn good. If you think about Singapore being, again, a sleepy $4 billion GGR market to now go to $5 billion, $6 billion, $7 billion, I don't think there's any question, Singapore is a $10 billion market by decade end. And again, things invest as well as ours, obviously, are predicated on those kind of numbers happening. But Singapore is going through a growth spurt that we -- people said, can you get back to COVID? We're $500 million of October levels today of EBITDA. Our slot machine business up 45%, our non-rolling table is up 55%. And it's a good shot. And all of a sudden, Singapore has become a hugely important market to anybody. And there's also a moat market, you can't get in. So we absolutely investing in the second quarter once we can finalize with the government.

It's a closed market, it would always be just a [ towards race ] in Singapore?

You can never say never. Never is a long time. But I don't think today there's something about third license.

Okay. And then you mentioned maybe potentially looking at the other areas in Asia? Obviously, again, you've talked about [indiscernible] that we've seen other mention with places like Thailand. Are those the kind of markets you're looking at is where Chinese travelers can travel?

Sure. We looked in Thailand, we spent time there. We're looking at -- we spent time in Japan that didn't work out for us. And we looked at Korea. But clearly, we'd like to be in other jurisdictions if the circumstances are right in Asia. And Thailand has been talked about lead jurisdiction in the market today in Asia. And certainly, we'll see where the government goes with it.

And is there an existing gaming business there? Or would you be kicking at all?

Legal game is not available in Thailand today. Just some underground probably something that you talk about. Legal casinos you can visit there [indiscernible].