Caesars Entertainment Inc (CZR) — Q4 2020 Earnings Call Transcript

Thank you, Sara, and good afternoon to everyone on the call. Welcome to our conference call today to discuss our fourth quarter 2020 earnings. This afternoon we issued a press release announcing our fourth quarter financial results for the period ended December 31, 2020. A copy of the press release is available on the Investor Relations section of our website at investor.caesars.com. Joining me on the call today are Tom Reeg, our Chief Executive Officer; Anthony Carano, our President and Chief Operating Officer; and Bret Yunker, our Chief Financial Officer. Before I turn the call over to Tom, I would like to remind you that during today's conference call, we may make certain forward-looking statements about the Company's performance. Such forward-looking statements are not guarantees of future performance and therefore one should not place undue reliance on them. Forward-looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the Company's filings with the Securities and Exchange Commission. Caesars Entertainment undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after today's call. Also, during today's call, the Company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of these differences between these non-GAAP financial measures and the comparable GAAP financial measures can be found on the Company's website at investor.caesars.com by selecting the Press Release regarding the Company's 2020 fourth quarter financial results. I will now turn the call over to Tom.

Thanks, Brian. Good afternoon, everyone. We are thrilled to close the book on 2020. It was, by any measure, the most challenging year that we've had operationally and personally to date. The fourth quarter was no exception to that. I want to start the call by recognizing all of our front-line employees. They lived through the vast majority of our employees being furloughed, then coming back into an environment where they were fearful for health and safety, fearful for what was happening at home with children or parents or grandparents or all of the above. And they came back and delivered the exceptional service that our customers are accustomed to at Caesars and operated through some extraordinary contact tracing changes in regulations, reopenings, and closings throughout the year, and we couldn't be prouder of them. For the fourth quarter, we did $346 million of EBITDA. We've listened to and read others’ calls; our cadence is similar, almost half of our EBITDA happened in October. As restrictions tightened across the country, November and December were sequentially less than October, but we think we’ve seen the bottom for the business and we'll talk about what we've seen in January, February, and going forward that makes us highly confident of that. In Las Vegas, we did $100 million of EBITDA, adding back the Rio rent payment, which we're proud of on a relative basis. However, we know that on an absolute basis, we've got a lot of work to do in Vegas as it reopens. We're seeing some encouraging signs there that I'll discuss. In the regional markets in the quarter, we had significant restrictions in Nevada, New Jersey, Colorado, and Ohio that related to operating hours. We had closures in Illinois, Pennsylvania, and the Lake Charles property from the prior hurricane. If you exclude just the closed properties and include everything that had operating restrictions, our regional EBITDA margins were up about 400 basis points for the quarter. Thus, we’re still seeing strong evidence on the cost side that progress is continuing despite the noise. When I'm speaking to investors, I'm often asked what am I missing, what is the market missing? What I think the market is missing now is similar to what I talked about in the last quarterly call—the demand that is coming as the world reopens and the flow through that you should expect to see in this business post reopening is wildly underestimated by the markets. Across the board in the sector, there’s a prevailing view in forecasts suggesting we get back to 2019 numbers sometime in 2023. I'm firmly convinced that we will at least run rate those numbers. The first quarter group business for Vegas is coming back in earnest, potentially as early as the second half of this year. Currently in Las Vegas, we are at our highest level of bookings since reopening. January and February have ramped up significantly—it’s almost like a switch was flipped, sometime around late January or early February. Our bookings are up 20% month-over-month in the FIT and casino segments. We measure gross and net pickup; gross pickup is how many aggregate rooms are booked in a given period while net pickup is bookings less cancellations. If you look at our gross and net bookings, 9 of our top 10 days since the pandemic reopening in Las Vegas happened in February, with Monday marking the highest bookings we have seen to date. Importantly, the booking window is extending as well. If you look back from reopening until the end of 2020, many bookings seemed like impulse trips with short booking windows. What we're seeing now is that almost half of our bookings are for trips that are at least 30 days out, essentially double the pace we had in the fourth quarter. We are extremely encouraged by that. Our actual performance in January and February has surpassed November and December and approached October in terms of EBITDA. February has been strong as well, obviously with fewer days in the month. But if we look forward at our forward-booking forecasts, by mid-March, we’re well into the 50s in terms of percentage occupancy mid-week on the Strip and we’re over 95% on weekends. For the second half of the year, we have 32% more room nights on the books versus the second half of 2019 on the same day. I'll grant you we didn't have the Forum Convention Center available in the fourth quarter of 2019, but you're talking about almost $200 million of room night revenue on the books for group business in the second half of the year. Remember, when we talk about group business, those rooms are booked for the actual event. So as those groups come, and guests decide to come early, bringing their families and staying a little longer, those additional rooms are not included in that group room night business. We know there is a lot of discussion and debate about when the world will reopen. We're heartened by the recent data, the vaccine advances in terms of supply, and by Governor Sisolak in Nevada, providing a pathway towards hosting group business in the middle of this year. Therefore, we think there is light at the end of the tunnel. Our internal messaging is to ensure that all of the cost discipline we've maintained over the last year stays in place as business comes back. We had an anomaly in the Tahoe market in the fourth quarter, where California's regulations were far more stringent than Nevada's. We saw a burst of early demand there, and our team, led by John Koster, did a fantastic job of maintaining discipline on the cost side, leading to Tahoe being up 7% in gaming revenue in the fourth quarter, with EBITDA up almost 60% and margin growth of over 1,100 basis points. This gives me optimism. Anecdotally, this past Saturday in Las Vegas was 95% occupied, essentially full. Last year we were at 99% at higher rates. Our EBITDA margins currently are running several hundred basis points ahead of last year, same day. So as this business comes back, we're looking at filling rooms with high-margin room revenue. We're also focusing on the return of high-end restaurant business and entertainment. The recovery we expect to see will likely be more dramatic than what we see modeled; the pace will certainly be much quicker. We are now seven to eight months post-closing the Caesars transaction and have exceeded all of our synergy targets. We expect this to continue after the world reopens. In terms of my opening remarks regarding William Hill, I am limited in what I can disclose since the transaction has not closed yet. We have two remaining regulatory meetings, one in Nevada, a two-parter, and one in Indiana. We anticipate these taking place in March, and we have a final court date in the U.K. set for March 30th. After clearing those, we expect to close the transaction soon after. We are working on the integration of William Hill specifically on the technology side, and we believe we'll be well positioned to have one of the best apps in the industry integrated into Caesars Rewards on both the sports and casino segments by the beginning of the football season in 2021. With that, I'll flip to Anthony.

Thanks, Tom, and good afternoon to everyone on the call. While 2020 was certainly a challenging year on many levels, I am extremely proud of our team members and their extraordinary dedication and commitment to running great properties. Our success this year could not have been accomplished without our team members' tireless efforts each day to provide a safe and healthy environment for our guests. Now turning to operations, in Las Vegas, we generated $90 million of adjusted EBITDA in the quarter and $100 million of property-level EBITDA, excluding the real rent payments. EBITDA improved over 40% on a quarterly sequential basis. October was our strongest month where we generated approximately $50 million of EBITDA. Total occupancy for Q4 was 60%, with weekend occupancy at up to 80% and midweek occupancy of 50%. Casino mix as a percentage of our occupancy was over 50% during Q4. Looking ahead, we are encouraged by the booking trends for the second half of '21. Group and convention room nights on the books for the second half of '21 versus '19 are currently pacing up over 30%, and we are seeing good rate growth as well. Group pace for 2022 is up 10% in room nights with strong rate growth against this time last year. As we have mentioned before, future business on the books remains uncertain, but the strength of forward bookings tells us our customers are anxious to return to Las Vegas. On the FIT side, our booking pace continues to accelerate and is at its highest level since reopening. Our booking windows are extending as well; 47% of Las Vegas market bookings since the beginning of the year are for at least 30 days out—almost double the percentage we saw in the fourth quarter. In 2021, we plan several property improvements in Las Vegas, including completely transforming the arrival experience at Caesars Palace which has largely remained untouched since the property opened in 1966. Additionally, we will be adding several exciting new food and beverage concepts across our Vegas properties. In our regional markets, operating results were negatively impacted by property closures and incremental COVID-19 restrictions during the quarter. At our closed properties, we continued to pay team members’ salaries and benefits throughout the quarter. In our regional non-destination properties, and excluding property closures, revenues were down 17%, EBITDA was down 6%, and EBITDAR margins improved approximately 400 basis points. Ten regional properties within the portfolio reported quarterly EBITDA and EBITDAR margin records. We have spent the last year refining our cost structure in both our destination and regional markets, and we expect meaningful EBITDA flow-through as recovery unfolds in '21. This should also lead to higher sustainable EBITDAR margins. We are excited about the year ahead and we remain confident in the eventual recovery of travel and tourism in the U.S. and especially here in Vegas. With that, I'll now turn the call over to Bret for some additional insights on the fourth quarter and details on our balance sheet and capital structure. Bret?

Thanks, Anthony. So we decided to mix things up a bit in the fourth quarter and transitioned from buyers to sellers, with the most significant announcements being the sale of two of our Indiana assets, yielding us over $1 billion of rent-adjusted debt relief, over $700 million of which is in the form of cash proceeds that we expect to receive during the second and third quarters of 2021. These proceeds further augment approximately $4 billion of year-end liquidity across our unrestricted cash on hand and available revolvers. We are well positioned to close on William Hill, which Tom mentioned, we expect to happen early in the second quarter, and our nearest debt maturities come in December of 2024. CapEx for 2021 is expected to land between $350 million and $400 million, excluding Atlantic City and Lake Charles, which we will be funding from Escrow and insurance proceeds. Back to you, Tom.

Thanks, Brett. With that, we will open it up to questions.

Hi, good afternoon, everyone. Thanks for taking my question. So, Tom, I really appreciate all that commentary; that was extremely helpful. Do you think we need to see Vegas meaningfully improve to the levels that you're talking about and getting back to those prior 2019 run rates before we see a Vegas asset sale? Is that kind of how you're thinking about it?

Yes, and thanks for asking that question because I should have addressed that in the opening remarks. I've read a lot of comments about how we're about to sell Planet Hollywood. If whoever knows what's happening there can call me and tell me what we're getting for it, I'd appreciate it. There are no assets for sale in our Las Vegas portfolio. We do still anticipate selling an asset in the future, but I want to be marketing that asset off actual performance under our stewardship not having to build a story, or build a bridge to what it's doing today versus what we think it will be doing. So, based on what I'm seeing, you should expect a sale is unlikely to take place in 2021; we're probably looking at some time in 2022, most likely in the first half.

Okay. Thank you. And just to switch gears here on sports betting and iGaming. I know, Tom, in the past, your message has been that your interactive digital business is profitable, whereas competitors are not. I guess a multipart question here. Is online sports betting and iGaming profitable for you? I know iGaming is, but I guess the first question is, is online sports profitable as well? And how has your strategy evolved on that thinking? I mean do you think that it's time to start getting more promotional and start to capture more market share? Maybe you can just help us think about how you're considering that? And then do you need to get this William Hill deal closed before you start maybe a more robust strategy on that front?

So I am limited in what I can say here. The answer to the first question is yes, we are profitable in all verticals in that business. Regarding the second piece, William Hill has been in a bit of suspended animation since we announced the transaction. Obviously, they were not integrated into Caesars when we announced it, so there is not a lot we’re able to do in the period between signing and closing. William Hill faced a situation where they had a brand that they knew was ultimately going to go away as the main driver of the business. It made little sense to spend a lot of money building the brand that's going to change early in 2021. We have not been in charge of that operating side of that business in the past. We’re in this to be a winner. If the answer is we need to invest more money to build market share, you should expect that we would consider that. I believe we have a strong operating team, and you shouldn't expect that to change when we're managing the sports and online business.

All right. Thank you very much.

Hi, everyone. Thanks for taking my questions. I guess to build off that last discussion a little bit, Tom, I wonder if you could talk a little bit about your thoughts on the iGaming trajectory. I think the last discussion you mentioned profitability in that segment and it's a business that Caesars has been in for a while. I think we've seen some legislation float around in Illinois and being considered Indiana. So, a lot of discussion on sports betting, but it seems like Caesars has a particular advantage given the experience in iGaming. I'm curious to get your thoughts on the pace of that market rollout?

Yes, John. As we've discussed, I think the miss in the area of the market in terms of expectations is the view that iGaming is going to significantly trail sports and ultimately not be legalized in nearly as many jurisdictions. In my experience when states start to see the revenue from something like sports, I think their inclination is going to be to expand that, and iGaming is certainly an easy path there. I'm encouraged by the January numbers we saw, in effectively 2.5 states, that suggest iGaming from a total market standpoint is already pushing $3 billion. We are significantly profitable there and that business keeps growing for us. We think we're well-positioned there and in sports with Caesars Rewards, and we believe we can take advantage as iGaming continues to roll out.

Tom, if I could ask a follow-up on that. I'm not sure how much detail you're prepared or can talk about, but we get a lot of questions on crossover play. I don't know if you have any stats out of New Jersey or anecdotally if you could tell us anything about how much of the Caesars Rewards database was playing on online or how many customers were acquired online into the Caesars casino for iGaming specifically?

Yes, I'm not going to disclose that level of detail until we've closed William Hill out of an abundance of caution.

Fair enough. I can appreciate that. If I could ask a second one instead on daily fantasy sports. You've made a minority investment in the business and obviously, the cross-sell rate we've seen from competitors has been pretty high. I wonder if you could give us a high-level view of the strategy and thought process as to how you might leverage that going forward?

Yes, for us it was twofold. We think we were acquiring customers at a particularly attractive acquisition cost, and the ability to fold it into Caesars Rewards quickly and their capabilities positioned us well for growth in that business. It was also an obvious gap in our lineup as we talked with our partners in the sports world, both teams and the NFL itself. We rolled our Flutter stock from the TSG skins deal into our investment in SuperDraft, which given what's happened with Flutter stock and where we think we can take SuperDraft, we consider that a good trend for us.

Understood. Thanks, Tom. I appreciate it.

Tom, you obviously talked a lot about the Las Vegas recovery and what you're seeing in group, noting that you believe you can be on kind of a 2019 run rate as early as the second half of this year. My question around that is, with the group demand you see on the books and a pretty good visibility into it, could you quantify what revenue level relative to 2019 you think you need to achieve on a quarterly or annual run rate basis to kind of hit those levels in Las Vegas specifically?

I mean, I think you should consider a minimum of 500 to 1,000 basis points of margin expansion on a consolidated basis. You can do the math to back into where we would need to hit, call it $3.5 billion, which was the pro forma, Eldorado, and Caesars numbers in 2019, plus the $500 million of synergies we announced in the original deal.

Okay. And that would be off the pro forma kind of 28 and change margin from 2019?

Yes. I would expect that to be a minimum, and I think we'll be chasing 40% pretty quickly.

And then if I could, just as you think about the regional portfolio, you've had multiple transactions over the last year-plus. Is there anything else that you are looking at across the board in your regional portfolio that you would consider non-core or in regions where you feel like potentially there could be something you want to do to clean up the portfolio or tailor it to what you're trying to do with the business moving forward?

I would say it’s unlikely that we would be a buyer of anything material that's already operating domestically. If markets like New York and Texas open up to commercial casinos, we would certainly take a hard look at whether it would make sense for us to enter there.

So when you announced the William Hill deal, you mentioned reaching $600 million to $700 million in sports betting and iGaming revenues in 2021. Do you still think that's a good target?

I can't update any numbers that aren't in the public filings, Thomas.

I thought it was worth a shot. So it gears a little bit. When we think about the strength that we're going to see in Vegas, hopefully in the second half of this year into 2022. Can you just talk about how you're managing your rooms? Are you holding back convention bookings because you think the FIT business is going to be so strong? How do you do that? Thank you.

No, I mean, keep in mind the booking windows are entirely different. When you're booking a convention, it’s typically for many months or typically more than a year out. We have a block of rooms that rolls about 15% of our total room capacity. There is no need to artificially reduce that for expectations of what can happen. In FIT, we are really managing that from a rate perspective, and we've got a team here led by Pavan Kapur, who has been with Caesars and is the best in the business at yielding and revenue management. This has been reflected in our results since we closed the transaction, and that’s what we rely on moving forward.

I am just asking that question in a different way. Like, are you guys keeping rates steady or even increasing rates for the groups that you are booking into 2022 and the second half of the year because of your confidence around groups?

The group business in the second half of the year is at higher rates than in 2019, and it's pure supply and demand within that block.

So, Tom if we go back to your biggest commentary around the group business, it could come back in some material form as early as the middle of this year. I understand you have a significant amount of room nights booked at this point, but I guess the question is how many—I'm not sure if you can answer this—but how many of these nights do you think will actually pan out or materialize? Meaning the conventional group meetings occur and those folks actually show up?

Yes. And that’s part of what Pavan's group does in forecasting and managing revenue. You can expect that in any environment, 100% of those room nights aren’t going to ultimately show up. The discount from what we would have been forecasting for 2019 in terms of expectations is larger, but we feel optimistic about where we’ll be whenever that business comes back in earnest.

And that’s regardless of where airline capacity is at that point; does that affect it?

Yes, our airline capacity in this market has been a lagging indicator. When you've seen demand for people to show up, more seats tend to flow to this market, and that should be especially true in an environment where airline performance is as it’s been.

And then Tom or Brett, could you update us on your leverage targets or goals and the timelines around potentially getting to those? And Tom, I don't think we've discussed this in a while, but the original $10 free cash flow target, is that still in place at this point?

Yes, Steve, I see it creeping down to $7.5 or $8, but I am still at $10. I'm highly confident we will be at $10 a share of free cash flow. In terms of leverage, nothing has changed. We have more leverage than we anticipated going into the deal, obviously a function of the pandemic. You should expect that as soon as we're generating significant free cash flow, our number one target will be debt pay down. We fully expect to drive leverage below four times on a gross lease adjusted basis. As we do that, we will reach a point of diminishing returns on equity, or should we push it further. As you know, Bret and I both come from fixed-income backgrounds, so we tend to be a little more conservative here anyway, and we recognize the benefits of flexibility that less leverage provides as well as the wider potential equity buyer audience that it creates. We are going to get there as soon as we possibly can.

As you think about the upside you found in the initial synergies and this potential march to 40%, where are the biggest opportunities being uncovered?

It's a whole different operating model, Steve, than it was before. We've been discussing this since reopening. The marketing environment is entirely different, and the operational pieces of the properties are also markedly different. Some of the most labor-intensive areas where we were losing the most money are never coming back. Additionally, we were in the middle of a merger that typically leads to synergies through reducing redundant capacity. Caesars was notably heavier in corporate departments than we've historically operated, and if you roll all that together, that’s how we expect to reach the margins we’re targeting.

And I guess as an unrelated follow-up, when you see this ebb and flow of customers and restrictions both in Vegas and at the regional properties, how has the customer profile changed? Are you seeing new customers that are signing up for the rewards program, or is it mainly existing customers?

Yes, you've got a mix of both. Given the effectiveness of the Caesars Rewards system, we’ve seen a lot of rated play come back. However, we have noted significant increases in the under-35 crowd that has unfortunately been offset by decreases in the over-55 crowd. In how this has evolved, it’s been relatively consistent—everyone has moved in tandem. Segmenting our business by rated and unrated or by age cohort shows similarities in behavior in how much they’ve decreased since reopening and in response to tightened restrictions, and then again when we’ve started to reopen.

Tom, I just wanted to follow up on your last remark. I believe you mentioned that the regional non-destination regional revenues were down 17% in the quarter, obviously including markets with restrictions. Do you have a sense of what this was in periods and at properties where there weren't restrictions, or I guess more importantly, when this starts to ease and we kind of get the vaccinations, do you think this can be closer to flat or slightly down? I'm just trying to figure out what was intentional versus everything else that was going on in the quarter. Thanks.

Yes, the short answer is the way you laid it out. Yes, if you took—obviously, Chad, you know we've got Atlantic City, Reno, and New Orleans in our regional properties, which are highly dependent on rooms. Those were the properties most impacted in the quarter due to restrictions. If you were to look at our core regional assets and compare us to operators like Pandora or Boyd, you would likely find we’d be around flat in revenue, with EBITDA expansion several hundred basis points ahead of the 400 basis points I pointed to earlier.

And I know in the past you've said that you're not interested in any assets outside of the United States. Can you just confirm that? And then also give us an update on where the Korea project sits and if there is any additional capital that needs to be funded from your side of the relationship.

We still have the Windsor management contract in Ontario. We expect to continue operating that. You should expect that over time that will be the extent of our non-U.S. business. Ask again the second part, Chad?

Korea. Yes, thank you.

Korea has gone; we sold it for some barbecue pork, although we sold it back to our partners. We have no more commitment; we’re out. I believe that was in May.

Thanks for taking my question. Tom, you mentioned that you've seen an uptick in the younger, unrated player, similar to a lot of your peers. To what extent, if any, have you been able to get them onto the Caesars Rewards program and maybe cycle them through to your sports betting or iGaming apps? Any color there would be helpful.

We're pretty good at signing people up when they come to visit. The under-35 crowd has not exhibited significantly different behavior than any other new cohort that shows up at the properties. We’ve converted them to Caesars Rewards. Remember, Caesars Rewards is not yet connected to sports and online since we have not closed the William Hill transaction. So it's not as seamless yet as it will be once that transaction is completed, which should be a few months from now.

Got it. All right. And then just kind of switching gears in terms of market access for sports betting. Your regional gaming footprint is among the largest of your peers. Can you remind me of some of the outstanding access agreements you may have and I know you announced one today, but if you could put some numbers around gaming opportunities as it relates to this high-margin revenue here?

That's another one I should wait until after we close William Hill. You’re asking about the access agreement sales we’re doing?

Right. Exactly.

Yes, I mean, let's get to that as soon as we close William Hill, and we can get some data out there. I'm trying to stay within the constraints of what's been filed.

Keeping it very simple, Tom, is it safe to conclude at this point that Las Vegas is now, as things stand, in recovery mode? And just related to that, is it possible to see a full revenue recovery, not necessarily EBITDAR, but revenue recovery on the Strip, even if business travel and convention demand don't fully return?

If business travel and convention demand never fully return, I don't think you'll see us get back to 2019 revenue numbers. Remember, that group business, even though it's only 15% of our business, is a big piece of cash operating income from high-end restaurants and entertainment. So that’s an important segment for our business, even though it represents only 15% of our operations. In terms of our status, I would describe it as having been wandering in the desert for nearly a year since the initial shutdown. You can clearly see the light shining through at this point in Las Vegas, particularly in customer behavior. The pace of booking and the fact that people are actually planning trips in the future marks a significant shift from 2020. Given our database and what we can leverage here, we feel positive about the trajectory, assuming no further public health setbacks, which is obviously a big presumption given what we've seen. We feel good that we've seen the bottom of both Vegas and the business and that we will only see improvement sequentially.

And then on the online gaming and sports betting side, to the extent you can comment, DraftKings and FanDuel seem to be the clear number one and two players in most markets, with William Hill that MGM and, I guess, you can say Barstool, even though they're only in two states, establishing themselves as the second tier in the market. Longer-term, where do you think, within that second tier, can long-term margins settle on the iGaming and sports betting side, not necessarily commenting about William Hill specifically? Thanks.

I think you're looking at a 25% to 30% EBITDA margin business at maturity for your top-tier operators in the market.

Thanks for taking my question. I wanted to go back to the online question first, if I may, and just speak high level and strategically as you're permitted, but is it a business where you believe you need to be in all of the available states? Obviously, some of the larger states are obvious, where you have access, and others where you may not. Do you need to be in all the states to find success? Is that part of your definition?

I mean it's part of our plan. We have access in 15 states, operating plus D.C. It should be 20 jurisdictions by the end of this year. We have access to nearly 80% of the U.S. population in our system, and you should expect us to pursue opportunities everywhere we can.

And with respect to just regional gaming again philosophically. We have discussions about what the new regional gaming experience will be in a post-COVID world. It’s easy for all of us to slip into absolute terms where margins are great in regional casinos, but not providing much food options can be complex. My sense is there’s a reality that encompasses both extremes. How are you thinking about that?

This is something we've discussed quite a bit. Your regional market customers show up for hours, which may sometimes coincide with meal times, but you can have nothing, and you don't need to lose nearly as much money providing food as the industry has historically done. I remember when casinos were exclusive to Nevada and New Jersey, and yet in the other 48 states, establishments figured out how to serve dinner without giving it away for free. We can’t speak for what others do; we're going to be smart about where we operate in the food and beverage sector and ensure we're not bleeding money with excess free meal offerings. We’ll find a way to meet customer demand while maximizing profitability.

Can you give us an update on the Pompano development? And with that, any thoughts on the prospects of sports betting in Florida?

On the Pompano development, we continue to work through the planning and local zoning. We're racing this season and we have a highlight license that we can move forward with. There has been litigation surrounding that license. We hope to resolve it amicably. Everything we've discussed previously remains viable. I wish the construction had progressed significantly by now, so the timing has not been as swift as we desired. In Florida, sports betting is an intriguing area. Each year as the legislative session starts, lobbyists are optimistic about achieving goals, but by the end of the session, they typically say they couldn’t get anything done. Florida's complex; you've got the Seminoles, commercial casinos, Disney, and Miami interests involved. Public sentiment may desire legal sports betting like other locations, but history leads me to believe it’s likely unlikely this year. Still, I remain hopeful and would happily be surprised. Texas is another state where there's significant public interest in sports betting. However, breaking through the legislature, given the competing parties, would be a tough journey, based on historical patterns. But we’re actively involved and pursuing opportunities there as well.

Tom, thinking about your commentary regarding the Las Vegas recovery, is it feasible to achieve historical revenue run rates without citywide compression? You’ve done great work on the casino block, and with group showing promise, what are your thoughts? I’m not considering business travel here, but if the rest of the market does not support you, can you still show improved results?

I can envision a scenario where we test 2019 revenue, even if the rest of the market does not rise with us in tandem. We benefit from the rewards program that aids our revenue management from that perspective. However, it's important to remember that our properties must still accommodate group schedules, which does limit our ability to fill rooms compared to the pre-pandemic numbers.

All right. Thanks, everyone. We’ll talk to you next quarter.