MGM Resorts International (MGM) — Q4 2021 Earnings Call Transcript

Good afternoon, and welcome to the MGM Resorts International Fourth Quarter and Full Year 2021 Earnings Call. This call is being broadcast live on the Internet at investors.mgmresorts.com, and we have also furnished our press release on Form 8-K to the SEC. On this call, we will make forward-looking statements under the safe harbor provisions of the federal securities laws. Actual results may differ materially from those contemplated in these statements. Additional information concerning factors that could cause actual results to differ from these forward-looking statements is contained in today's press release and in our periodic filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise. During this call, we will also discuss non-GAAP financial measures in talking about our performance. You can find the reconciliation to GAAP financial measures in our press release and investor presentation, which are available on our website. Finally, this presentation is being recorded. I will now turn it over to Bill Hornbuckle.

Thank you, Sarah, and thank you all for being here today. We ended the year on a very high note, achieving our highest consolidated adjusted EBITDAR quarter in the company’s history. Our Las Vegas Strip resorts set another all-time quarterly EBITDA record, and our regional properties also achieved a quarterly EBITDA record. The margins for both our Strip and regional operations remained strong in the fourth quarter. These outcomes reflect the dedication of our talented team nationwide, our enhanced focus on operational efficiency, and the strong demand for the services and experiences we provide at MGM Resorts, despite the challenges posed by COVID. Our employees are the foundation of our organization, and I am truly grateful for their commitment to our company and our guests. We could not have reached these remarkable results without our exceptional team members. The journey over the past couple of years hasn’t been easy, and I cannot thank everyone in the MGM family enough. Our strong workforce and leadership team have also driven us forward in realizing our strategic vision to be the world’s top gaming and entertainment company. As a reminder, our strategic plan has four main priorities: investing in our people and our planet, creating unique experiences for our guests through data-driven insights and digital capabilities, achieving operational excellence at every level, and responsibly allocating our capital to provide the best returns for our shareholders. I briefly mentioned the fantastic results we achieved in the fourth quarter, and Jonathan will elaborate on those shortly. For now, I want to highlight some key milestones we reached in 2021 that have transformed our company. Firstly, we made significant strides in monetizing our real estate assets, which greatly strengthened our domestic cash position. We streamlined our operations by bringing City Center fully under our control and selling MGP to VICI, with that transaction expected to close soon. We’re also strategically adjusting our Las Vegas portfolio with the acquisition of Cosmopolitan’s operations and the sale of the Mirage’s operations. We believe these transactions will enhance and diversify our offerings in one of the world’s most sought-after and competitive destinations. Our joint venture with Entain has established a strong brand and leadership position in U.S. sports betting and iGaming, finishing 2021 as the number one operator in iGaming and the second in overall sports and iGaming. I am very pleased with BetMGM’s execution thus far. We have made significant progress in Japan, as the City of Osaka has selected us as their partner to build and operate a new world-class integrated resort, allowing us to further diversify geographically into what we believe will be one of the largest gaming markets in the world. We have also returned substantial cash to our shareholders. Additionally, we enhanced our executive team last year with the welcome additions of Jonathan and Tilak Mandadi from Disney, who have already proven vital to achieving our long-term goals. We are grateful for all we have accomplished in 2021, and we are even more enthusiastic about the momentum this creates as we move into 2022. Starting with BetMGM, we are confident in the team’s ability to maintain and expand its leadership in both new and existing states. Both owners are expected to invest an additional $450 million into BetMGM this year. You heard from Adam and Gary on their recent call, and we will hear more from the BetMGM team during their Investor Day in May. Regarding new expansion opportunities, we are collaborating with our partners, Orix, in Osaka to submit a development plan to the central government by April. We are hopeful and confident about being awarded a license later this year to establish an integrated resort in Japan. In the U.S., we’re encouraged by the ongoing progress in securing a commercial gaming license in New York, which could be granted as soon as this year. Given our current operations in Empire City, we believe MGM is in an excellent position. Furthermore, as we consider organic growth, we see the potential to deepen customer loyalty and capture additional revenue by maximizing our premium resort properties and entertainment venues across the U.S. We are addressing this through a coordinated, company-wide effort, utilizing our strategic investments in advanced analytics, data, and technology. Our aim is to identify and acquire high-value gaming and non-gaming customers efficiently by enhancing our marketing, improving guest services, and enriching experiences throughout their visits. Our loyalty program plays a crucial role in acquiring, engaging, and retaining high-value customers. On February 1, we announced the enhancement and rebranding of our customer loyalty program from M Life to MGM Rewards. The new name aligns better with our business, and the updated program enables us to target high-value non-gaming customers alongside high-volume gaming clients, incentivizing cross-property visits and tier progression with more appealing benefits, and activating BetMGM's customers in our venues. In 2021, about 42% of our new database enrollments originated from BetMGM. We anticipate that this rapidly expanding group of omnichannel customers will navigate seamlessly between our online and offline offerings, enjoying MGM Resorts benefits in proportion to their tier status. The rebranding of MGM Rewards marks the first step in our organic growth strategy to attract and retain more high-value gaming, digital gaming, and non-gaming customers. In the coming years, we plan to invest over $2 billion into our properties, creating customer-centric experiences and services, along with the necessary technology and advanced analytics to better engage with our guests and increase market share in our key markets. Before I hand it over to Jonathan for our fourth quarter and full-year results, I'd like to provide some comments on our current trends and future outlook. As you are aware, the emergence of the Omicron variant in November caused a rapid increase in COVID cases. Fortunately, this did not affect our year-end plans, and December was great for us. However, January, which typically relies more on group business in Las Vegas, faced challenges as many groups chose to postpone events. While cancellations increased, they were concentrated in the short term with minimal impact beyond March. CES in January saw attendance drop by about 70%. Despite January’s challenges, we're pleased to see COVID cases declining across the U.S. Cancellations have decreased, and group lead volumes are returning to normal levels. Forward hotel bookings have stabilized in recent weeks and are starting to surpass 2019 levels. With positive COVID trends in Nevada, I anticipate a significant easing of COVID restrictions soon, similar to what we have witnessed in other states. Our weekends have remained robust; recently, events such as the East West Shine Ball, the NHL All-Star game at T-Mobile Arena, the NFL Pro Bowl at Allegiant Stadium, and Garth Brooks’ show at Dolby Live at Park MGM contributed to strong occupancy rates. This past weekend, our Strip hotels achieved 91% occupancy on Friday and 98% on Saturday. Looking ahead, we anticipate a strong turnout for the Super Bowl this weekend, and for the first time, the Grammys will be held in Las Vegas in April at the MGM Grand. Las Vegas will also host the NFL Draft in a couple of months. These successes underscore that the city, with MGM Resorts at the core, remains a resilient and premier destination for outstanding entertainment, especially sports. Turning to our regional properties, we achieved a record EBITDA year in 2021, with most of our properties leading in gaming revenue share within their markets. Our regional success is driven by our premium offerings and the strength of our rated gaming spend, aided by our strategies to attract our higher-value customers. We are reopening non-gaming amenities at a measured pace as resources and demand allow, with our teams focused on labor productivity, giving us confidence in sustaining margins above 2019 levels in the long term. In closing, regarding Macau, despite ongoing volatility due to travel restrictions and structural adjustments in the high-end sector, MGM China achieved a record 14% market share. The launch of the Emerald Suites at MGM Cotai this quarter has enhanced our hospitality offerings and is contributing to our growth in market share. We believe MGM China is well-positioned for the eventual market rebound due to its strengths in premium mass. Recent positive developments concerning concession renewals reinforce our confidence in the government’s thoughtful approach to this process. Macau is vital to our future, and we will continue to collaborate with the government to secure our license renewal while supporting the long-term development of Macau’s gaming industry and its tourism diversification goals. As many of you know, this will be Cathy Park's last earnings call with us. I want to express my gratitude for everything she has done for the company and wish her the very best. By the way, it is currently 69 degrees in Las Vegas, which is quite different from Boston. Jonathan, it's your turn.

Thank you, Bill. I would like to echo Bill's sentiments and express my sincere appreciation for our entire team at MGM. Your exceptional efforts have enabled us to achieve another quarter of impressive results. I am excited to collaborate with you to maintain this momentum into 2022. Now, let's delve deeper into our fourth quarter results. Our consolidated net revenues for the fourth quarter reached $3.1 billion, reflecting a 13% improvement from the previous quarter. Our net income attributable to MGM Resorts was $131 million, and our adjusted EBITDA rose sequentially to $821 million, primarily driven by our domestic operations. Sixteen out of our seventeen domestic properties set either all-time or fourth quarter EBITDA records, with fourteen achieving all-time or fourth quarter margin records. This performance indicates robust demand across all sectors, even towards the end of the quarter, which is typically a low season for us. Additionally, we showcased our ability to enhance operations while keeping costs in check amid workforce and supply chain challenges. Our Las Vegas Strip net revenues, now fully incorporating City Center, were 26% higher than the fourth quarter of 2019, amounting to $1.8 billion. The adjusted property EBITDAR for the Strip was $699 million, up 84% compared to the fourth quarter of 2019. We experienced a positive $8.5 million impact on our EBITDA in Las Vegas due to hold, bringing the Strip EBITDAR to $690 million. Our Strip margins were 39% in the fourth quarter, marking a 1,200 basis point boost compared to the fourth quarter of 2019 and matching the margins from the third quarter of 2021. We saw healthy casino performance in the fourth quarter, with Strip slot handle and table games drop increasing by 31% and 17% over the same quarter in 2019, respectively, excluding Circus Circus Las Vegas from both periods. Our fourth quarter casino revenues surged by 66% compared to the fourth quarter of 2019, or increased by 40% when including Aria and excluding Circus Circus for both periods. Notably, our rated customers aged 65 and older in Las Vegas reached pre-pandemic levels in terms of room nights during the fourth quarter for the first time since the pandemic began. The Strip hotel occupancy was 86% in the fourth quarter, up from 82% in the third quarter, driven by strong weekdays anchored by our best convention quarter since the pandemic and even better weekends. Our ADRs in the fourth quarter were 19% above those in the fourth quarter of 2019 or 7% higher on a same-store basis. Bill will now elaborate on our current operational challenges and why we remain optimistic about our business beyond the first quarter. To illustrate the scale of the current impact, we ended January with Las Vegas Strip occupancy at 66%. However, we anticipate improvement for the remainder of the first quarter, with February occupancy projected in the mid-70s and March in the mid-80s. February and March ADRs are tracking near 2019 levels, supported by weekend ADRs rising over 20%. Despite January's drop in occupancy, it was our best booking month since March 2021, surpassing any single month from 2019. These reservations were made in January for future stays. Overall, we are optimistic about the outlook in Las Vegas. Our regional net revenues for the fourth quarter were $900 million, remaining flat compared to the fourth quarter of 2019. We generated adjusted property EBITDAR of $309 million, which was up 36% over 2019 levels. Together with our Las Vegas results, our domestic operations produced over $1 billion in EBITDAR for the quarter. Regional margins increased by 900 basis points compared to the fourth quarter of 2019, reaching 34%. Recall that our margins in the third quarter had also improved by a similar 886 basis points over the same time frame in 2019. Despite the usual seasonality challenges during the fourth quarter, our regional casino business remained robust. Our slot and table game volumes improved by 7% and 5%, respectively, compared to the fourth quarter of 2019, and our net PO per day for rated customers rose by 34% over the same quarter in 2019, particularly in our high-value $400 segment. I'd like to comment on our cost structure and its evolution over time. Our EBITDAR margins in both Las Vegas and regional operations have stayed strong throughout the past year. While they benefited from pent-up consumer demand and increased casino spending, they also reflect the excellent work our teams have done to enhance the effectiveness of our operating model and rethink our business operations. This optimization includes improving labor productivity, enhancing food and beverage offerings, and strategically reinvesting in players. As we continue to adjust our staffing to sustainable levels and as our non-gaming revenue streams grow as vital contributors to our overall business, we expect our domestic margins to remain well above 2019 levels. Moving on to BetMGM, we are currently active in 21 markets, having recently launched in both New York and Louisiana in January, and in Puerto Rico today. The team is quite busy, which might be an understatement, as we anticipate launching in Illinois next month and expanding into Canada later this year. Adam and Gary from BetMGM provided a business update on January 19, announcing that they delivered $850 million in net revenue from operations in 2021, reflecting nearly 5x growth compared to 2020. We expect this momentum to carry into 2022, with BetMGM anticipating net revenue from operations exceeding $1.3 billion. Our 50% share of BetMGM's losses in the fourth quarter was $57 million, recorded under the unconsolidated affiliates line of our adjusted EBITDAR calculation, bringing our share of BetMGM's losses for the entire year 2021 to $211 million. As Bill mentioned earlier, we remain confident that BetMGM represents one of the most promising growth opportunities for our company, one that will yield significant returns on our investment. Lastly, regarding Macau, the overall market-wide gross gaming revenues in the fourth quarter grew by 2% sequentially from the third quarter. MGM China's net revenue increased by 9% sequentially to $315 million, while adjusted property EBITDAR slightly declined sequentially to $5 million due to factors like VIP hold and increased bad debt. Travel restrictions continue to be the primary obstacles to a more significant recovery in the region; however, we are encouraged by evident demand for our offerings. For instance, during the recently concluded Chinese New Year holiday, total visitor counts to our properties rose by 30% compared to the previous year, with our mass segment demonstrating healthy growth and recovery. Our corporate expenses in the fourth quarter, excluding share-based compensation, were $117 million, which included around $8 million in transaction costs. We incurred extra expenses related to the relaunch of our loyalty program and adjustments for performance-related compensation. Consequently, we expect our net corporate expense in the fourth quarter to be lower in the first quarter than in the fourth quarter. One critical subject for our company today is the allocation of our capital. We believe that returning capital to shareholders is among the most productive uses of our resources. Given the current trading levels, we see substantial value in our shares and have acted on that belief. In the fourth quarter, we bought back approximately 17 million shares for $727 million. So far in this quarter, we have repurchased around 8.5 million shares for $370 million. Since initiating the program last March, we have repurchased over 52 million shares for approximately $2.1 billion, representing over 10.5% of our market cap. These repurchases have been supported partially by a series of transformative transactions announced over the past year, transactions that have strengthened our portfolio, simplified our structure, enhanced our liquidity, and advanced our vision to be the leading gaming entertainment company worldwide. This year, we are focused on finalizing these deals. Our transaction with VICI is on track to close in the second quarter, pending regulatory approvals. We also anticipate completing our acquisition of the Cosmopolitan of Las Vegas operations in the second quarter, also subject to regulatory approvals. Additionally, we announced our agreement in December to sell the operations of the Mirage to Hard Rock for $1.075 billion, at a 17x multiple on its 2019 adjusted EBITDAR less rent, with this transaction expected to close in the latter half of the year. We maintain a strong liquidity position. As of December 31, our cash on hand, excluding MGM China and MGP, was $4.8 billion, or $7.4 billion when adjusted for the VICI deal, the Cosmopolitan in Las Vegas, the Mirage transaction, and the retirement of our $1 billion senior notes maturing next month. Our approach to capital allocation remains as follows: first, maintain a solid balance sheet with sufficient liquidity; second, return cash to our shareholders; and lastly, when exploring potential growth opportunities, invest where we hold clear advantages and exercise caution in evaluating potential returns for our shareholders. Before I hand it back to Bill, I want to touch on our organic growth plan, beginning with our new MGM Rewards loyalty program. In Las Vegas, we attribute over 80% of our gaming revenue to specific customers enrolled in MGM Rewards, allowing us to provide personalized service and relevant offers. However, for hotel dining and entertainment spending, this percentage attributable to specific customers is less than 40%. For MGM, these non-gaming revenues account for around $5 billion annually in Las Vegas alone. We all agree that MGM offers the best and most diverse hotel dining and entertainment experiences in Las Vegas. This presents a significant opportunity for us. By expanding the ways our customers can earn rewards and simplifying the benefits they receive, we create compelling reasons for guests to share their experiences with us. As our understanding of customer preferences deepens, we will enhance our ability to provide more personalized experiences and offers, fostering greater loyalty and expanding our customer base over time, ultimately benefiting our shareholders financially. I will now turn it back to Bill for his concluding remarks.

Thanks, Jonathan. Jonathan, by the way, just celebrated his first year anniversary. I wonder what he's been doing. When I first spoke with all of you as the CEO approximately two years ago, I expressed my desire to be focused, disciplined, and transparent in how we run this company. I believe these virtues have served us well over the last couple of years, and I believe they will continue to serve us well into the future as we look to drive long-term shareholder value. I'd like to close by thanking again all of our employees for their service, for their commitment, and their dedication to this company. Together, we've accomplished a lot in the past year, and I'm excited about what we can further do and accomplish this year and beyond. With that, Chad, I'll turn it back to you for questions.

Congratulations on the results. Going into tonight, I wanted to ask you, as you are going into the first quarter, what sort of hotel pricing elasticity you're experiencing, particularly on the weekend that you've addressed that. So I just wanted to clarify, I think, Jonathan, you had a comment, and I didn't capture all of what you said with regard to the revamped MGM Rewards loyalty program. You said 80% of the gaming revenues come from the current loyalty program, the non-gaming is only 40%. I guess, just to kind of understand if you got to parity what would that revenue opportunity be? And would that incremental revenue be at margins that would be accretive to the current blend of Strip EBITDA margins?

Sure. I was really intending to draw the distinction between the level of tracked revenue that we have through our gaming revenue as compared to non-gaming revenue. And so it's an opportunity — and that was the difference between the 80% and the 40% here in Las Vegas. And it's meant to illustrate the opportunity that we have to create a closer relationship with those guests of ours who generate non-gaming revenue for us across our hotel, restaurants, and entertainment venues. This is a massive business for MGM Resorts. It's a huge opportunity for us to grow share within those customer spend areas. And so we'll be detailing as we go through the year with the launch and the success of the MGM Rewards program, which rewards these guests for that spend and that allows us, of course, to customize offers to them.

Great. And then my follow-up question is related to New York, assuming you're able to build a full-scale at Empire City. What do you currently envision for that property? What would be the CapEx? How much disruption would there be as you're expanding and renovating that property?

Joe, great question. It will take some time. Obviously, we need to understand what the tax is going to be, what the licensing fee is going to be. It will determine a great deal. Presuming we're fortunate enough to win a license and ultimately, go forward. If we do it, I would say the way it was done in National Harbor, where you have an opportunity to create great jobs, a great environment, a great property because the tax ultimately and the fee is reasonable enough to allow us to do that. You're looking at a spend somewhere in the $1.2 billion to $1.3 billion for Phase 1, give or take. We have 97 acres there. We go back and forth on what kind of things we might want to put there. We could quickly see in the existing environment, a couple of hundred tables. We currently have 5,500 slots, which is massive. And so we reduced that to a certain degree. And then we build it out over time, clearly a need for a structured garage but there's a much broader vision to be had longer term. But I think — and look, the opportunity location, all of the things that would be meaningful to us in terms of a network and ultimately, omnichannel back here, both with BetMGM and ultimately Las Vegas as a cornerstone to that discussion could be very meaningful for the company. But we've got to be given the opportunity to spend capital to make it work. And so it really hinges on that discussion almost more than anything else. But that's a starting point. I think a good way to think about it.

I wonder if you could maybe touch on CapEx a little bit. Obviously, I think there were some numbers given in the presentation about sort of your targets for 2022. Jonathan, that looks a little bit above, I think, historically, maybe you thought closer to $400 million to $500 million for the core domestic portfolio on a maintenance basis. So could you help us elaborate on some of the spending in 2022? And then I think there's also a $2 billion number mentioned over maybe the next couple of years. So maybe you could help us think about some of the project focus going forward?

Sure. Two reasons for the elevated number against that maintenance target or history that you described: one would be some deferred maintenance that the company experienced during 2020 when the properties were closed and many of our employees were furloughed. The company didn't spend much CapEx at all during 2020. So some of it is making up for that. We also are taking on in a deliberate way, some hotel remodels in our system. We talked about, of course, Luxor and Bellagio last year. This year will be the Bora Bag New York-New York and beginning on some of the rooms at the MGM Grand. So those are all pretty meaningful investments, and we think in every case are going to drive nice returns and improvements in guest experience. The $2 billion number that you mentioned, that's really looking out to the next several years. And I would put it largely in three categories. The first is a continued program of room renovations across the system that we've now laid out for the next 7 or 8 years. The second is technology investments led by Tilak and his team, most of which are going to be directly experienced by our guests. And then the third, our growth capital investments within our core portfolio that we'll expect will drive a very nice return for shareholders. So those are the main buckets of that $2 billion number.

Great. And then maybe just as my follow-up. You gave some color on, I think, the margin build, and I think margin sustainability remains the $10,000 question across the space. So could you just help us drill down a little bit as you look at — you were very stable quarter-on-quarter. I think you mentioned negative mix as some of the kind of entertainment and food and beverage amenities come back in '22. But what are you seeing on the labor front, specifically? I think you do have some union relationships that might actually help protect you a little bit from some broader inflation. So maybe just help us walk through a few of the pressures you think you'll be up against and what maybe some of the offsets are in 2022?

Okay. So on the labor side, we're experienced generally labor inflation of 3% to 4% on an annual basis. So it is meaningful, but it's sustainable for us. We were also compared to back to 2019, we were down 22% in FTEs in the fourth quarter. It's a little bit better than the third quarter where we were down 25%. And we believe with the learnings that we've put in place, the actions that we took on the operating model a couple of years ago, that ultimately we'll stabilize at the level of FTEs 15% below 2019 levels. So that's some of the build that I talked about with bringing employees back but that has an offset, which is — there are some things for sale that we don't have open right now that we'll be able to open when we bring employees back. And the final thing, I guess, add in terms of the margin structure is there's really two sources of these 1,200 basis points, 1,000 basis points margin increases that we've had. One is the cost reductions, the improvements in efficiency that we've done, the $450 million of cost savings. The second is a mix of customers oriented more towards casino over the past six months, which has been accretive to margins. And we believe that as that returns to a more normalized mix of business that, that will have a dilutive effect on margins. But overall, we'll improve EBITDAR for the company.

I wanted to follow up on that just a little bit because we often engage in discussions that compare your Vegas margins with other operators, et cetera. And fairly, it's different for a number of reasons. And I — what I'd love to do is just get a sense for what the inherent pressures are. Jonathan, you talked about some of the labor issues and some of the other costs that are moving because of the current circumstance. But does the size of your operating platform? Where does it help? Where does it weigh on your ultimate landing spot for margins in the next couple of years?

Well, look, this is Bill, David. In the context of higher end, higher volume business, while there's a ton of cash to be made potentially with high-end gaming customers, they come with some margin. They come with G5 and other things that tie to that activity case. And so we have more than all in that category, and so that drives proportionately. When you think about entertainment and you think about Bruno Mars and you think about Lady Gaga, they're taking large chunks of the revenue out of the building right away. And so our entertainment platforms that scale tend to add to margin differentiators from some of the others. And then just generally speaking, particularly when we think about REA, you think about the matching you think about what we're doing here. As a percentage of our overall business here being Bellagio. Luxury comes with some additional expense and additional service. Can we sustain a 1,200 basis point margin increase? No. But we've said before that we're looking at 400, 500, or 600 basis points as a real place, and we believe that to be the case going forward. And so once again, COVID and Omicron during January has clouded this discussion. But as we come out of it, those 22% FTE reductions are very real. Those positions are gone. And so it will be to us from where we were and where we started very accretive.

And David, what I would add, this is Corey. Like type properties, Bellagio versus Wynn or New York, New York versus a legacy property of a competitor. Our margins are equal, if not better.

Jonathan, you touched on this a little bit as you talked about kind of the transition into more entertainment. And Bill, obviously, you just referenced it as well, but entertainment and F&B and some of those other non-gaming revenues that come back. When you look out towards the back half of this year, obviously, you guys will be facing some historic second half gaming comparisons. As you think about that transition and some of the margin degradation, do you feel like the comment you made earlier about over time, it will be more EBITDAR, but at a lower margin? Could that hold true in the second half? Or do you think that will take time to build on the non-gaming side?

I'll kick this off and turn it to Jon. A couple of broad thoughts. Clearly, even in the fourth quarter and third quarter last year, convention business did not return to normal. Corporate business had not returned to normal. And we have huge margin, particularly in the catering and banquet in that business. We had no appreciable international play to speak of. Almost nothing. With the exception of — we had some European play, but Asia was a nonevent and just general tourism that comes internationally. And I still believe there's a segment of the business. I had dinner with a gentleman last night, hadn't been here in two years, multi guy loves Las Vegas just was afraid to come back. So I think there's a segment of the market that has real disposable to spend that we have not yet seen to return. And so for those three broader reasons, I remain optimistic we've put us at a pretty high bar, I get the general question.

Yes. I would just add that it's important to note that in the third and fourth quarter, we're still running 7 to 10 points lower than normal in occupancy. So this business we're talking about, this gentleman Bill mentioned, the group business. This is additive largely to the current mix of business that we've had. And so that's another reason why we believe that we can continue to grow the earnings of the business, although the mix will be different as these customers come back.

I would also mention, Carlo, that the casino segment remains strong and we don't anticipate any slowdown. We expect international business to begin returning by the end of the first quarter or the second quarter. The additional business we expect to attract likely comes from the lower-end leisure package sector.

I wanted to ask about Macau and just take your temperature in terms of what the market is thinking about maybe timing of a recovery or at least some green shoots given that we've seen some Chinese New Year numbers and it's certainly a fluid situation. And then related to that, could you just kind of opine on the changes with junkets and VIP rooms? How you're positioned to transition this business and keep it in-house?

Yes. Let me maybe try — I know Hubert is on the call with us and you stayed up late. So let me give Hubert this moment of opportunity here. Hubert, if you could help us.

Yes. So thanks, Chad, for the question. In terms of timing of the recovery, I think that — generally speaking, we have seen the recovery in play in the past year. If you look at 2021, the number was higher than 2020. But overall speaking, it's driven by the — obviously, by the mass segment. You mentioned Chinese New Year, we're pretty satisfied with the Chinese New Year performance, particularly on the mass side. We'll take MGM Macau, for example. I think that we have reached 85% of the pre-pandemic level in terms of mass volume if we measure that by a table drop. So that's encouraging. But overall speaking, in China, which is basically a vast majority of our customers where they come from, their policy, prevention of COVID policy is very different from the ones that you see in the U.S. So they call it dynamic the 0 case. So as soon as there is a case popping up somewhere in China, there are strict travel restrictions in place for that barrier. But now in China, it's getting more and more precise. They can really — the acquisition of precise travel restriction targets to certain areas. But the intact Macau is that these areas travelers won't be allowed to come to Macau or they have to go through quarantine. And in the past year, we have seen that happening almost every quarter as close as to see the markets like Shenzhen or even Zhuhai and sometimes in northern areas. So I still believe that these things will happen in 2022 this year. And coupled with that is also the NAT test. So if there are cases in China, typically, these regions will require 24-hour test results to be presented when they enter Macau. So it's an inconvenience for these travelers. So in terms of broad recovery, we really need to look at all these travel policies, restrictions, and when that's going to be eventually lifted. So I think that ties to overall the national policy and also the vaccination rates. But I'm pretty confident that 2022 will be a better year than 2021, driven again by mass, particularly at the high end of the mass. Question upon the last point is that you asked about the conversion between what's happened in the junket world. So by now, I think that all the junket operators in the traditional sense have basically ceased operation in Macau. So the players or the agents working for the previous junket operators are trying to find a place to settle down. So it's still quite dynamic in the marketplace as far as the conversion of the former junket players to in-house players, and to some extent, to premium mass players as well. So what we are working on is, first of all, focusing on mass. I think that's where the future resides. And second, is to capture as much conversion from junket to in-house to mass as possible. And on that note, I think that we are also looking at reallocating the resources, particularly the table units to support the mass growth eventually. So we are going to reallocate more tables from VIP to mass in the coming quarters. So Chad, does that answer your question?

Yes, Hubert. Really appreciate it.

So I wanted to hit on the capital allocation share buyback. You guys have been pretty active there. I think buying back $700 million or so in the past couple of quarters and 370, I think you said for the first quarter. So I mean, is that — is this kind of $700 million level a reasonable expectation to have on a go-forward basis given your — I think you have maybe $900 million left? Or how should we think about this going forward as you look to return capital to shareholders?

Well, we do like to be consistent. At the same time, we are able to take advantage of opportunities of softness in the shares. And that was one of the things we were able to do during the fourth quarter particularly in December. As I recall, we were able to be aggressive, and we thought that was the right thing to do given our view of the value of the company. So I would suggest that the fourth quarter was certainly, it was the highest quarter I think we've had in several years, but it was merited by the value that was in the shares. And so going forward, we'll be programmatic about this, and we continue to think it's a good use of capital. I wouldn't commit though to any specific dollar amount simply because it is driven in part by the trading value of the stock.

Got it. And then could you just remind us when you'll be a full cash taxpayer?

We'll be a full cash taxpayer in 2025.

So you guys have had success integrating M Life with BetMGM in the past. So can you just elaborate on the new BetMGM rewards program? What's changed there? And what do you see as a big opportunity?

Well, Thomas, thanks for the question. I think the key as it relates to BetMGM is just further integration. Frankly, it's a little clunky. It needs to be fully integrated, where it's a smooth transition and transaction for a customer to take gaming activity on BetMGM, get recognized, get rewarded and get onto their phone in some way, shape, or form an opportunity to take advantage of something on a brick-and-mortar property. It's a transition. There's a two-step process that we want to see go away. The more broad change though with MGM Rewards is recognizing retail spend and making it more robust, recognizing people for that. We do — collectively as an industry and as a business, I think, particularly as a company, do an amazing job individualized with personalized guest service, recognizing high end. We're trying to extend that down the tier, if you will, to the next big tranche of people in the millions at this point. So I think once properly recognized and understood the value of all of the things we have to offer, whether it's Las Vegas or some of our regional destinations, we're going to be — I think we're going to be highly rewarded for it. But it's the reformat of MGM Rewards in terms of BetMGM is really more about the technology platform and getting the linkage pure and simple. The rewards program itself is about driving non-retail play at our expense.

Very clear. And then just following up on an earlier question about mix. I remember in 2019, you were at about 21% group mix. Can you guys talk about the split between FIT casino and group today? And like what do you think kind of the long term will look like?

Corey?

Sure. Thomas, thanks. Yes, the group mix, we've never given it. On the convention side, we're about 13% in the fourth quarter. And that's not bad considering everything. Look, in general, I think we'd like our convention mix back to where it was in '19/'20 with — to see our casino increase, and we're seeing some pretty good percentage increases by about 9% to 10%, that would be great. We'd also like to see some shift in transient, which we've been able to see during this period and probably taking away a little bit from the leisure package. That would be our end goal.

Bill, a follow-up to Thomas' question on BetMGM and the rewards program. Obviously, a significant number of rewards customers were acquired through BetMGM this year. I'm curious if you're seeing any meaningful cross-sell to your brick-and-mortar operation yet? Or it sounded like maybe with the rewards program revamp, that might be more on the comp. But just curious if you've had any anecdotes or data that you could share with us so far.

Yes. Look, a little bit more on the comp, particularly here in Las Vegas because of the distance and the destination. Having said that, remember, the best omnichannel example we have is Michigan. And we have seen a lot of cross play. And what has been proven — and this shouldn't be a surprise, but it's proven out to be the case is an omnichannel customer literally is worth 2x, 2.5x a regular customer. So they do take advantage of online brick-and-mortar and some of the opportunities that it presents back and forth. We've obviously have database shares. We go after customers. It's not a pure link with BetMGM and what was Life, where — and so some of this is just direct mail motivated on that database. Over time, that's exactly where we'll get to. And so I think you'll see a whole — the essence of it is we're just getting going, and I think there's real opportunities in Europe here of note.

That's good clarity. And if I could ask one more on the promotional and marketing environment. There's obviously a lot of spend going on as it relates to sports betting and digital gaming. But curious if that had any impact on the marketing environment or promotional environment at your regional or Las Vegas operations, there was a little bit of a demand dip because of Omicron. Curious if you've seen any changes in behavior? Is it really a...

Look, Corey can answer this, but I'll tell you in the BetMGM side, God, I hope it doesn't transition over. It's an openly aggressive market. We all know it. I think we've been one of the more disciplined. I mean, you heard the number we lost about $52 million or $4 million in cash in the fourth quarter in BetMGM. I know what we spend versus the competitive set. It's about — the spend is about 2:1, yet we maintain the market share that we have. So I think it's compelling. So the team does a really good job with that, but it has not nor will it impact its way into regionals. Go ahead, Corey.

Yes. And with regards to the properties, especially in the regionals, when we shut down, that was one of our saving opportunities was to readjust that investment into those customers, and we've been able to maintain that. The slowdown you may have seen in some of the markets in January, especially on the East Coast, would have been related to Omicron and the weather.

Two follow-up questions actually. First, on BetMGM, could you just maybe disclose how many monthly active users are on the app to end the year?

No. That's well over 1 million in the database at this point. I'd rather keep that close for now.

I think there — as you probably know, they're having an Investor Day in May. And I think at that time, the team will be sharing more detail.

Awesome. I had to sneak it in. And then the second one is another modeling follow-up. Any way you can share what your same property margins were in Vegas and in the regions in 2019, so we can kind of compare and contrast on an apples-to-apples basis?

Yes, those margins were in the kind of high 20s, around 28 or so on a kind of a like-for-like basis in 2019.

Thank you, Chad. Again, I'll be quick. I know it's late back us particularly, look, obviously, for us, it's been a tremendous year. We couldn't be more excited. I can't again thank our team enough. I think we've done a very good job by shareholders. We've returned a substantive amount of the company, over 10% back to them. We've got an amazing fortress balance sheet that presents all kinds of opportunities for diversification whether it's Japan, New York, or ultimately into digital, both domestically and beyond. You probably know we're stretching BetMGM into Canada in April. And so we're excited by its growth and other possibilities that may present themselves. And so we're excited to get refocused now on returning some of our properties and some of our growth programs and our remodel programs back to where we'd like them to be and beyond. And again, we're just getting rolling — because if you think about 2020 with sports, obviously, we had COVID, we're just getting rolling with that activity at full steam. And so I'm excited by the balance of this year. Again, because of COVID, the entertainment programming will be robust here. Many tours did not go out and they decided to stay in Las Vegas and do residencies, and it will be accretive to us throughout the course of this year. So again, appreciate your involvement. Appreciate your time and your rest in the company. So thank you all.

Cheers.