MGM Resorts International (MGM) — Q2 2024 Earnings Call Transcript

Good afternoon, and welcome to the MGM Resorts International Second Quarter 2024 Earnings Call. This call is being broadcast live on the internet at investors.mgmresorts.com, and we've 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 the call, we will also discuss non-GAAP financial measures when 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 Jonathan Halkyard.

Thanks, Andrew, and good afternoon, everyone. Before I get into our quarterly results, I would like to congratulate and thank all of our employees for another great quarter across all of our businesses. Their high level of execution is clearly evident in our results, and I couldn't be more proud of the team for our performance this quarter. Turning to our second quarter results. In Las Vegas, we achieved both top and bottom line growth year-over-year against a strong comparison. Net revenues grew 3%, driven by both higher rate and occupancy. Our strategic relationship with Marriott contributed to our performance this quarter now with over 410,000 room nights booked. The future for hotel bookings in Las Vegas is bright. Looking ahead at our pace, room rates on the books in Las Vegas are up year-over-year for every month in the third quarter and group rooms on the books are pacing up mid-single digits for the rest of 2024 and 2025. Our success in the quarter was underpinned by our luxury resorts, which are responsible for the vast majority of our top line growth in Las Vegas. We invest meaningfully in our Strip luxury offerings as this is where we see the most opportunity for profitable growth. In fact, 75% of our 2024 domestic property capital budget will be focused on these properties. This includes room remodels, which are underway now at the MGM Grand and suite updates across our Las Vegas portfolio. On the technology side, we've now completed the integration of the Cosmopolitan of Las Vegas into our MGM Rewards program, which will now allow our MGM Rewards members to enjoy full benefits at the Cosmopolitan and vice versa. In the regions, net revenues remained stable, driven by relatively flat year-over-year handle with our market share holding steady across each of our markets. We have also seen a full recovery at MGM Detroit, which we all know faced headwinds since midway through last year. Margins were within our targeted range of the low 30s as we remain vigilant on improving our variable labor effectiveness and executing on revenue initiatives such as our expanded air charter program, just one of many examples. In Macau, MGM China's net revenues grew 37% year-over-year, achieving a market share of 16%. Adjusted property EBITDAR reached $294 million for the quarter, marking a 40% increase with margins at 29%. During the quarter, we strengthened MGM China's balance sheet by extending our maturity profile with the issuance of a new $500 million seven-and-eight notes due 2031. The proceeds of this offering were used to pay down outstanding borrowings under the revolving credit facility. I'll conclude my remarks with some thoughts on the free cash flow algorithm we introduced last quarter. An algorithm that enables us to achieve a mid-teens free cash flow per share compound annual growth rate through 2028. Simply put, we expect to grow our EBITDAR at a faster pace than our rent escalators, interest payments, maintenance capital, and taxes, while investing for growth and reducing our share count. First, we'll generate recurring free cash flow from our resort operations by optimizing the operating model to achieve incremental revenue growth and realize cost savings. We'll grow our market share in Las Vegas through reinvestment into our properties with a focus on luxury. We'll maintain our market-leading positions in the regional markets, including an expansion in New York and generating a growing dividend from MGM China. Next, we anticipate generating free cash flow from our digital businesses in the coming years as BetMGM reaches an inflection point and LeoVegas delivers on its numerous market entries. We'll also be investing for long-term growth in Japan and other markets where our development expertise and brand awareness provide a distinct advantage. Finally, we'll repurchase our own shares. Through our strategy of using excess cash for share repurchases, our share count has decreased to around 300 million shares from close to 500 million, an approximately 40% reduction in our float in just three years. Taken together, the increase in free cash flow and reduction in share count would result in a mid-teens free cash flow per share compound annual growth rate by 2028, even without a contribution from MGM Japan. Bill, over to you.

Thanks, Jonathan, and good afternoon, everybody. I'd like to start by doubling down on Jonathan's comments on congratulating all of our employees. Their continued attention to detail in guest service has been amazing, and it continues to show through in our NPS scores and also just take a second to identify and thank our management teams in a challenging wage inflation environment. I think you've seen through our margins, they've all done a great job managing their way through the first part of 2024. And I will remind everybody that most of those increases now lapse as we go into the second half of this year. Turning to the quarter, we had excellent results against a strong 2023 comparison. We see continued strength, as Jonathan mentioned, in Las Vegas, driven by transient group demand. The Marriott integration is going exceptionally well and Mandalay Bay is fully leveraging its updated space. MGM China continues to hold its market share and margins against a very competitive and evolving market. And our regions continue to hold top line and operating efficiency, and it's great to see Detroit finally return to its earlier prowess in that marketplace post-strike last year. In Las Vegas, we believe Las Vegas growth continues its top line and maintains margins in the mid-30s. Group pace, as mentioned, is up in 2024 and 2025, anchored again by the refreshed space at Mandalay. Benefits from the Marriott program will only continue to increase, particularly on the group side, unique to MGM. We have a favorable supply dynamic with the closing of the Mirage and Tropicana taking approximately 1.5 million room nights off the circuit. Again, we'll see lower labor contract increases in the years two through five. And organic same-store growth driven by data optimization is just stepping in, especially now with the integration of the Cosmopolitan, which we finally completed yesterday. So we're very excited about that. Noting in the third quarter, I think all of you know this, but remembering back, we had the cyber-attack last year in the third quarter, and that should prove to be successful for us. However, in the fourth quarter, I think many of you see this through our room rates, Formula One is showing some softness. We are hoping and believing that this race will continue to pace up. But I think you can see that and so we're a little focused on trying to make that the best event that it can be, but that presents a potential headwind in the fourth quarter. Overall, though, given where we are, thinking about records into the second quarter of Las Vegas at this point is pretty compelling and pretty exciting for all of us. To the regions, business remains stable with margins holding at 30% plus against an established and consistent promotional environment, and we continue to have best-in-class properties with leading market share providing steady free cash flow generation. Macau, the story continues, where outstanding performance drives strength in that market, starting, I believe, with our leadership team. We have Kenny and Hubert on the phone. Pansy has clearly leaned in on many things that impact the property in our market and ultimately, our market share. And so we're thankful for that. There are many tactics that they deploy. I think the thing that's most compelling is they truly understand our customer base and their wants and needs. Without any real capital enhancements from where we left this market in 2019, we're obviously outperforming. MGM Macau is now the top producer on the Peninsula side, something we're proud of and a position we'd like to keep, so we're going to continue to invest into that property. Overall, and remembering the market has only returned to 80% recovery, well, MGM is well above that. We still see opportunities not only for growth in the market but ultimately for us to steal additional share. Before I turn this over to Gary Fritz, who you've not yet met, to talk more about MGM Interactive, I'd like to comment on Entain's recent announcements and BetMGM's domestic business. First, I'm excited about the relationship that we've created with Stella David, the Interim CEO, and now the Chair. I'm equally excited by the progress that's been made by the team and BetMGM's product enhancements with a key focus by the Entain Group. With the recent addition of Gavin Isaacs as CEO, I have confidence that he will do wonders for that business and ultimately the market. I'd also like to make a general comment on BetMGM's recent release and some promising signs reported by competitors in the space. We have stated that 2024 would be an investment year, recognizing that we've lost market share in sports, impacting our leading position in iGaming. We rightly decided to invest heavily into our sports product and continue to invest in customer acquisitions for iGaming so long as we see both market growth and overall market share growth. For the record, BetMGM was profitable in the second quarter of 2024, driven by our iGaming business, which annually contributes about $400 million to the overall business. The second piece is improving our sports product. We've made substantial steps with Angstrom, and we'll deploy a variety of new products into the football season, as well as a single account, single wallet in Nevada, allowing customers to carry funds back to their home state. We think it's a big deal for the business and for our omnichannel efforts. We love what BetMGM has done for our brand. We love the long-term prospects, and we enjoy having a partner during this development stage that is equally focused on the business. We are patient and have a strong belief in the growth of this business now and into the future. I want to turn it over to Gary. Gary is going to talk a little bit about BetMGM but really focus on MGM's other interactive activities around the world.

Thanks, Bill. Beginning a couple of years ago, we embarked on a journey with the vision of creating our own proprietary iGaming and sports betting platforms. The goal is to develop a differentiated product capable of capturing market share in both established and emerging markets. The crux of this strategy is based on four pillars and I'll walk through them. The first pillar was for MGM to own its tech ecosystem so that we were not reliant on third parties. A tech ecosystem that is scalable and cloud-based. We achieved this in 2022 through our acquisition of LeoVegas. Not only did we buy the technology, but we acquired an exceptional management team with an aggressive strategic plan that we have been executing. We also recognize the importance of having an owned sports betting platform to further highlight our brands and generate more cross-sell opportunities. We took a large step forward to achieving technical independence with the purchase of Tipico's US sports betting platform, which will close soon and drive important synergies. The second pillar of our strategy was to own our proprietary iGaming content with unique intellectual property. We found this through our acquisition of Push Gaming in 2023. Our strategy with Push is to develop games that are not only exclusive to our owned and operated platforms, but also to create titles that can be marketed to other operators. Since our acquisition, MGM Resort branded games have been our highest performing titles in the Push ecosystem. The third pillar of our strategy is to target organic growth in attractive regulated markets with the BetMGM brand. Just a reminder, we own the BetMGM brand and can use it anywhere in the world outside of the territories that the joint-venture operates in. We do this using our LeoVegas proprietary tech stack. We have already launched the brand in the United Kingdom and the Netherlands with great early results, and we plan to soon enter Latin America. The final component of our strategy is our Live Dealer product, enabled by our recently announced strategic relationship with Playtech, making us the only US operator to offer live casino content for international markets directly from the Las Vegas Strip. We have already launched at Bellagio and MGM Grand and are thrilled with the positive response from our live and online customers. The next phase involves constructing a dedicated space at MGM Grand featuring table games, and in the future, game shows from well-known third-party brands. We believe the synergy among all of these pillars will yield significant long-term returns, starting with a double-digit stabilized return by 2027. In the near term, after two years of investment, we see the core businesses at LeoVegas and Push Gaming beginning to show positive momentum. Over the next few years, we will focus on expanding our sports platform and making further investments in our new fully owned and operated BetMGM markets. Back to you, Bill.

Thanks, Gary. And obviously, excited by all the progress, and we look to scaling this business, particularly the Live Dealer piece here in Nevada, which I think is interesting and unique to us and an exciting format. Before I turn this over to Q&A, just a couple of overviews. Again, I think we enjoy a magnificent position in Las Vegas. We have made significant capital investment in our luxury. We've put over $1 billion into our properties in the last three years, principally focused on the building we're in, Bellagio. All of our rooms and suites now have been redone amongst many other new amenities. We're also continuing to explore ways to connect the heart of the Las Vegas Strip meeting Bellagio, ARIA, and the Cosmopolitan together. Some of you may have seen over the last couple of weeks a set of plans that was submitted to the county here. We are in the midst of trying to create something that we believe will be unique and special to Bellagio, something deserving that will have an experiential entertainment component as well as retail and nightlife components that will bring nightlife back to Bellagio in the long run. We're excited by that. We'll have more of those plans for the next quarter to announce in terms of content and pricing. As I think about our regional properties, again, I want to reiterate they are stable and generating free cash flow. We're excited to have the properties that we do within our portfolio. Many of them, as you know, are market leading. We have demonstrated now, I think in Macau, our growing EBITDAR prowess and our ability to keep a whole new plateau of economic performance. I am excited about the idea of omnichannel for football this coming season for BetMGM. I think it unlocks our database and enables people to take their wallets and go home to places like Colorado and still have funds that they can share. I am equally excited by the overall digital strategy that Gary has laid out. I just recently returned from Japan, and that is moving along nicely. We are on the ground as we speak and we hope to start pylons by May or June of next year, with a target date still of mid-2030 for opening. If I think about expansion, I think about the UAE and New York, particularly in our project in Dubai, where we're ideally situated. Progress has been made in New York, at least by the end of 2025. We all have to make our submissions and move that along, and I know we're in good standing as of this date. I look forward to that, and ultimately to additional markets. Next month, myself and Pansy Ho will be in Thailand looking at that opportunity. If we pursue that, we'll do it through MGM China Holdings. Finally, I'm excited by the information Jonathan consistently provides, I think we have an amazing balance sheet. We have low net debt and excess cash that we can deploy, whether it's for things here or against some of Gary's propositions. I think we ultimately have a pipeline of short, middle, and long-term value creators. With that, operator, I will turn this over to questions.

Good afternoon, everyone. Bill, Jonathan. Bill, I'd like to start off in Las Vegas and I realize the Marriott strategic partnership is beyond Las Vegas. It also relates to the regions. I was hoping maybe you can give us a little bit more detail regarding the contribution from the Marriott connectivity. I think, Jonathan, you mentioned at the outset, in the quarter, 410,000 room nights were booked. I want to make sure that was for the quarter or is that sort of since the inception of the property. But I guess what I'm trying to go to is, I know you kept the contribution on a steady-state basis at an annual EBITDA level of $65 million to $75 million in the slide deck. Does that timeline in which you think you could hit that change given that you've had a number of months of experience? And then as a follow-up, Bill, you mentioned that Formula One has some softness. When we think about the year-over-year delta related to the Formula One softness, shouldn't that be more than offset by the benefits of Marriott connectivity? And that's all for me.

Great question, Joe. So first of all, just to clarify a few facts regarding the production we're seeing out of Marriott. That 410,000 booked room nights number is year-to-date as of a couple of days ago. Of that, maybe 60% or so have stayed here. The remainder are reservations for nights over the next few months. But we measure it by production. So that's the production level. In terms of the incremental benefit, it comes from two places. One, the rate at which Marriott customers are paying as compared to those room nights that we're displacing. We are already operating at 96% occupancy. This was not about growing occupancy; it was about growing yield. The second is the increased spend by those customers while on property. Roughly $100 of the benefit per room night comes from the rate premium, and about $50 comes from the increased daily spend that we measure through charges to the folio. So it's not a perfect measure, but it's a pretty good proxy. Together, those are the incremental benefits from Marriott rooms. In terms of the timeline, we started a little bit later on this because of the cyber incident, we didn't start until February for most of our properties, when we originally anticipated starting at the end of 2023. So I think it's still a good estimate for the benefit for calendar 2024, even though we started a bit late.

And then, Joe, as it relates to F1, I get the principal point, although we could argue that revenue goes against labor increases or insurance or several other things. I think the real issue with Formula One is it's off to a soft start compared to last year, where we had a lot of advanced pre-bookings. I think you can see some of our ADRs are down. If you look at what we're charging, about 50%. The good news is we have an NFL game, so the south end of the Strip that only ran in the 60s last year, we anticipate filling that up. The actual event itself feels soft. It doesn't feel soft in gaming, which is the most important piece but just in room rates at the big three, meaning in this case ARIA, Cosmo, and Bellagio. So the overall impact we'll see. I'm hoping it feels later, and we can yield back up again. I'm sure it will. But I think it's worthy enough and we're concerned enough to make a point of distinction between this year versus last.

Hi. Good afternoon everyone. Thank you for taking my questions. Bill, I also wanted to ask a little bit about Las Vegas and then maybe a follow-up on digital. But the question on Las Vegas would be as we, I think this kind of second quarter in a row where we've seen some of the kind of core gaming metrics down a little bit, but obviously, the non-room revenue side continues to drive the story in the narrative, as you just talked about with Marriott. So can you just give us an update on what you're seeing out of the core gaming customer at this point? And so what some of the pros and cons might be about where you're targeting your focus around the Strip at the moment in terms to drive that gaming customer moving forward? Thanks.

Sure. Shaun, the core gaming customer is still pretty solid. Probably the change in the revenue on the slot side in particular is midweek and tied to the shift in the convention mix. But we continue to see our high-end perform extremely well. Our database leads are performing extremely well. Our focus continues to be on maximizing the right customer in the room, especially during the weekends, where we think there are opportunities to yield up to the better customer.

Great. Thank you. And then maybe to follow up on digital for whoever it's appropriate or Gary, if he wants to take it, would be thank you for the overview on sort of where you're taking the strategy. What I was curious about was if we think about net investments, so let's exclude some of the acquisition dollars that you spent. But as we think about these ventures in total, excluding what's going on with BetMGM, where we have a sort of core KPI like is the rest of the digital venture here largely self-funding meaning you're cash positive in some areas you're able to reinvest? Is there any kind of need to further invest or push especially when we think about new market launches, maybe like Brazil? Thanks.

Sure. Thanks for the question. I would say we definitely have portions of the portfolio, especially the core businesses at LeoVegas and Push Gaming, which are definitely profitable. I would say a modest level of investment is what we have to make around individual market launches. But nothing at the scale of what we've done here at BetMGM in the US.

Hi, guys. Thanks. Good afternoon. Jonathan, previously, you talked about EBITDA growth in 2024. The third quarter obviously sets up favorably, your commentary around the bookings for each of the months resonates favorably. Coupled with some of the commentary around Formula One, I wanted to revisit that statement and kind of see how you feel about the dynamic between the third and fourth quarters as we look ahead for the back half of the year?

Sure. The two quarters are quite different from one another in terms of the comparables, which is probably the most important distinction. The third quarter, as I noted, our outlook on room revenues is pretty strong, and everybody knows what we experienced last year in the third quarter. The fourth quarter, it depends greatly on our performance during F1. It's not the only thing going on; there's a lot driving the business in the fourth quarter. That was an important driver of our performance last year. I would say carving out that risk for the moment, we feel very good about the third and fourth quarters and their ability to grow. But just realistically, the fourth quarter does depend upon the performance of the F1 event.

No. Carlo, I don't think so. I think what was put out in that release is frankly more than sufficient. When we pay it with debt, and we do something else, time to tell. What's important for us is we need to continue to be mindful of expenses. But what's important to us is we don't lose iGaming share because it is precious and we properly relaunched the products we were talking about earlier, and we spend effectively and appropriately on it. Now that's an estimate. Let's see how it plays itself out. But the bigger question of are we going to invest even more money into that, I think what we've identified is plenty of money, and I do not anticipate that.

Hi, afternoon. Thanks for taking my question. I wanted to just understand better or hear you talk more about the digital strategy from a holistic perspective. BetMGM is sort of on its own path, right, with its own issue set, while the rest of the world is to some degree doing its own thing, some of which have the same brand. How do they converge one day, right? Or is that even a possibility? And to that end, capturing the most value in your stock for all of it, right? Does that necessarily require having them converge one day?

David, obviously, that kind of leads into the conversation of what's the relationship and what to do with Entain, and we're just not going to comment on that broadly. We enjoy where we are with them. We are very hopeful for what will come this fall. It's pivotal to the business and to our ability to regain share. We understand the exercise. We understand the long-term. Gary and his team have worked diligently in markets. We think the guys at LeoVegas was an exceptional find. They're a very strong team. We've launched the Netherlands with great success. We've launched the UK. We have our eyes on South America and Brazil. There's real money to be made in an organization that's already making money. So excited about that and the opportunity to play here with the notion of Live Dealer. 15% of all bets on BetMGM are Live Dealer. To the extent we could make it real from places in the future, we think that's compelling long-term. We believe we can actually have some real fun with that down the road by tying celebrity to it. But I get the longer-term question; I'm just not in a position to answer it right now.

Hey, just a follow-up on the BetMGM investment commentary. I guess we get a lot of questions on how the cost structure here compares with some of your peers. So I would love to get any color you have on the composition of the operating expenses there as we think about marketing and promos versus perhaps product and then think about what the flow-through could look like longer term.

Go ahead, Gary.

Sure. What we're looking for with the product deliveries towards the end of this year at BetMGM is designed to positively impact gross gaming margins. That then trickles down to the rest of the P&L and the cost structure itself because you're having significantly higher hold at the top of the funnel against handle. So that is a huge portion of the rationale behind the product releases that we're going to see coming here at the beginning of the football season.

Hey, good evening and good afternoon, everybody, and thanks for taking my question. The first question is on Las Vegas. Bill, you mentioned in your prepared remarks supply coming out of the Strip across the two properties that's well known. I'm curious if you could just walk us through where you're seeing it, group versus leisure proximity versus price point, what sort of got you excited enough to mention it?

Corey, can follow up on this. But I'd say, look, it's not as much group, particularly when you talk about Tropicana. There, it's a pure leisure play on that corner. It was clearly a value proposition. We also have several there with Luxor, Excalibur, and New York, New York. We think it's a pure leisure play there. There was some group activity at Mirage, but not extensive. I think we've seen maybe a couple of pop-up at MGM or one of the other facilities. I think, MGM. If you think about those leisure room nights, you think about other places to go in the interim. Our MGM portfolio has a lot of stuff in mid-market that lead into that. We think we're ideally positioned, particularly given that we know those customers. Remember, we retained part of that database. Leaning into them and being able to move them over we think is meaningful. Generally, inventory as we understand, Hard Rock will probably be out for three years. Tropicana is completely undefined. It's a substantial period of time. I know we've gone into the teeth of the inverse with Fontainebleau, but it's nice to go the other way for once.

That's helpful. Thanks for that. And then a question on MGM China, the market slowed down by many measures into 2Q slightly. Even your unit production for the mass took a slight step back yet you guys hit a high watermark for margins. Just curious, what you can call out there? I'm assuming your hotels are full, and you were yield managing. Is there anything else to see through just for that performance?

Yes. I think when we talk about China, with the economy scale and the population size, there are many dimensions to merit. We, at MGM China, are very focused on what we should be doing. Basically, we are focusing on the innovative and customer-centric investments both on CapEx and OpEx. In July, we saw our visitation to our property consistently perform well with the previous quarters. Our revenue share is still maintained at mid-teens. Our EBITDA margin is still in high percentage. That's where we are right now.

And Hubert, any color on the reason for the margins? I think I know, but go ahead.

On the margin, I think that, first of all, it’s a very disciplined approach towards the reinvestment. The mass component of the revenue mix has also increased and that helps with the margin increment.

Thanks, everyone.

Hey, good afternoon, everyone. On Vegas, the last couple of quarters, we've seen room revenues growing high single and low double-digit percentages, whereas this F&B, entertainment, group and other pieces of the business have been growing more slowly. Can you maybe unpack that a bit? Are there any trends in ancillary spend that you're seeing kind of under the surface as it relates to the different growth in these buckets?

Look, I'll set it up and then Corey turn it over to you. The conversation around Marriott and our ability to yield off of that drives our room rates. The return of our convention marketplace to former highs is driving those room rates. The other side of the coin is leisure is more prevalent over transient. When it comes to total spend, starting with entertainment and then food and beverage: food and beverage is at an all-time high, but catering and banquet is driving it. When you look at the actual restaurants, it'll be down 4% to 5% on covers.

The food and beverage side is a little misleading from that perspective. We are definitely feeding more mouths; it's just where they're being fed. Whether it's convention halls or in restaurants. The entertainment challenge is there is a lot of supply out there. With Spirit and their 18,000 seats and three shows a day, it puts a lot of pressure on a market that probably has a lot of supply. We're really focused on making sure we have the right acts in our buildings to attract those customers looking for performances.

Got it. That's helpful. And then in terms of the buybacks, I think you have an excess cash balance of $800 million and about $1.3 billion remaining on the repo. I know you've been pretty prolific here in repurchasing shares. But as we think about where we go over the next year or two. Jonathan laid out that free cash flow yield in the mid-teen growth. Is there a scenario where you would be willing to add debt to finance the share repurchases, or should we think about this tapering down over time?

I'll offer a couple of thoughts. First, at these values, we still believe our shares are a very attractive value. Just looking on the screen, probably our stake in MGM China is worth $10 to $11 per share. It's a very appealing free cash flow yield when you look at the kind of the value of just the operating businesses, not to mention BetMGM and our digital investments. That being said, you're right; we've called out about $800 million in excess cash right now. But that grows with free cash flow generation. When we put out things to the end of 2025, like a potential license fee for a New York expansion, it opens up the possibility for additional share repurchases. I do think over time, it tapers off a bit, but these values will still be aggressive purchasers. Finally, we would consider additional financial leverage to fund these repurchases. Our lease coverage is growing nicely. As Bill noted in the opening remarks, net debt is still close to zero. We're well below our leverage limits and would consider doing that, but we don't have to right now.

Hey, guys. I wanted to just follow up on F1. Given last year was so high-end focused, and we've heard plans to hopefully make this year a little more balanced. Do you see a chance for better performance at some of the non-luxury properties, or are you just concerned that might not be enough to make up for the softness you're seeing today at the top three properties?

The answer is yes. I don't know if you heard my comment earlier. We've got the Raiders in town with the game that weekend, and that will tremendously support the south end of the Strip. We've already seen that occurring once the schedule is announced. Last year, I think we did an amazing job scaring the hell out of people about traffic. Obviously, there was no traffic during the actual event. The idea of bringing people back to town and focusing them on some of the values here is critical. I think particularly driven by the game, you'll see the south end of the Strip come to life. I'm talking about $30 million-ish plus or minus. So when we think about the comment and what is at stake and look at the overall aggregate of the company for the quarter, let's keep that in perspective. Yet having said that, we're far from giving up. I'm signalling that ticket sales are soft; therefore, room sales are soft.

What I would say is we've heard from other markets; it's fairly consistent. Year one, there’s a lot of hype for the F1. This will be a good weekend for us compared to an average normal weekend. Comparatively speaking, F1 last year was substantial, especially on the rates at the luxury properties.

Hi, everyone. Thanks for taking my questions. Maybe to shift the conversation to your development pipeline first on UAE. We've got some guidelines from the GCGRA recently about the licensing process. Realizing there's probably not a lot of detail you can elaborate on, is there anything that you've seen or learned in the last couple of weeks or months that changed your level of enthusiasm for that prospective opportunity?

Yes. Thank you, John, for the question. With UAE, I think the great news is now that they've announced the lottery, which is something they said they would do. I'm encouraged that the rest of this will roll out as defined. Timing is still unknown; it kind of keeps moving around. I can't imagine by the end of this quarter or early next that we won't know with some specificity regarding Abu Dhabi and potentially what the umbrella language is as it relates to all of the other Emirates. We're excited about it. We're excited about the facility in Dubai, which is under construction as we speak. We're driving pylons right now. That facility has a combination for a large-scale casino. There are a lot of opportunities throughout the region. The initial license is likely spoken for, but each Emirate will have the opportunity to issue a license. Gary spent some time on that, and we'll continue to follow that closely, particularly for Dubai as a workplace to emanate from.

Great. Thanks. Just wanted to circle back to some of the comments you're making about kind of middle, high, and low-end different consumers. I know Vegas has a lot of puts and takes with the easy comps in Q3 and tougher in Q4. But when you look at gaming revenues declining in Q2 and then in the regional markets, some of the softness you've talked about, is there in your view, macro factors that you think could change that or may change that over time? Or do you think it's just getting back to some kind of pre-pandemic normalization before things would return to growth?

Sure, Robin. It's Jonathan. I guess I would disagree a bit with the premise of the question, which is that we're seeing some strength out of the customers. To take a couple of examples, the second quarter was a record drop in table games in Las Vegas for us in the quarter. We were down a little bit in slot handle, that’s for sure, but much of that was due to a shift in the mix from casino customers. Those casino room nights were down a couple of points because group room nights were up about 10%. Our rated theo per rated day, so the customers we know best, our most loyal customers, was up 4% or 5% during the quarter. I don't see any macro factors that could really dislodge the growth we’re seeing in gaming. Our customers have faced increased interest rates and higher hotel rates over the past 18 months and yet have continued to show nice growth.

Afternoon. Thanks for taking my question. You guys have laid out several different items in Las Vegas and the growth, particularly on the non-gaming side, food and beverage, room rates, etc., maybe offsetting some of the stability in the gaming business. So has anything changed in terms of how we should think about Las Vegas margins, I guess, in the near term or beyond as maybe that non-gaming piece grows? And then ask maybe separately, what are you seeing just in terms of the expense side of the business, particularly in labor? Is that now under kind of core inflation and manageable to hold margins if non-gaming is growing?

Thanks, Chad. Broadly speaking, we're comfortable with where margins are in our Las Vegas operations, where they've been in the last couple of quarters, let's call it, the mid-30s. We have experienced some increases in unit labor costs over the past three to four quarters, much of that due to our collective bargaining agreements. Our team has done a fantastic job in managing labor expenses. In particular, FTEs were down a couple of points in Las Vegas, a couple of points in the regional markets, and about 7% in the corporate office. I believe we've done a good job offsetting those increases. Going forward, increases in unit labor costs will be lower than they've been in the past few quarters, as Bill mentioned in his remarks. We are now lapping some of those increases incurred due to those new labor agreements not just in Las Vegas, so we're comfortable maintaining margins in this area.

Okay. Thank you. And then in terms of the Vegas portfolio and kind of where it stands just from a customer-facing standpoint with Bellagio complete, you mentioned Mandalay Bay. Are there any other projects that you’re contemplating maybe in the next 12 to 18 months? Or given the current situation with room capacity coming out of the market and you guys running in the mid-90s, does it make sense to defer bill outside of what you were talking about with Bellagio maybe defer some core renovations that you would otherwise think about doing at this time?

I think that, look, it's something we always look at, we challenge ourselves with our capital allocation and particularly our maintenance capital because it's just that. That said, because of our average room remodel now being under 10 years finally, ARIA has not been touched in a while. We're beginning MGM as we spoke. So we own those goods. That process starts later next year in earnest. Those are the two big ones to come. I think as it relates to the rest of the inventory, I hear you and don't disagree. We're going to get creative with Excalibur. We're transferring furnishings out of the MGM there. We continue to do creative things. One of the challenges is if you don't continue to renovate those rooms on a proper cycle, you wake up one day, and then you are where you are. I wouldn't anticipate us coming much off of those levels. I think it will come down some, $600 million to $700 million a year down the road in terms of true maintenance cap.

I think our room remodels are spaced out enough where we minimize disruption and make sure that we're able to push some of that business into the right buildings that will also enhance those buildings.

Hey, guys. Good afternoon. I want to stay on Vegas real quick. Jonathan, in your prepared remarks, you noted you guys expect to take market share in Vegas moving forward, given your continued investment in your properties, which I know you guys just talked about there. But I want to understand that comment a little bit better. And does that mean taking share as Mirage and Tropicana come out of service, or does that comment mean you think there's further share to take beyond those assets essentially shutting down?

I'll make the headline comment. I think there's further share to take. There's a high-end retail nightlife scene that I'd like to see us go after more aggressively. Some of the club scenes have lost some of their luster. I think there's things to do, particularly again in this building. There are things to do next door in Cosmopolitan, ARIA of note. As we think about ways to enhance the properties, we want to convince folks that staying within this compound is impressive and compelling given the amenities that there's no reason to go anywhere. We're going to continue to drive on that. As we perfect and get better with personalization of data, I believe we can yield more out of what we've got by keeping folks in our buildings.

The investments we're making are aimed at the luxury customer. Gaining a portion of that market share, I think achieves the goal that Jonathan mentioned previously. As we look at Bellagio and look at the competition out there, if we could get additional wallet or an additional trip, we'll regain that market share we're discussing.

I understand the point. Yes. At some point, of course, I would never say never. At some point, how hard do we chase sports versus learning iGaming flow? What does iGaming grow onto itself? But I think we're past the major investment scale. We’ve invested, call it, 650-ish into BetMGM, something like that. We’re 1.5 billion all in between LeoVegas and some of the other acquisitions. That is a lot, and we're not anticipating any of that going forward. This is more about yielding off of what we've created and hopefully doing that. I do understand the core question. We're not giving up on digital by any stretch. We still believe it’s a key component of growth within our company and the industry. It’s being proven out in several different places. We are going to be patient with it for a while.

Thank you, operator, and thank you all for joining us today. I will end where we started. It's still compelling, and I hope to all of you to think about Las Vegas, the company, and think that several records continue to be broken. We're proud of the activity case. We are proud of what we're doing here. Like every business, we have challenges in this environment. I believe we're meeting and maximizing on most of those. I'm excited by where Gary is going digitally and the longer term potential of all of that. With that said, I thank you all, and have a great evening.