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MGM Resorts International  (NYSE:MGM)
Q4 2018 Earnings Conference Call
Feb. 13, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to the MGM Resorts International Fourth Quarter and Full Year 2018 Earnings Conference Call. Joining from the call from the company today are Jim Murren, Chairman and Chief Executive Officer; Dan D'Arrigo, Executive Vice President and Chief Financial Officer; Corey Sanders, Chief Operating Officer; and Grant Bowie, CEO and Executive Director of MGM China Holdings Limited. Participants are in a listen-only mode. After the company's remarks, there will be a question-and-answer session. In fairness to all participants, please limit yourself to one question and one follow-up. Please note, this event is being recorded.

I would now like to turn the conference over to Mr. Dan D'Arrigo. Sir, you may begin.

Dan D'Arrigo -- Executive Vice President and Chief Financial Officer

Well thank you Cole and good afternoon and welcome everyone to the MGM Resorts International fourth quarter and full year 2018 earnings call. This call is being broadcast live on the Internet at investors.mgmresorts.com and we have furnished our press release on Form 8-K to the SEC this afternoon as well. 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 materially 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, updates or otherwise. During the 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, which is also available on our website. Finally, this presentation is being recorded.

And with that I'll now turn it over to Jim.

James J. Murren -- Chairman and Chief Executive Officer

Well thank you Dan, and good afternoon everyone. We had a good fourth quarter and end to the year coming in above our guidance here in Las Vegas. On a consolidated basis, our fourth quarter revenues grew 18% year-over-year and our adjusted EBITDA grew 21%, excluding certain onetime benefits.

Here in Las Vegas, our strong fourth quarter was driven by selectively leveraging our casino database and healthy convention business that improved intra-quarter. We delivered revenue growth of 6% and RevPAR growth of over 8%. We grew EBITDA by 15%, or 8% if you exclude onetime benefits, despite holding at the low end of our table games range.

Our fourth quarter margins increased 220 basis points during the quarter or by 50 basis points after that same adjustment. This was the best fourth quarter in Las Vegas since 2007.

We have many of the premier assets across The United States and our regional properties performed well in the fourth quarter, with revenues up 18% and EBITDA up by 32%. We set fourth quarter revenue and EBITDA records at MGM Grand Detroit, MGM National Harbor, Beau

Rivage and Gold Strike Tunica.

Over in Macau, the overall gaming market grew by 9%. MGM China's revenues grew by 33% and EBITDA was up 11%, as we gained market share in the fourth quarter. Grant will be available during the Q&A of course to answer any questions that you may have.

Now I want to spend a few minutes on our MGM 2020 plan, which we announced last month. As you know, a couple of years ago, when we implemented of our Profit Growth Plan, we underwent an organizational transformation that resulted in key centralized business functions to create best practices across our resort portfolio. This platform is established now and running, and we can now leverage these centralized functions. MGM 2020 will be rolled out in phases.

We announced phase-1 on January 3, and with the help of outside consultants, we will implement comprehensive organizational changes, as we find more efficient ways to operate. As announced, we expect phase-1 to realize $200 million in annualized EBITDA uplift by the end of 2020. Half of that will be labor savings, 25% from sourcing, and the remaining 25% from revenue optimization.

Phase-2 is centered on the company reallocating a portion of our annual CapEx budget to technology investments. We expect these investments to increase our revenues through a customer-centric strategy, driven by data, digital and loyalty capabilities. We expect this will yield an additional $100 million in EBITDA by the end of 2021. Through MGM 2020, we are investing in our business to drive long-term growth, and as we saw with PGP, we expect to see financial benefits building, and in this case, into the back half of 2019.

Accordingly, we expect to realize a third of the initial $200 million of EBITDA by the end of this year, with approximately two-thirds of that coming from our Las Vegas properties. We spent a lot of time on this. We talked about it last May during our Investor Day. We made it official in January. We have the full internal team focused on this effort. We have a strong sense of the numbers. We know how we will achieve those numbers, and you will hear more about our progress in the near future.

Turning to this year; we believe we're positioned well here in Las Vegas, with better citywide convention expectations, as well our own bookings. We're also excited about the entertainment calendar, bolstered by great programming at Park Theater, featuring of course Lady Gaga, who sells out every single night. Our business fundamentals are solid. However, we will maintain a level of caution, as we navigate through broader market volatility, the rising cost environment, trade tensions, and the resulting concerns on global growth. That said, we believe based on what we're seeing today, that the consensus for Las Vegas Strip EBITDA for the full year 2019 seems reasonable.

As I mentioned earlier, we're making good progress on MGM 2020. We will incur some costs in the front-end, before we start to see the financial benefits, as I said in the second half of this year. We're excited to have a Park MGM and NoMad fully open. We view this property just like a brand-new opening, and expect a normal ramp-up period over the next couple years. And as you know, we're making important investments in sports and entertainment that we believe will reap future benefits.

Our regional properties are off to a solid start this year. The addition of Empire city in New York and the soon to be acquired Northfield Park in Ohio, further cements our leadership in the Northeast and and enhances our cross-marketing efforts across our entire portfolio.

Macau is the number one gaming market in the world. But we all know, it can be volatile. Therefore, our focus there is on increasing our market share, as now all the amenities in Cotai becomes fully available. We're pleased that our VIP junket areas are open, The Mansion high-end casino is now operational, and The Mansion, which is stunning, will soon be receiving guests.

And as we look into 2019 and beyond, we're committed to our long-term strategy and our goals remain intact. Our five year capital cycle is now complete, and we will reap the benefits of these investments in National Harbor, Cotai, Springfield and Park MGM.

And today, we are reaffirming our consolidated free cash flow per share target of $3.50 in 2020. Our Project MGM 20 (ph) gives us increased confidence in our ability to hit those targets, even in light of a more uncertain macro environment. We continue to be focused on a fortified balance sheet, with targeted consolidated net leverage of three to four times by year-end 2020.

Over the past two decades, MGM has developed and assembled our industry's most successful portfolio of premier real estate in the United States. And during that time, we've executed on strategies to highlight this value, and have been focused on unlocking long-term value for our shareholders, and this will continue.

Our management team and the recently announced ad hoc committee remain committed to exploring and executing a real estate strategy, that is most optimal for MGM Resorts, one that supports our goals of enhancing free cash flow per share, maximizing the value of our owned real estate, preserving the company's financial flexibility, and creating sustainable shareholder value.

Lastly, while the company is focused on targeted growth opportunities such as sports betting and Japan's IR, we will continue to return any excess cash to shareholders in the form of share buybacks and dividends. In fact, we returned $1.5 billion to shareholders through buybacks and dividends in 2018. And this afternoon, we just announced another increase to our dividend.

So now let's turn it back over for Q&A.

Questions and Answers:

Operator

(Operator Instructions) And our first question comes from Joe Greff with JPMorgan. Please go ahead.

Joseph Greff -- JPMorgan. -- Analyst

Good afternoon everyone. Thanks for taking my questions. Jim, it's great to hear you talk about the momentum, not just on the Strip, but also in regionals and Macau. But my first question or questions are more strategic in nature. My first question relates to the ad hoc committee of the board, that was established last month. Can you talk in broad terms about what is being evaluated? i.e., is the committee and the board looking at things the board has looked at before and has passed on because of timing of circumstance, and is it a new willingness to transact real estate that you weren't willing to do before? How important are tax considerations today versus these considerations before? And to what extent is MGP independent front and center in the committee's evaluation? And then related to this, what's the time line for when you would expect this committee to present to the board, its recommendation, and when would the board look to act upon such recommendations? I know it's a lot here. Thank you.

James J. Murren -- Chairman and Chief Executive Officer

You think. So let me -- I'll start. We have -- and you've followed us a while, we've always thought about, what is in the best interest of the shareholders, how can we strategically create value? We've been doing that for a long time. The creation of the UPREIT with MGP was borne partly out of that belief, that we can create value, create a new security, in the triple net space, and of course it's been very successful, brought that public at $21 a share then, and it's like $30. We've said at the time and we remain very committed to the fact, we expect MGP to continue to grow. In fact, we expect it will outgrow its peer group in the triple net broader sector.

And it can, because it can transact with MGM, unlike many others, and it can make third party transactions done accretively, as they have done since they've been public. And through that, through the growth of MGP, we expected MGM Resorts that our interest will decline, not because we would like to sell OP units, but because we expect MGP to grow.

The idea of the ad hoc committee was to accelerate and put even greater focus on the opportunities that MGM Resorts' board believes it has, in assembling the kind of real estate that we uniquely own. We among any other company, have the real estate throughout the United States, that affords us the opportunity to evaluate on a property by property basis, how to maximize value.

In the ad hoc committee, which has already met a couple of times, I was already talking to bankers, is going to be focused on that very effort with management. And the ad hoc committee, consisting of real estate and shareholder experts, are going to be working with management and the full board to deliver their findings. Of course, they're board members. The board members have helped us, as management, craft our entire strategic goal. And this is very very exciting, but complicated. And we're going to make sure we get it right, not for tomorrow, but for the many tomorrows in the future.

I'm not going to get ahead of the ad hoc committee and give you a timetable considering it was only formed on the 24th of January. But I'll say, they're focused, they're expert, they'll be professionally advised, and they'll be working with a full board and management, and we're excited about the opportunities that seems to us, we have, more than any other company in our space. And there'll be a lot more to speak to this in the coming months and quarters.

Joseph Greff -- JPMorgan. -- Analyst

Thank you for your thoughts. I think my follow-up question was already taken.

Operator

And our next question comes from Harry Curtis with Instinet. Please go ahead.

Harry Curtis -- Instinet -- Analyst

Hi everyone. So Jim, you talked about the probable strength in the group outlook for Las Vegas in 2019. And according to the LVCVA data, it looks like first quarter is strong, second quarter's growth is even stronger. How do you compare that to what you see on your books so far by? And if you could give us some color by quarter?

James J. Murren -- Chairman and Chief Executive Officer

I will turn it over to Corey on the convention side.

Corey Sanders -- Chief Operating Officer

I think -- hey Harry. Throughout the year, our convention business is pretty solid. We've a lot of it -- most of it is on the books already. But on a cadence by quarter, we're seeing improvement in every quarter, compared to last year. Obviously, the first quarter is going to be our strongest as it always has, but all the other quarters look pretty good for us also.

Harry Curtis -- Instinet -- Analyst

Okay. And Jim, just a follow-up on that, the question that inquiring minds want to know is that, do you have any bid for giving some indication of what RevPAR in the first quarter might look like, in the ...?

James J. Murren -- Chairman and Chief Executive Officer

Nice try Harry. Dan, you want to give a view on what we think about in terms of that kind of guidance?

Dan D'Arrigo -- Executive Vice President and Chief Financial Officer

Well sir, I will. Thanks Harry for the question. Clearly we've been -- Aaron, Cathy and myself, the whole team here have been talking to a lot of you all, both on the buy side and the sell side, and really -- as you all know, we've been seeking that counsel, and that guidance and that input for quite some time. There's one real comment thread that really came through in most of those conversations, which was really getting to the longer-term vision, story, and goals that we're trying to achieve and attain here from a company standpoint. So we're going to continue to give you a lot of color. Obviously Corey just gave you a lot of color on the convention business. We are going to continue to give you a lot of insight into the baseline business and what we're seeing.

But getting into kind of quarterly specifics has not worked out too well for us. So we are going to continue to kind of focus on long term, as you will get a chance to go through the deck that we posted, which has a lot of information in it. You will see that we are reaffirming our 2020 $3.50 per share free cash flow guidance, as well as some of our EBITDA targets in 2020. Obviously, Jim commented on the consensus numbers for the year, and we feel like it's -- the investment community, a lot of good data points to be aligned with management on what we're trying to achieve here.

Harry Curtis -- Instinet -- Analyst

Thank you for that. And my second question I wanted to shift to Macau, a real quick question for Grant. Grant, you had very strong revenue growth, up 33%. EBITDA growth was shy of that. Was that due more to mix, more VIP mix, and as we look ahead, how would you expect that flow-through to look, as we get into the back half of this year? Particularly when The Mansion opens?

Grant R. Bowie -- Chief Executive Officer and Executive Director, MGM China

Yes. The margin actually is about where we would expect it. But you're correct, there was obviously mix effect, particularly with the introduction of the junkets into Cotai. And clearly now that we are stabilizing the Cotai operation, that focus we had to put on cost management, (inaudible) important and critical to us.

So in terms of the go forward, we're in that phase of just locking everything down. In terms of The Mansion, clearly, we are excited that we're bringing that all on board and getting all of those assets generating. And so, as a result of that, we are -- well I am very positive in terms of how we are now building that momentum. Also excited that we're starting to see stabilization and business opportunities reemerging in Macau, because as I have always indicated, we see this as a two property strategy, and we want to drive the importance of that property. So yes, we are confident that we can improve margin. We still give the guidance that we look to the mid to upper 20s in terms of margin performance.

Harry Curtis -- Instinet -- Analyst

Okay, Grant. Terrific. Thanks very much guys.

James J. Murren -- Chairman and Chief Executive Officer

Thanks Harry.

Operator

And our next question comes from Shaun Kelley with Bank of America. Please go ahead with your question.

Shaun Kelley -- Bank of America. -- Analyst

Hi, good afternoon everyone. Just going to the slide deck and some of the longer-term goals that you guys provided. I believe you did mention it for the Las Vegas Strip on an adjusted property basis, you're now expecting to see a 32% to 33% margin in 2020. Could you may at a high level, give us what your sort of backdrop or assumptions would be, to necessarily attain that? I know a piece of it clearly has to be the 2020 plan, where a lot of those savings will come from Las Vegas operations. But sort of what do you need maybe from a top line perspective to actually achieve that? Or do you think you can get there in even a fairly kind of low or benign top line environment?

Dan D'Arrigo -- Executive Vice President and Chief Financial Officer

Hey Shaun, it's Dan here. I will start and if anybody else has anything -- I think when you kind of look at it, obviously MGM 2020 is an important component of that strategy and how we get to those targeted numbers. It gives us definitely a higher level of confidence in getting there in terms of that margin and EBITDA target. When you look at what we're assuming, we're assuming kind of more or less the market is kind of status quo. That low kind of single-digit top line growth, and really kind of honing in on what we can control in terms of margin, continuing to use the tools that we've used in the past from a cost standpoint, as well as the team that you saw on the fourth quarter did a great job in terms of yielding our rates up, filling the buildings with the most profitable customers we can put into the rooms, and we're going to continue deploy that strategy going forward. And so it's -- from a top line standpoint, we're not looking at a Herculean lift, but it's pretty much status quo.

Shaun Kelley -- Bank of America. -- Analyst

That's perfect and helpful Dan. Thanks. And then my follow-up would just be on the 2020 plan. With the kind of the one-third of the contribution you're expecting to occur this year, is that -- is the total contribution going to be net of the investments in the first half? And then as we move into, I guess 2020, would we expect some of these upfront investments, which I am primarily in my head are consulting type costs, will those burn off at some point, meaning these are things that you have to -- they're not necessarily run rate expenses, just help us understand those two dynamics.

Dan D'Arrigo -- Executive Vice President and Chief Financial Officer

Yes sure. So the two goals, both phase-1 and phase-2 are net of the expenses. We need to kind of get the ball rolling on -- in both of those phases, as we look at it. There obviously will be both operational and capital. As you go through the deck, you'll see there's probably in our capital number this year, there's about $75 million of incremental spend for these projects that we're looking at on the technology side. And those will come with a return ascribed to them as well. So it is net, and we will be as transparent as possible in going through this over the upcoming quarters. So you make sure you have all the numbers for your analysis.

James J. Murren -- Chairman and Chief Executive Officer

And you're right. It will burn off, as we go throughout the year into next year.

Shaun Kelley -- Bank of America. -- Analyst

Great. Thanks very much everyone.

James J. Murren -- Chairman and Chief Executive Officer

Thanks Shaun.

Operator

And our question comes from Felicia Hendrix with Barclays. Please go ahead.

Felicia Hendrix -- Barclays -- Analyst

Hi good afternoon and thanks. So Jim and Dan, in the past you guys have said, as you were over the past few quarters reflecting upon your guidance conundrum, you've said that you guys don't give -- do such a great job with guiding out past one quarter, the quarter that you're in. So can you just help us understand the confidence in the full year EBITDA guidance you gave us in your prepared remarks?

Dan D'Arrigo -- Executive Vice President and Chief Financial Officer

Well I think, a couple of things. One is, I necessarily wouldn't hang my head on that being official guidance. What we're looking at is obviously the current estimates that are out there. And again, they seem reasonable from that perspective in looking at the 2019 period.

James J. Murren -- Chairman and Chief Executive Officer

And also, instead of not a good job, we have half of the baccarat business in this market. We're bigger than our top two competitors combined. We have over 42,000 hotel rooms. But it is a market that's very dynamic. And so we're trying to give color, but recognizing the fact that this is not a global company in the sense of spreading all of our assets all around the world, we're giving you very specific color as to Las Vegas, and I don't think anyone does a better job than us. I think it has been a dynamic market.

Felicia Hendrix -- Barclays -- Analyst

I'm just using words you guys have used in the past. And then I wanted to circle back to the committee to evaluate your real estate portfolio. I know it's really early stages and perhaps, just in this release and the way it's out there, this could evolve over time. But I'm just trying to wrap my arms around the whole process of evaluating your real estate portfolio, because when you think about your real estate portfolio, it's really three wholly owned assets on the Strip and your JV in CityCenter right, because Springfield is already kind of called for. And so, I'm just trying to -- from my own analytical purposes, trying to see what benefit you might get from selling those assets beyond potentially issuing a special dividend, or maybe holding that cash to use for CapEx for Japan, because your balance sheet -- even without that, will get to your optimal levels. I think everyone would -- based on the guidance that you have for the next few years. So I'm just -- can you help us understand what evaluating your real estate portfolio really means, because you don't really have a lot of real estate left?

James J. Murren -- Chairman and Chief Executive Officer

Sure. Well we've a lot of assets left we've a tremendous amount of real estate value. I'm sitting in a building that's worth billions right now.

Felicia Hendrix -- Barclays -- Analyst

Oh yea, you have those two, and that could generate -- exactly, but it's just kind of -- I guess what I'm really trying to get at is, how could that be strategically benefit -- beneficial for your valuation and the longer-term shareholders, beyond perhaps special dividend or something like that?

James J. Murren -- Chairman and Chief Executive Officer

Right. Thank you. I mean that's the question that we are working on here at management and the full board. And the reason why we created this committee, is really to create some real focus on evaluating what our very complex decisions that get into our balance sheet, get into our -- the tax basis of assets, get into our growth forecasts. And because we have the talent on our board, specific around real estate, and because they've been willing to give their time, I felt as part of management and as part of the board, that it would be beneficial to all of us to accelerate our thinking, and our knowledge accumulation, as to what we should do.

But I don't want to -- I want to be very clear on this. The ad hoc committee as part of the board is focused on the same strategic goals as the entire board and management to reduce our leverage, to drive our free cash flow, to create the quantum of cash that we believe we're going to use, because we believe we're going to win in Japan, to be able to allocate the cash to the shareholders, while concurring with our leverage targets. And so, you're absolutely right, we only have a few assets that are wholly owned today by MGM Resorts. We have a joint venture that is very valuable, that we've said, we would like to strategically rationalize in the future.

And we have the ROFO asset in Springfield. And they are going to look at all those properties and those ideas with outside advisors, and I feel really good about it frankly, because it will allow management to work with a very expert group of people, and our shareholders want to know, and we want to let them know, what is in the best interest of the shareholders from a standpoint of maximizing value. And I thought this will be a great way that identify the seriousness, the focus that the company has on our unmatched portfolio, both in terms of what we own outright, and what we own through MGP, and how it is that we look at those two entities and our joint ventures to maximize value. And that's really why we setup the committee. And as I said, they've already met. They've even been bankers. They're very focused, and I've been really happy with the output so far.

Felicia Hendrix -- Barclays -- Analyst

Thank you. That's super helpful. And Grant, just quickly, any early comments on Chinese New Year?

Grant R. Bowie -- Chief Executive Officer and Executive Director, MGM China

Well for us, the most pleasing is the Chinese New Year. This year is actually our second. We had our anniversary, so we are through our first year. It was solid for us. Lot of traffic in the city. It looks like the bridge has driven a lot of traffic. Probably hasn't -- as we see across our channel (inaudible) converted into gaming revenue. But we're also seeing indications that the play is extending longer. So we are well into the 10th day now and play -- and particularly in the upper end of the market that is pretty positive. So I would expect that, definitely for us, it has been a good holiday period continuing on from the fourth quarter for us. But from the city, I think it's probably solid. Lots of traffic, but I'm not expecting that there's significant spikes in GGR. I'd just reiterate comments I've made in the past. I think we are now starting to find that from a gaming play, when we get into these big holiday seasons, we are -- clearly we are getting a lot of footfall and a lot of traffic into the city. It's not necessarily -- it's probably more likely to be leisure visitors, as opposed to strictly, say, more gaming leisure.

Felicia Hendrix -- Barclays -- Analyst

Okay. Thank you.

James J. Murren -- Chairman and Chief Executive Officer

And maybe I should bring up Chinese New Years over year in Las Vegas, anticipating the question. I think we highlighted this, didn't we, in the deck. We had a very high hold percentage last year. And we're not holding to that level right now, number one. And secondly, there are a few players that just did not come to the United States, partly due to the government shutdown, some other logistical issues. We lost some groups to places like Sydney and London. So we can thank our total government for that. But we have still a good play in town. And as I said earlier -- as of last year at least, we're 49% of the entire baccarat business in Las Vegas. And so, I feel like we have a good feel for what's going on here, but I would say for -- at this point in time, we're going to be below what we earned last year for Chinese New Year, as a result of the whole delta and fewer customers in town.

Felicia Hendrix -- Barclays -- Analyst

Thanks a lot.

Operator

And our next question comes from Carlo Santarelli with Deutsche Bank. Please go ahead.

Carlo Santarelli -- Deutsche Bank -- Analyst

Hey everybody, good afternoon. If I could -- and may be Corey is best with this. With respect to the mix for 2019; I know last year -- or I should say 2018, you guys made a concerted effort to kind of expand your casino occupied room nights. As you think about 2019 and acknowledging, it sounds like your in-house and obviously citywide group is going to be a little bit better, so I would expect that to increase a little bit. Is the objective to continue to grow what I think is like a mid-to higher teens casino base at present?

Corey Sanders -- Chief Operating Officer

Yes. I think -- look we constantly look at the market and look what our competition is doing. I think there's opportunities to grow that base, from a customer gross profit per room night, they are definitely higher than some of our other segments. In particular, our focus is not just on the convention, but also improving the transient side of it, and as you mentioned the casino side. The one challenge we're having now that we see in the market is on the leisure side, and especially on the land-only. And we're seeing customers potentially going to Europe and other areas. But I think by increasing our casino database, it will help us offset some of loss in those areas. But in general, we think there's still opportunities to move this a few percent, and be much more profitable as a company.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great. And Corey, just to kind of follow-up on what you said. One of your competitors earlier this earnings season referred to Las Vegas as a marketers market, and I'm assuming that kind of dovetails with what you just noted on, on the leisure business. Are you guys seeing any kind of heightened promotional activity in Las Vegas around that leisure business?

Corey Sanders -- Chief Operating Officer

Look, I don't think it's any different than what it has been. When you don't have a base of convention or other events happening in town, that segment has always been very competitive. I don't see much of a difference in the offers going out there. They are always pretty rich, and the amount of I'm seeing -- actually they seem a little lower this year, than what was happening in the third quarter.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great. That's helpful. Thank you guys.

James J. Murren -- Chairman and Chief Executive Officer

Thanks Carlo.

Operator

And our next question comes from Thomas Allen with Morgan Stanley. Please go ahead.

Thomas Allen -- Morgan Stanley -- Analyst

Hey. So there's a lot of focus from investors on your Strip margins, and seeing progress there. Considering that your margin is up every quarter in 2019, does that make sense, or based on your previous comments, should they more hockey-stick in the second half 2019 and into 2020? Thanks.

Dan D'Arrigo -- Executive Vice President and Chief Financial Officer

Hey Thomas, its Dan. Obviously, factoring the comments we made around Chinese New Year's and hold, we did hold pretty high in the first few quarters last year, more toward the high end of that range, so that always impacts. And when we do our modeling, we're using kind of midpoint of our range kind of numbers. So that's going to impact a part of that margin. But you're correct in that, as MGM 2020 begins to ramp up in the back half the year, that's going to help the margins in terms of a third and fourth quarter from that perspective; as well as some of the burning off of some of the expenses of the upfront cost for the initiatives.

James J. Murren -- Chairman and Chief Executive Officer

And the ramp up of Park MGM and our convention business.

Thomas Allen -- Morgan Stanley -- Analyst

Helpful. And then just on the topic of ramping, can you talk about -- give any incremental color on how you see Springfield performing today, and how do you think that probably is going to ramp? And the other properties that are ramping right now? Thank you.

James J. Murren -- Chairman and Chief Executive Officer

Sure. Do you want to go with that? We both know. (inaudible), gosh it's a beautiful property and great. Unbelievable feedback we get from customers, from the gaming commission in Massachusetts, from the elected officials, and our food and beverage operations are ahead of target. Our hotel business is ahead of target. Our gaming business is slower, but ramping. We actually saw the almost exact same thing at National Harbor, as we built into a brand new market for us. So we expect that, given the quality of the assets and the people working there and the word-of-mouth marketing, we're going to be a little bit more tactical in marketing and reminding people that we are there, particularly leading up to a competitor in Everett, that's opening up in the second half of this year. But we view its operating future very much the same, as what we've seen in a different scale, with a smaller investment up there than at National Harbor. But what we are seeing in our other new properties.

Thomas Allen -- Morgan Stanley -- Analyst

Helpful. Thank you.

James J. Murren -- Chairman and Chief Executive Officer

Thanks.

Dan D'Arrigo -- Executive Vice President and Chief Financial Officer

Thanks Tom.

Operator

And our next question comes from Stephen Grambling with Goldman Sachs. Please go ahead.

Stephen Grambling -- Goldman Sachs -- Analyst

Hey, I guess first a follow-up on the real estate and ad hoc committee. You mentioned reducing leverage in the response to another question as a first kind of priority, and thinking about monetizing real estate. How would you think about the appropriate leverage ratio for an asset-light OpCo, relative to one with underlying real estate?

James J. Murren -- Chairman and Chief Executive Officer

I think that's going to be part of what the committee does. As we evaluate the asset intensity of MGM Resorts, and understanding the fact that MGP is a triple net and MGM Resorts is and always will be responsible for the capital that we continue to invest into those properties, which has been very successful. We're going to make sure that MGM Resorts' balance sheet meets the objectives that we've laid out, and is as durable as possible. I think we've made this very clear before, we're not going to be in a situation we found ourselves back in '08 on the eve of a global recession. We're going to be more conservatively postured. We are increasingly aware of what's going on around the world. Global trade tensions, slowdown, RevPAR declines and reductions of RevPAR guidance at hotel companies. And so, we're going to take all that on board with an eye toward making sure that we have that fortress (ph) balance sheet that we are delivering on the beacon, that is $3. 50 of free cash flow in 2020, and anything that we do with our real estate portfolio or what we own of MGP, will have to fit very squarely within those strategies.

Stephen Grambling -- Goldman Sachs -- Analyst

That's clear. And maybe changing directions a little bit, we are seeing more news drilling out of Japan on the integrated resort side. Can you just provide whatever color you can on how you're thinking about the opportunity, including the next key milestones and any evolution on your expectations?

James J. Murren -- Chairman and Chief Executive Officer

Sure, I will. We've had -- so a lot of progress in Japan. We've been there, as you know, longer than anyone else. The government is literally still traveling around the world, learning best practices in terms of how to implement a proper RFP process, as well as the regulatory framework. We have a large team there in both Tokyo and Osaka. We just recently opened up an office in Osaka. We've committed now to the Mayor and to the Governor of Osaka, that MGM has adopted in Osaka first strategy. We're focusing our considerable resources on Osaka. The government itself has said that they will likely come out with rules and policies this year, July August of 2019. Osaka as a prefecture, we believe its RFP will come out soon thereafter. And we think at this point in time, our guess, is that an operator will be selected by Osaka by early 2020.

The next step for Osaka or any other jurisdiction, is to go to the central government. We know we think Osaka will be one of the three concessions that will likely be granted. But we know the central government has to select Osaka and its operator. That probably happens maybe 12, 18 months after Osaka itself picks its operator. And remember that Osaka's goal is to have an IR opened by 2025 That's when the World Expo is in Osaka. So we have been very active. That's why you don't hear Bill Hornbuckle on this call, because he is in Japan right now. And we're focusing on energies there. We have been developing consortium partners. Exciting programming, getting ready for RFP submission. We have no illusions to the fact, that it will not be competitive, it will be highly competitive. But I think the cards are stacked in the favor of those who are prepared, who have been working hard, who will have the best program, best strategy, the best understanding of the country, of the prefecture, and I like a lot, MGM's chances.

Stephen Grambling -- Goldman Sachs -- Analyst

That's great. One last quick one if I could, just can you give us any sense for how forward trends are at Park MGM as you get past the renovations? And has anything changed in your expectations for how this property returns will ultimately shake out? Thanks.

James J. Murren -- Chairman and Chief Executive Officer

Yes I mean we had a -- it was a busy fourth quarter at Park MGM. Multiple, multiple elements opened up throughout the quarter, both in terms of the food and beverage venues, in terms of the nightclub, in terms of the residency for Lady Gaga. All that is right on track, and we've been building in the early days of course, only couple -- month and a half into it, right on track from what we've talked about in terms of our return on investment goals. We're highly confident we're going to achieve them. The property is completed now. Eataly has been opened and is doing extraordinary revenue on a daily basis. The other restaurants are very successful. The shows are selling out every single show. The ADR is moving up quite rapidly, both at Park MGM and at NoMad. We're still transitioning the customers from the old Monte Carlo customer, to a Park MGM and a NoMad customer. So that is the ramp component of it. But our GEM scores or customer scores are up through roof, in terms of the attractiveness of the property and -- Corey do you have anything to add?

Corey Sanders -- Chief Operating Officer

The other thing, getting that front door has been a big plus, and we're seeing the casino numbers we were hoping to see at this stage in the game. As Jim mentioned, the food and beverage numbers are where we expected, as are the hotel numbers. Just transitioning that customer, which we think will take some time, but the acceptance of the property has been amazing and all you have to do is walk through there on any event night and just see what potential for that property is.

James J. Murren -- Chairman and Chief Executive Officer

Here is an amazing thing. I don't know if we've talked about this. But before we built the park, before we built the plaza in T-Mobile, the traffic counts on the east side of the Strip were profoundly higher than they were on the west side of the Strip. Now it's completely the opposite, to the point that the county is building a bridge, so that people stop trying to run across from the east side to the west side. I don't know when that bridge is going to be done, but it's under way right now. That's really the last element. It's not in our control, that's a county project. But to give you a sense of the traffic flows now on the west side of the Strip, as a result of T-Mobile, the Park, the improvements to New York and obviously the improvements to Park MGM.

Corey Sanders -- Chief Operating Officer

The Bridge is supposed to be done around summer.

James J. Murren -- Chairman and Chief Executive Officer

Summer?

Corey Sanders -- Chief Operating Officer

Yeah.

James J. Murren -- Chairman and Chief Executive Officer

The Bridge is summer.

Stephen Grambling -- Goldman Sachs -- Analyst

That's helpful. Thanks. Best of luck this year.

Corey Sanders -- Chief Operating Officer

Thank you, Stephen.

Operator

And our question comes from John Decree with Union Gaming. Please go ahead.

John Decree -- Union Gaming -- Analyst

Good afternoon everyone. Thanks for taking my question. Just one for me Jim; wanted to get your thoughts on sports betting industry. You've been very been deliberate and quick in choosing your partners' sports league, your technology partner and GVC, and seems like we had a little bit of a roadblock with the latest opinion from the DoJ, that seems aimed at inhibiting the industry. I was wondering if you had an initial view on the path forward? And I guess more specifically, has it changed MGM's thinking at all in the near term, or is it still full throttle on the interactive and sports betting side for your company?

James J. Murren -- Chairman and Chief Executive Officer

Yes first on the second part, the latest missive from the DOJ is perplexing is an understatement. And if read as words, it would mean that Powerball as it exists in 44 states in the United States, isn't legal anymore. And so it's just -- we think an absurdly, poorly written and unenforceable opinion. And I don't think anyone in the industry, the gaming industry, the sports betting industry, feels any differently.

As it relates to our strategy, we have -- we are really excited. We are proud of what we've done. I think we've talked about this before, but we felt the pillars of success would be the following. We wanted to make sure that we had the right technology, in-house, scalable, evolving technology and we knew we didn't have it and we didn't want to buy it off the shelf and we did not want to buy a company, and that led us to the robust negotiations and the conclusion of joint venture with GVC, and that is working out extremely well -- certainly from an MGM perspective, but I think GVC would say the same.

We have a leader there. They're scaling up their operations. They're sourcing the headquarters. They're building staff. So we feel that, that was the right decision, not only from a technology perspective, but to get the in-game betting analytics which are really vital to real success. That's one.

Secondly, we wanted to develop an extraordinarily robust trusted relationship with customers, which is why -- before we did almost anything else, we started reaching out to targeted number of the leagues. Those league partnerships which we've announced, have resulted in manifest opportunities for us. The NBA as an example, because of that partnership, you're going to see a far more exciting, longer-lived summer league activity out here this year, with I think tremendous more attendance, viewership, interest, as one example.

The MLB partnership, in addition to working with MLB and their advanced analytics, through their dotcom channels, has also resulted in some exciting Japan opportunities for us, as MGM is hosting a number of the roadshow events that MLB is doing in Japan, leading up to some games that teams like the A's and the Mariners are playing against themselves and against Japanese teams.

The NHL, with their puck and play, and of course with our proud ownership of -- at least as a town of the Golden Knights, has led to other relationships outside of that. So these league relationships at the bigger league level, and even at a -- right now a micro level, with the alliance of American Football, which just launched last weekend, has resulted in interesting technology play, which is how we view that involvement with AAF. That's working out I think extremely well. But early days. The rollout state-by-state is as expected frustratingly slow, tortured, unclear, not transparent. Some states we believe have done it well. Some states have done it very poorly. And there is a mix everywhere in between, and there are several major market states right now, that are exploring that right now.

Our sports betting app is doing well. Our sports books, young as they are, in some cases only temporary, as in the case of Mississippi are at or above what we thought they would do.

So I think I would call this very competitive. Some really smart companies in this space competing against us. They too have made progress. The Ceasar's transaction with Turner, I think is a clever and smart one. I think you'll find our company going down other paths or may be similar paths. But everyone has -- view this as a good opportunity. But I think I'd have to say, from our perspective at MGM, we view sports betting as a larger opportunity than simply betting on sports. We look at it as a total interactive experience, which is why you'll see us talking more about social games, digital ventures, and a big part of bringing in an outside consultant that we talked about in our digital strategies around 2020, that second phase that we've talked about is going to be in -- not only interactive space, but around sports.

John Decree -- Union Gaming -- Analyst

That's really helpful. Thanks for all that color, Jim. I appreciate that. And just one smaller tailed question on sports if I could. You gave a little commentary about Chinese New Year. I think we're pretty close to overlap with Super Bowl. But wondering if you had some comments on how your properties fell (ph) during that event this year?

James J. Murren -- Chairman and Chief Executive Officer

Yes thanks for bringing that up. I should've brought that up. We had a good Super Bowl at MGM Resorts. We could add -- we could have made more money with different outcomes, but I guess it shows the power of having a lot of liquidity and a lot of handle on the game and we did better this year than we did last year on the game itself, profitability on the game. The challenge for us this year for everybody is, the Super Bowl on Chinese New Year is almost right on top of each other, as opposed to last year, where they were almost two weeks apart like a week and a half apart. So we had challenges around high-end room product. We had challenges around activity and then exacerbating that in the case of Chinese New Year's, is the fact that some folks just didn't feel like coming to the United States, because of any number of reasons. But it was a good Super Bowl, and we made more money than we did last year.

John Decree -- Union Gaming -- Analyst

Thanks gentlemen. I appreciate the questions and color, and congratulations again on the fourth quarter.

James J. Murren -- Chairman and Chief Executive Officer

Thank you. And Cole, can we please have the last question?

Operator

Sure thing. And that will come from Robin Farley with UBS. Please go ahead.

Robin Farley -- UBS -- Analyst

Great. Thank you. Most of my questions have been answered or at least asked. So just a couple of quick ones. One is, where did convention mix end up coming in for 2018? And I know you made some general comments about 2019, but I don't if you (inaudible) where convention mix will be? And then also had a question on -- last year at your Analyst Day, you talked about kind of some future potential capital projects, one of which was kind of reorienting the MGM Grand property, kind of opening up up to the Strip a little bit more. Just wondering if you have any time frame around that or are capital projects like that kind of on hold, while the Board committee looks at different options for real estate? Thanks.

Corey Sanders -- Chief Operating Officer

Hi Robin. This is Corey. On convention -- for 2018, we ended up a little under 18%, and for this year, we expect to be above that amount. On the project at MGM, those projects usually take a long time to get them right and figure out. So we think there's an opportunity there with the West Wing, planning it, getting the right product, the right mix in, seeing what's happening at Park MGM, also seeing some of the other investment income. We think it gives us time to really figure out what to put in there that could be successful. And so, we keep planning and when we have more news to announce, we'll give it to you.

Dan D'Arrigo -- Executive Vice President and Chief Financial Officer

And I guess I would add too Robin, that our overall annualized CapEx number hasn't changed. Anything that we have talked about in terms of potential projects are in that number. There aren't any incremental additional capital spends that will come. In the case of the Grand, it is illustrative of the levers that we have to pull. We don't have to do anything. We can evaluate -- sometimes, we evaluate for quarters and years, and do nothing, because the market moved away, or we have different capital ideas. We're not very close as to what we're going to do there at this point in time. What we did say, which I think we should focus on over the next couple of quarters is, capital that we will spend within that limit that we've set for ourselves, will be allocated more than it has in the past to technology, and the combination of the capital and the OpEx around our digital ventures area in 2020, will be taken in priority, and if we do that properly, and we think the money is there, our outside consultants think it's absolutely there. It's like opening up a new property, without all the attendant responsibilities and future capital needs that a new property represents.

So we see more opportunity on the capital side, now that we are very happy with our portfolio, given our leading position here in Las Vegas, given the fact that we are now done with those major projects that add more engines for free cash flow, to really evaluate everything through the lens of ROI, but also through the lens of -- do we spend capital on technology that can drive business in a much higher-margin way, and the answer is yes.

Robin Farley -- UBS -- Analyst

Okay. Great. Thank you very much.

James J. Murren -- Chairman and Chief Executive Officer

Thanks Robin.

Operator

And this concludes our question-and-answer session. I would like to turn the conference back over to the MGM management for any closing remarks.

James J. Murren -- Chairman and Chief Executive Officer

Well thank you. First I want to -- on behalf of the whole team here, thank you for joining us today. Obviously, we had a clear beat in the fourth quarter, but a strong finish to a challenging year, but a year that was not without a lot of rewarding achievements. We opened Cotai, we opened Springfield, we opened Park MGM. Lot of our regionals hit profit records. We talked about PGP today, because it provides the framework to think about 2020, laid the foundation for it, and that centralized expertise is going to -- we're confident, allow us to achieve these profit targets that we've talked about. And the investments we talked about today in sports and technology, we're also confident is going to achieve really exciting long-term growth for the company. The whole interactive space is going to be large and we expect to be dominant.

Our development cycle is over. Our new resorts give us more free cash flow engines. And we're going to use that free cash flow and harvest it, to hit the net leverage targets and return it to the shareholders. And most importantly, that free cash flow target that we set out quite a while ago, that $3.50 a share in 2020 is the beacon that drives all of our tactics here at the company. And that's the goal we absolutely intend to achieve. And in the meantime, as I said, I don't think there's any company in the world better positioned to win in Japan, and we intend to do that.

And with that, thank you very much for joining us and we'll always be around for your questions.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 62 minutes

Call participants:

Dan D'Arrigo -- Executive Vice President and Chief Financial Officer

James J. Murren -- Chairman and Chief Executive Officer

Joseph Greff -- JPMorgan. -- Analyst

Harry Curtis -- Instinet -- Analyst

Corey Sanders -- Chief Operating Officer

Grant R. Bowie -- Chief Executive Officer and Executive Director, MGM China

Shaun Kelley -- Bank of America. -- Analyst

Felicia Hendrix -- Barclays -- Analyst

Carlo Santarelli -- Deutsche Bank -- Analyst

Thomas Allen -- Morgan Stanley -- Analyst

Stephen Grambling -- Goldman Sachs -- Analyst

John Decree -- Union Gaming -- Analyst

Robin Farley -- UBS -- Analyst

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